CFPB Foreclosure Avoidance Procedures

Summary of the CFPB foreclosure
avoidance procedures
Foreclosure avoidance
In response to the poor experience of many distressed
borrowers during the mortgage crisis, the CFPB is
putting in place new procedures to facilitate borrowers
access to foreclosure avoidance options. The new rules
are designed to provide consistent and meaningful
protections for borrowers, and to give industry
necessary fexibility. The following summary highlights
the key provisions.
Foreclosure process
The new CFPB mortgage rules provide important new
federal protections to borrowers to help ensure they are
able to apply for all the foreclosure avoidance options
available to them. The rules end the worst runarounds
and eliminate some of the worst surprises of the
mortgage crisis.
Servicers required to contact borrowers
By 36 days after a homeowner misses a payment or cant
pay the full amount, the servicer must make a good faith
effort to establish contact by telephone or at an in-
person meeting. Servicers must reach out to borrowers
every time they miss payments. If the borrowers
situation calls for it, the servicer must tell the borrower
about loan modifcation or workout options available to
the borrower.
Before a borrower becomes 45 days delinquent, the
servicer must send a written notice to the borrower
or borrowers agent encouraging the borrower to
contact the servicer, providing the phone number for
the personnel assigned to the borrower, and giving
the borrower examples of loss mitigation options
the servicer offers. The borrower must also receive
information about how to fnd a housing counselor.
Any periodic mortgage statements the borrower
receives after he or she is 45 days late must include,
among other things, information on the possible risks
the borrower faces including expenses associated with
the delinquency; information on whether the servicer
has initiated the foreclosure process; the phone number
and website where the borrower can fnd a HUD-
approved housing counseling agency; and information
about any loss mitigation programs the borrower has
already agreed to.
Foreclosure restrictions
A mortgage servicer may not make a frst notice or
fling for foreclosure until the borrower is more than 120
days delinquent. The 120-day period under the rules is
designed to give borrowers time to learn about workout
options and fle an application for mortgage assistance.
In addition, if the borrower has already submitted a
complete application for mortgage assistance often
called a loss mitigation application the mortgage
servicer may not begin the foreclosure process while a
borrower is being evaluated for a loss mitigation plan.
Of course, a loss mitigation plan might not prevent
foreclosure if the borrower stops making payments
under the plan.
Servicer personnel and information
requirements
The CFPBs new rules are intended to make sure
homeowners no longer have to worry about dealing
with servicers who cannot access important information
about the borrowers loan.
The CFPB rules require servicers to assign personnel
to help delinquent borrowers and to make sure
those employees, among other things, give accurate
information about loss mitigation options, explain
correctly what a borrower must do to apply for workout
options, tell the borrower the status of a loss mitigation
application, and be able to quickly locate the written
information the borrower has submitted in connection
with a loss mitigation application.
Servicers must also be able to tell homeowners the
circumstances under which the servicer may make a
referral to foreclosure. This information is critical to
helping homeowners fle applications for foreclosure
avoidance assistance in time to preserve their rights
under the new rules.
Timelines for distressed borrowers
Timing is very important in getting the maximum
assistance in resolving a delinquent loan. The earlier
borrowers seek help, the more protections they have
under the new CFPB rules.
Borrowers have the most protections if a complete
application for mortgage assistance is submitted within
120 days of the frst missed payment because the
servicer is not allowed to start a foreclosure process
during those 120 days.
If a servicer receives a complete application for loss
mitigation options 45 days or more before a scheduled
foreclosure sale, the servicer must acknowledge
receipt of the application in writing and determine
if the application is complete. If the application is
not complete, the servicer must tell the borrower
what additional information and documents must be
provided. (If a servicer receives an application less than
45 days before a foreclosure sale, the borrower is not
entitled to a written notice that their application has
been received.)
If a servicer receives a complete application 90 days or
more before a scheduled foreclosure sale, the servicer
must give the borrower at least 14 days to accept or
reject an offer of a loss mitigation option. In addition,
if a servicer receives a complete application 90 days or
more before a scheduled foreclosure sale, the borrower
may appeal the denial for any loan modifcation. The
borrower has 14 days to fle an appeal.
A complete application received by a servicer 37 days
or more before a scheduled foreclosure sale will be
evaluated for loss mitigation options available to the
borrower. The servicer must give the borrower written
notice of the decision, though the contents of the letter
will depend on whether or not the servicer determines
that the borrower qualifes for a workout option.
Servicers are required to explain their
decisions to borrowers
Servicers are required to evaluate the borrower for all
the foreclosure avoidance options that the borrower may
qualify for, assuming a borrower submits a complete
application early enough. Servicers, lenders, and
investors are not required to offer any specifc loss
mitigation options.
When servicers deny a borrower for a loan modifcation
option, they must give specifc reasons for the denial.
For example, if a borrower is denied a loan modifcation
option because of an investor requirement, the servicer
must explain the requirement.
Borrowers who sought help before
may apply again for loss mitigation
under the new rules
Borrowers are entitled to loss mitigation evaluations
under the new rules, even if they applied for and were
rejected for loss mitigation before the new rules took
effect, provided they fle their complete applications
more than 37 days before a scheduled foreclosure sale.
The CFPB accepts consumer
complaints about mortgages
The CFPB accepts complaints about mortgages, so if
you have a problem, you can submit a complaint with
the CFPB. The CFPB will forward your complaint to the
company and work to get you a response from them.
Consumers may submit a complaint by calling (855)
411-2372 (CFPB) or by completing the complaint form at
consumerfnance.gov/complaint. The CFPB will also be
conducting enforcement and supervisory activities
to make sure servicers comply with the new rules.
Visit us online at consumerfnance.gov

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Summary of the CFPB foreclosure

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