The Consumer Financial Protection Bureau today proposed to establish a temporary COVID-19 emergency pre-foreclosure review period under Regulation X that would prohibit servicers from making the first notice or filing required to initiate foreclosure until Dec. 31. This “pre-foreclosure” period would apply to mortgage loans secured by the borrower’s principal residence.
The proposed rule would build on existing rules, which prohibit a servicer from making the first notice or filing required by law until a borrower’s mortgage loan obligation is more than 120 days delinquent. The CFPB issued the proposal in response to concerns that a potentially unprecedented number of borrowers may exit forbearance at the same time this fall when they reach the maximum term of forbearance and could strain servicer capacity, “potentially resulting in delays or errors in processing loss mitigation requests.”
In addition, the proposed amendments would temporarily allow mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. The proposed effective date of the temporary rule is Aug. 31, and if finalized, it would apply until Aug. 31, 2022.