The Consumer Financial Protection Bureau issued a proposal on Monday that would create a national moratorium on foreclosures until after December 31, 2021. In addition, the CFPB proposes certain amendments to the early intervention and reasonable diligence obligations that Regulation X imposes on mortgage servicers. This proposal comes on the heels of their April 1st memo that warned of “a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months.”
In their April 5th bulletin, they state that they are proposing these measures out of concern that a potentially unprecedented number of borrowers may exit forbearance at the same time this fall when they reach the maximum term of forbearance.
According to the CFPB, as of January 2021, there were more than 2.1 million borrowers in forbearance programs who were more than 90 days behind on their mortgage payments (including borrowers who have forborne three or more payments) that could still be experiencing severe hardships when their payments are to resume.
The CFPB’s proposal, if finalized, would:
- Generally, prohibit mortgage loan servicers from starting foreclosure until after Dec. 31, 2021. The CFPB is seeking public input on that date, as well as whether there are more limited ways to achieve the same purpose.
- Permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
- Make temporary changes to certain required servicer communications to make sure that, during this crisis, borrowers receive key information about their options at the appropriate time.
The proposed amendments would establish a temporary COVID-19 emergency pre-foreclosure review period until December 31, 2021, for principal residences. In addition, the proposed amendments would temporarily permit mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. The Bureau also proposes certain amendments to the early intervention and reasonable diligence obligations that Regulation X imposes on mortgage servicers.
Comments to the CFPB must be received on or before May 10, 2021.
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