New foreclosure avoidance procedures: Part 2
New procedures from the Consumer Financial Protection Bureau designed to provide consistent and meaningful protections to borrowers.
Many distressed homeowners had poor experiences during the mortgage crisis, including runarounds and surprises. In response, mortgage Servicers must comply with the new federal loss mitigation procedures implemented by the Consumer Financial Protection Bureau (CFPB). The new rules began January 10, 2014, and are designed to provide consistent and meaningful protections for borrowers. Part one focused on servicer responsibilities and this article will focus on borrower timelines.
Only the five Servicers who were part of the National Mortgage Settlement (See my related articles from April 9 and April 26, 2013) must comply with the CFPB procedures. The five Servicers are Ally/GMAC, Bank of America, CitiMortgage, JP Morgan Chase and Wells Fargo. The new rules do not apply to small servicers and community banks.
The earlier that borrowers seek help, the more protections they have under the new CFPB rules:
- Borrowers have the most protections if they submit a complete application for mortgage assistance within 120 days of the first missed payment. The servicer is not allowed to start a foreclosure process during those 120 days. There is no deadline to apply, but the sooner the better.
- If a borrower submits a complete application 90 or more days before a scheduled foreclosure sale, the servicer must give the borrower at least 14 days to accept or reject an offer of a loss mitigation option. Plus, in this timeframe, the borrower may file an appeal of a denial for any loan modification within 14 days.
- If the borrower submits a complete application for loss mitigation options 45 days or more before a scheduled Sheriff’s Sale, the servicer must send a written notice to the borrower encouraging the borrower acknowledging the receipt of the application within 5 business days. If the application is not complete, the servicer must tell the borrower what additional information and documents must be provided. If the borrower’s application is less than 45 days before a foreclosure sale, the borrower is not entitled to a written notice that their application has been received.
- If the borrower submits a complete application 37 or more days before a scheduled foreclosure sale, it will be evaluated for loss mitigation options including Making Home Affordable. The servicer must give the borrower written notice of the decision.
- When servicers deny a borrower for a loan modification option, they must give specific reasons for the denial for each available modification option.
- Borrowers who sought help before and were rejected may apply again for an evaluation under the new rules. Their complete application must be filed more than 37 days before a scheduled Sheriff Sale.
- Consumers may file a complaint about mortgages with the CFPB. Call 855-411-2372 (CFPB) or online at http://consumerfinance.gov/complaint .
Many Michigan State University Extension offices have HUD-approved housing counselors who offer the housing counseling requirement. Find one near you at http://www.mimoneyhealth.org/contact_us to call for an appointment in person, by phone or online. In other areas, find a HUD approved housing counselor.