The Consumer Financial Protection Bureau on Monday said it will not impose a moratorium on mortgage foreclosures until the end of the year but will impose “temporary safeguards” to ensure that homeowners with pandemic-related hardships have time to make payments on their homes.
“We have never seen so many homeowners who need assistance,” Acting CFPB Director Dave Uejio told reporters during a conference call. He said the agency’s rule will allow a “measured return to foreclosures.” He said that more than seven million borrowers took advantage of pandemic-related forbearance agreements.
In April, the CFPB proposed to stop mortgage servicers from foreclosing on most home loans until the end of the year as a result of the economic hardships caused by the pandemic. That is not included in the new rule.
Diane Thompson, a senior advisor to Uejoi denied that the rule issued Monday had been “watered down.” She said a total stop of all foreclosures would cause huge problems once foreclosures were permitted to resume. “I would expect to see a gradual increase in foreclosures,” she added.
Under the rule, before referring certain 120-day delinquent accounts for foreclosure, the servicers must ensure that at least one of the “procedural safeguards” has been met. Those safeguards include determining whether a borrower was evaluated based on a complete loss mitigation application and whether the existing foreclosure conditions have been met, or whether a borrower has been unresponsive to servicer outreach.
The rule is designed to give borrowers loss mitigation options and allows servicers to speed up assistance to homeowners, according to the agency. The rule permits servicers to offer certain loan modification options based on the evaluation of an incomplete application. “With this flexibility, servicers can get borrowers into affordable mortgage payment plans faster, with less paperwork for both the servicer and the borrower,” the agency said.
Agency officials said that homeowners with existing forbearance generally will have three options: resume regular mortgage payments, lower their mortgage payments, or sell their homes.