The Consumer Financial Protection Bureau today released a proposed rule to amend Regulation X’s mortgage servicing provisions, which would result in a major overhaul of the existing default servicing framework.
The proposed rule seeks to streamline existing loss mitigation requirements, add foreclosure procedural safeguards that begin as soon as a borrower requests loss mitigation assistance, revise certain early intervention requirements, and provide borrowers with access to certain mortgage servicing communication in languages other than English. The proposal would also limit the fees a servicer can charge a borrower while the servicer is reviewing possible options to help the borrower. The proposal would not apply to “small servicers,” defined as those that service 5,000 or fewer mortgage loans, all of which the servicer or affiliates own or originated.
The CFPB is seeking comment on the proposed changes and other related topics, “including possible approaches it could take to ensure servicers are furnishing accurate and consistent credit reporting information for borrowers undergoing review for assistance.” Comments are due Sept. 9.
The CFPB stated that the new rule is necessary to require mortgage services “to try to help borrowers first” before initiating foreclosure. However, in a joint statement, the American Bankers Association and Mortgage Bankers Association noted that servicers have helped more than 8 million families stay in their homes since the beginning of the COVID-19 pandemic—help came even as those same servicers adapted to new and frequently changing loss mitigation programs implemented by government agencies.
“The bureau’s proposal represents a substantial overhaul of the current framework, and we hope they will take into careful consideration the recommendations and feedback from our members who are serving millions of borrowers every day,” the associations said. “We look forward to reviewing the specific details of the proposal—including the items pertaining to Limited English Proficiency—to ensure any updated framework is operationally feasible and does not negatively affect consumers.”
