If you’re not prepared for it, homeownership can be a serious financial burden. When the burden becomes so overwhelming that consumers face foreclosure, the Consumer Financial Protection Bureau (CFPB) aims to help with certain rules for mortgage servicers. Recently, they made some changes to those rules.
A couple of years ago, the CFPB established some mortgage rules to help struggling borrowers who face foreclosure. Last week, they issued a press release saying they’ve revisited those rules and updated them. Here are a few things that will change:
Protection for successors and surviving family members: The new rules expand protection for successors, which includes someone who becomes a homeowner “when a property is transferred upon the death of a relative, as a result of a divorce or legal separation, through certain trusts, between spouses, from a parent to a child, or when a borrower who is a joint tenant dies.” Basically, these successors get the same protection as the original borrower.
Added foreclosure protections over the life of the loan: With the existing rules, the mortgage servicer must offer the borrower certain foreclosure protections once during the life of the loan (for example, an evaluation to avoid foreclosure to begin with). The new rule requires them to offer that protection again when the borrower gets current on their loan.
Additional info during loss mitigation: When a borrower can’t make a payment, they might apply for “loss mitigation.” In basic terms, this is the process of getting help from the loan servicer to avoid foreclosure. The CFPB’s new rules require the servicer to offer more information during this process. For example, they’ll have to let the borrower know when their loss mitigation application is complete, which is important because some protections don’t kick in until that application is complete.
The CFPB says the updates are finalized, but they won’t go into effect until for a while so that servicers can update their systems and procedures. Housingwire estimates that it will take 12-18 months to fully implement the rules once the CFPB publishes them. There are a handful of additional changes beyond these, and you can check out the CFPB’s press release below for more info.
We’ve updated our mortgage servicing rules to provide greater protections for mortgage borrowers and other homeowners | via Housingwire
Photo by Cameron Parkins.