New Mortgage Rule Aims to Stop Avoidable Foreclosures

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New Mortgage Rule Aims to Stop Avoidable Foreclosures

A new regulation has been published by the Consumer Financial Protection Bureau (CFPB) to aid in preventing foreclosures in circumstances when they are avoidable. The new regulation, which took effect on August 31, mandates that the majority of mortgage servicers assist forbearing customers in locating viable repayment choices before beginning the foreclosure process.

Key Takeaways

  • Millions of Americans have been granted forbearance, or the suspension or reduction of monthly mortgage payments, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
  • The majority of mortgage servicers are now banned by the CFPB’s new regulation from starting a foreclosure process on a loan that is in forbearance unless they first get in touch with the borrower and provide them realistic choices to assist them remain in their homes.
  • Homeowners with loans in forbearance should get in touch with their servicers as soon as possible since the new regulation, which becomes effective on August 31, 2021, is only temporary.

How the New Mortgage Rule Works

Millions of homeowners have been significantly impacted by the coronavirus epidemic, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act gave debtors who couldn’t afford their monthly payments the much-needed relief of forbearance programs. The arrangements enabled the house owner to halt or lower their mortgage payments for a while.

Many of these safeguards have now passed away, however homeowners with FHA, USDA, or VA mortgages who have not yet benefited from forbearance may still do so until September 30, 2021. There is currently no deadline for obtaining a COVID-related deferment for mortgages guaranteed by Fannie Mae or Freddie Mac.

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The new regulation stipulates that most mortgage servicers must now inform homeowners who are already in forbearance about payments or other alternatives that might prevent foreclosure. Generally, lenders are not permitted to start the foreclosure process before to January 1, 2022.

The CFPB advises homeowners who are in this scenario to contact their mortgage servicers as soon as possible, while this regulation is still in force, rather than waiting for the servicer to contact them, since the new rule is only temporary. Even before speaking with the servicer, the CFPB advises seeing a certified housing counselor.

Is My Mortgage Covered?

All mortgages that are federally guaranteed, such as the ones stated above, are subject to the new CFPB regulation. Loans for investment properties, reverse mortgages, and home equity loans and lines of credit, however, are not permitted. The CFPB also states that certain small mortgage servicers are exempt from compliance requirements. Contact your mortgage servicer immediately if you are unclear whether you qualify.

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