New CFPB Rule Provides Options to Help Prevent Foreclosure

 Posted on August 05, 2021 in Uncategorized

Many homeowners have suffered financial setbacks during the COVID-19 pandemic, and this may have caused them to be unable to make mortgage payments. Government programs have helped protect people who have been affected by COVID-19, including allowing them to receive forbearance on mortgage payments. A moratorium on foreclosures has ensured that those who have defaulted on their mortgage will not be forced out of their homes during this emergency. However, these programs and protections are coming to an end, and lenders may soon begin initiating foreclosure proceedings for those who are delinquent on mortgage payments. To address this issue, the Consumer Financial Protection Bureau (CFPB) recently implemented a temporary rule to ensure that homeowners have options for avoiding foreclosure.

Loss Mitigation Options for Borrowers

While the moratorium on foreclosures for federally-backed mortgages expired on July 31, 2021, the CFPB’s rule has generally prohibited lenders from initiating foreclosures until January 1, 2022. Foreclosures can only be initiated prior to this date if a borrower is not eligible for loss mitigation, if the property has been abandoned, or if a borrower does not respond to communications from a lender regarding loss mitigation.

Borrowers who have been affected by COVID-19 may have qualified for forbearance plans which allowed them to temporarily pause mortgage payments. However, these plans do not pause any delinquency for payments that had not been made prior to entering into a forbearance plan. Because of this, when a forbearance plan ends, lenders may be able to initiate foreclosure proceedings immediately. To address this issue, the CFPB is requiring lenders to contact borrowers between 10 and 45 days before the end of a forbearance plan and advise them of their loss mitigation options. This requirement will remain in effect until October 1, 2022.

Loss mitigation options may include loan modifications that will allow borrowers to address delinquency and make affordable payments. However, there are certain restrictions that apply to these modifications:

• The term of a loan cannot be extended by more than 480 months after the date of the loan modification.

• A loan modification cannot cause a borrower’s monthly principal and interest payments to increase above what they paid prior to the modification.

• Interest cannot be applied to any payments that were delayed prior to a loan modification.

• A loan modification must end any preexisting delinquency on a borrower’s mortgage.

• No fees may be charged for loan modifications, and existing late charges, stop payment fees, or other penalties incurred after March 1, 2020, must be waived.

Contact Our Broward County Foreclosure Defense Lawyer

Homeowners who have faced financial difficulties because of COVID-19 may have options to address delinquent mortgage payments and prevent the loss of their home through foreclosure.  At Elliot Legal Group, we can provide you with legal representation as you negotiate loan modifications, or we can help you determine whether filing for bankruptcy will allow you to eliminate debts and regain financial stability. Contact our Surfside, FL loan modification attorney at 754-332-2101 to learn more about how we can help you resolve your financial issues.

Sources:

https://www.mayerbrown.com/-/media/files/perspectives-events/publications/2021/07/cfpb-makes-temporary-revisions-of-default-servicing-rules-to-assist-borrowers.pdf

https://www.federalregister.gov/documents/2021/06/30/2021-13964/protections-for-borrowers-affected-by-the-covid-19-emergency-under-the-real-estate-settlement