Forbearance Exit Rules
Yesterday (June 28), the CFPB Consumer Financial Protection Bureau released new forbearance exit rules for servicers. The rules run to more than 200 pages and can have very technical compliance requirements.
According to the final rule, servicers can initiate a foreclosure action only after certain events. A borrower submitting a loss mitigation application must be eligible. The borrower cannot break or reject a loss mitigation agreement. However, any borrower already 120 days past-due as of March 1, 2020 can be foreclosed. Additionally, abandoned property merits foreclosure. And lastly, any borrowers not responding to servicer contacts merit foreclosure.
And for extra fun, the FHFA weighed in. The Federal Housing Finance Agency (FHFA) is requiring Fannie Mae and Freddie Mac servicers to follow the new rule before it goes into effect. Get that? A new rule isn’t yet in effect but do it anyway!
Escrow Shortages and Streamline Modifications
The CFPB roadmap also allows recovery of escrow shortages (advanced by servicers for taxes and insurance for the borrower) in various ways. The servicers want to recover these as quickly as possible. These advances can be included in a loss mitigation option. But, the rule limits the amount a servicer can require a borrower to deposit in an escrow account over the next year.
Streamlined loan modifications move quicker with less information on certain loans. These qualify for forbearance exit under two scenarios. Modifications must not increase the monthly payments. And no term extension can exceed 40 years. Servicers must waive any late charges if a borrower accepts a modification. This represents only a few of forbearance exit rules. But these represent core requirements.
Read our posts on avoiding default and exiting forbearance. Winning Mortgage, Winning Home outlines more information on the best planning tools. As a result, if you plan right you can avoid later stress.