CFPB moves to avoid a wave of foreclosures

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The Consumer Financial Protection Bureau is moving to strengthen protections for distressed mortgage borrowers, including those with loans not backed by the federal government who have so far been excluded from national COVID-related relief. Proposed rule changes announced by the CFPB on Monday would generally block servicers from initiating foreclosures until after the end of this year, allow servicers to offer certain simplified load modification options to borrowers with pandemic-related difficulties. and would help ensure that borrowers get timely information on forbearance and loss mitigation options.

The proposed changes “will ensure that servicers and borrowers have the tools and time to work together to prevent avoidable foreclosures, which alter lives, uproot children and inflict more costs on those least able to bear them,” said the acting director of the CFPB, Dave Uejio, on a call. with reporters on Monday. Nearly 3 million homeowners have fallen behind on mortgage payments, according to the CFPB. In February, severe mortgage delinquencies – those 90 days or more behind – were at five times pre-pandemic levels, according to mortgage data provider Black Knight. Also Read: How To Determine If You Qualify For Pandemic-Related Mortgage Relief If Finalized, Rule Changes Could Have Particular Meaning For The Approximately 14.5 Million Single Family Mortgages Not Backed By Federally Authorized Fannie Mae FNMA , + 1.96% or Freddie Mac FMCC, + 0.50% or by the federal government. While homeowners with federally backed mortgages may qualify for up to 18 months of COVID-related forbearance and are currently protected from foreclosure until after June 30, homeowners whose loans are private and do not have Federal backing does not guarantee such relief. Although some servicers say they are trying to offer the same help options to all borrowers regardless of whether their loans are backed by the federal government, MarketWatch reported last month that some homeowners with private loans have received little or no help. and have faced foreclosure during the pandemic. . One reason the CFPB took action is that the Coronavirus Relief, Relief and Economic Security Act (CARES) protections applied only to federally backed loans, but about 30% of loans they are privately owned, Diane Thompson, CFPB senior adviser, said in the press call Monday. The proposed rules would generally apply across the mortgage market, he said. Monday’s announcement comes on the heels of the CFPB’s warning last week that mortgage servicers should be prepared for a “surge” of distressed homeowners who will need help when federal emergency mortgage protections expire at the end of this year. Nearly 1.7 million homeowners will come out of leniency in September and the following months, and managers need to make sure they have enough staff and resources to help them, the office said. To help ensure that those borrowers do not rush into forbearance, CFPB’s proposal includes a “special pre-foreclosure review period” that would generally prohibit servicers from initiating foreclosures until after December 31, 2021. The The office says it is seeking public input on that date and considering whether to allow prior foreclosures if servicers take certain steps to weigh loss mitigation options or contact unresponsive borrowers.