WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a final rule on mortgage servicing under the Real Estate Settlement Procedures Act (RESPA). Many families are experiencing long-term income disruptions due to the pandemic and economic crisis – particularly families of color. Over two million homeowners are in payment forbearances scheduled to end this fall and winter. Forbearance exits will strain the system as homeowner and servicer communications reach record levels and as, ideally, servicers process many loan modifications.
Center for Responsible Lending Senior Policy Counsel Melissa Stegman issued the following statement:
In this financially difficult time, the consumer bureau’s rule equips homeowners with key protections and helps to prevent unnecessary foreclosures. The rule creates a pathway for homeowners and servicers to arrange loan modifications to help keep people in their homes.
The streamlined modification provision is critical, as it will help servicers offer, and enable borrowers to easily accept, a payment reduction modification and preserve homeownership.
The escrow provision is also valuable for financially struggling homeowners as it permits escrow shortages to be included in a home retention solution rather than requiring borrowers to pay it in a short period of time.
The final rule does the following:
- Requires servicers to follow temporary special procedural safeguards prior to initiating foreclosure, including engaging in borrower outreach and sending required loss mitigation notices;
- Requires servicers to wait at least 30 days after a forbearance plan ends before initiating foreclosure, and longer if the borrower is in active communication with the servicer;
- Facilitates streamlined modifications that reduce borrower payments, so long as they are consistent with the federal housing agencies’ rules; and,
- Clarifies that escrow shortages may be included in a home retention solution, such as a deferral or loan modification.
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