CFPB Issues Rules to Assist Borrowers and Mortgage Servicers Following Expiration of Federal Foreclosure Moratoria
On June 28, 2021, the Consumer Financial Protection Bureau ("CFPB") issued a final rule (the "2021 Mortgage Servicing COVID-19 Rule") amending Regulation X to protect borrowers from financial distress upon expiration of forbearance plans and ease the strain on mortgage servicers, who are likely to be inundated with requests for loss mitigation assistance in the coming months. The new rules, which apply to loans on principal residences, will become effective on August 31, 2021.
The CFPB estimates that over two million homeowners are currently in COVID-19 hardship forbearance programs, with at least 900,000 homeowners expected to come off these programs between now and the end of the year. The 2021 Mortgage Servicing COVID-19 Rule aims to prevent what the CFPB considers to be avoidable foreclosures by establishing procedural safeguards to ensure that most borrowers who became seriously delinquent during the COVID-19 pandemic will have the opportunity to be considered for all loss mitigation options before being referred to foreclosure. This rule also allows mortgage servicers to provide faster assistance to borrowers by offering them streamlined loan modifications without requiring complete loss mitigation applications. Mortgage servicers will also be required to perform increased borrower outreach before initiating foreclosure to provide borrowers important information about repayment or other loss mitigation options.
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“CFPB Issues Rules to Assist Borrowers and Mortgage Servicers Following Expiration of Federal Foreclosure Moratoria,” by Jonathan K. Moore and Louise Bowes Marencik was published as a LexisNexis Practical Guidance® article in July 2021.
This article was first published as a Blank Rome Consumer Finance Litigation Alert on July 2, 2021.