Millions of Americans took advantage of the suspension of payments and mortgage tolerance programs, both lenders and the federal government, due to the Covid-19 pandemic last year. But as these emergency programs begin to end this year, the Office of Consumer Financial Protection wants to establish guarantees to ensure millions of families are not forced to foreclose.
One year after the pandemic, nearly 2.5 million homeowners remain enrolled in some type of tolerance program, according to data from the Association of Mortgage Banks for the week of March 21, 2020. Although, with these programs underway, about 5% of homeowners are currently delinquent on their mortgages, the MBA found in its latest report.
This could increase exponentially as tolerance programs begin to end this fall.
“Emergency protections for homeowners will begin to expire later this year and in the fall, a flood of borrowers will need the assistance of their trustees,” CFPB Acting Director Dave Uejio said Monday. “The CFPB proposes changes to mortgage service rules that ensure administrators and borrowers have the tools and time to work together to prevent avoidable, life-threatening foreclosures, rip off children, and inflict more costs on those who are less able to bear them “.
To help homeowners who have been left behind on their mortgages, the CFPB proposes a new rule that would establish a “temporary period of prior review of Covid-19 emergency mortgage foreclosure” that would essentially prevent mortgage administrators start the foreclosure process until after December 31, 2021.
This new review period would add to existing rules that prevent loan administrators from initiating the foreclosure process until a homeowner completes more than 120 days with the loan.
Many of the current tolerance programs were established under the CARES Act last year and apply to federally supported loans offered through agencies such as Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Housing and Urban Development. Private lenders and administrators also established their own tolerance programs. The rule proposed by the CFPB would cover all homeowners, including those with mortgages through private lenders such as banks.
The CFPB plan released on Monday is currently a proposal. The agency is seeking public comment until May 11 before issuing a final rule.
In addition to requiring mortgage administrators to complete a review period, the CFPB also proposes a simplified loan modification process, which typically allows homeowners to request a reduction in the interest rate on the loan, extend the term of the loan, and / or reduce your monthly payments. .
The streamlined process would allow technical services to offer some loan modification options based on incomplete applications. Borrowers typically have to submit a myriad of documents (including proof of income, such as pay stubs, tax returns, and recent bank statements) before an administrator can make a decision.
Streamlining the process would allow service agents to receive less heavy payments from homeowners more quickly, CFPB says. The expedited process would only be available for loan modification options that do not increase homeowners ’monthly payments, extend the term of the mortgage for more than 40 years, or charge any commission.
In February, President Joe Biden ordered federal housing regulators to extend mortgage tolerance programs for an additional six months and extend foreclosure relief programs to an extent that covered 70% of mortgages for foreclosures. detached houses in the USA
Morgages backed by Fannie Mae or Freddie Mac, as well as the Department of Veterans Affairs (VA), the Department of Agriculture (USDA) and the FHA announced that they are expanding their tolerance programs to 18 months. For homeowners who applied for registration in March and April 2020, it means these programs will expire in September and October.
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