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CFPB: Servicers Must Double Their Efforts to Protect At-Risk Borrowers

As forbearance plans begin to expire for millions of Americans, rules set forth by the Consumer Financial Protection Bureau (CFPB), the 2021 Mortgage Servicing COVID-19 Proposed Rule [1], were aimed to prevent avoidable foreclosures as protections expire. The Rule was drafted to allow mortgage servicers to provide viable opportunities for consumers to avoid foreclosure and remain in their home, provide other mortgage relief options, and protect mortgage borrowers from unwelcome surprises as they exit forbearance plans.

The CFPB notes that before January 1, 2022, most servicers cannot begin the foreclosure process—except in limited circumstances—without first reaching out to homeowners to evaluate their complete application for options to help avoid foreclosure.

According to the Mortgage Bankers Association’s latest Forbearance and Call Volume Survey [2], the total number of loans in forbearance plans nationwide is currently as 3.25%, with approximately 1.6 million homeowners currently in forbearance plans.

Since the outset of the pandemic last March, nearly seven million homeowners took advantage of COVID-19 hardship forbearance, temporarily pausing the obligation to make their mortgage payments, while they resolved financial insecurity caused by the pandemic and its effects.

Taking effect August 31, the goal of the CFPB’s rule is to:

“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 [3]. “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.”

Click here [4] to review an Executive Summary of the CFPB’s 2021 Mortgage Servicing COVID-19 Rule.