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New Foreclosure Rules Could be on the Horizon

The Consumer Financial Protection Bureau (CFPB) has introduced new guidelines that require mortgage servicers to provide greater foreclosure protection for homeowners. One change would extend the number of times borrowers are allowed to seek alternatives to foreclosure during the term of their loan. At present, a borrower is provided this option only once, even if financial hardships arise at a much later date. The new rules would require that mortgage servicers offer additional foreclosure protection to homeowners who have made good on any delinquencies since the last mediation. Additionally, it would ensure that loss mitigation (foreclosure prevention) agreements are upheld by subsequent servicers in the event the loan is transferred.

Currently, the CFPB rules provide protection for family members should the borrower die. The revised guidelines extend the definition of a successor and provide them the same protections afforded to the borrower. They also reduce the number of wrongful foreclosures by laying out the servicers’ obligation to accurately follow loss mitigation proceedings. It is currently prohibited to initiate foreclosure proceedings if a completed loss mitigation claim has been submitted within 37 days of the sale date; however, some servicers are not adhering to this policy. The CFPB proposal outlines measures to be put in place to avoid wrongful foreclosure. Servicers who do not follow the guidelines will be required to dismiss pending foreclosures.

Under the new rules, servicers are required to clarify the date in which the borrower becomes delinquent on their loan. They must also inform the borrower of the status of their loss mitigation claim once it is complete as well as the type of foreclosure protection provided. The changes include greater flexibility for servicers who must comply with specific insurance or disclosure regulations. The public has 90 days to respond to the changes once it has been published in the Federal Register.

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