CFPB Outlines Foreclosure Prevention Guiding Principles
Consumer Protections Outlined as Government Foreclosure Relief Program Is Set to Expire
August 2, 2016, the Consumer Financial Protection Bureau (CFPB) outlined consumer protection principles to guide mortgage servicers, investors, government housing agencies, and policymakers as they develop new foreclosure relief solutions.
Highlights of the press release are reproduced below
The Bureau’s action comes as the Department of Treasury’s Home Affordable Modification Program, a foreclosure relief program put in place in response to the financial crisis, is nearing its expiration date. The CFPB’s proposed principles are meant to inform the discussion of potential options to help prevent avoidable foreclosures.
During the financial crisis, the Department of Treasury created the temporary Home Affordable Modification Program to provide relief to families at risk of foreclosure. Consumers who could not make their mortgage payments have been able to seek changes through the program to reduce their monthly payment and prevent foreclosure. With the program expiring in January 2017, the industry is beginning to develop new foreclosure relief options appropriate for a post-crisis environment.
The CFPB principles call for assistance to consumers facing foreclosure that is accessible, affordable, sustainable, and transparent. These principles span the spectrum of home-retention options such as forbearance, repayment plans and modifications, and home-disposition options such as short sales and deeds-in-lieu. In summary, the principles promote:
- Accessibility: Consumers should easily be able to obtain and use information about loss mitigation options, and how to apply for those options.
- Affordability: Repayment plans and mortgage loan modifications should generally be designed to produce a payment and loan structure that is affordable for consumers.
- Sustainability: Loss mitigation options used for home retention should be designed to provide affordability throughout the remaining or extended loan term.
- Transparency: Consumers should get clear, concise information about the decisions servicers make.
The Departments of Treasury and Housing and Urban Development and the Federal Housing Finance Agency have also issued a joint white paper on this topic that details lessons learned from the program, and core principles they deem necessary in future loss mitigation frameworks.
The principles announced by the Bureau do not establish binding legal requirements but instead are intended to complement ongoing discussions among industry, consumer groups, and policymakers. The CFPB believes these principles are flexible enough to apply to an array of approaches, and recognize the interests of consumers, investors, and servicers.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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