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New Mortgage Servicing Guidelines from the CFPB

The Consumer Financial Protection Bureau has finalized new mortgage servicing guidelines. These new guidelines, known as the 2021 Mortgage Servicing COVID-19 Rule, are designed to give homeowners who suffered hardship due to the pandemic a path to get back on track with their mortgage while also encouraging loan servicers to evaluate borrowers for loan modification instead of commencing a foreclosure action in 2021.  This Rule is effective August 31, 2021, the day after New York’s foreclosure moratorium is scheduled to end.

Streamline Mortgage Loan Modifications

The 2021 Mortgage Servicing COVID-19 Rule encourages servicers to offer streamlined loan modifications, which are loan modifications offers made without a complete evaluation of the borrower’s financial situation. The Rule also prohibits interest accrual on any delayed portion of the loan, which is due at maturity, this is commonly known as a balloon payment. 

New Mortgage Loan Procedural Safeguards

The 2021 Mortgage Servicing COVID-19 Rule includes additional procedural safeguards for the period of August 31, 2021 through December 31, 2021. During this period, a loan can only be referred for foreclosure if

  • the property is abandoned,
  • the borrower is unresponsive to servicer outreach, or
  • the borrower has been evaluated based on a complete loss mitigation application.

Principal Residence Mortgages Only

The Rule applies only to the borrower’s principal residence and not to investment properties, second homes, or reverse mortgages. The Rule also does not apply if the loan was more than 120 days delinquent before March 1, 2020 or if the statute of limitations will expire before January 1, 2022.

Have questions about the new mortgage servicing guidelines from the CFPB?

We are an experienced real estate and loan modification law firm that has helped thousands of clients with real estate transactions and mortgage loans.  We understand that the mortgage loan servicing guidelines can be a bit overwhelming, and that is why we’re here to help you.  Please give us a call to schedule a free consultation at 914.472.6202.

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