The Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac (the government-sponsored enterprises) servicers will not be permitted to make a first notice or filing for foreclosure that would be prohibited by the Consumer Financial Protection Bureau's (CFPB) Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X Final Rule before the CFPB rule takes effect.
The CFPB final rule prohibits servicers from making a first notice or filing for foreclosure in most cases covered by the rule before December 31, 2021. Servicers will still be able to make a notice or filing for foreclosure on abandoned properties and those that had a foreclosure referral prior to March 2020, along with certain other exceptions. CFPB's final rule will take effect August 31, 2021. The GSEs' moratoriums on single-family foreclosures and real estate-owned (REO) evictions will expire on July 31, 2021. Requiring GSE servicers to follow the CFPB's new protections a month before the CFPB rule takes effect will protect borrowers from foreclosure and provides certainty for servicers about GSE expectations.
“The COVID-19 pandemic has created many financial challenges for families,” said FHFA Acting Director Sandra L. Thompson. “Through no fault of their own, many of these families had to rely on COVID-19 forbearance to stay safe in their homes during the pandemic. Today, many families' finances are improving allowing them to exit forbearance. The protections FHFA is putting in place today will protect vulnerable families as they begin their financial recovery from the impact of the COVID-19 pandemic.”
Earlier this week, the Mortgage Bankers Association (MBA) reported that an estimated two million American homeowners remain in forbearance plans. For the 17th consecutive week, forbearance volume has declined, as the MBA found that the forbearance share of overall mortgage volume sits at 3.91% as of June 20, 2021.
Despite the downward trend in forbearance volume, MBA's SVP and Chief Economist Mike Fratantoni cautioned that despite an improvement in the overall economic landscape and rollout in vaccinations, many homeowners may be re-entering plans.
“The steady improvement in the aggregate forbearance numbers is heartening, as it is evidence that improving economic conditions are allowing more homeowners to get back on their feet,” said Fratantoni. “However, we continue to closely monitor the number of forbearance re-entries, reflecting borrowers who exited forbearance, but had to re-enter due to hardships. These re-entries accounted for 6.2% of loans in forbearance this week."
The FHFA continues to monitor the effect of the COVID-19 servicing policies on borrowers, the GSEs and their counterparties, and the overall mortgage market. FHFA stated that it may extend or sunset its policies based on updated data and health risks.
“As the nation shifts from the COVID-19 emergency to the economic recovery, we cannot be complacent about the dangers we still face,” said CFPB Acting Director Dave Uejio in a release Monday. “An unchecked wave of foreclosures would drain billions of dollars in wealth from the Black and Hispanic communities hardest hit by the pandemic and still recovering from the impact of the Great Recession just over a decade ago. An unchecked wave of foreclosures would also risk destabilizing the housing market for all consumers. We are giving homeowners the time and opportunity to make informed decisions about the best course of action for them and their families, whether that is seeking a loan modification or selling their home. And we are giving mortgage servicers the flexibility they need to serve homeowners with dignity, while managing an unprecedented volume of borrowers seeking assistance.”