The Bureau of Consumer Financial Protection (CFPB) today issued its final rule to amend Regulation X to assist mortgage borrowers affected by the COVID-19 emergency. Effective August 31, 2021, the final rule establishes temporarily procedural safeguards to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation before the servicer can make the first notice or filing required for foreclosure on certain mortgages. In addition, the final rule would temporarily permit mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application. The Bureau has also finalized certain temporary amendments to the early intervention and reasonable diligence obligations that Regulation X imposes on mortgage servicers.
A summary of the rules follow, and the actual Final Rule can be viewed here…
From August 31, 2021 through December 31, 2021, unless an exception applies, before referring certain 120-day delinquent accounts for foreclosure the servicer must make sure at least one of the temporary procedural safeguards has been met.
Procedural Safeguards. The three procedural safeguards are:
1. The borrower was evaluated based on a complete loss mitigation application and existing foreclosure protection conditions are met. To meet this safeguard, the servicer must confirm that:
- The borrower submitted a complete loss mitigation application, and the servicer evaluated the application.
- The borrower remained delinquent since submission of the loss mitigation application.
- The foreclosure protection conditions in the existing Mortgage Servicing Rules discussed above, are met, such that a servicer is permitted by the Rules to make a foreclosure referral.
2. The property is abandoned. To meet this safeguard, applicable state or local law must consider the property securing the mortgage abandoned when referred to foreclosure.
3. The borrower is unresponsive to servicer outreach. To meet this safeguard, the servicer must not have received any communications from the borrower in the 90 days prior to the foreclosure referral and the servicer must confirm:
- It has complied with the early intervention live contact requirements in the Mortgage Servicing Rules during that 90-day period.
- It has provided the early intervention 45-day written notice required by the Mortgage Servicing Rules. The servicer must have sent the notice at least 10 but no more than 45 days before foreclosure referral
- It has complied with all loss mitigation notice requirements in the Mortgage Servicing Rules during that 90-day period, such as the notice of an incomplete loss mitigation application.
- The borrower’s forbearance program, if applicable, ended at least 30 days before foreclosure referral.
Exceptions. The temporary procedural safeguards are not required if:
- The foreclosure referral occurs (as permitted by applicable law) on or after January 1, 2022.
- The borrower was more than 120 days delinquent prior to March 1, 2020.
- The applicable statute of limitations will expire before January 1, 2022.
If the servicer has met the temporary procedural safeguards, or if the safeguards do not apply, the servicer may proceed with foreclosure referral, to the extent permitted by other law and the existing foreclosure protections in the Mortgage Servicing Rules. If the temporary procedural safeguards apply, a servicer is required to maintain records that evidence the servicer complied.