The agency said the rule is aimed at making it easier for homeowners struggling with mortgage payments to receive assistance, seeking to shift the focus of mortgage servicers from foreclosure to providing help, reducing paperwork, and improving communication with borrowers. The proposal is open for public comment through Sept. 9.
CFPB Director Rohit Chopra touted the benefits of the proposed changes in an accompanying statement.
“When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers, and the economy as a whole,” he said. “The CFPB’s proposal would reduce avoidable foreclosures and make the mortgage market more resilient during future crises.”
Mortgage servicers are responsible for managing mortgage loans, collecting payments, maintaining records, and assisting homeowners facing difficulties.
The CFPB explained in the rule that prompt assistance can lead to reduced losses for investors and prevent foreclosures.
Current regulations, in place since 2014, require extensive paperwork and rigid timing, often delaying aid to homeowners, according to the agency.
Formulated in response to the 2007–2009 foreclosure crisis, those rules mandated comprehensive document submission before servicers could offer assistance or halt foreclosure proceedings.
Other Provisions and Industry Reaction
Servicers would be required to exhaust all assistance options before proceeding with foreclosure when borrowers request help, and fees charged during the review process would be limited, incentivizing fair and swift evaluations, according to the agency.The proposal would give servicers flexibility to review assistance options individually, potentially speeding up the process and helping more homeowners stay in their homes.
Servicers would also be required to provide tailored notices under the proposed rule, including information about the loan investor and available assistance options, shortly after a missed payment to inform borrowers of all their options.
Borrowers who receive marketing materials in a non-English language could also request assistance in communications in the same language under the proposal.
Notices would be provided in both English and Spanish, with oral interpretation services available during phone calls, something industry associations expressed support for in response to the proposed rule notice.
The American Bankers Association (ABA) and Mortgage Bankers Association (MBA) said they were supportive of updates that clarify options, remove barriers, and enhance emergency preparedness in a joint statement after the proposed rule was released.
The ABA and MBA said they will review the proposal, particularly its provisions on Limited English Proficiency, to ensure it benefits consumers and is feasible.
They further stated the rule proposal represents a “substantial overhaul” of the current framework and expressed their hope the agency will take into consideration feedback from their members.
“We have long advocated for modernizing the loss mitigation framework under Regulation X and appreciate the Bureau’s efforts to simplify and streamline the process,” the groups said in the joint statement. “Servicers have helped more than 8 million families stay in their homes since the beginning of the COVID-19 pandemic while adapting to new and rapidly changing loss mitigation programs implemented by government agencies.”
The ABA and MBA further stated that since the last rule change in 2014, servicing practices for struggling homeowners have improved.
The CFPB also noted the proposed rule would not apply to small servicers, and existing requirements will remain effective until a final rule is established.
