Mortgage payments are often a household’s single largest expense, so the terms of a mortgage greatly impact a household’s financial stability. When interest rates decline, many borrowers benefit from the lower rates by refinancing their loans. However, mortgage refinancing can be harder to access for borrowers with smaller loan balances. Black and Hispanic borrowers, who on average have smaller loans, have not participated in recent refinance booms at the same rate as white borrowers.
New streamlined and automatic refinancing mortgage products could make sure that those buying a home now, or refinancing to cover other needs, are able to benefit from the next interest rate drop. The CFPB wants to better understand what barriers prevent people from taking advantage of falling interest rates and how competition can help all households increase their financial stability.
We recently released a Request for Information seeking insights on ways to improve mortgage refinances for homeowners who would benefit from refinancing, like borrowers with smaller loan balances. We also want public input on ways to support access to short-term and long-term assistance for homeowners who experience financial disruptions, including through automatic and streamlined processes.
We welcome comments from consumers, creditors, and other stakeholders on their experiences participating in the mortgage market, as well as research and other evidence. We specifically want input on:
- Targeted and streamlined refinance programs that are used to improve refinancing, typically with lower transaction costs than traditional refinances;
- Innovative refinancing products, such as automatic refinancing, that automatically trigger an offer to refinance or automatically reduce a loan’s interest rate in certain circumstances; and
- Improved access to short- and long-term loss mitigation assistance features, such as automatic or streamlined processes, that may help homeowners whose incomes or financial situations are affected by events, such as natural disasters, receive timely payment relief that could help them avoid foreclosure and provide increased household financial stability.
This request for information seeks innovative and timely ideas to address persistent market failures and to help borrowers access beneficial refinancing along with short- and long-term loss mitigation assistance. Your input will help inform future policy initiatives, rulemaking, and other mortgage competition and innovation initiatives.