Proposed CFPB Rule to Amend Regulation Z
Due to Covid-19 many homeowners are struggling to pay their mortgage and have fallen into foreclosure. As our world is opening back up again, homeowners may be in jeopardy of losing their home as the emergency federal foreclosure protections expire.
The Consumer Financial Protection Bureau (CFPB) is taking steps to specifically prevent avoidable foreclosures due to the COVID-19 pandemic.
On April 5, the CFPB issued a notice of proposed rulemaking (NPR) to amend Regulation Z in mainly three areas:
- Prohibit services from initiating a notice for any foreclosure before December 31. The CFPB is considering, however, to allow servicers to still pursue foreclosure prior to December 31 in certain situations.
- Allow servicers to offer borrowers who have had Covid 19 an option to perform a loan modification.
- Offer early intervention options to delinquent borrowers at two specific times. The first would be an initial live contact that would occur if the borrow is not yet in forbearance. The second live contact would occur prior to the end of the forbearance period. These live contact requirements would expire on August 31, 2022.
In addition, the NPR explains that if a borrower is in a short-term payment forbearance program due to a Covid-19 hardship, servicers are required to contact the borrower no later than thirty days before the forbearance period to see if the borrower has any intentions of completing a loss mitigation application. If the borrower provides a full loss mitigation evaluation, then the servicers must work diligently to complete the application before the forbearance program terminates. The NPR defines a direct or indirect financial hardship due to the COVID-19 emergency as a COVID-19 related emergency. The CFPB will allow commentary on the NPR as long as they are submitted prior to May 11.
The CFPB issued a bulletin on April 1st, stating that all servicers must take the steps to prevent the outbreak of avoidable foreclosures and that leaving these foreclosures unaddressed is unacceptable. The bulletin noted eight areas that the CFPB will need to pay particular attention to while engaging in loss mitigation services. The CFPB openly announced that any servicers not providing full services or unable to perform the expectations of loss mitigation services, should expect the CFPB enforcement to address violations under its Regulation X, CFPA, or other authorities. Under the Biden administration, the CFPB is being proactive in consumer financial industries. Still, servicers are advised to pay attention to these new developments arising and create strategies to fix them.
In effect, “the economic crisis will continue to threaten the nation’s families and communities if steps are not taken to prevent avoidable foreclosures.”
Current CFPB’s analysis and data indicates the following:
- To date, one million homeowners are behind on their mortgage with approximately 2.1 million mortgages in forbearance and at least 90 days delinquent.
- Foreclosures cost homeowners an average of $12,500 with neighboring homes dropping in value by 1 to 1.6 percent after nearby foreclosures.
- The racial inequality deepens as Black and Hispanic homeowners are more than two times more likely to be behind on house payments.
The Home Assistance Center is constantly reviewing updates with the CFPB and mortgage servicers to ensure our clients’ ability to retain their homes.
