While most homebuyers, tenants, agents and sellers have been concerned about inventory, rising prices and multiple offers, the CFPB has been issuing bulletins updating the public on proposed actions.
With more homeowners behind in their mortgages than at any time since 2010, the CFPB estimates almost 1.7 million borrowers will exit forbearance in September and the following months into the Fall of 2021.
Because of the anticipated wave of distressed homeowners, the CFPB is proposing:
- Giving borrowers time: With nearly 3 million borrowers behind in their mortgage payments the CFPB is looking for ways to provide these distressed homeowners time to resume their payments so we don’t have an onslaught of foreclosures in the 3rd and 4th quarters of 2021. The CFPB is proposing a pre-foreclosure period that would prohibit foreclosure action until after December 31, 2021.
- Keep borrowers informed of their options: The CFPB is proposing temporary changes to servicer notices to help get information to borrowers. Servicers would be required to ask if the borrower has a COVID-19 related hardship if they are not already in a forbearance program. If the borrower is not in a forbearance program, the servicer would be required to describe all the programs available to the borrower and a list of actions the borrower would need to take in order to enter a forbearance program.
If the borrower is already in forbearance, the servicer would be required to tell the borrower the date the forbearance program ends and provide a list of loss mitigation options. In addition, even with an incomplete application, a servicer could offer a borrower a loan modification that extended the term of the existing loan no more than 40 years. If the loan mod allows deferral of some amounts until an event such as a refinance or sale occurs, then late fees, accrual of interest and other fees would be forbidden.
Fair Debt Collection and Renters: On April 19th the CFPB issued a statement regarding a landlord’s debt collector, including attorneys, obligations to renters under the CDC Eviction Moratorium. The new rule states that as of May 3rd 2021, a debt collector must provide a tenant disclosure document stating the temporary eviction laws and rules of you state, local area, city and the CDC, including notification of the CDC Tenant Declaration Form and the Covid-19 criteria for qualification.
Here are the criteria to qualify for CDC protection. At least one of these must be true in order to qualify:
- You must have received a stimulus check in 2020 or 2021
- You were not required to report income to the IRS in 2020
- You earned less than $90,000/year as an individual or less than $198,000/year as a joint tax filer
And you have one of these hardships:
- Household income has gone down substantially
- You have been laid off work
- Your work hours or wages were cut
- You have “extraordinary” (7.4% or more of your adjusted gross income) in our of pocket medical expenses
In order to take advantage of the CDC protections, a tenant must fill out, sign and deliver the Declaration to the Landlord. There is no verification requirement.
The debt collector is required to provide “clear and conspicuous written notice”. Phone calls, text messages, emails and other electronic notices are not sufficient. In addition, the CFPB has provided sample language you can find on their website.
The interim rule was rushed forward without the usual 30-day public comment period because CFPB declared it was too important to delay its issuance. The Fair Debt Collection Practices Act (FDCPA) prohibits certain unfair and deceptive debt collection practices. This rule amends that act and extends the debt collectors obligations to advising the tenant of government programs they may or may not qualify for, even if the landlord or property manager previously advised the tenant of the CDC rule.
As you read the order you will see the CFPB bases this change on an assumption that tenants are unaware of the CDC order and if they are aware don’t know how to deliver a notice to their landlord. The statement assumes the tenant is unable to print, sign and provide the notice to the landlord while at the same time it assumes a tenant knows how to give notice to the landlord when they are moving out.
What is striking is the rule states the CDC, housing advocates, consumer advocates and government have been inadequate at making sure the CDC order is publicly known, and so because of that inadequacy, debt collectors, and by extension landlords, must act as consumer advocates.
This all hinges on what the report terms “informal outreach to consumer advocates and other stakeholders” as well as CFPB generated reports. Read the footnotes in the report. In several cases the footnotes contradict the report statement.
In the rule overview section, the CFPB admits it has limited data to quantify the potential costs, benefits and impacts of the rule on consumers, landlords and residential property owners. It further states its data is largely taken from Princeton University’s Eviction Lab Tracking System, which tracks only 27 cities and only eviction actions devoid of context and circumstance. The Eviction Lab website contains eviction data from 2000-2016 and Jan 2020 to March 2021 gathered from the Maricopa County Justice Courts. None of that data addresses specific reasons for the eviction or circumstances leading the website to infer circumstances and impacts. Because the data is limited and incomplete for the expressed purposes of the rule, the CFPB discussion is qualitative, not quantitative.
The report is riddled with statements starting with the word “May”. For example, in the report it is stated that…
Some consumers who are unaware of the CDC Order may be removed from the property even though they would have been eligible for the Order’s protection had they taken certain steps. Some consumers may be unaware of the eviction protection available under the CDC Order and therefore may move out following receipt of an eviction notice but before a formal eviction action is filed or judgement issued. Some consumers may be falsely informed they are ineligible for the CDC Order’s protections.
This statement is footnoted as being based on U.S. Census data that was a self-reporting by renters. 12% of White renters reported being behind on their rent while 20% of non-white renters reported being behind. 19% of renters with pre-tax income less than $35,000 reported being behind in rent versus renters with income between $35,000 and $75,000.
For the life of me I can’t figure out how the CFPB extrapolated the census data to mean unawareness and then expanded that to perceived, possible actions that somehow transposed into needed action.
Furthermore, the CFPB assumes weekly eviction filings will remain constant at 5,000 per week based on filing action in the first 11 weeks of 2021 and that the share of evictions from those 27 cities will be the same percentage as from 2000 to 2016. What cities are tracked? Phoenix, Tucson, Houston, Boston, Dallas, Fort Worth, Austin, Gainesville, Greenville, Cincinnati, Cleveland, Memphis, Jacksonville, Milwaukee, New York, Philadelphia, Pittsburgh, St. Louis are among the cities. All cities that during the recession suffered a large number of distressed property owners and tenants.
For the Phoenix area, our eviction filings were up in January and February of 2020, but far below historic eviction filing rates and they remain at historically low levels today with white neighborhood evictions outpacing Latinx and other racial neighborhoods with about 43% of the eviction filings.
Part of the CFPB justification for the rule is the assumption they are buying time for renters to use the moratorium period to secure rental assistance funds, bring the rent current and that in turn will reduce the number of evictions when the moratorium ends.
That justification would indicate to me a monitoring of the Treasury Department’s Emergency Rental Assistance Program funds in those cities. It would appear that when that fund’s numbers get to a certain point the CFPB will stop extending the moratorium, and I base that thought on the rule statement that prevention and delay of evictions based on the Treasury’s rental assistance program funding is the motivation for the order.
The rule goes on to state that delay in evictions will benefit consumers by reducing their exposure to Covid-19, infection, disease and death. Part of that is the automatic assumption that evicted persons cannot social distance and might even lodge with friends and family, giving them Covid-19.
The rule assumes Landlords will benefit from the rule since there will be less Covid-19 exposure in society, although it does admit Landlords will bear costs of delayed evictions. It assumes a Landlord who recovers rent from the Treasury Department program is only suffering delayed income with no other harm or burden and that the circumstance is not as burdensome as eviction. The CFPB admits it has no data that would allow it to even hazard a guess as to the economic effects of the moratorium and the rule’s additional delays would have on landlords.
While property owners and their property managers are not identified as debt collectors, each property owner and property manager will want to consult their own attorney for guidance.
And this brings us to one of the most distressing aspect of this and other rules from various agencies and the Legislature. Nowhere is this or other rules and pieces of legislation is there attention to property rights, free will, private contract rights or even a healthy respect for individuals.
The fact that individuals were renegotiating rental contracts as soon as government began shutting down whole industries is not considered. There is no recognition that most landlords and tenants are smart enough to deal with reality to the best of their ability and that harm comes when government pre-supposes consequences and actions based on imagined motivations.
For all of us, the question is: Are you OK with government discounting individual rights, liberties, free will and intelligence, causing harm to all concerned, while taking away the right of both parties to discuss and renegotiate the terms of their agreement? Are you OK with government taking away the tools you, property owners and tenants use to come to agreements that can be honor? Are you Ok with government essentially taking one person’s property for the benefit of another leading to the harm of both parties? All based on no data, supposition and based on construction of “what if statements”.
Which is why the CDC Moratorium keeps being vacated and has even been found unconstitutional by Federal Judges in various courts. The eviction moratorium clearly exceeds the agency’s authority.
There are many issues with the way our established principles have been ignored or in some cases violated by laws, rules and other government actions over the past 14 months. I suggest we all sit back and reflect on how we resurrect those basic principles that have served us well for over 250 years. After all, our industry is based on the right to private contract and private property rights. We always do better when we go back to those principles, and so do are progeny.