Following the U.S. government’s COVID foreclosure moratorium, which ends on July 31st, questions remained as to whether or not the foreclosure ban would be extended. Late last month, the U.S. Consumer Financial Protection Bureau announced that there were no plans to continue the moratorium. However, on June 28, the CFPB issued the 2021 Mortgage Servicing COVID-19 Rule, which lists three procedural safeguards that lenders need to be aware of prior to a foreclosure referral.
Step One: Borrowers Must Submit A Loss Mitigation Application
Before the foreclosure process can begin, the borrower must complete a loan mitigation application. This must be reviewed by the servicer; the servicer must also ensure that foreclosure protection conditions in the current CFPB Mortgage Servicing Rules are met. The borrower also must have remained delinquent following the submission of the loan mitigation application.
Step Two: There Must Be Confirmation That The Property Is Abandoned
Before starting foreclosure proceedings, the loan servicer must confirm that the property is abandoned. It’s important to avoid ambiguity here - state and local laws will provide guidelines as to whether or not a property is considered abandoned, and should be adhered to.
Step Three: Outreach Efforts To The Borrower Must Have Been Made
Loan servicers must be in compliance with early intervention live contact requirements during the 90 day period prior to the foreclosure referral. The borrower must have been sent, by certified mail, a 45-day early invention written notice. This must have been sent at least 10 but no more than 45 days prior to the foreclosure referral. In addition, the loan servicer must confirm that it has been in compliance with all loss mitigation notice requirements during that 90-day period. If the borrower was under a forbearance program, it must have ended at least 30 days before the foreclosure referral.
If during this time there has been no communication from the borrower, and the borrower is more than four months delinquent, then the foreclosure process can move forward.
Exceptions: When You Do Not Have To Comply With The Above Safeguards:
Servicers do not have to comply with the three safeguards when any of the following affect the delinquent loan: (a) The foreclosure referral occurs on or after January 1, 2022; (b) the foreclosure was more than 120 days delinquent prior to March 1, 2020, or (c) the statute of limitations will expire before January 1, 2022.
The COVID-19 pandemic has added a new layer of complexity to the foreclosure process. The new 2021 Mortgage Servicing COVID Rule goes into effect on August 31. Lenders who aren’t up to speed on the latest developments and current guidelines may find themselves facing an uphill battle when it comes to resolving foreclosures and recovering loans.
At Total Lender Solutions, we advocate for lenders looking to maximize recoveries on defaulted loans. For over 15 years, our team of highly experienced real estate professionals and legal experts has transformed complicated processes into clear resolutions for institutional and private lenders. We work as a vigorous extension of your team to provide comprehensive solutions and seamless communication, from pre-foreclosure and notice of default to the final sale phase. Our dedication and persistence when it comes to the foreclosure process ensures that our clients feel confident in reaching a successful outcome. Contact us today.
