Everyone in this nation has felt the impact of the coronavirus pandemic and the resulting economic crisis. Along with the tragic death toll and so much other human misery, we have seen a shocking increase in housing insecurity. Millions of our fellow Americans are living precariously, months behind on their mortgage or rent because of lost jobs or lowered incomes. Millions of jobs lost in 2020 have yet to return. And just as with the physical toll of the virus, the economic damage has been distributed unevenly, with communities of color disproportionately harmed at every turn.
Even as the vaccine rollout moves forward and the nation begins opening up again, we must neither lose sight of the continued suffering in our midst, nor miss any opportunity to prevent further harm.
That is why we are here today. The CFPB is proposing changes to the mortgage servicing rules that will ensure servicers and borrowers have the tools and time to work together to prevent avoidable foreclosures, which disrupt lives, uproot children, and inflict further costs on those least able to bear them.
Emergency protections for homeowners will start to expire later this year, and by the fall a flood of borrowers will need assistance from their servicers. As many as 1.7 million borrowers will exit forbearance programs in September and the following months—a surge that dwarfs anything the servicing industry has confronted before. Our driving principle is simple: struggling homeowners should have the opportunity to fully explore ways of getting current on their loans and avoiding foreclosure if possible.
To accomplish this goal, our proposal would create a special pre-foreclosure review period during which servicers could not make an initial notice of foreclosure. This provision would only apply to loans secured by a borrower’s principal residence. We are proposing that review period would last until the end of 2021, and we are eager to hear public feedback.
We also propose giving servicers greater flexibility, in light of the extraordinary circumstances of this time. Servicers would be able to offer some loan modification options based on an incomplete application. We are trying to allow servicers to get borrowers into affordable payments faster, while establishing some additional guardrails to ensure the modifications are consumer-friendly.
Our proposal would give struggling homeowners a critical lifeline, while also ensuring mortgage servicers can do their work effectively. Foreclosures can be devastating for homeowners, they lower property values in the surrounding neighborhoods, and they are expensive for servicers and investors alike. We are going to use everything in our toolbox to prevent avoidable foreclosures and this proposed rule is among our sharpest tools.
During my time as Acting Director of the CFPB I’ve guided our work by two clear priorities: helping consumers facing financial hardship due to the pandemic and addressing racial inequities in the financial services marketplace. The changes we are proposing today are consistent with both priorities and are urgently needed.