CFPB Expands, Clarifies Rules Related To Foreclosure

The Consumer Financial Protection Bureau (CFPB) is proposing numerous new rules for mortgage servicers to ensure that – in the words of CFPB Director Richard Cordray – ‘no one is wrongly foreclosed upon.’

Most of the new rules expand upon or clarify existing rules on the CFPB's books. Among them is a proposed rule requiring servicers to provide struggling borrowers with foreclosure protections – such as loan modifications and other alternatives to foreclosure – more than once over the life of the loan. Currently, a servicer must offer a borrower foreclosure protections only once during the life of the loan. Under the proposed rule, servicers would have to tell borrowers about these protections even if borrowers are current.

The CFPB is also proposing to expand the protections for surviving family members and other homeowners by expanding the circumstances in which consumers would be considered successors under the rules. This would include when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child or when a borrower who is a joint tenant dies.

In addition, the CFPB wants to establish a rule requiring servicers to promptly notify borrowers when their loss mitigation applications are complete. The bureau points out that if borrowers don't know if their applications are complete, they can't know they have any protections in place.

The CFPB also wants to strengthen its rules regarding the transfer of mortgage servicing rights – particularly its rules relating to the transfer of loans in some stage of loss mitigation. Specifically, the CFPB wants servicers to handle the transfer of loans that are in loss mitigation seamlessly, so that the process stays ‘within the same timeframes that applied to the transferor servicer.’

The bureau is also seeking to clarify servicers' obligations to avoid dual tracking and prevent wrongful foreclosures, as well as to clarify when a borrower becomes ‘delinquent.’

In yet another change, the bureau wants servicers to provide more information to borrowers in bankruptcy – including periodic statements with specific information tailored for bankruptcy. Currently, they do not have to provide such information.

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