Kathy Kraninger, director of the Consumer Financial Protection Bureau (CFPB) continues to be on the hot seat.
It can be noted that since the past few months, top Democrats in both the House and Senate blasted her with accusations for putting corporation’s interests ahead of the consumers, falling behind with the mortgage relief awareness, and reorganizing CFPB departments at a magnitude level before the US elections.
Sherrod Brown, Ohio Democrat and ranking member of the Senate Banking Committee repeatedly accuses the director of failing her responsibilities. This time, Brown is calling the attention of Kraninger to make sure the CFPB does more to prevent wrongful foreclosures in the wake of COVID-19 pandemic.
Upon COVID-19’s arrival, Americans experienced financial hardship as many businesses were closed causing a wave of unemployment. As part of the government’s response to the pandemic, millions of homeowners were entered into forbearance programs under the CARES Act. More than 7 months after the pandemic, many of those homeowners have exited the forbearance or are close to the end of their initial 180-day forbearance. This concerns Brown and Kraninger wrote a letter that emphasizes the possible outcome of the forbearance expiration – a wave of improper foreclosures.
Brown also mentioned in his letter that some borrowers will be able to resume their regular payments using the deferral or partial claim processes setup by Fannie Mae, Freddie Mac or their private lenders. CFPB’s June 2020 Interim Final Rule made changes in the servicing process to facilitate deferrals.
However, Brown also added that some homeworkers may be unable to resume their prior payments and will need more time to enter a modification with their servicer to make their payments more affordable.
What troubles Brown is the time it takes for a mortgage modification to be processed. By then, servicers may already be putting the borrowers on track for foreclosure.
Brown wrote, “Under current rules, servicers can begin the foreclosure process when a borrower becomes 120 days delinquent. While the CARES Act provides that servicers are not to report borrowers as delinquent to credit reporting agencies if the loan was current before entering forbearance, servicers and agencies backing federally-backed loans still consider borrowers delinquent for servicing purposes during forbearance under the CFPB’s servicing rules.
By end of the first 180-day forbearance period, a borrower could immediately be pursued by the servicer for foreclosure if the forbearance is not renewed.
While services are required to reach out to borrowers prior to initiating foreclosure proceedings, the timelines may be shorter than the 120-day period that typically precedes a foreclosure.
Large number of borrowers to contact could mean a massive amount of time to reach out to all borrowers.
Brown worries that with such a large number of borrowers that servicers need to contact within a limited time could become a challenge for the outreach to be carried out.
“It is unlikely that borrowers will understand how quickly foreclosure could begin,
