One thing that is constant in the mortgage industry is change, requiring lenders and servicers to remain agile in the face of new regulations. Adding to the significant changes in loss mitigation products and policies this year, the Consumer Financial Protection Bureau has published a proposed rule that revamps the current loss mitigation rules.
The CFPB’s Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties Notice of Proposed Rulemaking would amend various sections of Regulation X, 12 CFR Part 1024, to streamline loss mitigation, strengthen borrower protections and recognize current industry practices. The rule would also revise certain early intervention requirements, clarify error resolution provisions and require communication in languages other than English.
The most significant change proposed is to apply protections against foreclosure (and now certain fees) when the borrower requests loss mitigation assistance instead of when the servicer receives a complete loss mitigation application. The CFPB introduces the new concept of a loss mitigation review cycle that would grant these protections from the time the borrower requests loss mitigation assistance until the borrower becomes current or exhausts all the foreclosure procedural safeguards outlined.
While the proposed loss mitigation rule is under review with comments due on September 9, 2024, mortgage servicers can take this time to prepare their technology and operations for the potential changes. The impact of the proposed rule spans beyond the servicer’s loss mitigation team and will affect other areas that have contact with distressed borrowers. Servicers will need to adapt their processes and technology to meet the new requirements for capturing loss mitigation requests and communicating with the borrower.