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Despite a one-month gap between the end of the foreclosure moratorium and the start of new regulations to protect homeowners, mortgage servicers will not be able to begin foreclosure proceedings this year for most borrowers with loans backed by Fannie Mae or Freddie Mac, the Federal Housing Finance Agency said in a statement Tuesday.
The move to restrict mortgage servicers came a day after the Consumer Financial Protection Bureau finalized rules to protect homeowners who have experienced hardships during the COVID-19 pandemic. Those rules, which delay most foreclosure proceedings until 2022, take effect on Aug. 31. But Fannie Mae and Freddie Mac’s moratoriums on single-family homes and real estate owned (REO) evictions expire on July 31.
Requiring servicers to follow the CFPB’s new rules a month before they take effect was done for two reasons: to protect borrowers from foreclosure and to provide certainty to mortgage servicers about Fannie Mae and Freddie Mac’s expectations, the FHFA said.
“The COVID-19 pandemic has created many financial challenges for families. 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,” Acting FHFA Director Sandra L. Thompson said in Tuesday’s statement. “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.”
The CFPB said on Monday that about 2 million homeowners are still in forbearance, with at least 900,000 expected to exit forbearance between now and the end of the year.
The CFPB’s amendments to mortgage servicing rules prevent servicers from making a first notice or filing for foreclosure in most cases before Dec. 31. The temporary rules also provide borrowers with several safeguards, including:
- Giving borrowers who exit forbearance until the end of 2021 to consider their next steps and pursue options other than foreclosure.
- Allowing mortgage servicers to offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit paperwork for every option.
- Requiring mortgage servicers to increase their outreach to borrowers before initiating foreclosure and to provide borrowers with information about repayment or other options.
Servicers can still begin foreclosure proceedings in some instances, including on abandoned properties and with borrowers who had a foreclosure referral before March 2020.
