Procedural safeguards don’t apply for borrowers who were behind before the pandemic!
The Consumer Financial Protection Bureau (CFPB) today released extensive mortgage servicing regulations it hopes will prevent “unwelcome surprises” for borrowers exiting forbearance
Across more than 200 pages, the CFPB laid out the rules for mortgage servicers to follow in the coming months — shortly after it warned them, “Unprepared is unacceptable.”
According to today’s final rule, servicers can initiate a foreclosure action only after the borrower has submitted a loss mitigation application, and either isn’t eligible for, breaks or rejects a loss mitigation agreement. Servicers can skip those caveats if the borrower was already six months past-due by March 2020 or if the property is abandoned.
The CFPB rule also clarifies that escrow shortages — which servicers are keen to recover — can be included in a loss mitigation option. The rule also places a limit on how much servicers can require borrowers to deposit in an escrow account over the next year.
Servicers can offer streamlined loan modifications to borrowers, as long as the modification does not increase the monthly payments, or stretch the mortgage term out beyond 40 years. Servicers can’t charge any extra fees for the loan modifications, and if a borrower accepts a loan modification, the servicer must waive any late charges.
Lastly, the rule adds clarity to the definition of financial hardship to mean any hardship that the pandemic brought on, either indirectly or directly, from March 2020 to February 2021.