The Consumer Financial Protection Bureau (CFPB) put out a warning for mortgage servicers to take the necessary steps now to avoid a wave of foreclosures this coming fall.
The CFPB pointed out that millions of homeowners are currently in forbearance. They will need help from their servicers when the federal emergency mortgage protections implemented during the pandemic expire this summer and fall.
The CFPB recommends that mortgage servicers dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help.
“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste and no excuse for inaction. No one should be surprised by what is coming,” CFPB Acting Director Dave Uejio said. “Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.”
Currently, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides borrowers with federally backed mortgages with access to forbearance. Private lenders have provided similar assistance. As of January 2021, approximately 2.7 million borrowers remained in such programs. Further, 2.1 million borrowers are in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages were not in forbearance programs, but they were at least 90 days delinquent.
Research indicates that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Mortgage servicers will need to increase their capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance.
CFPB officials said they will monitor how servicers engage with borrowers, respond to requests, and process applications for loss mitigation. In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures.