With millions of homeowners behind on their mortgage payments, and a looming foreclosure moratorium that expires July 31, the Consumer Financial Protection Bureau (CFPB) has added some new protections to help borrowers keep their homes. However, since lenders don’t always follow the rules, you’ll want to know what these new protections are so you can advocate for yourself.
Lenders must follow these steps if you’re behind on payments
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To mitigate a cascade of foreclosures later this summer, the CFPB has established new rules for 120-day delinquent accounts. Effective from Aug. 31 through Dec. 31, a lender can’t proceed with foreclosure proceedings until one of these conditions are met:
- The borrower has exhausted all repayment measures as part of a good-faith attempt to avoid foreclosure. This includes a completed loss mitigation application, which is a repayment plan that you can claim based on financial hardship. The new rule states the “servicer must determine that the borrower is not eligible for any loss mitigation options and notify the borrower of such,” which puts the onus on the lender to make sure this option has been exhausted.
- The property is abandoned, as defined by local and state laws.
- The borrower is unresponsive to servicer outreach. If the homeowner is unresponsive for more than 90 days, then the process can move forward.
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Furthermore, to speed up the process, the CFPB is allowing mortgage servicers to offer streamlined loan modifications, which don’t require borrowers to resubmit paperwork, as long as these loan modifications don’t increase a borrower’s payments.
Know your rights as a homeowner
With these rule changes, mortgage lenders are required to check whether you qualify for a lower interest rate or a different amortization schedule that makes it easier to repay. That said, some lenders haven’t been consistent in following special COVID-relief rules, so it’s best to know your rights as a homeowner rather than counting on your mortgage provider to tell you what they are.
If you already know that you can’t pay your mortgage once forbearance ends, contact your loan servicer now to discuss your options. For more on what those options might be, check out this Lifehacker post.