CFPB urges servicers to stave off foreclosure wave

Agency Rule-Making & Guidance CFPB Compliance Mortgages Mortgage Servicing Foreclosure Forbearance

On April 1, the CFPB urged mortgage servicers “to take all necessary steps to prevent a wave of avoidable foreclosures this fall.” Citing to the millions of homeowners currently in forbearance due to the Covid-19 pandemic, the Bureau’s compliance bulletin warns servicers that consumers will need assistance when pandemic-related federal emergency mortgage protections begin to expire later this year. The Bureau notes that it “will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation,” and “will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.” According to the Bureau, industry data suggests that almost 1.7 million borrowers will exit forbearance programs starting in September, many of whom will be a year or more behind on mortgage payments. The Bureau cautions servicers to take proactive measures to prevent avoidable foreclosures, including by (i) contacting borrowers before the end of the forbearance period; (ii) working with borrowers to ensure they obtain all necessary information; (iii) addressing language access and maintaining compliance with ECOA and other applicable laws; (iv) evaluating income fairly when determining loss mitigation options; (v) handling inquiries promptly; and (vi) preventing avoidable foreclosures through compliance with foreclosure restrictions under Regulation X and other federal and state restrictions.