The Consumer Financial Protection Bureau (CFPB) has amended RESPA Reg. X, concerning mortgagees’ early intervention and loss mitigation requirements, by granting significant new rights to homeowners exiting mortgage loan forbearance or experiencing payment hardship related to COVID-19 pandemic. 86 Fed. Reg. 34,848 (June 30, 2021).
The new rule, effective August 31, 2021, applies broadly to all “federally related” mortgage loans, as defined by RESPA, and (1) requires servicers to comply, until December 31, 2021, with additional procedural safeguards before initiating foreclosure; (2) permits servicers to offer certain streamlined loan modifications without requiring the borrower to submit a complete loss mitigation application; (3) specifies how and when a servicer must resume reasonable diligence efforts at the end of forbearance; and (4) imposes new early intervention requirements for borrowers in default. The borrower will have a private right of action under RESPA for violations.
The new rule applies only to mortgages secured by the borrower’s principal residence that became 120-days delinquent after March 1, 2020. It permits foreclosure without the additional servicing in cases where the statute of limitations is in issue, where the property has been abandoned, or where the borrower has been unresponsive to the servicer’s RESPA notices, as specified in the rule. Servicers may initiate foreclosure after January 1, 2022, without regard to the additional procedural safeguards.
The new rule is complicated and layered with exceptions and conditions. For covered loans, servicers should ensure careful examination or consult competent counsel. DeBlasis Law Firm can help.