Here’s what the Biden administration's new mortgage servicing rules mean for you
The CFPB and FHFA made new mortgage servicing rules to help homeowners struggling to make their mortgage payment. (iStock)
The Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Administration (FHFA) each issued new mortgage servicing rules at the end of June that put regulations in place to help homeowners who are still struggling to make payments on their mortgage loans due to COVID-19.
The CFPB's rule was issued as an amendment to the Truth in Lending Act and Real Estate Settlement Procedures Act, a rule that protects homeowners and loan borrowers from predatory lending practices. That rule will take effect on Aug. 31, 2021.
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Just one day after that amendment was issued, the FHFA announced that it would be prohibiting federally backed mortgage companies Fannie Mae and Freddie Mac from making most initial foreclosure filings until the CFPB's rule took effect.
If you are struggling to make your mortgage payments, refinancing could also be a good option, helping you secure a lower interest rate and lower your monthly payments. Visit Credible to see your personalized rate from multiple mortgage lenders at once.
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What does the new CFPB rule do?
Early intervention and loss mitigation requirements for mortgage servicers are amended as a result of the new CFPB rule. Simply put, the rule establishes safeguards to help borrowers who are at risk of losing their homes to foreclosure due to the coronavirus pandemic, and helps in moving them into a loss mitigation agreement or repayment plan that fits them.
Under the new rule, mortgage servicers may not offer a loan modification plan that would increase the monthly payment for a homeowner emerging from their forbearance program, and may not extend the term of the loan for more than 480 months. The rule will also allow mortgage servicers to tack on missed payments to the end of the home loan to keep homeowners from falling into delinquency.
If you missed mortgage payments due to COVID-19-related hardships, you could still qualify for a mortgage refinance. Visit Credible to view multiple lenders and get prequalified without affecting your credit score.
"The ways servicers may have handled loss mitigation in the past, including the allocation of resources and communication methods used, may not be as effective in these unprecedented circumstances," the CFPB said.
If you are struggling to make mortgage payments after the end of the forbearance period on your loan, you may not need to face fees, penalties or even bankruptcy. Visit Credible to see refinance options available to you. As home prices surge, more homeowners may benefit from refinancing their mortgage and lowering their monthly payment.
FHFA restrictions – here's what they mean
Because the CFPB’s final rulemaking will not take effect until the end of August, the FHFA issued a rule of its own in the interim. They prevent some lenders from starting the foreclosure process or having a foreclosure sale before the new rule takes effect.
The FHFA announced that servicers cannot initiate a first notice on a foreclosure on mortgage loans backed by Fannie Mae and Freddie Mac. This rule doesn’t apply to abandoned properties or those that had a foreclosure filing before March 2020. After the foreclosure moratorium ends on July 31, 2021, the GSEs will basically have to follow the new CFPB rule one month before it takes effect due to the FHFA rule.
"The COVID-19 pandemic has created many financial challenges for families," FHFA Acting Director Sandra Thompson said. "Through no fault of their own, many of these families had to rely on COVID-19 forbearance to stay safe in their homes during the pandemic. Today, many families’ finances are improving allowing them to exit forbearance. The protections FHFA is putting in place today will protect vulnerable families as they begin their financial recovery from the impact of the COVID-19 pandemic."
HERE'S WHY YOU SHOULD (OR SHOULDN'T) REFINANCE YOUR MORTGAGE
While the Biden administration is actively creating policies it says will help homeowners, these solutions are not permanent. Borrowers will still need to take action to begin making their mortgage payments after their forbearance options expire. You can work to get back on track with your home loan through loan modification, paying back missed payments or even a refinance. Contact Credible to see your options and speak to a home loan expert who can answer all your questions.
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