Buchalter COVID-19 Client Alert: CFPB Issues Rule on Required COVID Relief Steps and Availability of Foreclosure for Residential Mortgage Loans
Published: June, 2021
Submission: July, 2021
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On June 28, the Consumer Financial Protection Bureau (CFPB) issued a new rule (Rule) setting forth loss mitigation/loan modification steps residential mortgage loan servicers must take in regard to mortgage loan borrowers due to possible COVID-19 related hardship, and when servicers may or may not commence foreclosure proceedings. The Rule will take effect on August 31, 2021 and remain in place until December 31, 2021. The Rule does not replace or remove any state’s or local jurisdiction’s COVID related restrictions on foreclosures.
Generally, the Rule provides that:
The Rule may be found here:
The specifics of the Rule are as follows:
Commencing Foreclosure Process
Servicers may not make the first notice or filing required by applicable law for a foreclosure proceeding based on delinquent payments if:
Streamlined Loan Modification Options and Incomplete Applications
Servicers may offer certain streamlined loan modification options made available to borrowers with COVID-19 related hardships based on the evaluation of an incomplete loss mitigation application.
Streamlined Loan Modification
The requirements are:
Avoiding Requirements of Prior Loss Mitigation Applications
Amended Early Intervention Obligations
Servicers must discuss specific additional COVID-19-related information during live contact with borrowers established under existing 12 CFR § 1024.39(a) in two circumstances:
Borrower Not in a Forbearance Plan - Information Servicer Must Provide
If the borrower is not in a forbearance program at the time the servicer establishes live contact with the borrower pursuant to § 1024.39(a) and a forbearance program is available to borrowers experiencing a COVID-19-related hardship, the servicer must inform the borrower that forbearance programs are available for borrowers experiencing such a hardship.
Unless the borrower states they are not interested, the servicer must also:
Borrower in a Forbearance Plan - Information Servicer Must Provide
If the borrower is in a forbearance program made available to borrowers experiencing a COVID-19-related hardship, then during the live contact made pursuant to § 1024.39(a) that occurs at least 10 days and no more than 45 days before the scheduled end of the forbearance program, the servicer must:
Servicers’ Reasonable Diligence Obligations When Borrower Is in a Short-Term COVID-19 Forbearance Plan
Servicers have several specific obligations when the borrower is in a short-term payment forbearance program made available to a borrower experiencing a COVID-19-related hardship based on the evaluation of an incomplete application.
Specifically, a servicer must:
Buchalter’s experienced and highly recognized Mortgage Banking Practice Group is available to help lenders understand and address the full range of mortgage banking related issues. Feel free to contact any of the attorneys in the Buchalter Mortgage Banking Industry Group.
This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.
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