With millions of homeowners behind on their mortgage payments and a looming moratorium on foreclosure expiring July 31, the Consumer Financial Protection Bureau (CFPB) has added some new protective measures to help borrowers keep their homes. However, since lenders don’t always follow the rules, you want to know what these new protections are so that you can stand up for yourself.
Lenders need to follow these steps when they are behind with payments
To ease a cascade of foreclosures this summer, the CFPB has introduced new rules for 120-day overdue accounts. With effect from August 31st through December 31st, a lender cannot proceed with Foreclosure proceedings until one of these conditions is met:
- The borrower has exhausted all repayment measures in a bona fide attempt to avoid foreclosure. This includes a completed Claim Mitigation, which is a repayment plan that you can draw upon due to a financial emergency. The new rule states that the “service provider must determine that the borrower has no options for loss mitigation and inform the borrower,” which leaves the lender responsible for ensuring that this option has been exhausted.
- The property is being abandoned in accordance with local and state laws.
- The borrower does not respond to the contact with the servicer. If the homeowner does not respond for more than 90 days, the process can continue.
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Also, to expedite the process, the CFPB allows mortgage service providers to offer streamlined loan modifications that do not require borrowers to re-submit papers as long as those loan modifications do not increase a borrower’s payments.
Know your rights as a homeowner
With these rule changes, mortgage lenders need to consider whether you are eligible for a lower interest rate or another repayment schedule that makes repayment easier. That said, some lenders weren’t consistently following special COVID aid rules, so it is best to know your homeowner rights rather than relying on your mortgage provider to tell you what they are.
If you already know that you will no longer be able to pay your mortgage after the deferral has expired, contact your loan service provider now to discuss your options. For more information on these options, see check out this Lifehacker post.
