‘Gear up’ for foreclosures, CFPB warns

(April 2, 2021) Seemingly pulling no punches, the CFPB late this week sent a warning to mortgage servicers: unprepared for an expected surge in homeowners needing assistance is unacceptable – and the companies should “gear up.”

In a compliance bulletin, the bureau said mortgage servicers should take “all necessary steps” to prevent a wave of what it called “avoidable foreclosures” coming this fall. “Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall,” the bureau stated in the bulletin. “Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help.”

The bureau said it will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. CFPB added that it will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.

Our first priority is ensuring struggling families get the assistance they need,” bureau Acting Director Dave Uejio said in a statement. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”

In its release, the agency stated that as of January approximately 2.7 million borrowers remained in federally- backed mortgages with access to forbearance; 2.1 million borrowers, the bureau said, were in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent, the agency said.

CFPB added that industry data suggest 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. Beginning with the expiration of the federal foreclosure moratoriums put in place by last year’s Coronavirus Aid, Relief, and Economic Security (CARES) Act at the end of June, CFPB said, “mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.”

To meet this surge, servicers will need to plan now, the bureau said. “In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures,” the agency added.

Particular attention will be paid, the bureau said, to how well servicers are being proactive, working with borrowers, addressing language access, evaluating income fairly, handling inquiries promptly, and preventing avoidable foreclosures

CFPB April 1, 2021 compliance bulletin.