CFPB Issues NPRM Seeking to Halt Foreclosures Until 2022

The Consumer Financial Protection Bureau yesterday issued a Notice of Proposed Rulemaking (NPRM) that would prohibit mortgage servicers from starting foreclosure proceedings until 2022 while also providing servicers with the ability to offer streamlined loan modification options to homeowners who have been impacted by the COVID-19 pandemic.

The NPRM follows a compliance bulletin that the CFPB released last week warning servicers to prepare for a surge in the number of requests for assistance that are likely to be coming from homeowners who are going to need help getting their mortgages back on track.

Underscoring the “urgency of the crisis,” the CFPB is fast-tracking the comment period, requesting that comments on the NPRM be submitted before May 11.

The NPRM would amend Regulation X, the CFPB’s Mortgage Servicing Rule and would go into effect on August 31, if enacted.

“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 in a statement. “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 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.”

Servicers would be required to ask homeowners if they are experiencing financial hardship related to COVID-19 and would be required to list and describe forbearance programs available to those homeowners who answer yes to that question. Servicers would also be required to provide the actions that the homeowner must take to be evaluated for those programs.

Servicers would be allowed to offer certain loan modifications based on the evaluation of an incomplete application if certain criteria are met. Those criteria include: the modification would extend the term of the loan by no more than 480 months and would not result in an increase to the homeowner’s principal and interest payments, any loan amount that is deferred would not accrue interest, and the modifications must be made available to any homeowner experiencing a COVID-19 related hardship.

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