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During the pandemic lockdown, an unprecedented number of
borrowers suddenly entered into forbearance plans as state and local
governments issued stay-at-home orders, shutting down economies and
preventing many Americans from being able to go to work.
As their income was reduced or even
eliminated amid the layoffs and business
closures that ensued, homeowners were unable
to make their mortgage payments. But the
federal government quickly mobilized in order
to prevent the next housing crisis.
Servicers were required to offer forbearance
plans to consumers with federally-backed
mortgages who were affected by COVID-19,
but no proof of hardship was required from
these borrowers. Even those not eligible for
forbearance couldn't be foreclosed on due to an
eviction freeze put in place by the Consumer
Financial Protection Bureau (CFPB).
However, many questions arose.
Forbearance shouldn't impact a homeowner's
credit score, but could it be noted on their
credit report, making it difficult to secure any
new loans? Could borrowers still refinance their
mortgage as interest rates plummeted in order
to lower their monthly payments? Could new
homebuyers buy a home and enter forbearance
immediately afterward? How would the money
from the missed payments get paid back?
Although these questions created confusion
when forbearance was first instated, the Federal
Housing Finance Agency (FHFA) and other
housing agencies have since issued more
guidelines, and given mortgage lenders and
servicers time to prepare their systems for the
end of forbearance periods.
Now, as an increase in loss mitigation
efforts is being required of servicers to help
borrowers choose the best option after their
forbearance ends, on the back of FHFA
guidance, the CFPB will likely see an
Feature By: Meghan Jones-Rolla
ATTENTION
TO DETAIL
CFPB swings into full enforcement mode as loss mitigation alternative efforts begin.
