Foreclosure Moratorium Ends. Now What?


With the foreclosure protections of the CARES Act set to end late this summer, the Consumer Financial Protection Bureau (“CFPB”) has tried to step in to stem the tide of foreclosures that may result as Covid 19 protections which halted foreclosure proceedings for approximately 16 months, have now elapsed.

Beyond even the worst numbers in the great Housing Recession, the CFPB estimates that over 3% of all American homeowners are over 120 days past due.  At risk are over 900,000 homeowners who are projected to have forbearance agreements before the end of 2021.  To avoid a barrage of foreclosures, the CFPB issued a Final Ruling effective August 31, 2021 to help “ensure a smooth and orderly transition as other State and Federal Protections come to an end,” by providing guidelines to avoid foreclosures and promote home retention.  To address concerns as record numbers of homeowners now out of forbearance create a large volume of homeowners needing assistance from mortgage servicers, the CFPB passed five amendments to prior Bank Regulation X, all with the intent of creating meaningful opportunities for foreclosure avoidance:

  1. These CFPB procedural safeguards will be afforded to COVID-19 forbearance mortgages from August 31, 2021 through January 1, 2022 to afford borrowers an opportunity for loss mitigation.
  1. The CFPB rule permits servicers to offer streamlined modification options for COVID-19- affected mortgages.
  1. The CFPB rule amends early intervention obligations to ensure that servicers are prompt and accurate with borrowers about loss mitigation options.
  1. The CFPB rule clarifies obligations by servicers to use reasonable due diligence for COVID-19 forbearance homeowners who seek loss mitigation through an incomplete application.
  1. The CFPB rule further clarifies and defines a COVID-19-related hardship.

Unfortunately, no program can guarantee the processes or results that will save all homeowners.  In addition to the various exceptions to mortgages covered by Regulation X and the CFPB final ruling, we are likely to see the usual bureaucratic fumblings of large servicing companies with rising expenses and an insufficient allocation of resources to these often-underserved borrowers.  Furthermore, historical data shows that forbearances create large and severe delinquencies that limit the chances that COVID relief Borrowers will be able to recover from large back payment arrearages.  For the 200,000 or more delinquent homeowners never eligible for forbearance agreements under the CARES Act, various state foreclosure moratoriums have created another 18 months of delinquent payments, seriously reducing their chances for home or retention recovery with non-white borrowers being statistically at higher risk.  Hopefully, the good intentions of the CFPB ruling will play out in actual successful interactions with servicers as the judicial floodgates of foreclosure courts reopen across America.