The Federal Reserve along with the other federal financial agencies and Conference of State Bank Supervisors (CSBS) issued the attached statement to encourage regulated institutions and state supervised entities that service residential mortgages (servicers) to pursue strategies to mitigate losses while preserving homeownership to the extent possible and appropriate.1 The statement addresses the special issues of servicers of securitized mortgage loans that were not addressed in other recent interagency statements on residential mortgage lending.2
The statement outlines the steps a servicer may pursue when there is an increased risk of default, including: identifying borrowers at heightened risk of delinquency or default, contacting borrowers to assess their ability to repay, and determining whether default is reasonably foreseeable. The statement goes on to explain possible loss mitigation techniques that a servicer may pursue with a borrower. The agencies and CSBS recognize that servicers have to consider the governing documents for the securitization trust to determine their authority to restructure loans that are delinquent or are in imminent risk of default. Servicers should also consider referring appropriate borrowers to qualified homeownership counseling services that may be able to work with all parties to avoid unnecessary foreclosures.
Federal Reserve Banks are asked to distribute this letter and statement to appropriate banking organizations supervised by the Federal Reserve, as well as to their own supervisory and examination staff. For questions concerning the safety and soundness aspects of this guidance, please contact in the Division of Banking Supervision and Regulation: Sabeth Siddique, Assistant Director, at (202) 452-3861; Virginia Gibbs, Senior Supervisory Financial Analyst, at (202) 452-2521; and William Tiernay, Supervisory Financial Analyst, at (202) 872-7579. For questions related to consumer compliance issues, please contact Maryann Hunter, Advisor, Division of Consumer and Community Affairs, at (202) 452-6468.