Yesterday, the CFPB released a 200-page final rule outlining their guidance to servicers on how they should treat borrowers in forbearance, effective at the end of August. Here are some highlights from that rule:
Servicers can initiate a foreclosure action only after the borrower has submitted a loss mitigation application, and either isn't eligible for, breaks or rejects a loss mitigation agreement.
Escrow shortages can be included in a loss mitigation option.
Servicers can offer streamlined loan modifications to borrowers, as long as the modification does not increase the monthly payments, or stretch the mortgage term out beyond 40 years.
Servicers can't charge any extra fees for loan modifications, and if a borrower accepts a loan modification, the servicer must waive any late charges.
So, how are servicers supposed to handle foreclosures during the month-long gap between the end of foreclosure moratoriums in July and when the CFPB rule takes effect at the end of August? Glad you asked!
Today, the very new acting director of the FHFA (chosen after the dramatic departure of former Director Mark Calabria) clarified that servicers working with Fannie and Freddie will need to start adhering to the final rule as soon as the moratorium ends — a whole month early. Which likely means servicers won't be able to initiate a foreclosure until the end of the year.
Clarity is a good thing, especially in an atmosphere of beefed-up regulation. The CFPB wasn't joking when it warned servicers on April 1 that "unprepared is unacceptable." The FHFA looks to be on the same page.
The Federal Housing Finance Agency is requiring Fannie Mae and Freddie Mac servicers to follow the Consumer Financial Protection Bureau's new foreclosure rule a full month before it goes into effect.
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