CFPB Issues Principles for Future of Loss Mitigation

The Consumer Financial Protection Bureau today outlined four principles that will guide its discussions on the future of loss mitigation as the U.S. Treasury’s crisis-era Home Affordable Modification Program is phased out at the end of this year. The principles — accessibility, affordability, sustainability and transparency — do not represent binding legal requirements, the bureau said, but will be used by the bureau in discussions with industry participants about loss mitigation through the lens of consumer protection.

Among other things, the bureau called for loss mitigation options that would be “flexible enough to assist special populations or unique circumstances,” and available to consumers who decline a loan modification offer or who re-default. The CFPB also recommended using a common application form for borrowers applying for loss mitigation assistance and considering principal reduction when doing so may benefit the investor. Additionally, the bureau said that servicers should give consideration to meeting the needs of those with limited English proficiency and that key loss mitigation data should be reported publicly on a regular basis.

CFPB noted that while its principles “have applicability to most loss mitigation programs, certain recommendations may not align with government insured lending programs such as those offered by Federal Housing Administration, Veterans’ Affairs or Rural Housing Service.”

ABA is in the process of reviewing these principles and determining the potential effects not only for the secondary market, but also for banks that hold mortgages in portfolio. ABA will continue to engage with member banks and the bureau as discussions move forward.