The Consumer Financial Protection Bureau (CFPB) proposed new rules Wednesday intended to help homeowners facing foreclosure.
The proposed rules would require mortgage servicers to exhaust all avenues to help homeowners before foreclosing and limit the fees they can charge while reviewing those options, which can include pausing payments temporarily and lowering monthly payments by extending the loan term.
“Foreclosure protections under our proposal would begin as soon as the borrower asked for help — no magic words, no form, no need to submit documents. As soon as the borrower asked for help then the servicer under the proposal would need to focus solely on addressing options,” a CFPB official said on a call with reporters.
Vice President Harris said in a statement that the new proposed rule will help "homeowners throughout America get the assistance they need to stay in their homes, grow their equity, and keep their families safe.”
“I have always believed that homeownership represents more than a roof over our heads; it represents financial security, the opportunity to build wealth, and a foundation for a better future for people across our nation, their children, and future generations," Harris said.
"That is why I took on some of the largest banks during the foreclosure crisis and later drafted and fought to pass the California Homeowner Bill of Rights as the state’s Attorney General, protecting families from unfair mortgages and predatory foreclosure practices."
The proposed rule would also require servicers to issue more tailored notices to borrowers, provide both English and Spanish translations of the notices and make interpreters available during phone calls.
The CFPB also streamlined servicer paperwork loads, “rigid” timing and other requirements imposed in 2014 in the wake of the foreclosure crisis in which 7.5 million homes were lost between 2006 and 2014.
The watchdog says the new rule does not apply to small servicers, which CFPB officials defined as those who service 5,000 loans or less.
The CFPB solicited comments on how to improve borrower protections in 2022 and heard from a range of mortgage industry and borrower advocates including the Mortgage Banker Association and the American Bankers Association. Additional comments on the proposed rules are due within 60 days after they are published in the Federal Register, including on a reasonable effective date for the final rule.
"When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers, and the economy as a whole," said CFPB Director Rohit Chopra.
"The CFPB's proposal would reduce avoidable foreclosures and make the mortgage market more resilient during future crises."
