On April 5, 2021, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that seeks to amend Regulation X to assist borrowers affected by the COVID-19 emergency. Last week, the CFPB warned mortgage services of the coming wave of foreclosures when existing forbearance agreements come to an end. That warning included a directive that mortgage servicers need to be ready to handle the expected increase of loss mitigation requests by mortgage borrowers. The information released by the CFPB last week suggest that as many as 3 million consumers are behind on their mortgages.
The CFPB’s proposed rule to amend Regulation X (mortgage servicing rule) would:
- Give borrowers more time by providing “a special pre-foreclosure review period” that would generally prohibit servicers of mortgage loans from starting foreclosure until after December 31, 2021. In essence, it would modify the 120-day rule to be a temporary blanket prohibition on starting a foreclosure because of a mortgage delinquency until after December 31, 2021.
- Allow for streamlined loan modification options to borrowers with COVID-19 related hardships based on the evaluation of an incomplete application.
- Keep the consumers informed of their options by changing the required servicer communications to consumers.
Please note that this proposed rule to the mortgage servicing rules would apply only to mortgage loans secured by a borrower’s principal residence. Further, the proposed changes would apply only to large servicers but the CFPB is seeking comments on whether it should extend to small servicers. The proposed effective date of these changes is August 31, 2021. The CFPB is accepting public comments on the proposed rule through May 10, 2021.
SVL is working to put together a virtual event to go through this proposed rule in detail. We anticipate having further information on the virtual event later this week. In the meantime, if you have questions, please contact a lawyer at SVL.