CFPB Bulletin Issues Blunt Warning to Mortgage Servicers: ‘Unprepared is Unacceptable’

The Consumer Financial Protection Bureau last week warned mortgage servicers to “take all necessary steps now” to prevent a wave of avoidable foreclosures this fall.

“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months,” said CFPB Acting Director Dave Uejio. “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. 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.

The April 1 compliance bulletin notes millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall. The Bureau said it will closely monitor how servicers engage with borrowers, respond to borrower requests and process applications for loss mitigation. The Bureau said it will consider a servicer’s “overall effectiveness” in helping consumers when using its discretion to address compliance issues that arise.

“Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help,” the Bureau said.

The Mortgage Banker Association reported last week that nearly 2.5 million borrowers remain in forbearance programs. Industry data suggest 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.

The CFPB said it would monitor the  following servicer activities:

• Being proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
• Working with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.
• Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
• Evaluating income fairly. Where servicers use income in determining eligibility for loss mitigation options, servicers should evaluate borrowers’ income from public assistance, child-support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
• Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
• Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.