(July 2, 2021) Rules described as designed to help prevent a surge of foreclosures as federal protections expire were finalized this week – to become effective Aug. 31 – by the CFPB, effectively putting an end to an extension of a foreclosure moratorium by the agency at the end of this month.
The bureau said its amendments to federal mortgage servicing regulations would help protect mortgage borrowers from “unwelcome surprises” as they exit forbearance following the end of the federal foreclosure moratorium, set to end July 31. The rules cover loans on principal residences and generally exclude small servicers.
The protections only apply to first legal or first notice between the effective date of Aug. 31, 2021 and the sunset of Jan. 1, 2022.
Under the new rules, borrowers will have at least three options to bring mortgages current and avoid foreclosure: Resume regular mortgage payments; lower their monthly mortgage payments or; sell their homes, the bureau said.
The agency noted that the rules announced this week will establish “temporary special safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes.”
According to the bureau, the rules will:
- Give borrowers a meaningful opportunity to pursue loss mitigation options. “As borrowers exit forbearance, they need time to process their current options and consider next steps,” the agency stated. “As such, to ensure that borrowers can pursue foreclosure avoidance options, servicers must meet temporary special procedural safeguards before initiating foreclosures for certain mortgages through the end of the year.”
- Allow mortgage servicers to help borrowers faster. “Under the new temporary rule, servicers can offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all the paperwork for every possible option,” the agency stated. “These streamlined loan modifications cannot increase borrowers’ payments and have other protections built into them. With this flexibility, servicers can get borrowers into affordable mortgage payment plans faster, with less paperwork for both the servicer and the borrower.”
- Tell borrowers their options. “Servicers will be required to increase their outreach to borrowers before initiating foreclosure and tell borrowers key information about their repayment or other options when they communicate with borrowers who are exiting forbearance or struggling to make mortgage payments,” CFPB said.
Not all foreclosures are avoidable, CFPB said, noting such action can start if the borrower: has abandoned the property; was more than 120 days behind on their mortgage before March 1, 2020; is more than 120 days behind on their mortgage payments and has not responded to specific required outreach from the mortgage servicer for 90 days; or has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.
LINKS:
Final rule, federal mortgage servicing regulations
(April 23, 2021) The set of proposed rules proposed earlier this month by the CFPB aimed at preventing “avoidable foreclosures” as the emergency federal foreclosure protections expire is the focus of a recent summary from NASCUS.
As are all NASCUS summaries, it is available to members only.
CFPB said, on April 9 when it issued the proposals, that is seeks to “ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain.”
The NASCUS summary outlines the key provisions of the proposal, which include:
- A special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after Dec. 31, 2021.
- A provision permitting servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
- Temporary changes to certain required servicer communications to ensure that borrowers receive key information about their options at the appropriate time during the pandemic.
Comments on the proposals are due May 10.
(April 23, 2021) In a follow-up to its action last week essentially freezing foreclosures until year’s end, the CFPB this week issued an interim final rule stating that tenants can hold debt collectors (including lawyers) accountable for illegal evictions in the face of a moratorium on such actions outlined by federal health authorities.
Based on the Fair Debt Collection Practices Act (FDCPA), the rule requires debt collectors to provide written notice to tenants of their rights under the eviction moratorium issued by the federal Centers for Disease Control (CDC). The bureau said the rule also prohibits debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the Centers for Disease Control (CDC) moratorium.
Under the rule, CFPB said debt collectors, including attorneys, seeking to evict tenants for non-payment of rent must provide tenants who may have rights under the CDC order with clear and conspicuous written notice of those rights. The notice must be provided on the same date as the eviction notice, or, if no eviction notice is required by law, on the date that the eviction action is filed, the bureau said.
Phone calls or electronic notices such as text messages or emails are not sufficient; the notice must be in writing. Sample language to satisfy the rule’s disclosure requirements is included in the rule, the CFPB said.
The bureau added that its rule does not preempt more protective state laws, which some states (and localities) have adopted to enforce their own eviction moratoria. Debt collectors may also be required to provide notice of these moratoria, the bureau noted.
The rule takes effect May 3 (which the bureau said “will give debt collectors time to come into full compliance.” Debt collectors may begin complying with the rule before the compliance date, the bureau added.
It’s a short comment period for the rule: it ends May 19.
LINK:
CFPB Rule Clarifies Tenants Can Hold Debt Collectors Accountable for Illegal Evictions
(April 16, 2021) In another summary prepared this week, NASCUS outlines a bulletin issued by the bureau April 6 detailing its expectations for mortgage servicers’ engagement with borrowers in the closing months of forbearance programs created to help them deal with the financial impact of the coronavirus crisis.
Like all NASCUS summaries, it is a benefit of membership.
The bulletin issued last week follows the bureau’s proposed rules (issued April 5) aimed at preventing “avoidable foreclosures.” The proposed rules, the agency said, seek to “ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain.”
The follow-up bulletin (Bulletin 2021-02, “Supervision and Enforcement Priorities Regarding Housing Insecurity”), issued the following day, explains the CFPB’s intention to monitor servicers’ engagement with borrowers “at all stages in the process” in coming months and to prioritize mortgage servicing oversight work in carrying out its enforcement and supervision in the coming year.
LINK:
NASCUS Summary: CFPB Bulletin 2021-02, Supervision and Enforcement Priorities Regarding Housing Insecurity (members only)
(April 9, 2021) Widely depicted as a freeze on foreclosures until after Dec. 31, the CFPB this week unveiled a set of new rules it said were aimed at preventing “avoidable foreclosures” as the emergency federal foreclosure protections expire.
In a release, the bureau asserted that 3 million homeowners are behind on their mortgages due to the financial impact of the coronavirus crisis (with an estimated 2.1 million mortgages in forbearance and at least 90 days delinquent). The agency said the delinquent mortgage total has doubled since the beginning of the pandemic and that, as of December 2020, 6% of mortgages nationwide were delinquent.
Further, the bureau stated, 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.”
CFPB said its proposal “seeks to ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain.”
Specifics of the proposal include:
- A special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after Dec. 31, 2021. The bureau said it is seeking comment on that date, as well as whether there are more limited ways to achieve the same purpose. “For example, the CFPB is considering whether to permit earlier foreclosures if the servicer has taken certain steps to evaluate the borrower for loss mitigation or made efforts to contact an unresponsive borrower.” The provision would only apply to loans secured by a borrower’s principal residence.
- A provision permitting servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. “Normally, with certain exceptions, Regulation X requires servicers to review a borrower for all available options at once, which can mean borrowers have to submit more documents before a servicer can make a decision,” CFPB said. The agency said the provision would allow servicers to get borrowers into an affordable mortgage payment faster, with less paperwork for both the servicer and the borrower. It 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.
- Temporary changes to certain required servicer communications to ensure that borrowers receive key information about their options at the appropriate time during the pandemic.
LINK:
(April 9, 2021) Following its proposed rules to prevent “avoidable foreclosures,” the bureau later in the week released a new bulletin detailing its expectations for mortgage servicers’ engagement with borrowers in the closing months of forbearance programs created in the wake of the financial impact of the coronavirus crisis.
Bulletin 2021-02, “Supervision and Enforcement Priorities Regarding Housing Insecurity,” explains the CFPB’s intention to monitor servicers’ engagement with borrowers “at all stages in the process” in coming months and to prioritize mortgage servicing oversight work in carrying out its enforcement and supervision in the coming year.
The bulletin states that, in its oversight work, the CFPB plans to pay particular attention as to whether servicers are:
- Providing clear and readily understandable information to borrowers about their options for payment assistance;
- Complying with the outreach requirements in Regulation X (Real Estate Settlement Procedures Act, or RESPA) to ensure that borrowers are getting needed information about loss mitigation options;
- Complying with the Equal Credit Opportunity Act’s (ECOA’s) prohibition against discriminating against any applicant, with respect to any aspect of a credit transaction, including in their work with limited English proficiency borrowers and those having a range of income types;
- Promptly handle loss mitigation inquiries and avoid unreasonably long hold times on phone lines (for example, the CFPB plans to scrutinize servicer conduct where hold times are significantly longer than industry averages);
- Maintaining policies and procedures that are reasonably designed to achieve the continuity of contact objectives to ensure that delinquent borrowers receive accurate information about their loss mitigation options;
- Evaluating the applications consistent with the Regulation X requirements to promote timely and consistent evaluations (for borrowers who submit complete loss mitigation applications);
- Complying with foreclosure restrictions in Regulation X and other federal or state foreclosure restrictions; and
- Whether servicers are complying with the Fair Credit Reporting Act’s (FCRA) requirements to report the credit obligation or account appropriately.
LINK:
Bulletin 2021-02: Supervision and Enforcement Priorities Regarding Housing Insecurity
(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
LINK:
CFPB April 1, 2021 compliance bulletin.
(March 5, 2021) The day before CFPB Director Nominee Rohit Chopra’s appearance before a Senate committee considering his nomination, the bureau released a report from the current acting director saying the agency is working to mitigate home foreclosures prompted by the economic fallout of the coronavirus crisis.
Acting Director Uejio, in a report posted on the bureau’s website, said up to 10% of U.S. households are now at risk of eviction and foreclosures, largely as a result of the economic impact of the coronavirus crisis. Uejio also noted that the bureau is working with other agencies to mitigate a potential flood of home foreclosures and evictions in the coming months.
“The good news is that actions taken by both the public and private sector have, so far, prevented many families from losing their homes during the height of the public health crisis,” Uejio wrote in a blog post. “However, as legal protections expire in the months ahead, over 11 million families – nearly 10% of U.S. households – are at risk of eviction and foreclosure. He added that “put simply: we have very little time to prevent millions of families from losing their homes.”
The report notes that, in 2020, those who have fallen behind at least three months on their mortgage increased 250% to more 2 million households. The report asserts that delinquencies are “now at a level not seen since the height of the Great Recession in 2010.”
Collectively, the report states, these households are estimated to owe almost $90 billion in deferred principal, interest, taxes and insurance payments. Meanwhile, the report continues, there are more than 8 million rental households behind in their rent, which the report termed “a rental crisis.”
LINKS:
Housing insecurity and the COVID-19 pandemic
(Feb. 19, 2021) The White House this week announced extensions of the moratorium on foreclosures and mortgage forbearance programs that were set to end in March to help provide relief to homeowners with federally guaranteed loans currently in forbearance due to the coronavirus crisis
The changes apply to loans guaranteed by the Department of Veterans Affairs or Department of Agriculture, and those insured by the Department of Housing and Urban Development. More specifically:
- The foreclosure moratorium for homeowners is extended through June 30, 2021;
- The mortgage payment forbearance enrollment window is extended until June 30, 2021 for borrowers who wish to request forbearance;
- Additional mortgage payment forbearance, in two three-month increments, is provided up to six months for borrowers who entered forbearance on or before June 30, 2020.
The announcement was made in conjunction with formal announcements by each of the departments in a coordinated effort to extend and expand upon existing forbearance and foreclosure relief programs. Last week, the Federal Housing Finance Agency (FHFA) said Fannie Mae and Freddie Mac would extend forbearance by three months for borrowers coming to the end of their forbearance period and extend the moratorium on foreclosures for Fannie Mae and Freddie Mac loans to March 31, 2021.