Homeowners behind on their mortgages could soon win extra time to get caught up, a federal consumer watchdog agency tells CBS MoneyWatch.
An estimated 2 million homeowners are months behind on their home-loan payments due to income losses during the coronavirus pandemic. A foreclosure moratorium passed by Congress last year has kept families in their homes even though they’re behind on payments. The moratorium is set to expire next week.
Hoping to gain more time for homeowners, the Consumer Financial Protection Bureau is working on a new rule that would delay many foreclosure scenarios into the foreseeable future. A bureau spokesperson didn’t give details Tuesday about the pending rule, but told CBS MoneyWatch the agency expects to hash out a proposal involving mortgage servicers in coming weeks.
Citing anonymous sources, Reuters reported Tuesday the bureau plans to adopt a rule that further delays certain types of foreclosures. However, the bureau spokesperson said the final outcome is still a moving target.
“The CFPB is working on finalizing the proposal,” the spokesperson said in a statement. “We remain committed to working with both [mortgage] servicers and homeowners to prevent avoidable foreclosures to the maximum extent possible. The economic recovery risks leaving some communities behind, and no one should lose their home without a chance to explore their options.”
In April, CFPB officials introduced new rules aimed at preventing “avoidable foreclosures” due to the pandemic. One of those rules was blocking mortgage servicers from starting foreclosure proceedings until after December 2021. The rule would only apply a house that is a borrower’s primary residence. If approved, that rule would essentially give homeowners until 2022 to start repayments.
Bureau officials are looking to adopt the rule by the end of August, Reuters reported.
The new CFPB rule would exclude homeowners who are already in the process of making payment arrangements with their mortgage servicer, homeowners who have abandoned their house without telling their mortgage servicer and homeowners who haven’t told their mortgage servicer whether they will remain in their house, Reuters also reported.
No matter the exclusions, a decision from the bureau could decide the housing fate of numerous Americans who are still struggling financially. Mortgage industry data suggest about 1.7 million homeowners will be kicked off government and private forbearance programs by September and many of those homeowners will be a year or more behind on payments by that time, CFPB officials said in April.
Congress has dedicated $10 billion to help homeowners get caught up on payments, but it’s unclear if that funding will make it to families before mortgage companies begin sending out foreclosure notices. Housing advocates have pushed for President Joe Biden to sign an executive order to extend the foreclosure moratorium, but there’s no indication an extension will happen.
