Newsletter — May 2021

The Consumer Financial Protection Bureau (CFPB) issued policy guidance and proposed new rules in April, signaling that it plans to prioritize mortgage-servicing oversight in the coming year.

According to Reuters, the CFPB has been requesting data from servicers as to how they are handling forbearance programs for their hardest-hit borrowers, and has even opened probes into a handful of servicers over their handling of forbearance requests.

The move indicates a tougher stance toward the financial-services industry under the Biden administration, in contrast to the leeway servicers were afforded during the pandemic.

"The CFPB is focused on protecting consumers financially harmed by the COVID-19 pandemic," said a CFPB spokeswoman.

One of the CFPB’s proposed rules would give borrowers more time through a pre-foreclosure “review period” that would prevent servicers from foreclosing until 2022. The agency also wants to give servicers more options for streamlining loan modifications, and ensure more effective and timely communication with borrowers.

The new policy guidance urges mortgage servicers to “dedicate sufficient resources and staff to ensure they can communicate clearly with borrowers,” effectively manage requests for assistance, and reduce avoidable foreclosures.

The Mortgage Bankers Association estimated last month that 2.3 million homeowners were in forbearance — about 4.6% of servicers’ total portfolio volume. Those forbearance programs (along with foreclosure moratoriums) were enacted by the Trump administration and are scheduled to expire at the end of June.

Anticipating a surge in foreclosures as those COVID-19 protections come to an end, the CFPB warned servicers to be prepared for an onslaught.

Loss-mitigation expert Jane Mason recommends mortgage professionals prepare by communicating with their borrowers now, sending surveys and collecting data as to what their plans are for getting back on their feet.

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