CFPB Proposes Foreclosure Ban Until 2022

Millions of homeowners who’ve fallen behind on mortgage payments due to the pandemic would have more time before facing foreclosure under rules proposed Monday by the Consumer Financial Protection Bureau.

The revamp would generally prohibit mortgage servicers from starting foreclosures until after December 31, the CFPB said in a statement. The goal is to give the nearly 3 million borrowers who’ve delayed or stopped making payments a chance to resume them before lenders initiate forced home sales. According to the CFPB, industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. 

Many of the current forbearance programs were set up in the CARES Act last year and apply to federally-backed loans offered through agencies including Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Housing and Urban Development. Private lenders and servicers also set up their own forbearance programs. The CFPB’s proposed rule would cover all homeowners, including those with mortgages through private lenders.

The agency is seeking public comments through May 11 before issuing a final rule. 

The CFPB proposals follow a warning from the agency last week that mortgage companies could face penalties if they don’t take action to prevent a surge in “avoidable foreclosures.”