Amending Regulation X to give servicers and homeowners more time to work through options
The Consumer Financial Protection Bureau (CFPB) released a notice of proposed rulemaking on Monday that would amend Regulation X to provide a special pre-foreclosure review period prohibiting servicers from starting foreclosures until after December 31, 2021.
Under current CFPB foreclosure rules, a borrower must be 120 days delinquent before the foreclosure process can start. The Bureau said that nearly 2.1 million households in forbearance are past the 90-day delinquent mark and said it is concerned that those homeowners may be transferred immediately in to the foreclosure process once their forbearance period expires.
To manage a potential wave of foreclosures, the CFPB’s proposed change would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
“What we’re proposing would be that you wouldn’t have to evaluate someone for every possible available option, so long as the options that you offer them have certain safeguards,” said Diane Thompson, senior advisor to the acting CFPB director, on a Monday media call.
Similarly, in the spring of 2020, the CFPB engaged in a rulemaking process that laid out new guidelines for servicers. Servicers didn’t have to evaluate every borrower for every loss mitigation option so long as they moved them in to a deferral where the payments that they missed were put on the back end and they resumed their regular payments, Thompson said.
