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Following the CFPB's warning last week to mortgage servicers, the bureau Monday proposed mortgage servicing changes in an attempt to preempt an expected wave of foreclosures once coronavirus relief provisions expire.

The bureau said the proposal "seeks to ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge in borrowers exiting forbearance in the fall will put mortgage servicers under strain."

The proposal would:

• create a review period – that could last until the end of 2021 – during which servicers are generally prohibited from initiating foreclosure;
• provide some flexibility for offering loan modification options based on an incomplete loss mitigation application so long as the modification does not increase a borrower's monthly payment and extends the loan's term by no more than 40 years from the modification's effective date; and
• enhance requirements for communications with borrowers about their loss mitigation options.

Comments on the proposal are due May 10.

In its compliance bulletin issued last week, the bureau outlined six areas it will focus on as it monitors how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation as forbearance relief provisions expire. It noted in its mortgage servicing proposal that 3 million homeowners are currently behind on their mortgage payments.

The bureau and Federal Trade Commission (FTC) last week also announced they are investigating potentially illegal eviction practices. The efforts follow a CFPB report on housing insecurity, which found nearly 10 percent of U.S. households could face eviction and foreclosure when COVID-related relief provisions expire in the coming months.

NAFCU has consistently flagged its concerns related to increased forbearance requests amid the coronavirus pandemic and how credit unions are working with members impacted by the crisis with regulators and lawmakers.