Due to the COVID-19 pandemic and ensuing economic crisis with millions of families nationwide suffering the loss of income and nearly 3 million homeowners behind on their mortgages, the CFPB on Monday proposed prohibiting mortgage servicers from starting foreclosure until after the end of the year. The proposed rule can be accessed on the CFPB website, while comments are due by May 11, 2021.
“To make sure borrowers aren’t rushed into foreclosure when a potentially unprecedented number of borrowers exit forbearance at around the same time this fall, the proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after Dec. 31, 2021,” the CFPB said in a statement.
The agency is seeking public input on that date, as well as whether there are more limited ways to achieve the same purpose. For example, the CFPB is considering whether to permit earlier foreclosures if the servicer has taken certain steps to evaluate the borrower for loss mitigation or made efforts to contact an unresponsive borrower. This provision, like the rest of the proposal, would only apply to loans secured by a borrower’s principal residence.
The CFPB is also proposing to 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 agency proposes temporary changes to certain required servicer communications to make sure that, during this crisis, borrowers receive key information about their options at the appropriate time.
In a compliance bulletin issued April 1, the CFPB warned mortgage servicers to dedicate resources and staff to prepare for a surge in requests for assistance.
For additional insight about the CFPB’s proposed rule, visit the New York’s State of Mind blog, written by Henry Meier, the New York Credit Union Association’s senior vice president and general counsel