Millions of homeowners who fell behind on mortgage payments due to the pandemic would have more time before facing foreclosure under rules proposed Monday by the Consumer Financial Protection Bureau.
The overhaul would generally prohibit mortgage agents from starting foreclosures before Dec.31, the CFPB said in a statement. The goal is to give the nearly 3 million borrowers who have delayed or stopped their payments a chance to resume them before lenders initiate forced home sales.
One of the main reasons the CFPB has said the change is necessary is that approximately 1.7 million consumers will be leaving U.S. forbearance relief programs in September and beyond, which means that they will have to start making payments again.
The CFPB would also allow service providers to offer “simplified” loan modification options to borrowers who have suffered from the pandemic. The agency said it plans to allow mortgage companies to continue foreclosures before the end of the year if they take certain steps to help borrowers avoid losses, such as modifying loans to reduce monthly consumer payments.
“The nation has endured more than a year of a deadly pandemic and punitive economic crisis,” CFPB acting director Dave Uejio said in the statement. “We must not lose sight of the dangers that so many consumers still face. “
The CFPB’s proposals follow a warning from the agency last week that mortgage companies could face penalties if they do not take action to prevent an increase in “avoidable foreclosures.”
More homeowners are behind on mortgage payments today than at any time since 2010, the office said Monday. The proposed set of rules, on which the regulator will seek public comment, aims to give service providers and borrowers the “tools and the time” necessary to prevent a deluge of foreclosures, the statement said.
This article was provided by Bloomberg News.