The Consumer Financial Protection Bureau (CFPB) joined other government agencies on Wednesday to announce a return to enforcing protections intended to help families and homeowners avoid foreclosure.
The protections, put in place following the Great Recession, give families the opportunity to find alternatives to foreclosure before losing their homes. With the majority of the over 1 million remaining COVID-19 forbearances expected to end before the end of the year, struggling homeowners will need these protections to avoid foreclosure, the agencies said.
“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago,” CFPB Director Rohit Chopra said. “Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law."
In addition to the CFPB, the joint statement was issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators.
According to these agencies, most homeowners make their monthly mortgage payments to a mortgage servicer, not the entity that owns the loan. Servicers collect the payments on behalf of that entity, and are hired and fired by that entity, not the homeowner.
Since homeowners can’t shop for a new servicer, no matter how badly they may be mistreated, the borrowers lack the market power to discipline the servicers. Without government intervention, borrowers have no defense against a servicer’s abuse, the agencies said.
The statement issued Wednesday makes clear that the agencies will apply their respective supervisory and enforcement authorities to protect homeowners and address any compliance failures. The joint statement provides that a previous joint statement issued in April 2020 — which stated that the agencies would relax supervisory and enforcement oversight with respect to certain requirements in Regulation X — will no longer apply.
According to the Federal Reserve, Regulation X requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. It also prohibits specific practices, such as kickbacks, and places limitations upon the use of escrow accounts.
The agencies said they believe servicers have had enough time to adjust their operations to comply with the timelines and other requirements of Regulation X, and that servicers will now be expected to fully comply with the rules.
The CFPB also released a report summarizing its work to help struggling homeowners and avert another foreclosure crisis. This includes:
- Conducting prioritized assessments, or targeted supervisory reviews, designed to obtain real-time information from mortgage services due to the elevated risk of consumer harm because of the pandemic.
- Reminding servicers that “unprepared is unacceptable,” and that servicers need to dedicate enough resources and staff to ensure they can communicate clearly with homeowners, effectively assist borrowers, and reduce avoidable foreclosures during the surge in forbearance exits this fall.
- Implementing temporary procedural safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes.
- Analyzing consumer complaint data about mortgage servicing and mortgage forbearances.
- Conducting additional, targeted review of high-risk complaints related to COVID-19 forbearance.
- Analyzing and publishing mortgage servicers’ COVID-19 pandemic response.
- Conducting original research documenting that Black and Hispanic communities, and low-income communities across racial and ethnic groups are at increased risk of another foreclosure crisis due to the disproportionate concentration of mortgage forbearances and delinquencies in those communities;
- Creating an online housing hub website at www.consumerfinance.gov/housing, in partnership with other federal agencies, to connect homeowners, renters and landlords with information about CARES Act assistance and protections.
- Creating and distributing homeowner outreach materials, in English and other languages, that servicers and housing counselors can use to help homeowners affected by the COVID-19 pandemic.
The CFPB said it will continue to closely monitor the performance of mortgage servicers to prevent avoidable foreclosures “to the maximum extent possible” and will not hesitate to take supervisory or enforcement action, if warranted.
