On April 5, 2021 the Consumer Financial Protection Bureau (CFPB) published a proposed rule entitled Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X. The proposed amendments to Regulation X are aimed to ensure that the approximately 2.5 million borrowers still in forbearance programs will not be ushered immediately into foreclosure when their respective COVID-related forbearance ends.
The proposed amendments, which apply only to mortgage loans secured by principal residences, contemplate a temporary pre-foreclosure review period that would essentially prohibit servicers from filing any foreclosure action until after December 31, 2021. Exceptions may be granted to allow for earlier filings if a servicer completes loss mitigation review and determines a borrower is not eligible for a non-foreclosure option or made certain efforts to contact the borrower to which the borrower did not respond. Second, the CFPB is proposing servicers offer streamlined modifications to borrowers experiencing a COVID-19-related hardship. The terms of the modification may not, among other things, cause the borrower’s monthly required principal and interest payment to increase and may not extend the term of the loan by more than 480 months from the date the loan modification is effective.
The CFPB is accepting comments on the proposed amendments until May 11, 2021, and has noted that it is particularly interested in “whether the proposed amendments facilitate efficient and timely pre-foreclosure loss mitigation review without interfering with the housing market in a way that is not proportional to the level of potential borrower harm.” While it would benefit loan servicers, borrowers, and courts alike to prevent mass, similarly-timed foreclosure actions, it remains to be seen whether the amendments proposed would simply push the mass filings to 2022, or have a real impact on the number of borrowers who can avoid foreclosure upon exit from forbearance.
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