Proposed Regulations from CFPB Aim to Protect Borrowers and Investors
The U.S. Consumer Financial Protection Bureau (CFPB) has announced proposed regulations that would require mortgage servicers to offer assistance to struggling borrowers before moving to foreclosure. These new rules aim to protect investors from losses caused by borrower defaults, with inspiration drawn from temporary changes made during the COVID-19 pandemic.
CFPB Director Rohit Chopra emphasized the importance of providing help to homeowners without unnecessary obstacles, stating that it benefits borrowers, servicers, and the overall economy. If finalized, the regulations would mandate that servicers explore all options for assistance before initiating foreclosure, or if the borrower ceases communication with the servicer.
Vice President Kamala Harris expressed support for the policy, highlighting its potential to help homeowners maintain their residences, build equity, and ensure family safety. The proposed changes, which were prompted by public comments in 2022, seek to streamline the assistance process by reducing paperwork requirements and providing information in the borrower's preferred language.
CFPB officials indicated that they would assess public feedback before determining the timeline for implementing the final rule. Additionally, the proposed regulations would exempt small mortgage servicers, defined as those managing fewer than 5,000 loans, which represent 95% of all servicers.