The Federal Housing Finance Agency is doing nothing to ensure that mortgage servicers inform borrowers of federally backed mortgages that they have a right to forbearance as they deal with the economic impact of the coronavirus crisis, the agency’s Inspector General said this week.
The agency has delegated responsibility for monitoring mortgage servicers to Fannie Mae and Freddie Mac, which reported that they are not ensuring compliance with the rule. In the report, the two agencies are referred to as “the enterprises.”
“The Enterprises reported to us that they have not asked any servicer to demonstrate compliance with the CARES Act and implementing guidance,” the IG said.
The IG and the agency cannot even agree on whether the two enterprises have a responsibility to ensure that servicers inform borrowers of the forbearance option.
In their response to the IG report, the Federal Housing Finance Agency and the two enterprises dispute the assertion that they have any enforcement responsibility over mortgage servicers. They said that the Consumer Financial Protection Bureau has that power.
However, the IG said that the enterprises are responsible for managing the federal government’s relationship with the servicers.
The IG said it surveyed 60 websites hosted by servicers and found incomplete or unclear information about forbearance on 14 of the 20 websites of the largest servicers and limited or no information on the remaining websites.
The economic stimulus legislation enacted in response to the pandemic requires servicers of federally back mortgages to grant forbearance to borrowers with pandemic-related problems. The forbearance may last up to two consecutive 180-day periods.
If forbearance is requested, the mortgage servicer is required to make the borrower’s payments, which the IG said provides the companies with a financial incentive not to offer it.
“The potential financial burden on servicers for mortgages in forbearance is significant and, in our view, creates the risk that some mortgage servicers may not follow the mandates in the CARES Act and implementing guidance,” the IG said.
Fannie Mae and Freddie Mac told the IG that they do not consider it their responsibility to test whether their servicers comply with legal and regulatory requirements. They said that their long-standing business relationships with the servicers give them confidence that servicers are aware of their responsibilities.