On June 28, the Consumer Financial Protection Bureau (CFPB) issued a 208-page final rule that completes the rule making on amendments to the federal mortgage servicing regulations (Regulation X) that:
- Establish temporarily procedural safeguards to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation before the servicer can make the first notice or filing required for foreclosure on certain mortgages.
- Temporarily permit mortgage servicers to offer certain loan modifications made available to borrowers experiencing a COVID-19-related hardship based on the evaluation of an incomplete application.
- Finalize certain temporary amendments to the early intervention and reasonable diligence obligations that Regulation X imposes on mortgage servicers.
The final rule applies to loans on principal residences. Small servicers are generally exempt from the requirements, but there is a strong message for all services, large or small.
The final rule establishes temporary special COVID-19 procedural safeguards that must be met for certain mortgages before the servicer can make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process because of a delinquency. This requirement generally is applicable only if
- The borrower’s mortgage loan obligation became more than 120 days delinquent on or after March 1, 2020, and
- The statute of limitations applicable to the foreclosure action being taken in the laws of the State or municipality where the property securing the mortgage loan is located expires on or after January 1, 2022.
The temporary safeguards expires on January 1, 2022, meaning that the procedural safeguards are not applicable if a servicer makes the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process on or after January 1, 2022.
A procedural safeguard has been met, and the servicer may proceed with foreclosure, if:
- The borrower submitted a completed loss mitigation application and § 1024.41(f)(2) permits the servicer to make the first notice or filing;
- The property securing the mortgage loan is abandoned under State or municipal law; or
- The servicer has conducted specified outreach and the borrower is unresponsive.
The CFPB has prepared an Executive Summary of the 2021 Mortgage Servicing COVID-19 Rule.
The final rule is effective on August 31, 2021. Compliance Resource, LLC previously provided information regarding the April 5, 2021 proposed regulation on the same topic.