The CFPB’s 2021 Mortgage Servicing COVID-19 Rule
will be effective August 31st
, 2021. Among other things, this Rule requires specified communications with a delinquent borrower prior to commencing a foreclosure.
The Rule only applies to a mortgage loan secured by the borrower’s principal residence, not to investment properties or second homes. It also does not apply to reverse mortgages or small servicers (defined as having 5,000 or fewer mortgage loans).
The CFPB’s current 120-day Rule prohibits the commencement of foreclosure until the loan is more than 120 days delinquent. In addition, the new Rule requires that the servicer confirm the borrower’s eligibility for any loss mitigation options, and notify the borrower if they are not eligible (prior to commencing a foreclosure). The borrower must also have rejected all offered loss mitigation options or failed to perform under a loss mitigation agreement.
The servicer must ensure at least one of the Rule’s following temporary procedural safeguards are met (unless an exception applies):
- The borrower was evaluated based on a complete loss mitigation application, and the servicer has confirmed that the borrower remained delinquent since submission of the loss mitigation application (and the existing Mortgage Servicing Rules are met, permitting the commencement of a foreclosure);
- The property is abandoned; or
- The borrower is unresponsive to the servicer’s outreach. In this case, the servicer must have:
- Not received any communications from the borrower in the 90 days prior to commencing the foreclosure;
- Complied with the early-intervention requirements;
- Provided an early intervention 45-day written notice; and
- Complied with all loss mitigation notice requirements (in addition, the borrower’s forbearance program, if applicable, must have ended at least 30 days before the foreclosure is commenced).
Exceptions to the temporary procedural safeguards are:
- The foreclosure is commenced on or after January 1st, 2022
- The borrower was more than 120 days delinquent prior to March 1st, 2020
- The applicable statute of limitations will expire before January 1st, 2022
Until October 1st
, 2022, the Rule requires the servicer to promptly provide information after establishing live contact (both to borrowers in a forbearance program and those who are not). Failure to fulfill the Rule’s requirements may give borrowers defenses to raise in foreclosure actions.
To help ensure a clean case, our team at Weltman has developed a compliance checklist. Download and complete the checklist
and provide it with your referrals for our firm to commence a foreclosure, or to reactivate a foreclosure on hold.
To view Larry’s previous Weltman webinar, New Compliance Requirements for Mortgage Holders: The CFPB’s Proposed Regulation X Amendments, click here
. If you have questions about our compliance checklist or want additional insights on this blog’s topic, contact Larry here
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.