CFPB Announces Final Mortgage Servicing Rule to Help Borrowers Affected by the COVID-19 Pandemic Avoid Foreclosure
In anticipation of the expiration of federal COVID-19 pandemic foreclosure protections, the Consumer Financial Protection Bureau has issued a final rule amending its federal mortgage servicing regulations. Among other changes, effective from August 31, 2021 through December 31, 2021, a borrower must be given an opportunity by the mortgage servicer to explore all available loss mitigation options before a foreclosure proceeding can be commenced on a borrower's principal residence. The final rule also gives servicers greater flexibility to offer borrowers COVID-19-related streamlined loan modifications, creates new, temporary early intervention requirements for live contact, and clarifies how to exercise reasonable diligence with respect to incomplete loss mitigation applications related to COVID-19.
The new rule will not preclude commencement of foreclosures prior to January 1, 2022 if:
- The mortgage servicer has satisfied the loss mitigation procedures outlined in the rule;
- The borrower has been unresponsive to servicer outreach for more than 90 days;
- The property is abandoned;
- The borrower was more than 120 days delinquent prior to March 1, 2020; or
- Where the applicable statute of limitations will expire before January 1, 2022.
Stay tuned for additional implementation guidance from our Financial Services team.