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The
Consumer Financial Protection Bureau (CFPB) in April proposed,
among other measures, a new review process which it said at the
time would generally prohibit mortgage servicers from starting a
foreclosure until after Dec. 31, 2021.
The agency is trying to prevent a wave of foreclosures as
900,000 homeowners start to exit COVID-19 mortgage holiday or
"forbearance" programs in coming months.
Reuters reported last week that the agency was due to proceed
with the foreclosure rule but was expected to carve out certain
groups of borrowers after industry groups said the proposal was
too broad and beyond the CFPB's legal remit.
On Monday, CFPB Acting Director Dave Uejio told reporters the
final rule "takes a different tact" from what was originally
proposed. It will require that mortgage servicers temporarily
undertake additional pre-foreclosure protections, including
making a greater effort to reach out to struggling borrowers,
but it will give servicers more flexibility, CFPB staff said.
As of June 14, an estimated 2 million homeowners were in
forbearance, according to the Mortgage Bankers Association.
Around 900,000 of those are due to expire later this year, real
estate industry data provider Black Knight estimates.
Under the new rule, from Aug. 31, 2021 through Dec. 31, 2021,
mortgage servicers may only refer 120-day delinquent accounts
for foreclosure provided at least one of three new temporary
safeguards has been met: the borrower has been thoroughly
evaluated and there are no available options to avoid
foreclosure; the property is abandoned; the borrower is
unresponsive to servicer outreach.
The rule will also allow mortgage servicers to offer streamlined
loan modifications, which cannot increase borrowers payments; it
also doesn't require borrowers to submit full paperwork. That
flexibility will allow servicers to get borrowers into
affordable mortgage payment plans faster, with less paperwork,
the CFPB said.
The new required protections do not apply to non-primary
residences, borrowers who were more than 120 days behind on
their mortgage before March 1, 2020, and small mortgage
services.
Speaking to reporters, CFPB officials said they were focused on
preventing a cliff of foreclosures and ensuring an "orderly
transition" to a normal housing market, but that in some cases
foreclosures would resume once the forbearance programs expired.
(Reporting by Michelle Price; Editing by Aurora Ellis)
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