Last year, due to the Covid-19 pandemic, millions of Americans took advantage of the payment moratorium and mortgage tolerance program, which was launched by both lenders and the federal government. But with the end of these contingency plans this year, the Consumer Financial Protection Bureau hopes to adopt safeguards to ensure that millions of families will not be forced to foreclose their collateral.
According to data from the Mortgage Bankers Association for the week of March 21
As the tolerance plan begins to gradually decrease this fall, this number may increase exponentially.
CFPB Acting Director Dave Uejio said on Monday: “The emergency protection measures for homeowners will expire later this year. By the fall, a large number of borrowers will need the help of their service staff.” “CFPB Proposals for changes to mortgage service rules are being proposed to ensure that service providers and borrowers have the tools and time to work together to prevent avoidable foreclosures, which can destroy lives, displace children, and maximize affordability. Poor people bring further costs.”
In order to help homeowners whose mortgages are lagging behind, the CFPB has proposed a new rule that will establish a “temporary Covid-19 emergency collateral redemption review period”, which will actually prevent mortgage service providers from initiating collateral redemptions The right to process until December 31, 2021.
This new review period is in addition to existing rules, which prohibit loan service providers from initiating foreclosure procedures until the homeowner defaults on his mortgage for more than 120 days.
Many of the current tolerance programs were established under the CARES Act last year and apply to federally supported loans provided through agencies such as Fannie Mae, Freddie Mac, the Federal Housing Administration, and the Department of Housing and Urban Development. Private lenders and service providers have also established their own tolerance programs. The CFPB’s proposed rules will cover all homeowners, including homeowners mortgaged through private lenders such as banks.
The CFPB plan released on Monday is a proposal. The agency will solicit public comments before issuing the final rules on May 11.
In addition to requiring mortgage service agencies to conduct a review, the CFPB also proposes to simplify the loan modification process, which usually allows homeowners to apply for a lower loan interest rate, an extension of the loan period and/or a reduction in monthly repayments. .
The simplified process will allow service providers to provide some loan modification options based on incomplete applications. Usually, the borrower needs to submit a large number of documents, including proof of income, such as pay slips, tax returns, and recent bank statements before the service provider can make a decision.
CFPB said that streamlining the process can enable service providers to reduce the burden on homeowners more quickly. The expedited procedure is only available for loan modification options, which will not increase the homeowner’s monthly payment, extend the mortgage period beyond 40 years or charge no fees.
In February of this year, President Joe Biden instructed the federal housing regulator to extend the mortgage tolerance program for another six months and extend the foreclosure program, which covers approximately 70% of mortgage loans for single-family homes in the United States.
With the support of Fannie Mae or Freddie Mac, as well as the Department of Veterans Affairs (VA), Department of Agriculture (USDA) and FHA, they announced the extension of the tolerance program for 18 months. For homeowners who are required to register in March and April 2020, this means that these plans will expire in September and October.
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