The Consumer Financial Protection Bureau sent a final rule updating federal mortgage servicing requirements to the Office of Management and Budget for review. The proposed changes began under the Biden Administration as an attempt to simplify how financially distressed homeowners obtain assistance and avoid foreclosure.
The CFPB’s current mortgage servicing rules under the Real Estate Settlement Procedures Act of 1974, or Regulation X, were finalized in 2013 and were meant to protect borrowers from servicer misconduct and to prevent avoidable foreclosures. The newly finalized rule, titled Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties, was sent to OMB on Nov. 6. The text has not yet been made public, and it’s not yet clear how the final version compares with the original proposal issued in July 2024.
The original proposal drew on lessons from the COVID-19 pandemic, when mortgage servicers used expanded forbearance programs and streamlined procedures to help borrowers remain in their homes. The 2024 proposal would allow servicers to begin evaluating borrowers for assistance without waiting for completed applications, establish additional protections against avoidable foreclosures and restrict certain fees while borrowers are being evaluated for relief. It also proposed changes to borrower communications, including requirements involving notices in languages other than English.
In June this year, the American Bankers Association sent a letter to the CFPB, urging the bureau to eliminate the proposal’s “sweeping changes and overly expansive borrower protections” and make targeted structural updates instead.
In the letter, ABA recommended that the bureau adopt a more targeted and balanced approach — combining clear guardrails with sufficient flexibility to respond to borrowers’ needs — consistent with the executive order’s directives. The association recommended:
- Removal of the anti-evasion provision;
- Requiring an affirmative borrower request to trigger foreclosure protections;
- Establishing clear, finite endpoints to foreclosure protections and retaining one review per delinquency;
- Simplifying and streamlining borrower notices; and
- Providing relief for small servicers by increasing the exemption threshold.
The letter also reiterated ABA’s continued opposition to several aspects of the 2024 proposal, including fee prohibitions and language access requirements. allow servicers to review loss mitigation options one at a time, require borrowers to affirmatively request assistance before foreclosure protections apply, and to set clear, finite endpoints for those protections.
