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With a significant number of homeowners falling behind on mortgage payments and a foreclosure moratorium set to expire on July 31, the Consumer Financial Protection Bureau (CFPB) has introduced fresh measures to support homeowners. Since lenders often fail to comply with regulations, it's crucial to understand these new protections to defend your rights.
If you're behind on your payments, lenders must adhere to these steps.
In order to prevent a wave of foreclosures later this summer, the CFPB has established new guidelines for accounts 120 days overdue. Starting from Aug. 31 and lasting through Dec. 31, lenders are prohibited from initiating foreclosure proceedings unless one of the specified conditions is met.
The borrower has made every effort to avoid foreclosure, including submitting a completed loss mitigation application, which outlines a repayment plan based on financial hardship. The new regulation requires the lender to confirm that the borrower isn't eligible for any mitigation options and to inform the borrower, placing the responsibility on the lender to ensure all options have been explored.
The property is deemed abandoned according to local and state laws.
If the borrower fails to respond to the servicer's attempts to reach out, foreclosure proceedings can move forward after 90 days of no contact.
To expedite the process, the CFPB is permitting mortgage servicers to offer simplified loan modifications that don't require borrowers to resubmit paperwork, provided that these modifications do not increase the borrower's monthly payments.
Understand your rights as a homeowner
Under the new regulations, mortgage lenders are now obligated to determine if you qualify for a reduced interest rate or a modified repayment schedule that may make it easier for you to pay off your loan. However, some lenders have been inconsistent in applying COVID-relief rules, so it’s essential to be proactive and know your rights instead of relying solely on your lender to inform you.
If you already know you won't be able to pay your mortgage once forbearance ends, reach out to your loan servicer now to explore your options. For further details on what options might be available, check out this Mytour post.
