On April 5, the Consumer Financial Protection Bureau (CFPB) announced a Notice of Proposed Rulemaking (NPR) to help struggling borrowers experiencing pandemic-related hardship keep their homes as the economy recovers. If finalized as proposed, the rule would prohibit servicers of both federally-backed loans as well as privately-backed loans from initiating foreclosure proceedings before December 31, 2021, except in certain situations.

In response to a request for public comment from the CFPB, on May 10, SFA in collaboration with members submitted a letter on proposed amendments to Regulation X and raised concerns regarding the Bureau’s NPR on foreclosure moratorium.

 

Key Points:

• Servicers have taken proactive steps to identify borrowers impacted by COVID-19 and helping provide suitable options to keep their homes. These steps include payment relief programs, deferral periods, loan modifications, as well as other measures.
• Mandating a blanket, nationwide six months moratorium is not the best tool to achieve the objective of preventing avoidable foreclosures. In fact, recent studies suggest that prolonging foreclosure timelines may increase costs and reduce borrower’s equity in their homes.
• Aside from the policy implications, an overly broad moratorium may fall outside the bounds of existing Bureau authority.

 

* UPDATE:  The CFPB issued its final rule on June 28, 2021 and reversed the proposed foreclosure moratorium in favor of a more pragmatic approach that balances the needs of struggling homeowners who are actively working with their servicers while also recognizing the need to not let abandoned houses, needlessly drawn-out timelines, or unresponsive borrowers contribute to neighborhood blight and other challenges in the housing market