June 29, 2020

Good Morning,

For the past several weeks, the MBA has been working with Governor Walz, Attorney General Ellison and Minneapolis Federal Reserve Bank President Kashkari on a mortgage relief statement/agreement. These officials want to ensure that Minnesota homeowners who are affected by COVID-19 will get relief from their lenders.

Very early in this process, these leaders suggested taking the same approach that California took back in March. California saw what Congress had done in the CARES Act, which was to grant homeowners with loans that are owned by Fannie Mae and Freddie Mac a very generous forbearance period. California then asked banks and other lenders to agree to give all homeowners that same type of forbearance option. Banks that made a mortgage loan and held it on their own books were asked to sign a pledge that they would agree to forbearance, under specific terms, for their portfolio loans.

When the Attorney General, Governor and Fed President approached the MBA about taking this kind of action in Minnesota, we agreed to work with them. But the circumstances and the timing here in Minnesota were different. We let them know that the Minnesota banks have already been working with their borrowers for several months. With most of the COVID-19 layoffs happening back in March, many Minnesota homeowners have already received mortgage relief, without the need for any sort of government pledge. Banks signing a government pledge to work with their borrowers now, after so many banks have already been providing mortgage relief for the past four months, seemed unusual.

In working with these officials, we also stated that forbearance is just one form of mortgage relief. We urged the officials to take a more rounded view of the relief options that are available to banks and their borrowers, rather than making forbearance the only form of relief in a statement or pledge.

Finally, we also urged the officials to make consumer education the focus of this effort. There may be borrowers who need help, but they do not know that they can ask for assistance. Any statement by these elected officials should first and foremost be an announcement that borrowers who need help should get it, immediately. Asking for help earlier rather than later will ensure that lenders have more options to assist borrowers. Consumers should know they are not alone in this situation, and that lenders are ready to help. At this point in time, since the banks have already helped a lot of borrowers, any government statement or agreement should primarily be used to ensure that borrowers who are in trouble know that they can get help.

Unfortunately, the officials chose not to include our suggestions in their statement/agreement. It is essentially a California-like agreement that asks banks to pledge they will give forbearance, under specific terms, to all borrowers. The Attorney General’s office sent the MBA a copy of the statement late on Friday. The statement is mostly complete, but it does not include the supportive quotes from the Attorney General and the Governor. The agreement looks like the officials are taking credit for forcing the lenders to help their customers. Starting with the title of the agreement, it does not give the banks credit for doing the right thing over the past four months, which is unfortunate.

The Attorney General’s office has asked the MBA to send the statement to our member banks, asking whether any banks are interested in signing this agreement to provide this specific type of mortgage relief to all their borrowers affected by COVID-19. There is a very quick turnaround on this agreement. They are requiring banks to sign on to this agreement by noon today.

This process has been extremely disappointing. The Minnesota banks have done what they always do. They have taken care of their customers and their communities when they need it most. The MBA gave a lot of input on what a Minnesota agreement should look like. We clearly stated our concerns and our suggestions. The ICBM was also heavily involved in this process, providing very good feedback as well. After working with these government officials for several weeks, it would have been great if their statement/agreement would have acknowledged the feedback that we provided. Unfortunately, they did not do so. Based on the specific language in this agreement, the MBA is not in a position to support it at this time.

However, we feel obligated to send a copy of the agreement to our member banks. Click here to read the agreement.

The Attorney General’s office is asking individual banks to sign this agreement. Signing on to the agreement is completely voluntary. Perhaps some banks will be interested in doing so. If you choose to sign this agreement, please send an email to Sadaf Rahmani in the Attorney General’s office, Sadaf.Rahmani@ag.state.mn.us, by noon today, indicating that your bank will sign the agreement.

Thank you for your attention. If you have any questions, please contact Joe Witt at joew@minnbankers.com. Have a great week.