United States: CFPB Takes Action to Limit COVID-19 Related Mortgage Buyouts
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April 5th Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (NPR) amend Rule Z, in part, to “prevent foreclosure prevention” due to the COVID-19 pandemic “as the federal emergency foreclosures expire.”
NPR will basically do three things for loans secured by the borrower’s primary residence:
- “[G]In general, prohibit service providers from making the first notice or registration required by applicable law for any litigation or out-of-court foreclosure process until December 31, 2021. “However, the CFPB is considering whether to include exceptions to this broad foreclosure prohibition that could allow service personnel in certain situations to initiate foreclosure before December 31.
- Allow service providers to offer optimized loan modification options to borrowers experiencing COVID-19 difficulties based on an incomplete application. Any proposed loan modification must meet certain criteria in terms of maturity, interest on deferred funds, pre-existing delinquencies and fees.
- Amend the Early Intervention Requirements of Regulation Z by requiring service personnel to discuss specific information related to COVID-19 with certain expired borrowers on two separate occasions. First, on initial live contact, if the borrower is not already participating in the abstinence program and the owner or assignee of the loan is offering a COVID-19 abstinence program. Second, at the last live contact before the end of the abstinence period, if the borrower is participating in a COVID-19 abstinence program. These live contact requirements will end on August 31, 2022.
In addition to the above, NPR clarifies that when a borrower enters into a short-term deferred payment program due to COVID-19 difficulties based on an incomplete application, a reasonable obligation on the support staff requires it to contact the borrower “no later than 30 days in advance. the end of the abstinence period to determine if the borrower is willing to complete a loss mitigation application and proceed with a full mitigation assessment. ”If the borrower responds in the affirmative, then“ the service staff must exercise reasonable discretion to complete the application before the end of the abstinence program period. ” will define “financial difficulties directly or indirectly related to a COVID-19 emergency” as a COVID-19 emergency CFPB will accept comments on NPR submitted by May 11.
NPR appeared just days after CFPB issued a bulletin on April 1warning service personnel that they must “take all necessary steps now to prevent a wave of avoidable foreclosures” and that it is “unacceptable” to be unprepared to deal with such foreclosures. The bulletin identifies eight specific areas in which CFPB will “pay special attention” to how well service companies are engaging in loss reduction efforts with consumers. The CFPB explicitly states that “companies that cannot adequately manage loss reduction can expect [CFPB]to take enforcement or supervisory actions to remedy violations in accordance with Regulation X, CFPA or other authorities. “
The CFPB has established itself as an active player in the consumer finance industry under the Biden administration. Hence, service companies are strongly encouraged to pay close attention to these events and begin developing rigorous compliance strategies to address them.
The content of this article is intended to provide general guidance on the subject. You should seek professional advice regarding your specific circumstances.
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