In an effort to avert a possible deluge of foreclosures and evictions due to the ongoing pandemic emergency, the Consumer Finance Protection Bureau (CFPB) has proposed a new rule that would halt all foreclosure proceedings against delinquent mortgage holders until January 2022. If made official, the rule would give millions of struggling homeowners more time to work out payment solutions with their lenders, including many in New York. Let's examine this proposal and talk about what it might mean for you.
Why More Foreclosure Protection Is Needed
Despite the widespread availability of the COVID-19 vaccine and the reopening of the economy after the global pandemic, the shutdowns and mass unemployment in 2020 have caused severe economic shortfalls for many consumers—shortfalls from which it will take some time to recover. At least 3 million households are currently behind in their mortgage payments, according to the NY Times—and despite the current moratorium on foreclosures, an estimated 1.7 million will still be behind when forbearances run out this fall. Without additional intervention, those millions of homeowners will be placed at serious risk of losing their homes, clogging up the courtrooms and creating a huge surge in homelessness across the country. In addition, current foreclosure protections only apply to federally-backed mortgage loans, meaning private mortgage loans are not protected.
What the New Rule Would Do
Current moratoriums on foreclosure are set to expire on June 30. However, many mortgage holders will be eligible to extend forbearance for another 3-6 months, meaning protections for many will begin expiring sometime in September. If passed, the new CPFB rule would create a new temporary “pre-foreclosure review” period lasting until January 1, 2022, for delinquent mortgages, effectively prohibiting foreclosure and eviction proceedings until that time. The rule also makes it easier for lenders to construct certain loan modification offers so long as those modifications do not further jeopardize the consumers.
This protection would also apply to all mortgages, both federally-backed and private.
How It Affects You
If you are behind on mortgage payments, the new CFPB rule would extend any forbearance you are currently under until January 1, 2022, giving you ample time to pay to bring your mortgage current, or work out a new payment agreement or mortgage modification with your lender. It is not loan forgiveness; you will still have to pay your mortgage. It simply gives you more time to figure out a recovery solution that works for both you and your lender.
Will the Rule Pass?
While we can't predict the future, the signals suggest the rule will pass—albeit possibly with some modifications. The CFPB has opened the proposal up for public comment until May, allowing financial institutions and others to weigh in on possible changes. We will probably know more later this month.
Because the current changing rules and foreclosure protections are layered and complex, it can be difficult to know whether your lender complies with the rules. If you believe your lender is not complying with the rules or is threatening foreclosure, it helps to have a New York foreclosure attorney in your corner to ensure you're protected. Contact our offices today to learn more.