Millions of Americans have not been able to pay their mortgages in over a year, and fortunately, many are in mortgage forbearance. However, most of those forbearance periods end in just a few months and many could be in danger of losing their homes.
According to the Consumer Finance Protection Bureau (CFPB), at least one million Americans will be in “imminent danger of foreclosure” by October, and by December, that number could rise to more than 2 million.
“This is sort of an unprecedented situation,” said Mark McArdle, assistant director of mortgage markets at the CFPB.
The CFPB is a government agency that was created after the 2008 housing crisis and is charged with preventing another housing crisis this year.
"A lot of this depends on income and whether folks get their incomes back,” explained McArdle. “If they do, there are a lot of interesting tools out there to help them.”
The CFPB issued a warning this month to banks, essentially asking banks to start working with homeowners to prevent foreclosures.
The agency suggests banks do the following: increase staff, address potential language access issues for non-English speaking homeowners, start contacting borrowers before the foreclosure period ends, and give borrowers options.
The CFPB has approved a streamlined process for loan modification to make this option easier for banks and borrowers.
“We want servicers to know that we are paying close attention,” said McArdle. "This is our number one priority to make sure servicers treat borrowers fairly, that they evaluate them for all options and that they use all the tools at their disposal.”
To ensure that, the CFPB is also proposing a rule to stop banks from filing any foreclosures until the end of the year. After a brief public comment period, it’s expected to be approved by the end of summer and banks could face hefty fines if they do not comply.
The CFPB said it will monitor, in real-time, whether banks and services are following the guidance. Homeowners with potential issues could file complaints directly on the CFPB’s website.
“The jury is out on how effective the enforcement action will be, but it is certainly better than sitting on the government's hands and doing nothing,” said Patricia McCoy, a law professor at Boston College Law School.
McCoy was the first head of the CFPB’s Mortgage Markets unit.
She recommends homeowners protect themselves further by proactively reaching out to the mortgage service or at least pick up the call when they make the required effort to reach out to you.
McCoy also suggests asking for an evaluation. The earlier you do it the better chance you won’t get jammed up with millions who will be coming off forbearance at the same time. To further protect themselves, homeowners should document all contact with their servicer or bank. It’s important to note the name of the person you talked to, the date, time, and a note about the conversation.
“Last piece of advice: there are free housing counselors in every state,” said McCoy. “They can help you. They can be your counselor through this process.”
The Consumer Finance Protection Bureau has a ‘find a housing counselor’ tool on its website. You simply put in your zip code and will be given the information on a free housing counselor near you.
