Mortgage Servicers Can Soon Resume Foreclosure Proceedings With Limitations
The Consumer Financial Protection Bureau has issued a final rule that extends its foreclosure moratorium through August 31, but allows foreclosures to resume after that under limited circumstances.
The new rules require mortgage servicers to give borrowers a chance to avoid foreclosure, including resuming regular mortgage payments and deferring the missed payments until the end of the mortgage term, lowering of monthly mortgage payment amounts or selling their homes.
Servicers can also begin the foreclosure process if:
The owner has abandoned the property.
The owner was more than 120 days behind their mortgage payments before March 1, 2020.
Is more than 120 days behind on their mortgage payments and has not responded to any outreach from the servicer for 90 days.
The owner has been evaluated for all options other than foreclosure but will not be able to avoid foreclosure.
More than 7 million homeowners took advantage of the COVID-19 hardship forbearance rules over the course of the pandemic, with about 2 million still in forbearance, according to the CFPB. More than 3% of borrowers are now four months behind or more on their mortgage payments, which puts them at potential risk of foreclosure proceedings. A larger summary of the final rule can be found here.