Opinion: How Mortgage Servicers Can Prepare for a Crackdown From the Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau is drawing a line in the sand for the mortgage servicing industry with new guidance and proposed revisions to its mortgage servicing rules. The CFPB expects that the impending expiration of federal foreclosure and forbearance protections for mortgagees will increase the risk of borrower harm and produce a wave of foreclosures. In a spate of activity from March to early May, the Bureau ended any hopes of leniency for mortgage servicers, as the industry continues to grapple with the complex patchwork of federal, state, and investor rules and guidance for working with affected borrowers. The overarching message from the CFPB is clear: for mortgage servicers, noncompliance is not an option.

In particular, the Bureau noted the expected expiration of state and federal foreclosure moratoria and forbearance protections and a corresponding influx of borrowers at risk of foreclosure, and expressed its concern that servicers may not effectively communicate loss mitigation options to borrowers, particularly minorities and those in high-risk populations. Seemingly as a response to its own concerns, the CFPB proposed revisions to Regulation X that would establish pandemic-specific early intervention and loss mitigation procedures and prohibit foreclosure referrals through the end of 2021. At the same time, the Bureau also rescinded seven policy statements providing Covid-19 regulatory flexibility.