The Federal Housing Finance Agency on Tuesday closed a gap between the end of the federal foreclosure moratorium and the start of a new policy from the Consumer Financial Protection Bureau, as mortgage and consumer groups responded with cautious optimism about both.
While industrial groups had not reviewed the entirety of the 200-page preliminary final regulation of the CFPB as of the cut-off date, they were relieved that the directive allowed them to resume a wider range of foreclosures after the end of the federal ban.
The FHFA's announcement that it would immediately adjust its policies to those of the CFPB following the end of the federal ban on July 31, although the office's rule won't technically come into effect until late August appeased some consumer groups who were angry with the loophole.
"I think this type of 'split the baby' decision, for lack of a better description, could really be a good solution for a lot of people," said Richard Kruse, director of distressed asset manager Gryphon USA. draws attention to the need to strike a balance between consumer and industrial goals that are difficult to reconcile.
The CFPB policy, which only allows foreclosures if certain steps are taken to ensure consumers receive optimized housing withholding options between late August and December 31, appears to have almost reached that balance.
"When a service provider tries to reach a borrower by phone, text message, email or in writing, they must take certain action and demonstrate that they tried to reach the consumer," said Meg Burns, executive vice president of Housing Policy Council.
Homeownership options called for in the CFPB's guidelines appear practical and efficient, according to the Mortgage Bankers Association.
"The MBA appreciates that the CFPB has included the reasonable exemptions for situations where further delaying the process is not in the best interests of the borrower, lender, or the community," Pete Mills, senior vice president of residential policy, said in a E-mail. "The rule also makes it easier for service providers to provide optimized support to borrowers by removing the obligation to screen borrowers for all possible options, including those that the borrower is not qualified for or not interested in."
While consumer groups welcomed the FHFA's announcement on Tuesday referring to the large number of loans bought by state-sponsored companies Fannie Mae and Freddie Mac, they remain concerned that the CFPB's protection will end before the backlog the distress caused by the pandemic has been resolved.
"This is really encouraging about the loophole, at least for Fannie and Freddie," said Sarah Mancini, attorney for the National Consumer Law Center, but added that she hoped the end date of the regulation and the loophole isn't an issue, particularly for loans in the market outside of the GSEs that are subject to higher levels of distress and may not have government home retention protocols.
If the regulation works as intended, the time frame of the CFPB could be sufficient to process loans without too long delays, said Kruse.
“I think it's a great way to move things forward and clear the backlog without affecting people who are either unfamiliar with the options available to them or previously fearful of reaching out to their mortgage lenders,” Kruse said .