On April 5th, the CFPB proposed a set of rule changes intended to prevent foreclosures as emergency federal foreclosure protections expire this summer. Given that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain, the proposed rules seek to ensure that servicers and borrowers work together to prevent foreclosures.
The proposed rules intend to:
- Give borrowers time: The proposed rules provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.
- Give servicers options: The proposed rules permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. This provision would only be available for modifications that do not increase a borrower’s monthly payment and that extend the loan’s term by no more than 40 years from the modification’s effective date.
- Keep borrowers informed: The proposed rules provide temporary changes to certain required servicer communications to make sure that borrowers receive key information about their options at the appropriate time.
The CFPB is requesting comments be submitted before May 11, 2021. Read the Proposed Rules and Request for Public Comment here.
Note that the CFPB already warned mortgage servicers to take all necessary steps to prevent a wave of foreclosures this fall. To read more click here.