The Consumer Financial Protection Bureau Finalizes Amendments to Help Protect Mortgage Borrowers from Unwelcome Surprises

The Consumer Financial Protection Bureau (CFPB) a Federal Government Agency, has just finalized amendments to reinforce the ongoing economic recovery as the federal foreclosure moratoria are phased out. The amendments will also help protect mortgage borrowers from unwelcome surprises as the exit forbearance plans. The amendments were drafted to support the housing market’s smooth and orderly transition to post-pandemic operation, temporarily establishing safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes. The rules cover loans on principal residences, generally exclude small servicers, and will take effect on August 31, 2021. The CFPB’s new rules will require servicers to redouble their efforts to work to prevent avoidable foreclosures, by: 1) Giving borrowers a meaningful opportunity to pursue loss mitigation options. 2) Allow mortgage services to help borrowers faster. 3) Explain to borrowers their options. With these rule changes in place, homeowners exiting forbearance will have the time and support to make the decision that best fits their individual and family needs. Generally, borrowers will have at least three options to bring their mortgages current and avoid foreclosure. Borrowers may resume regular mortgage payments; lower their monthly mortgage payments via loan modifications; or sell their homes. However, in some cases, foreclosures are not unavoidable, and under the CFPB’s new rule, foreclosures will be able to start if the borrower: 1) Has abandoned the property. 2) Was more than 120 days behind on their mortgage before March 1st, 2020. 3) Is more than 120 days being on their mortgage payments and has not responded to specific required outreach from the mortgage services for 90 days. 4) Has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.