Consumer Financial Protection Bureau Expands Foreclosure Protections

cfpb

Consumer Financial Protection Bureau Expands Foreclosure Protections
Updated Servicing Rule Provides Surviving Family Members and Other
Homeowners with Same Protections as Original Borrowers

FOR IMMEDIATE RELEASE: August 4, 2016

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today finalized new measures to ensure that homeowners and struggling borrowers are treated fairly by mortgage servicers. The updated rule requires servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, clarifies borrower protections when the servicing of a loan is transferred, and provides important loan information to borrowers in bankruptcy. The changes also help ensure that surviving family members and others who inherit or receive property generally have the same protections under the CFPB’s mortgage servicing rules as the original borrower.

“The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray. “These updates to the rule will give greater protections to mortgage borrowers, particularly surviving family members and other successors in interest, who often are especially vulnerable.”

Mortgage servicers are responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. They typically handle customer service, collections, loan modifications, and foreclosures. To address widespread mortgage servicing problems, the CFPB established common-sense rules for servicers that went into effect on January 10, 2014.

The CFPB issued proposed amendments to those rules in November 2014, and the final rule issued today adopts many of the proposed provisions. However, the Bureau made a number of changes in the final rule after considering comments received from the public.

The rule issued today establishes new protections for consumers, including:

  • Requiring servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan: Under the CFPB’s existing rules, a mortgage servicer must give borrowers certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Today’s final rule will require that servicers give those protections again for borrowers who have brought their loans current at any time since submitting the prior complete loss mitigation application. This change will be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship – such as the loss of a job or the death of a family member – that could otherwise cause them to face foreclosure.
  • Expanding consumer protections to surviving family members and other homeowners: If a borrower dies, existing CFPB rules require that servicers have policies and procedures in place to promptly identify and communicate with family members, heirs, or other parties, known as “successors in interest,” who have a legal interest in the home. Today’s final rule establishes a broad definition of successor in interest that generally includes persons who receive property upon the death of a relative or joint tenant; as a result of a divorce or legal separation; through certain trusts; or from a spouse or parent. The final rule ensures that those confirmed as successors in interest will generally receive the same protections under the CFPB’s mortgage servicing rules as the original borrower.
  • Providing more information to borrowers in bankruptcy: Under the CFPB’s existing mortgage rules, servicers do not have to provide periodic statements or early intervention loss mitigation information to borrowers in bankruptcy. Today’s final rule generally requires, subject to certain exemptions, that servicers provide those borrowers periodic statements with specific information tailored for bankruptcy, as well as a modified written early intervention notice to let those borrowers know about loss mitigation options. Servicers also currently do not have to provide early intervention loss mitigation information to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act. Today’s final rule generally requires servicers to provide modified written early intervention notices to let those borrowers also know about loss mitigation options.
  • Requiring servicers to notify borrowers when loss mitigation applications are complete: Whether a borrower is entitled tokey foreclosure protections depends in part on the date a borrower completes a loss mitigation application. If consumers do not know the status of their application, they cannot know the status of those foreclosure protections. Today’s final rule requires servicers to notify borrowers promptly and in writing that the application is complete, so that borrowers know the status of the application and have more information about their protections.
  • Protecting struggling borrowers during servicing transfers: When mortgages are transferred from one servicer to another, borrowers who had applied to the prior servicer for loss mitigation may not know where they stand with the new servicer. Today’s final rule clarifies that generally the new servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer, but provides limited extensions to these timeframes under certain circumstances. If a borrower submits an application shortly before transfer, the new servicer must send an acknowledgment notice within 10 business days of the transfer date. If the borrower’s application was complete prior to transfer, the new servicer must evaluate it within 30 days of the transfer date. If the new servicer needs more information to evaluate the application, the borrower would retain some foreclosure protections in the meantime. If the borrower submits an appeal, the new servicer has 30 days to make a determination on the appeal.
  • Clarifying servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures: The CFPB’s existing rules prohibit servicers from taking certain actions in foreclosure once they receive a complete loss mitigation application from a borrower more than 37 days prior to a scheduled sale. However, in some cases, borrowers are not receiving this protection, and servicers’ foreclosure counsel may not be taking adequate steps to delay foreclosure proceedings or sales. The CFPB’s new rule clarifies that, if a servicer has already made the first foreclosure notice or filing and receives a timely complete application, servicers and their foreclosure counsel must not move for a foreclosure judgment or order of sale, or conduct a foreclosure sale, even if a third party conducts the sale proceedings, unless the borrower’s loss mitigation application is properly denied, withdrawn, or the borrower fails to perform on a loss mitigation agreement. The clarifications will aid servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
  • Clarifying when a borrower becomes delinquent: Several of the consumer protections under the CFPB’s existing rules depend upon how long a consumer has been delinquent on a mortgage. Today’s final rule clarifies that delinquency, for purposes of the servicing rules, begins on the date a borrower’s periodic payment becomes due and unpaid. When a borrower misses a periodic payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date the borrower’s delinquency began advances. The final rule also allows servicers the discretion, under certain circumstances, to consider a borrower as having made a timely payment even if the borrower’s payment falls short of a full periodic payment. The increased clarity will help ensure borrowers are treated uniformly and fairly.

Today’s final rule makes additional changes to the CFPB’s mortgage servicing rules. These changes include providing flexibility for servicers to comply with certain force-placed insurance and periodic statement disclosure requirements. The changes also clarify several requirements regarding early intervention, loss mitigation, information requests, and prompt crediting of payments, as well as the small servicer exemption. Further, the changes exempt servicers from providing periodic statements under certain circumstances when the servicer has charged off the mortgage. Finally, concurrently with the final rule, the CFPB is issuing an interpretive rule under the Fair Debt Collection Practices Act relating to servicers’ compliance with certain mortgage servicing provisions as amended by the final rule.

Most of the provisions of the final rule will take effect 12 months after publication in the Federal Register. The provisions relating to successors in interest and the provisions relating to periodic statements for borrowers in bankruptcy will take effect 18 months after publication in the Federal Register.

The final rule issued today is available at: http://files.consumerfinance.gov/f/documents/20160804_cfpb_Final_Rule_Amendments_to_the_2013_Mortgage_Rules.pdf

The interpretive rule issued today is available at: http://files.consumerfinance.gov/f/documents/20160804_cfpb_Bureau_Interpretations_Safe_Harbors_from_Liability_under_FDCPA.pdf

CONTACT: Office of Communications Tel: (202) 435-7170

No Author Biography has been linked to this Article.

Related Articles

September 8, 2019
By Lawrence R. Ahern, III, Brown & Ahern (Nashville, TN) Introduction Four bankruptcy-related bills were enacted during the 116th Congress and signed into law on August 23, 2019.1 The legislation affected both business and consumer cases. One bill, the Small Business Reorganization Act of 2019 (SBRA),2 deals on its face with a non-consumer topic. However, it will be of great...
Members
kevinanderson
June 26, 2022
Consumers have burned through their stimulus cash and are now drawing down their savings to satisfy pent up spending sprees and to cover the increasing cost of living. This cannot continue. From 2015 through the end of 2019, consumers held a consistent average of $1.1 trillion in savings. However, with the commencement of the COVID pandemic and the first of...
Members
August 8, 2021
By Henry E. Hildebrand, III, Chapter 13 Trustee, Middle District of TN (Nashville) Chapter 13 trustee is not compelled to return the percentage fee taken from a Chapter 13 case when the case is dismissed prior to confirmation. Harmon v. McCallister, 2021 WL 3087744 (9th Cir. BAP July 20, 2021) (Gan) Case Summary Douglas and Christine Harmon filed a Chapter...
Members
ahern_larry_regular
June 11, 2023
Introduction This series reviews developments in bankruptcy procedure during the past year. One new rule and amendments to 16 rules took effect December 1, 2022. Many reflected changes necessitated by the Small Business Reorganization Act of 2019 (SBRA), and had been in place in the same or similar form on an interim basis since that legislation took effect.
Members
August 15, 2021
After the CARES Act’s 120-day moratorium on evictions ended, the Centers for Disease Control (“CDC”) extended the moratorium, with the CDC’s order based on authority under the Public Health Service Act of 1944. CDC stepped into the landlord-tenant arena to make and enforce regulations necessary to prevent spread of COVID-19, citing 42 U.S.C. § 264(a). Subsequent to CDC’s action, Congress...
September 20, 2020
By The Honorable William Houston Brown (Retired) Chapter 13 debtors’ FDCPA claim was not “related to” bankruptcy case. After reopening closed case, the debtors filed adversary complaint against mortgage holders and servicers, alleging various claims for violation of discharge injunction, automatic stay and FDCPA. The complaint plausibly pleaded elements required for §§ 362(k) and 524(i), but the claims under FDCPA...
Members
Academy-emeritus-Logo-gold3
February 12, 2023
Previously the Emeritus Trustees (“ETC”) were asked to comment on “How to Manage Unprofessional and Discourteous Attorneys”. We now turn to ETC to share their collective wisdom when addressing the issues raised by incompetent, unprepared, and negligent bankruptcy counsel. Chapter 13 Trustees are required to administer cases in accordance with the duties set forth in 11 U.S.C. Sec. 1302 and...
Members
January 13, 2019
By John P. Gustafson, United States Bankruptcy Judge, Northern District of Ohio, Western Division (Toledo, OH) Click here for Part 1 of 6 Click here for Part 2 of 6 Click here for Part 4 of 6 Click here for Part 5 of 6
Members
M Joseph Photo 2-1-22
November 5, 2023
“The focus of this article is to review some of the issues faced in cases with pending state court marital property division proceedings.”
Members

Looking to Become a Member?

ConsiderChapter13.org offers a forum to advance continuing education of consumer bankruptcy via access to insightful articles, informative webinars, and the latest industry news. Join now to benefit from expert resources and stay informed.

Webinars

These informative sessions are led by industry experts and cover a range of consumer bankruptcy topics.

Member Articles

Written by industry experts, these articles provide in-depth analysis and practical guidance on consumer bankruptcy topics.

Industry News

The Academy is the go-to source for the latest news and analysis in the Chapter 13 bankruptcy industry.

To get started, please let us know which of these best fits your current position: