CFPB’s COVID-19 Mortgage Servicing Final Rule: Foreclosure safeguards

Happy Wednesday, compliance friends!  We’re halfway through another week of summer.  I hope you’ve been able to stay safe and enjoy it, so far!

The Consumer Financial Protection Bureau’s COVID-19 Mortgage Servicing Final Rule was published on June 30, 2021 and becomes effective on August 31,2021.  However, credit unions may begin compliance before that date.

This final rule amends sections 1024.39 and 1024.41 of Regulation X in order to assist mortgage borrowers affected by the COVID-19 pandemic.  The rule establishes temporary procedural safeguards to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation before the servicer can begin foreclosure proceedings on certain mortgages.  However, the CFPB does recognize that some foreclosures are unavoidable, and that not every borrower will be able to remain in their home indefinitely.

Of note, the temporary protections provided in the rule can apply more broadly than the CARES Act, because the provisions in the final rule apply to “federally-related mortgage loans” subject to RESPA (whereas the CARES Act only applied to “federally backed mortgage loans”).  This allows the temporary safeguards in the final rule to be applied to portfolio loans that were not expressly subject to the CARES Act or other protections.  The final rule includes five key amendments to Regulation X, all of which are aimed at encouraging borrowers and servicers to work together to identify options to avoid foreclosure.  This post will focus on the first amendment, related specifically to the loss mitigation procedures that must occur before the first notice or filing for foreclosure can be made.


continue reading »