Millions of Americans have taken advantage of the suspension of payment and mortgage tolerance programs that both creditors and the federal government have implemented due to the Covid-19 pandemic last year. But as these emergency programs begin to decline this year, the Consumer Financial Protection Bureau wants to put in place safeguards to ensure that millions of families are not forced into foreclosure.
One year after the start of the pandemic, about 2.5 million homeowners are still enrolled in some kind of indulgence program, according to the Mortgage Bankers Association data for the week of March 21, 2020. However, even With these programs in place, about 5% of homeowners are currently in default on their mortgages, the MBA found in its latest report.
This can increase exponentially as tolerance programs begin to decline this fall.
“Emergency protections for homeowners will begin to expire at the end of this year and, with the fall, a flood of borrowers will need the help of their employees,” said CFPB acting director Dave Uejio on Monday. “The CFPB is proposing changes to the mortgage service rules that will ensure that employees and borrowers have the tools and time to work together to prevent preventable foreclosures, which disrupt lives, uproot children and inflict additional costs on the least able to afford it. them. “
To assist homeowners who are behind on their mortgages, the CFPB is proposing a new rule that would establish a “Covid-19 temporary emergency pre-foreclosure review period” that would essentially prevent mortgage agents from starting the foreclosure process until after December 31, 2021.
This new review period would be in addition to the existing rules that prevent credit agents from starting the foreclosure process until the owner is more than 120 days past due on his loan.
Many of the current tolerance programs were established in the CARES Act last year and apply to federally guaranteed loans offered by agencies such as Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Housing and Urban Development. Private lenders and servicers have also established their own tolerance programs. The CFPB’s proposed rule would cover all homeowners, including those with mortgages through private creditors, such as banks.
The CFPB plan released Monday is a proposal for the moment. The agency is seeking public comment until May 11 before issuing a final rule.
In addition to requiring mortgage agents to perform a review period, the CFPB is also proposing a simplified loan modification process, which normally allows homeowners to request a reduction in the loan’s interest rate, extend the term of their loan. loan and / or reduce your monthly payments.
The simplified process would allow servicers to offer some loan modification options based on incomplete applications. Borrowers typically need to present a myriad of documents – including proof of income, such as payment receipts, tax returns and recent bank statements – before a manager can make a decision.
Simplifying the process would allow servicers to include landlords in less onerous payments more quickly, says the CFPB. The accelerated process would only be available for loan modification options that would not increase homeowners’ monthly payments, extend the mortgage term by more than 40 years, or charge any fees.
In February, President Joe Biden ordered federal housing regulators to extend mortgage tolerance programs for another six months and extend foreclosure relief programs in a move that covered about 70% of US single family mortgages.
Morgages supported by Fannie Mae or Freddie Mac, as well as by the Department of Veterans Affairs (VA), Department of Agriculture (USDA) and FHA announced that they were expanding their tolerance programs for up to 18 months. For owners who applied for registration in March and April 2020, this means that these programs will expire in September and October.
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