In 2020, the federal government and lenders rolled out programs that allowed homeowners who could not pay their mortgage to suspend payments or get a forbearance without having to face foreclosure. Now, as these programs are set to end at certain points in 2021, the Consumer Financial Protection Bureau wants to take action to ensure struggling homeowners are not suddenly forced into foreclosure.
Preventing foreclosure in 2020
Many people in the U.S. either were furloughed from their jobs for a period of time or were let go when their workplace shuttered its doors. While some of these people were able to go back to work by 2021 oftentimes it was for fewer hours or reduced pay. All of these circumstances made it impossible for these homeowners to pay their mortgage.
To avoid the onslaught of potential foreclosures and further exasperating a downturned economy, the federal government and lenders put a halt to foreclosures and enacted programs allowing homeowners to go into forbearance instead of facing foreclosure. As of now, there are approximately 2.5 million homeowners who are still participating in some type of forbearance program, and approximately 5% of homeowners are behind on their mortgage payments.
Protecting homeowners in 2021
As these forbearance programs expire, the CFPB wants to enact emergency protections for homeowners who will face foreclosure. Under a proposed rule, a “temporary Covid-19 pre-foreclosure review period” will be established. Basically, this rule would stop mortgage servicers from initiating foreclosure proceedings until January 1, 2022. This is in addition to current rules that prevent mortgage servicers from initiating foreclosure proceedings only once the homeowner is over 120 days late on their mortgage payments.
In addition, the CFPB is proposing a more streamlined loan modification process. Under this proposal, homeowners will be able to apply to lower the interest rate on their mortgage, extend the term of their mortgage and/or lower their monthly mortgage payment.
Learn more about foreclosure in Maryland
It is important that homeowners who suffered financial hardships in 2020 do not lose their home due to circumstances outside their control. This post is for educational purposes only and does not contain legal advice. Struggling homeowners who want to know more about foreclosure are encouraged to explore our firm’s webpage on this topic.