New Federal Protections for Mortgage Borrowers with COVID-19 Hardships
The Consumer Financial Protection Bureau (“CFPB”) has amended its mortgage servicing rules to assist mortgage borrowers experiencing a COVID-19-related hardship (the “Amendments”). The Amendments add temporary provisions that are designed to help borrowers avoid foreclosure in the wake of many state and federal COVID-19-related protections ending. The Amendments:
require special COVID-19 loss mitigation procedural safeguards to ensure that a borrower has a meaningful opportunity to apply for loss mitigation before the mortgage account is referred to foreclosure after national foreclosure moratoria have ended,
provide servicers the ability to offer borrowers certain COVID-19-related streamlined loan modifications without a complete loss mitigation application,
require the provision of additional information promptly after early intervention live contacts are established with certain delinquent borrowers, and
establish timing requirements for when servicers must renew reasonable diligence efforts to obtain complete loss mitigation applications from certain borrowers.
The Amendments temporarily add to the foreclosure protection conditions in certain circumstances. From August 31, 2021 through December 31, 2021, unless an exception applies, before referring certain 120-day delinquent accounts for foreclosure the servicer must make sure at least one of the temporary procedural safeguards has been met.
Procedural Safeguards. The three temporary procedural safeguards are:
The borrower was evaluated based on a complete loss mitigation application and existing foreclosure protection conditions are met. To meet this safeguard, the servicer must confirm that:
The borrower submitted a complete loss mitigation application, and the servicer evaluated the application.
The borrower remained delinquent since submission of the loss mitigation application.
The foreclosure protection conditions in the existing Rules discussed above, are met, such that a servicer is permitted by the Rules to make a foreclosure referral.
The property is abandoned. To meet this safeguard, applicable state or local law must consider the property securing the mortgage abandoned when referred to foreclosure.
The borrower is unresponsive to servicer outreach. To meet this safeguard, the servicer must not have received any communications from the borrower in the 90 days prior to the foreclosure referral and the servicer must confirm:
It has complied with the early intervention live contact requirements in the Mortgage Servicing Rules during that 90-day period.
It has provided the early intervention 45-day written notice required by the Mortgage Servicing Rules. The servicer must have sent the notice at least 10 but no more than 45 days before foreclosure referral.
It has complied with all loss mitigation notice requirements in the Mortgage Servicing Rules during that 90-day period, such as the notice of an incomplete loss mitigation application.
The borrower’s forbearance program, if applicable, ended at least 30 days before foreclosure referral.
Exceptions. The temporary procedural safeguards are not required if:
The foreclosure referral occurs (as permitted by applicable law) on or after January 1, 2022.
The borrower was more than 120 days delinquent prior to March 1, 2020.
The applicable statute of limitations will expire before January 1, 2022.
If the servicer has met the temporary procedural safeguards, or if the safeguards do not apply, the servicer may proceed with foreclosure referral, to the extent permitted by other law and the existing foreclosure protections in the Rules. If the temporary procedural safeguards apply, a servicer is required to maintain records that evidence the servicer complied with them.