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There’s a new plan brewing to help delinquent borrowers and prevent another wave of foreclosures. The Consumer Financial Protection Bureau wants to extend the foreclosure moratorium through the end of this year and is currently asking for comments on the plan. But does the CFPB have the authority to do this?
According to the Mortgage Bankers Association, 2.7 million homeowners were in forbearance programs as of January 31st of this year. That’s down from a pandemic peak of some 6 million homeowners, but it’s a substantial number of homes at risk of foreclosure.
Black Knight estimates the number of mortgages that are currently 90 or more days past due is about 2 million. And that’s about five times higher than before the pandemic began. The real estate data firm expects some improvement through the end of June, when the current foreclosure moratorium expires, but it expects that 1.8 million mortgages will still be seriously delinquent.
The MBA says the delinquency rate for one-to-four-unit residential properties was 6.73% at the end of the fourth quarter. Black Knight says it fell below 6% in January, for the first time since the pandemic began.
Although the foreclosure moratorium is currently set to expire in June, delinquent homeowners may have different dates for the expiration of their forbearance programs. Loans backed by Fannie and Freddie can have as much as one year of forbearance. Private lenders may have other options.
Extending the foreclosure moratorium will give homeowners more time to work out a solution with their lenders. The CFPB is also proposing ways to streamline the process of getting homeowners out of forbearance and into other payment plans.
The MBA’s CEO, Dave Stevens, feels the CFPB has gone beyond its authority in offering to extend the moratorium. Stevens told HousingWire: “My concern is that the bureau is overstepping its bounds and violating in essence agreements that have already been previously made.”
He says that another halt on foreclosures could hurt the mortgage industry’s relationship with its investors, which servicers have worked hard to maintain. According to Black Knight, service providers have advanced investors $19 billion for delinquent mortgage payments during the last year.
HousingWire also reports that lenders have already been doing a good job helping homeowners exit forbearance. It says that almost 86% of those who exited forbearance did so with a payment plan in place.
Executive Vice President of RealtyTrac, Rick Sharga, says of the results: “I think the math speaks for itself how well the forbearance program has worked, and it’s one of the few times in my career that I have seen a government-initiated program adopted as well and executed as well by the industry as this one.”
He doesn’t feel the same way about another foreclosure moratorium however. He says: “What they are doing is getting involved in a very complex process and it may be forcing servicers to violate covenants of the investor who bought the loan, and that’s the real challenge.”
MBA President, Robert Broeksmit, is also citing some impressive numbers. He reportedly said in a recent article that mortgage servicers successfully helped 4.3 million Americans enter forbearance plans in less than 10 weeks. Broeksmit says: “The ability for the industry and mortgage servicers to overcome the obstacles created by COVID-19 will depend on our ability to work together.”
The CFPB is proposing three actions to help borrowers impacted by the pandemic. The first is to grant borrowers more time, with a moratorium that runs through December 31st. The second is to give servicers a way to modify loans more quickly with less paperwork. And third, to improve communication with borrowers so they are aware of their options at the appropriate time.
The public comment period runs through May 11th.
You’ll find links to the CFPB’s proposal and other articles mentioned in this episode on the podcast player page at www.NewsForInvestors.com