On August 4, new rules by the Consumer Financial Protection Bureau (CFPB) came into effect. These will protect homeowners from wrongful foreclosure, and give them a chance to catch up on their payments before lenders can seize the property.
These rules require mortgage servicers to provide various protections to those in foreclosure. Under the old system, borrowers were given one opportunity to take advantage of these protections. Under the new rules, servicers must offer them to homeowners multiple times, especially if the homeowner has made arrangements with the lender to avoid foreclosure. This aims to help those who have obtained a mortgage modification but later find themselves in other financial hardship that has them facing foreclosure again.
The guidelines also expand these protections to cover surviving family members in the event of the borrower’s death. Lenders must provide borrowers who have declared bankruptcy with information that covers these protections and any possible intervention.
Rules are now in place that affect borrowers who have undergone loss mitigation, an alternative to foreclosure that helps borrowers pay their debt while remaining in their homes. The new guidelines require loan servicers to notify borrowers once a loss mitigation application is completed. Another change prevents servicers from beginning the foreclosure process once a loss mitigation application is received.
These new rules were in response to a June report that showed many homeowners received no, outdated, or incorrect, information about foreclosure protection.