As Mortgage Payments Climb 96% Since 2020, CFPB Proposes New Rules For Homeowners To Avoid Foreclosure

At a time when homeownership is under threat due to high interest rates and housing costs, federal regulators are stepping in for struggling homeowners.

The Consumer Financial Protection Bureau (CFPB) issued a proposal on Wednesday to make it easier for homeowners to get help when they’re having trouble paying their mortgage — a move that comes as mortgage payments have soared 96% since 2020. If finalized, the proposal would change how mortgage servicers interact with distressed homeowners. It focuses on helping borrowers over foreclosing and aims to cut through the red tape that often delays assistance.

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"When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers, and the economy as a whole," Rohit Chopra, the CFPB’s director, said. "The CFPB’s proposal would reduce avoidable foreclosures and make the mortgage market more resilient during future crises."

The CFPB is pushing to stop "dual tracking," pursuing foreclosure while simultaneously working with a borrower on alternatives. Under the new rules, servicers would be required to exhaust all possibilities for assistance before moving forward with foreclosure.

The CFPB also proposes streamlining the paperwork requirements that often bog down the assistance process. Before a servicer can evaluate them for help, borrowers must submit a "complete application" with all information needed to assess eligibility for all available options.

The bureau also proposed temporary payment suspensions and loan term extensions, easing the burden on borrowers.

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Drawing lessons from the pandemic, the agency points to the success of mortgage forbearance programs implemented during the crisis. The measures, which allowed borrowers to pause or temporarily reduce payments, proved beneficial for homeowners and lenders, who avoided foreclosure.

The new rules would allow servicers more flexibility to review borrowers for each option individually, potentially speeding up the assistance process.

Critics argue that the proposal could increase lenders’ costs, which might be passed on to consumers. But proponents say the benefits far outweigh the potential drawbacks.

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"We’ve seen time and time again that when homeowners get the right help at the right time, everyone wins," Michael Roberts, a housing counselor in Chicago, said to Benzinga. "Fewer foreclosures mean more stable communities and a healthier housing market overall."

The proposal also includes provisions to improve communication between servicers and borrowers, including requiring tailored notices and ensuring that information is provided in languages borrowers understand.

As the housing market grapples with high interest rates and inflated home prices, the CFPB’s proposal marks a step toward protecting homeowners. But for many, like Roberts, the test will be in the implementation.

"It sounds good on paper," he said. "It will be better when we see it."

The CFPB is seeking public comment on the proposal until September 9. 

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