The Consumer Financial Protection Bureau (CFPB) announced a new rule to help prevent foreclosures in situations where they can be avoided. The new rule, which came into effect Aug. 31, requires most mortgage agents to help forborne borrowers find viable repayment options before they begin the foreclosure process.
Key points to remember
- Under the CARES (Coronavirus Aid, Relief, and Economic Security) law, millions of Americans have been able to suspend or reduce their monthly mortgage payments without the risk of foreclosure, a process known as forbearance.
- With the new CFPB rule, most mortgage agents are prohibited from foreclosing on a delinquent loan unless they first contact the borrower and offer meaningful options to help them find their way. stay home.
- The new rule went into effect on August 31, 2021, but because it is temporary, homeowners with overdue loans should contact their agents soon.
How the new mortgage rule works
The coronavirus pandemic has had a significant impact on millions of homeowners, and the CARES (Coronavirus Aid, Relief, and Economic Security) law has provided much-needed relief in the form of forbearance plans for borrowers who could not. pay their monthly payments. The plans allowed the homeowner to temporarily suspend or reduce their mortgage payments.
These protections have since expired in many cases, but homeowners with FHA, USDA, or VA mortgages who did not take advantage of the forbearance can still apply for a COVID-related forbearance until September 30, 2021. In the case of Fannie Mae or Freddie Mac backed mortgages, there is no deadline to apply for COVID-related forbearance yet.
For homeowners who are currently forborne, the new rule says that most mortgage agents must now notify them of repayment or other options that can help them avoid foreclosure. In general, lenders cannot begin the foreclosure process until January 1, 2022.
Because the new rule is temporary, the CFPB urges homeowners in this situation to contact their mortgage agents as soon as possible, while this rule is still in effect, rather than waiting for the agent to contact them. The CFPB also suggests consulting a licensed housing advisor even before contacting the service agent.
Is my mortgage covered?
The new CFPB rule applies to federally guaranteed mortgages, which includes the types mentioned above. However, home equity loans and lines of credit, reverse mortgages and investment property loans are not eligible. In addition, some small mortgage agents are not required to comply, according to the CFPB. If you are unsure if you qualify, contact your mortgage agent directly.