April 11, 2021

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Mortgage News

Forbearances Decline but CFPB Warns Servicers to Prepare for Default Surge

While the indulgence-related mortgage number continues to decline, Black Knight said it was down 33,000 in the past week and 172,000 homeowners left the various programs in the last month. 2.54 million borrowers remain lenient. That is 4.8 percent of all mortgage loans. Now the Consumer Financial Protection Bureau (CFPB) is warning mortgage servicers to prepare for a wave of avoidable foreclosures as forbearance comes to an end in the fall and current foreclosure moratoriums expire.

While the GSEs (Fannie Mae and Freddie Mac) and Ginnie Mae, who are in charge of VA and FHA loans, have offered borrowers various options to repay overdue mortgage payments incurred during the pandemic, many homeowners are in need of help from their servicers . CFPB warns them that they must provide adequate resources and personnel Start now to make sure you are prepared for any climb.

“There is a tidal wave of distressed homeowners who will need help from their mortgage service providers in the coming months. Responsible service providers should prepare now. There is no time to waste and no excuse for inaction. No one should be surprised what is to come,” said the deputy director of the CFPB, Dave Uejio. “Our first priority is to ensure that families in trouble get the support they need. Servicers who put families in trouble first have nothing to fear, but we will hold those who are homeowners and families accountable Cause harm. “

CFPB says that of the loans that remain in forbearance programs, an estimated 2.1 million are at least 90 days in arrears. Another 242 mortgages that are not lenient are also badly criminal. With nearly 1.7 million borrowers expected to leave the indulgence in September and in the months that follow, many of them may lag behind in payments for a year or more. Servicers need increased capacity to reach and respond to the large number of homeowners who are likely to need assistance with mitigation. The CFPB will closely monitor the overall effectiveness of a servicer in helping consumers resolve compliance issues that arise.

CFPB says it will pay special attention to how good the servicers are:

  • Be proactive.
    You should reach out to borrowers before the grace period expires to give them time to apply for help, ensure they have all the necessary information, and help them obtain documents and other information that will be used to evaluate the borrowers for the loan Assistance are required.
  • Addressing the voice access. The CFPB will carefully examine how servicers manage communications with borrowers with limited English proficiency and ensure compliance with the Equal Credit Opportunity Act and other laws.
  • Evaluate income fairly. If income is used to determine eligibility for harm reduction options, service providers should evaluate income from public support, alimony, maintenance or other sources in accordance with the anti-discrimination protection of the Equal Credit Opportunity Act.
  • Process inquiries immediately. The CFPB will closely examine the behavior of servicers when hold times are longer than the industry average.
  • Avoiding avoidable foreclosures. The CFPB expects service workers to comply with foreclosure restrictions in Regulation X and other state and state restrictions to ensure all homeowners have an opportunity to rescue their homes before foreclosure is initiated.

See the CFPBs for more information
Compliance Bulletin of April 1, 2021.