Real Estate

Consumer protection agency cracks down on mortgage servicers that don’t assist struggling homeowners

Andrew Harrer | Bloomberg | Getty Images

The Consumer Financial Protection Bureau is warning mortgage servicers that they’re expected to help the surge of struggling homeowners in the pandemic and explore options other than foreclosure.

“Responsible servicers should be preparing now,” CFPB Acting Director Dave Uejio said in a statement. “There is no time to waste, and no excuse for inaction.”

When the federal foreclosure moratoriums expire at the end of June, the CFPB says mortgage servicers should brace for a flood of homeowners reaching out for assistance.

In particular, the consumer agency says it will pay attention to how well all servicers are working with borrowers and preventing avoidable foreclosures.

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The bulletin is a welcome turnaround from the Trump administration, said Mitria Wilson-Spotser, director of housing policy at the Consumer Federation of America.

“All these policies in the past have applied to federal servicers,” Wilson-Spotser said. “The CFPB’s announcement is the first attempt to address the private market.” Around a third, or 14.5 million, of mortgages in the U.S. are privately owned and not federally backed.

What it means for struggling homeowners

In short, it means the CFPB is expecting mortgage servicers to help you stay in your home.

What should that assistance look like?

For one, your servicer should present you with any possible options other than foreclosure, including forbearances or reduced monthly payments, said Alys Cohen, an attorney at the National Consumer Law Center.

If you prefer to be told your options in a language other than English, you should be able to request that. If you’re deprived of any of these things, experts recommend you submit a complaint with the CFPB.

In addition to the consumer agency’s guidance, there have been many other relief measures passed for people finding it difficult to pay their mortgage in the pandemic.

The Biden administration has announced additional forbearance opportunities for homeowners with federally backed mortgages. Some people can have their payments paused for as long as 18 months.

If you expect that your ability to come up with your monthly mortgage payments will remain hampered beyond your forbearance term, you can ask your lender for a payment reduction, Cohen said.

Although a lower monthly payment can mean a longer loan term and more interest, the option allows many people to stay in their homes. (If you pursue this route, you’ll want to find out how your insurance and tax payments will be impacted.)

The most recent stimulus package passed by Congress also includes a $10 billion pot to help homeowners who’ve fallen behind. This money can be used on your mortgage, homeowner association fees, property taxes or utilities.

States still need to set up programs to disburse the funds but, in the meantime, experts recommend that you call local housing groups, your representatives or the local 211/311 lines in your area to learn how to get in line for the money.