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CFPB Proposes Changes to Prevent Foreclosure

Posted: Apr 7, 2021 | Author: Cornerstone League
CFPB  lending & collections  mortgage lending 

The Consumer Financial Protection Bureau (CFPB) has proposed changes intended to help prevent impending foreclosure actions as the emergency federal foreclosure protections are eventually set to expire. To prevent a windfall of foreclosures that may overwhelm servicers, the CFPB has proposed a number of actions.

CFPB Acting Director Dave Uejio said, “Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up. Last week, we warned that servicers need to be prepared for a high volume of borrowers exiting forbearance, and today, we are proposing additional guardrails and tools for servicers as they navigate the coming months. We will do everything in our power to ensure servicers work with struggling families to find solutions that prevent avoidable foreclosures.”

Nearly 2.5 million homeowners are currently in forbearance plans, according to the Mortgage Bankers Association. Since the beginning of the pandemic, the number of homeowners behind on their mortgage has doubled, as 6% were delinquent as of December 2020. More homeowners are behind on their mortgages than at any time since 2010, the peak of the Great Recession. Industry data suggests that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments.

The CFPB’s proposal, if finalized, would:

  • Generally prohibit servicers from starting foreclosure until after Dec. 31, 2021. The CFPB is seeking public input on that date, as well as whether there are more limited ways to achieve the same purpose.
  • Permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
  • Make 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.

CFPB predicts that nearly 1.7 million loans could be at least 90 days delinquent by September 2021. Foreclosures have an average cost to borrowers of at least $12,500, with neighboring homes also losing value and sale prices dropping by 1% to 1.6% after nearby foreclosure sales. According to a March CFPB report, Black and Hispanic homeowners were more than two times as likely to be behind on housing payments as of December 2020.

Public comments on the CFPB’s proposed rule are due May 10, 2021. 

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