United States – The U.S. Consumer Financial Protection Bureau, ranked the premier U.S watchdog by consumers, issued on Wednesday proposed rules it said would compel mortgage servicers to assist borrowers in distress before proceeding to eject them.
Director’s Statement on Proposed Rules
The new draft rules would also shield investors from losses when borrowers fail to pay, with the U. S. Consumer Financial Protection Bureau (CFPB) stating that measures during the COVID-19 for temporary changes for borrowers who experience changes in their circumstances helped inform the proposal, as reported by Reuters.
“When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers, and the economy as a whole,” Rohit Chopra, director of the CFPB, said in a statement.
Key Provisions of the Proposal
If implemented, the rules will allow servicers to continue with foreclosure only if there are no other non-deta foreclosure options available for the borrower or if the borrower has withdrawn from any further communication with the servicer.
The CFPB released a statement today where Vice President Kamala Harris, who has been the subject of political speculations about her potential to replace President Biden, for the Democratic nomination in November’s elections, endorsed the policy, stating that it will assist homeowners to “stay in their homes, to build their equity, and to protect their families.
The modifications, which come in the wake of a public comment period the agency published in 2022, would also lessen exactly how much documentary evidence is needed in the process of seeking help, which would start as soon as a borrower requested it and would mandate that borrowers receive certain information in the languages they prefer.
Implementation and Market Impact
CFPB officials said to the reporters that they would have to look at how the society will react to the announcement before they can determine when the final rule might come into force, as reported by Reuters.
The officials also mentioned that the proposed changes would not be binding on small mortgage servicers or those who oversee fewer than 5,000 loans, making up 95% of the market.