The United States Consumer Financial Protection Bureau finalized a rule for homeowners who are struggling to make mortgage payments due to the pandemic, but said foreclosures would be allowed to resume in coming months once those extra protections have been met.
The new rule safeguards struggling borrowers and allows them to consider loan modifications and home sales. The amendments will also help protect mortgage borrowers from unwelcome surprises as they exit forbearance plans.
The amendments were drafted to support the housing market’s smooth and orderly transition to post-pandemic operation, temporarily establishing safeguards to help ensure that borrowers have time before foreclosure to explore their options, including loan modifications and selling their homes. The rules cover loans on principal residences, generally exclude small servicers, and will take effect on August 31, 2021.
“As the nation shifts from the COVID-19 emergency to the economic recovery, we cannot be complacent about the dangers we still face,” said CFPB Acting Director Dave Uejio. “An unchecked wave of foreclosures would drain billions of dollars in wealth from the Black and Hispanic communities hardest hit by the pandemic and still recovering from the impact of the Great Recession just over a decade ago. An unchecked wave of foreclosures would also risk destabilizing the housing market for all consumers. We are giving homeowners the time and opportunity to make informed decisions about the best course of action for them and their families, whether that is seeking a loan modification or selling their home. And we are giving mortgage servicers the flexibility they need to serve homeowners with dignity, while managing an unprecedented volume of borrowers seeking assistance.”
Since the outset of the pandemic last March, nearly seven million homeowners took advantage of COVID-19 hardship forbearance, temporarily pausing the obligation to make their mortgage payments, while they resolved financial insecurity caused by the pandemic and its effects.
The Biden administration this month extended the federal eviction moratorium through the end of July.
The rule will become effective starting August 31, 2021.