Aiming to help protect mortgage borrowers from “unwelcome surprises” as they exit forbearance, the CFPB on Monday finalized amendments to federal mortgage servicing regulations in an effort to reinforce the ongoing economic recovery as the federal foreclosure moratoriums are phased out.
The amendments included in a final rule are intended to support the housing market’s “smooth and orderly transition” to post-pandemic operation and aim to establish temporary, special safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes, according to the CFPB.
The CFPB says that the rule requires servicers to redouble their efforts to prevent avoidable foreclosures, including:
- giving borrowers a “meaningful” opportunity to pursue loss mitigation options;
- offering streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all paperwork for every possible option; and
- increasing outreach to borrowers before initiating foreclosure and providing key information about repayment or other options to those exiting forbearance or struggling to make mortgage payments.
More than seven million homeowners took advantage of COVID-19 hardship forbearance while they resolved financial insecurity caused by the pandemic and its effects. Today, just over two million homeowners are still in forbearance, but most of those are projected to be in forbearance for more than a year, according to the CFPB.
The rule covers loans on principal residences, generally excludes small servicers and will take effect on Aug. 31, 2021. An executive summary of the rule can be accessed on the CFPB website.