The Consumer Financial Protection Bureau wants to ban foreclosures until 2022, according to a recent proposal.
The agency’s notice of proposed rulemaking would amend Regulation X to institute a pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021. The bureau wants feedback on the cutoff date as well as whether there are “more limited ways” to achieve the same purpose.
As of February 2021, there were nearly 3 million homeowners behind on their mortgages, the CFPB said, with an estimated 2.1 million mortgages in forbearance and at least 90 days delinquent. Under current CFPB regulations, a borrower must be 120 days delinquent before the foreclosure process can start. If current trends continue there may be 1.7 million such loans in September 2021, creating concern that those borrowers would immediately enter foreclosure following the end forbearance measures, the agency said.
The proposed rule would also permit servicers to offer certain loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application. This move would help streamline the process and reduce paperwork requirements, the bureau said. The proposal also includes temporary changes to communicate new requirements to borrowers more clearly.
“The nation has endured more than a year of a deadly pandemic and a punishing economic crisis. We must not lose sight of the dangers so many consumers still face,” said CFPB Acting Director Dave Uejio. “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, the CFPB issued a bulletin cautioning mortgage servicers to prepare for a high volume of borrowers exiting forbearance. It will be “closely monitoring how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation,” the agency said, considering servicers’ “demonstrated effectiveness in helping borrowers” should compliance issues arise.
“We will do everything in our power to ensure servicers work with struggling families to find solutions that prevent avoidable foreclosures,” Uejio said.
Because of the tight deadline, comments on the proposed rule are due by May 11.