CFPB to Offer New Rules for Troubled Borrowers

Filed under: Market Comentary

CFPB2Due to the financial crisis during the last decade, the Consumer Financial Protection Bureau (CFPB) was created to protect home owners. Over the last several years, the CFPB has introduced various rules to help troubled borrowers, and last week, it updated additional rules.

According to Paul Blake of ABC news, these newly implemented rules update how servicers, institutions that handle the daily business of mortgages, interact with borrowers during the process of “loss mitigation,” where the two parties work together to try to avoid foreclosure.

These new CFPB rules now require servicers to notify borrowers when their application for loss mitigation is complete. This is vital because the CFPB says that borrowers need the right to know when their application is complete due to protections that come into play at that point.

In addition, the new rules require servicers to provide information about loss mitigation to certain borrowers while their loan is still in the active stage.

The CFPB also added that the new changes will allow some borrowers to get repeated loss mitigation help, which is important for borrowers who have recently lost their job or who have been unfortunately diagnosed with a major illness.

Another new rule will provide protection for anyone who acquires a loan through a death in the family or through a divorce.

One final new rule will provide protection to mortgage holders in bankruptcy by requiring servicers to provide information to applicable borrowers specifically about bankruptcy. It will also require “early intervention information” to be given to borrowers in bankruptcy to inform them about the available options in loss mitigation.

Here’s perhaps why this is most important…

Safeguards such as this help to prevent foreclosures and events that lead to a market collapse.  When clients ask you about the status of the real estate industry, you can mention things like this to them and explain that practices today are different than they were in 2005, thereby making a “bubble burst” less likely.

If you have any questions about the mortgage industry, please feel free to give me a call and we can discuss whatever is on your mind.


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