Borrowers will now have multiple options for avoiding foreclosure.
The Consumer Financial Protection Bureau (CFPB) finalized amendments made to the federal mortgage servicing regulations that will support the housing market’s transition to post-pandemic operation. The CFPB established temporary special safeguards to ensure that borrowers have time before foreclosure to explore other options of repayment, including loan modifications and selling their home. The rule covers loans on a principal residence, excluding small servicers, and will take effect on August 31, 2021. The new rules require servicers to redouble their efforts to avoid foreclosures. Generally, borrowers will have 3 options to bring their mortgages current and avoid foreclosure. One option is to resume regular mortgage payments and defer missed payments to be paid off at the end. The second option is to lower their monthly mortgage payment with loan modifications on interest rates, principal payments, or length of mortgage. The third option is to sell the house, although long-term forbearance may erode the borrower’s equity, and home prices may dip. CFPB acting director Dave Uejio, said, “As the nation shifts from the COVID-19 emergency to the economic recovery, we cannot be complacent about the dangers we still face. An unchecked wave of foreclosures would drain billions of dollars in wealth from the Black and Hispanic communities hardest hit by the pandemic and still recovering from the impact of the Great Recession just over a decade ago.”
Source: National Mortgage Professional