Servicers Should Gear Up for Expected Surge in Homeowners Needing Assistance
Warning to Mortgage Servicers
(April 1, 2021 – reprint from CFPB) The Consumer Financial Protection Bureau (CFPB) today warned mortgage servicers to take all necessary steps now to prevent a wave of avoidable foreclosures this fall. Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall. Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help. The CFPB will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. The CFPB will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.
There is a tidal wave of distressed homeowners coming and responsible servicers must be preparing now.
“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,” said CFPB Acting Director Dave Uejio. “Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.” The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides borrowers with federally- backed mortgages with access to forbearance, and private lenders have also provided similar assistance.
As of January 2021, approximately 2.7 million borrowers remained in such programs, with 2.1 million borrowers in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent. Industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums at the end of June 2021, mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance. To meet this surge, servicers will need to plan now. In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures. The CFPB will pay particular attention to how well servicers are:
Being proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
Working with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.
Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
Evaluating income fairly. Where servicers use income in determining eligibility for loss mitigation options, servicers should evaluate borrowers’ income from public assistance, child-support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.
All of us are frustrated by people who can’t or won’t do their job. Especially when doing their job correctly is the difference between losing or saving our home. The times of COVID have and will continue for years to bring mass-confusion to the homeowners, lenders and servicers. But, there is no excuse for the lenders or servicers not doing their job or following the law (that is what they are paid to do). Just because this is all new to them, so what this is your home that is at risk. The only way you can combat lazy people who are not following the rules, is for you to KNOW THE RULES. Do your own homework about the various programs available during and after COVID.
I feel for the lenders and servicers, but that is their job – so they need to learn the rules and know their role in working through the disaster that COVID has wrought on hundreds of thousands of homeowners.
Never default on your mortgage if you can afford to keep paying. Do not assume any of the COVID laws will give you a free ride and wipe out several months of mortgage payments. Trust me – you will have to pay the missing payments at some time – either immediately when your forbearance is over or (if you are really, really lucky) at the end of your mortgage or when you sell your home, whichever comes first. Never trust the lender or servicer to give you competent advice. Always keep written evidence of any discussions or communications (name, date and time, contact info and specifically was said).
This is a dangerous time for us all (yes, even us lawyers who have no idea how and what will happen with the various loan programs).
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
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