The Consumer Financial Protection Bureau (CFPB) on Monday finalized its regulation on protecting mortgage services, which is designed to enable a smooth transition when state foreclosure moratoriums expire. CUNA raised several concerns about the CFPB’s original proposal, which included a moratorium on enforcement, and the final ruling confirms CUNA’s comments about the inadequate customization of the proposal and its potential to do more harm than good.
“We thank the CFPB for listening to CUNA and other concerns about the overly broad and potentially harmful moratorium,” said CUNA President / CEO Jim Nussle. “We share the bureau’s goal of getting consumers through the pandemic and its impact and the credit unions will continue their efforts to work with members of the credit union.”
Under the CFPB rule, credit unions retain the discretion and ability to initiate foreclosure if the borrower:
- Has given up ownership;
- Has been more than 120 days in arrears with his mortgage payments and has not responded to the specific required request from the mortgage servicer for 90 days; or
- Has submitted a full loss mitigation application and has been peened for options other than foreclosure and there are none available.
These protective measures only apply to loans that are in arrears for more than 120 days after March 1, 2020 and whose statute of limitations expires on or after January 1, 2022.
This procedural protection only applies to the first notification or initial registration to initiate foreclosures between the effective date of August 31, 2021 and the expiry date of January 1, 2022.
Other mortgage servicing protections related to borrowers exiting the forbearance were also concluded with the rule, including the clarity CUNA sought to provide regarding live contact. The rule will go into effect on August 31, but a servicer may voluntarily take certain actions for certain provisions before that date, as described in the 2021 rule.
In addition, the Bureau does not intend to take any regulatory or enforcement action against any service provider offering a borrower an optimized loan modification based on an incomplete application prior to that date, as long as the modification meets the criteria set out in the 2021 rule.