The Consumer Financial Protection Bureau (CFPB) has developed a proposal to prevent avoidable foreclosures as temporary forbearance measures put in place during the pandemic will expire in the fall.
The CFPB’s proposal seeks to ensure that both mortgage servicers and borrowers can work together to prevent avoidable foreclosures.
“The nation has endured more than a year of a deadly pandemic and a punishing economic crisis. We must not lose sight of the dangers, so many consumers still face,” CFPB Acting Director Dave Uejio said. “Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up. Last week we warned that servicers need to be prepared for a high volume of borrowers exiting forbearance, and today we are proposing additional guardrails and tools for servicers as they navigate the coming months. We will do everything in our power to ensure servicers work with struggling families to find solutions that prevent avoidable foreclosures.”
Specifically, the proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after Dec. 31, 2021. Further, it would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. In addition, the CFPB is proposing temporary changes to certain required servicer communications to make sure that borrowers receive key information about their options.
As of February, about 3 million homeowners were behind on their mortgages. Of that total, an estimated 2.1 million mortgages were in forbearance and at least 90 days delinquent. If current trends continue, there could be 1.7 million delinquent loans in September 2021. Further, Black and Hispanic homeowners were more than two times as likely to be behind on housing payments as of December 2020, according to the CFPB.
The CFPB has warned mortgage servicers to dedicate resources and staff to prepare for a surge in requests for assistance. The CFPB will be monitoring how servicers engage with borrowers, respond to borrower requests, and process applications.
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