The Consumer Financial Protection Bureau’s proposed mortgage foreclosure moratorium is unnecessary, overbroad, and unconstitutional, Elizabeth Young LaBerge, the Credit Union National Association’s senior director of advocacy and counsel told the agency Monday.
“The Bureau should very seriously reconsider whether it has the legal authority to issue this moratorium and, if so, whether doing so violates the constitutional rights of the financial institutions the bureau regulates,” she wrote, in a letter commenting on the proposed moratorium.
The CFPB has proposed placing a moratorium on foreclosures on primary residences that would last until the end of 2021. The proposal only would impact financial institutions with more than 5,000 mortgages.
The National Association of Federally-Insured Credit Union officials also sent a letter to the CFPB opposing the moratorium but did not accuse agency officials of violating the law.
In her letter, Young LaBerge said that delaying foreclosure would lengthen the period of delinquency, making it more difficult for borrowers to recover.
“It appears that the Bureau’s goal is simply to stop any foreclosures for a few more months during which increasing vaccination rates and economic improvements will better situate more borrowers to qualify for workouts and avoid foreclosures,” she wrote.
She added that the proposed rule restricts commercial speech and impedes access to the courts. She said that when servicers contact consumers about the consequences of non-payment, they are engaging in “non-deceptive commercial speech, which is protected by the First Amendment.” She noted that servicers also have a First Amendment right to petition the government, including access to federal courts.
In her letter, Kaley Schafer, NAFCU’s senior regulatory affairs counsel said that the moratorium would not help borrowers as intended and asked the bureau to provide explicit exceptions to the moratorium. “NAFCU encourages the Bureau to provide flexibility, where possible, in terms of documents that a credit union can provide to a member without triggering the first notice or filing,” she wrote. Schafer also said that the moratorium may cause liquidity problems for servicers.