The Consumer Financial Protection Bureau (“CFPB”) announcedpost-COVID-19 mortgage servicing rules that went into effect August 31, 2021 (“Rules”). The Rules are designed to protect borrowers from “avoidable foreclosures” and impose new “procedural safeguards” that loan servicers must follow now that the COVID-19 foreclosure moratorium has come to an end. The Rules remain in effect until December 31, 2021.
The new temporary provisions generally prevent a servicer from initiating a new foreclosure, or completing a pending foreclosure before January 1, 2022. Unlike the prior COVID-19-related foreclosure moratoriums, the Rules are not limited to COVID-19-related borrower protections or the CARES Act and apply to “federally-related mortgage loans” (as defined under RESPA) that are secured by the borrower’s principal residence. Therefore, the new rules can apply to portfolio loans, rather than just federally backed mortgage loans (such as Fannie Mae, Freddie Mac, FHA, or VA loans), that were subject to the CARES Act
Early Intervention Live Contact. When a servicer makes live contact with a borrower, as required under the existing Mortgage Servicing Rule, the servicer must provide the following information:
COVID-19 Streamlined Loan Modification Options. Under the existing Mortgage Servicing Rules, servicers are prohibited from offering any loss mitigation option based on an incomplete application from the borrower. However, the Rules include new exceptions to that general prohibition. In addition to short-term forbearances or repayment plans, servicers may offer certain additional COVID-19-related loan modification options, based on an incomplete application, if the following criteria are met:
However, if the borrower fails to perform under a trial modification plan per the new exception, or requests further loss mitigation assistance, the servicer must immediately resume reasonable diligence efforts to help complete the loss mitigation application, and provide the borrower with an updated notice, as needed, conveying the information required to complete the application.
Temporary COVID-19 Foreclosure Safeguards. The Rules also require enhanced foreclosure protections through December 31, 2021. Until then, servicers may not intiate a new foreclosure due to missed payments unless one of three safeguards have been met:
Finally, the Rules add language to the commentary detailing recordkeeping and other requirements in connection with these foreclosure safeguards.
The Rules do not apply to small servicers or reverse mortgage loans as defined under RESPA. The temporary safeguards also do not apply if: