Homeowners struggling with mortgage payments may soon have stronger protections under new rules proposed by the Consumer Financial Protection Bureau (CFPB). The proposed changes, announced in Washington, D.C., aim to streamline mortgage assistance, reduce unnecessary foreclosures, and improve borrower communication.
If finalized, these rules would require mortgage servicers to focus on helping homeowners before resorting to foreclosure, while also simplifying assistance programs by reducing paperwork. Here’s a breakdown of the key provisions and what they mean for mortgage professionals.
Key Changes in the CFPB’s Proposed Rules
1. Foreclosure Prevention Becomes the Priority
Under the new rules, servicers must prioritize helping borrowers who request assistance before initiating foreclosure proceedings. A foreclosure can only proceed if:
a) All possible assistance options are exhausted, or
b) The borrower stops responding to the servicer’s outreach efforts.
Additionally, the proposal limits fees that servicers can charge borrowers while they are being evaluated for assistance. This measure is intended to incentivize servicers to act quickly and fairly when reviewing borrower requests.
2. Paperwork Requirements Streamlined
Currently, servicers cannot evaluate borrowers for assistance without a complete application containing all necessary information for every available option. This rigid process can delay relief and increase the risk of foreclosure.
The CFPB’s proposal allows servicers to review each option individually, making it possible to approve assistance faster and with fewer documentation hurdles. Studies have shown that simplified loan modification processes significantly improve homeowners’ ability to keep their homes.
3. Enhanced Borrower-Servicer Communication One major challenge in foreclosure prevention is poor communication between borrowers and servicers. The proposed rule would:
a) Improve early delinquency notices by including details about loan investors and available assistance options.
b) Require servicers to provide tailored notices that clearly outline borrowers’ next steps to receive aid.
By ensuring borrowers understand their options early, the CFPB hopes to reduce avoidable foreclosures.
4. Multilingual Access to Critical Information
To better serve diverse communities, the CFPB wants to ensure borrowers receive important mortgage assistance information in languages they understand. The new rule would require:
a) Borrowers who received marketing materials in another language to have the right to request assistance in that same language.
b) All borrowers to receive notices in both English and Spanish as a default.
c) Oral interpretation services to be made available for borrowers during phone calls with servicers.
By eliminating language barriers, these changes could help more homeowners successfully navigate financial hardships and avoid foreclosure.
Lessons from the Pandemic: A More Flexible Approach to Assistance
The CFPB’s proposal is shaped by lessons learned during the COVID-19 pandemic, when millions of homeowners faced financial hardship. During the crisis, the CFPB temporarily relaxed mortgage servicing rules, allowing servicers to quickly provide forbearance and loan modifications without extensive documentation.
Both borrowers and servicers benefited from this streamlined approach, leading the CFPB to consider making some of these temporary changes permanent in the new rule.
What Happens Next?
The CFPB is seeking public comments on the proposal until September 9, 2024. If the rule is finalized, mortgage servicers will need to adjust their procedures to comply with the new borrower protection requirements.
Final Thoughts
These proposed rules reflect the CFPB’s commitment to preventing unnecessary foreclosures while also making the mortgage servicing process more efficient and responsive. Servicers must be prepared to adopt new communication, compliance, and assistance strategies to align with these regulations.
For mortgage professionals, staying informed and proactively updating servicing processes will be key to ensuring compliance and delivering better outcomes for borrowers.