In order to prevent a tide of foreclosures that could overwhelm servicers, the Consumer Financial Protection Bureau (CFPB) earlier this week proposed a number of actions, including rules that would push potential filings out to January 2022.
“Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up," CFPB Acting Director Dave Uejio said at the time. "[The previous week] we warned that servicers need to be prepared for a high volume of borrowers exiting forbearance, and today, we are proposing additional guardrails and tools for servicers as they navigate the coming months. We will do everything in our power to ensure servicers work with struggling families to find solutions that prevent avoidable foreclosures."
While the move has received support from various organizations and companies, there also are servicers out there who believe that delaying foreclosures another nine months and creating more regulations builds undue pressure on consumers and the nation's housing market.
Richard Kruse, a distressed-asset auctioneer with Gryphon USA, says that although he understands the bureau's intent, "the CFPB is effectively demanding an immediate and unrealistic overhaul of lending, investment, servicing and mortgage insurance industries, not understanding that the end result will be worse with these rules than allowing the legal system work."
Kruse goes on to suggest that federal and local foreclosure and eviction bans, which have periodically been extended throughout the course of the COVID-19 pandemic, would allow for nonperforming mortgages to be further along in default status, negatively impacting the homeowner once the ban is lifted. It is the "kicking the can down the road" dissent floated by numerous experts over the past months.
"Call it what you want ... sticking another finger in the dyke, or stacking additional pressure behind a cork that must eventually pop," Kruse said. "The fact remains that throwing these new rules at the problem will not solve homeowners' financial distress; it will only delay it. "
Other organizations, Wells Fargo, for example, have come out in support of the CFPB's efforts, while also stating that they will participate in reviewing and commenting on the specific proposed rules.
"We are committed to working with the CFPB and other government agencies, the mortgage industry, community leaders, mortgage investors/guarantors, and others in determining how to best serve our customers and communities," said Wells Fargo representatives in a public statement, "particularly racially and ethnically diverse communities that have been disproportionally impacted by the pandemic."