This proposal prohibits mortgage service providers from initiating a foreclosure process against delinquent borrowers until after December 31, 2021. The rule will apply to all mortgages, both federal and private, in a main residence, reveal the employees of the CFPB (Consumer Financial Protection Bureau).
Covid-19 has led to a sharp increase in housing insecurity amid mass unemployment and loss of earnings, underlining the homeowners’ ability to pay monthly mortgages, reports CNBC.
The CFPB states that loans placed in the tolerance program at the beginning of the pandemic will end their grace period in September or October. “Around 1.7 million borrowers are expected to exit tolerance programs at that time and are at risk of foreclosure,” adds CFPB interim director Dave Uejio.
In that regard, the consumer agency has proposed creating a “temporary Covid-19 emergency pre-foreclosure review period” during which mortgage service providers cannot make an initial foreclosure notice. This period would last until after this year.
The proposal would three months of space for service providers to complete a “loss mitigation” review for borrowers, says Patricia McCoy, former CFPB deputy director for mortgage markets, speaking to CNBC.
In this review, service providers mortgage services will be able to assess the financial situation of borrowers and whether it makes sense to restructure your mortgage for more affordable payments or, ultimately, to foreclose.
This proposal would also give some concessions to service providers, such as flexibility to offer simplified loan modification options with less paperwork from borrowers if the restructuring met certain conditions.
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