Millions of Americans have benefited from suspension and mortgage suspension programs, both creditors and the federal government launched because of the Covid-19 pandemic last year. But as these emergency programs begin to roll out this year, the Office of Consumer Financial Protection wants to put in place security measures to ensure millions of families are not forced to seize.
One year after the pandemic, about 2.5 million homeowners are still enrolled in some type of tolerance program, according to the Mortgage Banks Association for the week of March 21, 2020. However, even with these programs in place. force, about 5% of homeowners are currently delinquent in terms of mortgages, the MBA found in its latest report.
This could increase exponentially as resistance programs begin to end this fall.
“Emergency protections for homeowners will begin to expire later this year, and by the fall, a flood of borrowers will need assistance from their services,” CFPB interim director Dave Uejio said Monday. “CFPB proposes changes to mortgage servicing rules to provide services and borrowers with the tools and time to work together to prevent preventable seizures, which disrupt lives, uproot children and cause additional costs to those least able to bear them.”
To help homeowners who are behind on mortgages, the CFPB is proposing a new rule establishing a “temporary Covid-19 emergency pre-foreclosure review period” that would essentially prevent mortgage services from starting. enforcement process until after December 31, 2021.
This new review period would add to existing rules that prevent loan administrators from commencing foreclosure until a homeowner is more than 120 days late in their home loan.
Many of the current tolerance programs were established in the CARES Act last year and apply to federal loans offered by agencies, including Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Housing and Urban Development. Private lenders and service providers have created their own tolerance programs. The rule proposed by the CFPB would cover all homeowners, including those with mortgages through private lenders, such as banks.
The CFPB plan issued on Monday is a proposal at the moment. The Agency requests public comments by 11 May before issuing a final rule.
In addition to requiring mortgage agents to conduct a review period, the CFPB also proposes a simplified loan modification process, which usually allows homeowners to request a reduction in the loan interest rate, an extension of the loan term and / or a reduction in monthly payments.
The streamlined process would allow service providers to offer some loan modification options based on incomplete applications. Debtors normally have to present a multitude of documents – including proof of income, such as payment slips, tax returns and recent account statements – before a service agent can make a decision.
Simplifying the process would allow service providers to attract homeowners faster in less burdensome payments, says CFPB. The accelerated process would be available only for loan modification options that do not increase homeowners’ monthly payments, extend the mortgage term by more than 40 years, or charge fees.
In February, President Joe Biden ordered federal housing regulators to extend mortgage suspension programs by another six months and extend foreclosure bailouts in a move that covered about 70 percent of single-family home mortgages. from the USA.
Morgages, backed by Fannie Mae or Freddie Mac, as well as the Department of Veterans Affairs (VA), the Department of Agriculture (USDA) and the FHA, have announced they are extending their tolerance programs to 18 months. For homeowners who applied for registration in March and April 2020, it means that these programs will expire in September and October.
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