The Consumer Financial Protection Bureau (CFPB) issued new federal mortgage servicing regulations as the foreclosure moratoria and forbearances are phased out. The rules will establish temporary special safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes. The rules cover loans on principal residences, generally exclude small servicers, and will take effect on August 31, 2021.
Smooth and Orderly Transition
The new rules will require servicers to redouble their efforts to work to prevent avoidable foreclosures. The rules will:
- Give borrowers a meaningful opportunity to pursue loss mitigation options. As borrowers exit forbearance, they need time to process their current options and consider next steps. As such, to ensure that borrowers can pursue foreclosure avoidance options, servicers must meet temporary special procedural safeguards before initiating foreclosures for certain mortgages through the end of the year.
- Allow mortgage servicers to help borrowers faster. Under the new temporary rule, servicers can offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all the paperwork for every possible option. These streamlined loan modifications cannot increase borrowers’ payments and have other protections built into them. With this flexibility, servicers can get borrowers into affordable mortgage payment plans faster, with less paperwork for both the servicer and the borrower.
- Tell borrowers their options. Servicers will be required to increase their outreach to borrowers before initiating foreclosure and tell borrowers key information about their repayment or other options when they communicate with borrowers who are exiting forbearance or struggling to make mortgage payments.
With these rule changes in place, homeowners exiting forbearance will have the time and support to make the decision that best fits their individual and family needs. Generally, borrowers will have at least three options to bring their mortgages current and avoid foreclosure. Borrowers may:
- Resume regular mortgage payments. Servicers can move a borrower’s missed payments to the end of the mortgage, commonly called “deferral.”
- Lower their monthly mortgage payments. Loan modifications can change the interest rate, principal balance, or length of the mortgage.
- Sell their homes. For homeowners with sufficient equity, a sale may be a possibility. However, long-term forbearance may have significantly eroded borrowers’ equity, and home prices may dip if the market is inundated with home sales.
In some cases, foreclosures are not avoidable. Under the CFPB’s rule, foreclosures will be able to start if the borrower:
- Has abandoned the property;
- Was more than 120 days behind on their mortgage before March 1, 2020;
- Is more than 120 days behind on their mortgage payments and has not responded to specific required outreach from the mortgage servicer for 90 days; or
- Has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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