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Stepping Up Efforts to Avoid a Foreclosure Wave

The Consumer Financial Protection Bureau (CFPB), along with the Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and state financial regulators have issued a joint statement to mortgage servicers announcing a return to enforcement of critical pandemic-related protections for families and homeowners.

The protections seek to prevent a foreclosure crisis in the wake of the COVID-19 pandemic, offering homeowners the chance to find alternatives to foreclosure before losing their home.

The Mortgage Bankers Association (MBA) estimates that approximately one million Americans are currently in a state of forbearance, and with a majority of those plans expected to expire before the end of the year, at-risk homeowners will need these protections to avoid foreclosure.

“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago,” said CFPB Director Rohit Chopra. “Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law."

Today’s joint announcement clarifies the fact that these agencies will apply their respective supervisory and enforcement authorities to protect homeowners and address any compliance failures.

The announcement also cites the “Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act,” released April 3, 2020 which stated that the agencies would relax supervisory and enforcement oversight with respect to certain requirements in Regulation X, will no longer apply. The April 2020 ruling noted that the pandemic created staffing issues and other obstacles for servicers at the outset of COVID-19 in dealing with clients. The agencies believe that the servicers have had adequate time to adjust their operations to comply with the timelines and other requirements of Regulation X and servicers will now be expected to fully comply with the rules.

The CFPB also issued the 11-page study, "Mortgage Servicing Efforts in Response to the COVID19 Pandemic," detailing the CFPB’s efforts to help struggling homeowners and avoid a foreclosure crisis.

“We have adapted our supervision approach to hold servicers accountable, amended our mortgage servicing rules to provide specific COVID-19 protections, and we continue to provide direct assistance to homeowners through complaint intake and distribution of information, including in-language information to make sure all homeowners have a chance to avoid foreclosure,” said the CFPB in its report.

The CFPB highlights the following actions it took to protect homeowners over the past 18-plus months:

  • Conducted assessments and supervisory reviews to obtain real-time information from mortgage services due to the elevated risk of consumer harm because of the pandemic.
  • Reminded servicers that “unprepared is unacceptable,” and that servicers need to dedicate their resources to ensure clear channels of communication with borrowers.
  • Implemented temporary procedural safeguards to help ensure that borrowers have time before a foreclosure process were to begin to cover all their options.
  • Analyzed consumer complaints regarding mortgage servicing and forbearances.
  • Established a website at www.consumerfinance.gov/housing, in partnership with other federal agencies, to connect homeowners, renters and landlords with information about CARES Act assistance and protections.
  • Created and distributed homeowner outreach materials, in English and other languages for use by those impacted by the pandemic.

Click here to read more about the CFPB and agency-issued “Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the Continuing COVID-19 Pandemic and CARES Act” released today and click here to read the “Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act” from April 3, 2020.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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