Industry group advocates for clearer regulations under Regulation X
The Mortgage Bankers Association (MBA) is advocating for key changes to mortgage servicing rules under Regulation X, urging the Consumer Financial Protection Bureau (CFPB) to simplify the loss mitigation framework and improve language assistance for borrowers with limited English proficiency.
Additionally, in a separate report, MBA noted that mortgage credit availability increased in August, reflecting loosening lending standards.
“Counterproductive” changes
In a recent letter to CFPB director Rohit Chopra, the trade association expressed support for efforts to enhance language access for borrowers with limited English proficiency (LEP), but raised concerns about some aspects of the proposed changes to mortgage servicing rules under Regulation X.
The letter emphasized the need for clear guidelines, particularly regarding how language assistance should be provided to borrowers.
“Upon borrower request, a servicer must provide translation or interpretation services for any language the servicer knows or should have known was used in marketing to the borrower,” the letter stated. “We believe that this particular standard is too broad and operationally cumbersome for servicers to execute; as a result, it has the potential to constrain, rather than expand, language access.”
MBA added that the proposal is vague on key policy elements crucial to effective implementation, specifically around what qualifies as “marketing” and when a servicer “should have known” a borrower received marketing in a non-English language.
“These concepts are not defined or sufficiently explained in a manner that clarifies the conduct that triggers the relevant obligations,” the group said.
MBA further highlighted that marketing practices are not consistently tracked across companies, making it difficult for servicers to determine when language assistance should be provided.
Read more: Housing industry backs CFPB's mortgage servicing rule changes
“In addition, marketing practices are not currently tracked or monitored across companies in a way that would enable one company to determine whether a borrower received non-English language marketing materials or conversed with another company’s loan officers in a language other than English,” the letter read. “This is especially true when the entity servicing the loan is distinct from the entity that originated the loan.”
Instead, the MBA called for more practical solutions to enhance borrower assistance. Some of their recommendations include simplifying the process for servicers and borrowers in the loss mitigation process, reinstating the “one review” framework, and eliminating foreclosure fee prohibitions under certain conditions.
MBA also proposed creating a separate rulemaking process focused on expanding language access, with clear cost-benefit analysis.
“In sum, while we appreciate the Bureau’s attention to language access and will share additional thoughts separately, the marketing section of the Reg X mortgage servicing proposal would not produce the gains in language access that the Bureau seeks, and instead would more likely be counterproductive. We encourage the Bureau to remove the marketing section and pursue operationally feasible policies that will enhance assistance to borrowers with limited English proficiency,” MBA said.
Credit availability uptick
In other news, mortgage credit availability saw a slight increase in August, according to the Mortgage Credit Availability Index (MCAI) published by the MBA.
The MCAI, which tracks the availability of mortgage credit, rose by 0.9% to 99.0, signaling that lenders have slightly loosened their standards, making credit more accessible.
“Credit availability increased in August, with the conventional credit index reaching its highest level since July 2022. This was driven by increased cash-out refinance and non-QM programs,” said MBA deputy chief economist Joel Kan. “Additionally, the jumbo index increased for the eighth consecutive month to its highest level since 2022.”
Kan noted that mortgage rates, which have been declining since May 2024, have spurred more interest in refinancing, especially for homeowners with higher-rate loans.
“As a result, the increase in credit availability was the result of lenders broadening their refinance offerings to meet the greater demand,” he said.
The Conventional MCAI, which covers loans not backed by government entities, rose by 1.8% in August. Within the conventional index, the Jumbo MCAI, which tracks large loan sizes, increased by 1.5%, while the Conforming MCAI, which focuses on smaller loan sizes, jumped by 2.6%. Meanwhile, the Government MCAI, which includes FHA, VA, and USDA loans, remained unchanged.
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