During Great Recession housing foreclosures, some lenders lost paperwork and made excuses. CFPB doesn’t want that again after the current foreclosure ban ends.

WASHINGTON  – The Consumer Financial Protection Bureau (CFPB) warned mortgage servicers via a Compliance Bulletin to “take all necessary steps now to prevent a wave of avoidable foreclosures this fall.”

It says millions of homeowners in forbearance will need help from their servicers as pandemic-related federal mortgage protections expire this summer and fall, suggesting that servicers know that as well as anyone. As a result, they should dedicate sufficient resources and staff now to ensure they’re prepared for a surge of borrowers who need help.

CFPB says it plans to closely monitor servicers – how they engage with borrowers, respond to borrower requests and process applications for loss mitigation. It says it will “consider a servicer’s overall effectiveness in helping consumers” and make discretionary decisions on how to address compliance issues that arise.

“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,” says CFPB Acting Director Dave Uejio.

“Our first priority is ensuring struggling families get the assistance they need,” he adds. “Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”

Size of the potential problem

As of January 2021, approximately 2.7 million borrowers remained in such mortgage forbearance programs, with 2.1 million at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent.

Industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums at the end of June 2021, mortgage servicers will need “ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.”

CFPB’s list of concerns as it studies lenders and mortgage servicers

  • Be proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
  • Work with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers obtain documents and other information needed to evaluate the borrowers for assistance.
  • Address language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
  • Evaluate income fairly. If servicers use income in determining eligibility for loss mitigation options, they should evaluate borrowers’ income from public assistance, child-support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
  • Handle inquiries promptly. The CFPB says it will closely examine servicer conduct where hold times are longer than industry averages.
  • Prevent avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.

© 2021 Florida Realtors®