The past year has been extremely challenging for homeowners in South Florida and throughout the rest of the country. For some, it is a bit too reminiscent of the Great Recession and that is enough to strike fear in the heart of any Floridian. It is well known that Florida was one of the hardest-hit states in 2008, and it took homeowners here much longer to come out of it than it did other people in different parts of the country.
New federal and state regulations enacted last year helped homeowners avoid the foreclosure process at a time when there was unprecedented job loss. Now though, those protections are expiring, or have already expired and so, it is once again a cause for concern for homeowners that still are not back on their feet financially. Fortunately, the Consumer Financial Protection Bureau (CFPB) has proposed new rules that, if passed, would bring much-needed relief.
Forbearance Periods Are Coming to an End
Over this past year, many homeowners entered into forbearance programs that protected them from foreclosure during COVID-19. When a homeowner is eligible for forbearance, they enter into an agreement with their mortgage lender that allows them to pause their mortgage payments for a certain period of time, or lower the amount of their mortgage. Forbearance does not mean homeowners are never responsible for those payments. Instead, the payments are usually tacked onto the end of the loan’s life and it is only then that the payments become due.
Forbearance is a great option for homeowners and it has certainly helped during the pandemic. Unfortunately, even the longest forbearance periods expire after 18 months. Due to the fact that so many people entered into a forbearance agreement with their lender during the COVID-19 crisis, it is estimated that the forbearance period will end for approximately 1.7 million homeowners in September or October of 2021.
Although Florida has re-opened and many have returned to work, it will still be months, or even years, before people get back on their feet financially. With so many forbearance programs set to expire later this year, those homeowners may still be unable to make their mortgage payments and will face the fear of foreclosure once again. It is for this reason the CFPB has proposed a new rule to prevent this very scenario from occurring.
Provide More Time for Borrowers
The rule the CFPB is proposing would establish a new pre-foreclosure review timeframe that would prohibit lenders from starting the foreclosure process until January 1, 2022. The hope, if the new rule is approved, is that homeowners in South Florida and throughout the country can avoid the same scenario as the Great Recession when millions of homeowners were facing foreclosure. The CFPB is asking for the public’s input on the new rule to determine whether the date proposed is appropriate. The CFPB is also considering allowing certain exceptions to the new rule.
For example, the CFPB is considering making an exception for servicers that have taken certain steps to evaluate the homeowner for certain loss mitigation options. The CFPB is also considering allowing servicers to start the foreclosure process when they have tried to contact a homeowner but have not received a response. It is always important to communicate with your lender or servicer if you are behind on your mortgage payments. If this new rule is passed, it will become even more essential that all borrowers keep in contact with their lender or servicer, as the rule may not protect them if they do not.
The provisions outlined in the new rule would apply to all homes, and not just those backed by Fannie Mae and Freddie Mac, as so many other protections did. However, they also only apply to loans that are secured by the borrower’s primary residence and not those that are applied to investment properties.
Provide Servicers with More Options
It is not only homeowners who will get some relief if the new rule is passed, but servicers as well. Under the proposed new rule, servicers would be allowed to offer certain streamlined loan modification options to homeowners undergoing hardships related to COVID-19, even when they submitted an incomplete application.
Under normal circumstances, Regulation X requires servicers to evaluate borrowers for all options they may be eligible for at the same time. This typically means that homeowners have to submit extensive documentation before a decision is made on their case. By eliminating the requirement for all of this documentation, homeowners could obtain a mortgage payment they can afford much faster because there is less paperwork for both the borrower and the servicer.
Like the portion of the rule that would prohibit foreclosures until next year, the proposed rule regarding Regulation X also comes with some exceptions. The modifications provided as part of loss mitigation are only available if the homeowner’s monthly payment does not increase. The terms of the loan can also not exceed more than 40 years from the effective date of the modification.
Keeping Borrowers Better Informed
The new CFPB also recognizes that the pandemic has created much confusion for homeowners and the new rule will attempt to make things a bit clearer. Under the new rule, the CFPB is proposing changes that will require servicers to provide important information to homeowners about their options in a timely manner. These rules, like most under the proposed rule, are temporary.
Our Foreclosure Defense Lawyers in Florida Can Help You Avoid Foreclosure
While the new proposed rule from the CFPB is good news for homeowners in Florida, it is important to remember that it has not yet been approved, and it is only temporary. If you have missed mortgage payments and are in fear of losing your home, our South Florida foreclosure defense lawyers can help. At Loan Lawyers, our seasoned attorneys will determine which defense is best for your case and will use it to give you the best chance of a positive outcome. Call us today at 954-807-1361 or fill out our online form to schedule a free consultation.