Regulators lower CBLR, offer relief to mortgage servicers

Federal banking agencies temporarily lowered the community bank leverage ratio to 8 percent to provide relief to community banks, and offered flexibility for mortgage servicers working with troubled borrowers amid the coronavirus pandemic.

The Fed, the FDIC and the Office of the Comptroller of the Currency issued two interim final rules intended to provide relief to community banks regarding the CBLR. The rules will modify the community bank leverage ratio frameworks so that beginning in Q2 of 2020 and until the end of the year, a bank that has a leverage ratio of at least 8 percent will be able to use the community bank leverage ratio framework. Community banks will also have until Jan. 1, 2022, before the leverage ratio requirements to use the CBLR framework will return to 9 percent.

“The agencies are providing community banking organizations with a clear and gradual transition back to the 9 percent leverage ratio requirement previously established by the agencies,” regulators said in a joint press release. “The transition will allow community banking organizations to focus on supporting lending to creditworthy households and businesses given the recent strains on the U.S. economy caused by the coronavirus.”

Federal agencies issued a policy statement on April 3 granting flexibility to mortgage servicers to work with borrowers struggling as a result of the pandemic. Under the CARES Act, servicers are required to grant payment forbearances to impacted borrowers for up to six months, and possibly longer.

The Consumer Financial Protection Bureau, the Fed, the FDIC, the OCC, the state banking regulators and the NCUA confirmed that the forbearances can be offered in a manner consistent with Regulation X.

The agencies also said they would not penalize servicers for failing to provide the required notice of acknowledgement to borrowers who submit incomplete applications within the five-day timeframe described in the servicing rules, provided that the notice is given before the end of the forbearance period. 

Regulators also said they would not penalize servicers for failing to provide other loss mitigation notices and outreach efforts or for delays in sending annual escrow statements as long as the servicers demonstrate good faith efforts to comply “within a reasonable timeframe.”

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