The Consumer Financial Protection Bureau (CFPB) proposed on Thursday an additional set of measures designed to expand foreclosure protections for mortgage borrowers.
In an announcement Thursday afternoon, CFPB detailed the latest additions to its mortgage servicing rules, which first went into effect earlier this year. Since that time, the bureau says it has continued to engage in outreach with consumer advocacy groups, industry representatives, and other stakeholders to develop additional provisions to protect consumers and make it easier for companies to comply with the rules.
"The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon," said CFPB Director Richard Cordray in a statement. "Today's proposal would give greater protections to mortgage borrowers."
Chief among the proposed rules would be a requirement that servicers must provide additional foreclosure protections to borrowers who have already worked through the loss mitigation process previously and recovered.
Under the current rules, servicers are already required to provide certain protections, including the right to be evaluated under CFPB requirements for foreclosure avoidance options once during the life of the mortgage.
The proposed rule would require servicers to offer those same protections again for borrowers who have brought their loans current at any time since the last loss mitigation application. The bureau says the rule is largely designed to protect those who obtain a permanent loan modification and then later suffer an unrelated hardship that could create additional struggles, such as a job loss or the death of a family member.
Also included in the proposal are a number of provisions to improve borrower/servicer communications and to clarify previous regulations:
- Protections for mortgage heirs: Currently, servicers are required to identify and communicate with surviving family members or heirs, called successors in interest, in the event of a borrower's death. The latest proposal would expand the bureau's definition of a successor to account for more situations, including when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child, or when a borrower who is a joint tenant dies. The proposal would also ensure those confirmed as successors receive the same foreclosure protections as the original borrower.
- Communications regarding loss mitigation applications: Servicers would be required to notify borrowers when their loss mitigation applications are complete and when their foreclosure protections kick in.
- Working with borrowers during servicing transfers: The proposal offers clarifications to previous rules dealing with servicing rights transfers between firms. Under the rule, if a borrower's loss mitigation application was complete prior to the transfer, the new servicer must evaluate it within 30 days of when the prior servicers received it. For involuntary transfers, the new servicer has 15 days from the date of the transfer.
- Providing information to bankrupt borrowers: The proposal would generally require servicers to provide periodic loss mitigation information and other statements to borrowers in bankruptcy with information geared specifically to them. Servicing firms must also provide written early intervention notices to let those borrowers known about their loss mitigation options even after they've been told to stop contact.
- Clarifying dual-tracking and wrongful foreclosure requirements: While CFPB already has rules in place prohibiting servicers from engaging in foreclosure proceedings and loss mitigation efforts at the same time, the bureau says that "in some cases, borrowers are not receiving this protection and servicers' foreclosure counsel may not be taking adequate steps" to delay the foreclosure. The clarified proposal would outline the steps servicers and their counsel must take to avoid a wrongful foreclosure sale.
- Clarifying the meaning of "delinquency": CFPB's proposal would clarify that, for the purpose of its servicing rules, "delinquency" begins on the day a borrower fails to make a periodic payment. If that payment is later made up, the bureau proposes that the date of delinquency should be pushed up. The new rule would also create room for servicers to consider a payment as "timely" under certain circumstances even if it's not the full payment.
A full summary of the proposal, including additional measures, can be found at CFPB's web site. The rule and disclosures will be open for public comment for 90 days after their publication in the Federal Register.