Mortgage servicing proposed rule

Last week, the Consumer Financial Protection Bureau (CFPB) proposed amendments to the early intervention and loss mitigation rules in Regulation X. The changes were designed to protect consumers that may have been affected by the COVID-19 pandemic by implementing safeguards to prevent avoidable foreclosures as more and more consumers end their forbearances at a time when foreclosure moratoria might be drawing to a close.

The early intervention rules in section 1024.39 of Regulation X require servicers to reach out to delinquent borrowers to make sure that the borrowers understand that there are loss mitigation options available to them. There is a live contact requirement and a written notice requirement. The proposed rule only seeks to change the live notice requirements. Currently, servicers, in most cases, are required to “establish or make good faith efforts to establish live contact with a delinquent borrower no later than the 36th day of a borrower’s delinquency and again no later than 36 days after each payment due date so long as the borrower remains delinquent.”

The proposed rule changes the live notice requirement in two ways. If a borrower is not in a forbearance plan when live contact occurs, servicers will be required to inquire as to whether the borrower was affected by a COVID-19-related hardship, which is a term defined in the proposed rule. If the borrower answered in the affirmative, then servicers would be required to list and describe all forbearance programs available to the borrower, including the next steps the borrower would need to take to be evaluated for those programs. The CFPB emphasized that servicers would need to describe all forbearance programs available, not just those limited to borrowers affected by a COVID-19-related hardship.

 

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