CFPB Announces Stepped Up Enforcement

The Consumer Financial Protection Bureau (CFPB) released a joint statement with other government agencies to mortgage servicers announcing a return to enforcement of protections for families and homeowners.

The statement cited an April 2020 decision not to take “supervisory or enforcement action” regarding the timing requirements of the Regulation X mortgage servicing rules during the pandemic. The decision would last indefinitely “as long as the servicers made good faith efforts to provide those required notices or disclosures and took the related actions within a reasonable period of time. “

Wednesday’s statement from the CFPB walked back that flexibility, saying mortgage servicers have had plenty of time to adapt their operations to the ongoing challenges of Covid-19. The agencies will return to regular enforcement, though the statement did note that pandemic-related challenges will be considered “when appropriate” in deciding agency action.

“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago,” said CFPB Director Rohit Chopra. “Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law.”

The increased enforcement is meant to protect families from foreclosure as a result of Covid-19. The Regulation X mortgage servicing rules were created after the Great Recession to prevent future foreclosure crises and give families the chance to find alternatives to foreclosure before losing their homes.

Under these rules, mortgage servicers must provide delinquent borrowers with continued servicer contact and evaluate borrowers’ applications for available loss mitigation options.

Chopra has zeroed in on foreclosures since he was appointed CFPB Director. In testimony to the House Financial Services Committee, he said he plans to encourage more competition in the mortgage refinance market for families with lower balance mortgages and implement policies to reduce avoidable foreclosures.

Forbearance exits jumped in October, and the number of borrowers in forbearance plans dropped to 1 million last week. But some of those borrowers exited via the expiration of their forbearance programs and have not financially recovered from the pandemic.

“More borrowers who exited forbearance the last week of October went into modifications, a sign that they have not yet regained their pre-pandemic level of income,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. 

More than 500,000 homeowners are currently engaged in active loss mitigation after exiting their forbearance plans, a 37% increase month-over-month, according to Black Knight’s latest Mortgage Monitor Report.