Key facts
- The revised rule, Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties, is under Regulation X.
- Attorneys at Troutman Pepper Locke expect the final rule to allow sequential review of loss-mitigation options rather than all at once.
- The attorneys also expect the final rule to drop the proposed ban on fee accrual during loss-mitigation reviews.
- They expect removal of the 2024 draft's language access provisions.
- The American Bankers Association said 8.8 million families were helped under pandemic-era loss-mitigation programs.
- The ABA said the re-default rate for loans exiting COVID-19 loss-mitigation programs was about 10%.
The Consumer Financial Protection Bureau sent a revised version of its 2024 mortgage servicing proposal to the White House Office of Management and Budget for review, the agency's latest step toward finalizing new loss-mitigation standards under Regulation X. The final rule, titled Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties, is expected by industry attorneys to be narrower than the 2024 proposal advanced when the CFPB was led by Rohit Chopra. The CFPB did not immediately reply to a request for comment from HousingWire.
The step follows President Donald Trump's March 13 executive order, Promoting Access to Mortgage Credit, which directs the CFPB to modernize Dodd-Frank-era rules that lenders and servicers say raise compliance costs. The current standards were finalized in 2013.
In a blog post, Joseph M. DeFazio and Joe Reilly, partners at Troutman Pepper Locke, wrote that the final rule's content will not be known until it is published, but that the comment record and the bureau's priorities point toward a significantly narrower rule. They said the bureau has rescinded prior guidance and indicated a preference for clear, fixed rules over open-ended frameworks like the 2024 proposal.
The CFPB received more than 80 comments on the proposal, which the attorneys described as showing an unusual degree of convergence among groups that rarely agree. The American Bankers Association has urged the CFPB to finalize only a limited portion of the 2024 proposal, pressing for targeted changes rather than a full rewrite.
In a June letter to the CFPB, Teshale Smith, the ABA's senior counsel for regulatory compliance and policy, said the 2024 proposal was founded on the misconception that servicers prioritize foreclosure over helping borrowers resolve payment disruptions. Smith said sustained low foreclosure rates and high customer satisfaction rates show servicers remain committed to helping struggling borrowers. The ABA letter said industry estimates showed 8.8 million families were helped under pandemic-era practices, with a re-default rate of about 10% for loans exiting COVID-19 loss-mitigation programs.
The 2024 proposal would let servicers evaluate loss-mitigation options before borrowers complete an application, prohibit late fees and other charges while a review is underway, and make assistance available in multiple languages. It would allow a loss-mitigation review cycle to start when a borrower asks for help, not only after a completed application, and last until the loan is current or all options are ruled out. During that period servicers could not begin or advance foreclosure, a protection that currently applies only after a complete application is on file. Foreclosure could resume only after options were exhausted or the borrower stopped communicating.
Troutman Pepper Locke attorneys expect the final rule to permit sequential review of loss-mitigation options instead of requiring servicers to evaluate all options at once, to drop the proposed ban on fee accrual during loss-mitigation reviews, and to remove the language access provisions from the 2024 draft. Isaac Boltansky, head of public policy at Pennymac, said the company supports clear, consistent standards that give servicers the certainty they need to deliver the best possible outcomes for homeowners, particularly those facing financial hardship.