WASHINGTON–Housing advocates from a number of consumer groups are speaking out against proposed rules from the CFPB that the Bureau said are designed to ensure homeowners do not face foreclosure once many forbearances expire.
The groups, however, say the CFPB proposal is not the “right solution.”
The National Consumer Law Center, Americans for Financial Reform Education Fund, National Community Stabilization Trust, and the National Housing Law Project said the proposed rules that would impose a pre-foreclosure review period (essentially a moratorium) through Dec. 31, 2021 on mortgage loans for primary residences will not accomplish what they say needs to be done.
The organizations said they are encouraging the Bureau to replace its market-wide moratorium with an individualized requirement for servicers to comply with strict requirements before they can initiate a foreclosure, including reviewing borrowers for streamlined loan modifications that reduce the borrower’s payment.
As CUToday.info reported, the proposed rule comes a week after the Bureau issued a Bulletin on its plans to enhance supervision and enforcement of mortgage servicing, including for homeowners who have limited English proficiency.
Step in Right Direction, But…
The consumer groups said they welcome the Bulletin as a step in the right direction and stressed the importance of the Bureau’s heightened oversight of the mortgage market as millions of homeowners, including many people of color, seek sustainable arrangements with their mortgage companies.
“A particularly important role of the Bureau is to ensure that homeowners with mortgages that are not government-backed (including those with private loans, manufactured home loans, and land contracts) and homeowners with other financial challenges (including those facing tax foreclosures) have a chance to save their homes from foreclosure,” the organizations stated.
“However, the Bureau's proposal announced today to impose a broad foreclosure moratorium through the end of the year is not the right solution and may make it more difficult for homeowners to know they should be seeking permanent solutions sooner, costing them substantial home equity and creating a risk of increased neighborhood blight,” the groups said.
Recommendation Made
Instead of the moratorium, the groups are urging the Bureau to prevent servicers from filing for foreclosure unless they first meet rigorous requirements to establish contact with the borrower and to review the borrower for each home retention solution for which the borrower qualifies, including streamlined modifications.
“These protections should be available to the crush of homeowners exiting forbearance in the coming months and also to homeowners who are seriously delinquent but have not made forbearance arrangements with their mortgage servicers,” the consumer groups said.
Moreover, according to the consumer groups, the Bureau's approach to increasing access to streamlined loss mitigation options fails to provide adequate consumer protections. The organizations said they appreciate the Bureau’s recognition of the importance of access to streamlined modifications, since hundreds of thousands of borrowers will be reaching out to their servicers during the same period.
Need for a ‘Right to Appeal’
“However, a borrower who tells their mortgage servicer they are unable to resume their regular monthly mortgage payment, whether or not they are exiting a forbearance, should have access to key consumer protections, including appeal rights and a halt to the foreclosure process,” the groups said.
Finally, the consumers groups said they are encouraging the Bureau to adopt additional protections, including clearly written notices laying out details about post-forbearance options, to ensure that homeowners know their options, can make payment arrangements prior to the start of foreclosure, and are not faced with demands for lump-sum repayments.