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At the end of June, new mortgage servicing rules were issued by the Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Administration (FHFA) putting regulations in place to help homeowners who are still struggling to make payments on their mortgage loans because of the pandemic.
The CFPB’s rule which protects homeowners and loan borrowers from predatory lending practices was issued as an amendment to the Truth in Lending Act and Real Estate Settlement Procedures Act.
This rule will take effect on Aug. 31, 2021.
After that issuance of the amendment, FHFA announced that it would be prohibiting federally backed mortgage companies Fannie Mae and Freddie Mac from making most initial foreclosure filings until the CFPB’s rule took effect.
The function of the new CFPB rule
As a result of the new CFPB rule, for mortgage servicers, early intervention and loss mitigation requirements are amended.
The rule safeguards borrowers who are at risk of losing their homes to foreclosure due to the COVID-19 pandemic and helps in moving the homeowners into a loss mitigation agreement or repayment plan that fits them.
Under the new rule, mortgage servicers should not offer a loan modification plan that will increase the monthly payment for those emerging from the forbearance program, and neither can the term be extended for more than 480 months.
The rule will also allow mortgage servicers to tack on missed payments till the time the home loan ends so the homeowners don’t fall into delinquency.
Reference Source: Fox Business
