The Consumer Financial Protection Bureau yesterday issued an interim final rule that will make it easier for individuals in mortgage forbearance programs to repay the balances that were accrued, which companies in the credit and collection industry may want to use as a blueprint for any forbearance programs it has put into place to help individuals affected by the coronavirus pandemic.
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, individuals with mortgages that are backed by the federal government are allowed to defer payments that were forborne (great word) during the pandemic until the end of their mortgages. The CFPB’s interim rule allows servicers to collect limited application information from borrowers instead of a complete loss mitigation application, which is required under Regulation X of the Real Estate Settlement Procedures Act.
The rule requires servicers to “allow the borrower to delay paying all principal and interest payments that were forborne or became delinquent as a result of a financial hardship due, directly or indirectly, to the COVID-19 emergency,” according to the CFPB. “Servicers may not charge any fees to borrowers in connection with the option, and the borrower’s acceptance ends any preexisting delinquency.”
The new rule goes into effect n July 1.
In order to qualify for the exemption under the interim rule, servicers must allow borrowers who became delinquent to delay all principal and interest payments, refrain from charging any fees or accruing interest while the relief is in place, and ensure that acceptance of a loss-mitigation offer resolves the borrower’s delinquency status.
Making it easier for individuals to access forbearance programs and make up those missed payments when they are back on their feet is great advice for companies in the credit and collection industry, too.
