The Obama Administration’s primary foreclosure-prevention program, known as HARP, is expiring at the end of the year. So the U.S. Consumer Financial Protection Bureau has released guidelines for mortgage servicers designed to help protect homeowners who may face potential foreclosure.
These “principles” announced by the CFPB call for assistance to consumers facing foreclosure that is “accessible, affordable, sustainable, and transparent.”
In the wake of the financial crisis, the U.S. Department of Treasury created the temporary Home Affordable Modification Program, or HARP, to provide relief to families at risk of foreclosure. Consumers who struggled to make their mortgage payments have been able to reduce their monthly payment and prevent foreclosure via HARP. With HARP expiring in January 2017, the industry is beginning to develop new foreclosure relief options “appropriate for a post-crisis environment,” says the CFPB.
“We aim to help consumers avoid foreclosures, which upset their personal and financial lives,” said CFPB Director Richard Cordray. “The modification program was put in place to provide alternatives to foreclosure. Our principles will serve as helpful guardrails for servicers, investors, and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages.”
Mortgage servicers typically collect payments from the borrower and forward those payments to the owner of the loan, the investor. Servicers handle customer service, collections, loan modifications, and foreclosures.
Here is a breakdown on the principles suggested over the range of home-retention options, such as forbearance, repayment plans and modifications, and home-disposition options such as short sales and deeds-in-lieu. In summary, the CFPB says the principles promote:
Accessibility: Consumers should easily be able to obtain and use information about loss mitigation options, and how to apply for those options.
Affordability: Repayment plans and mortgage loan modifications should generally be designed to produce a payment and loan structure that is affordable for consumers.
Sustainability: Loss mitigation options used for home retention should be designed to provide affordability throughout the remaining or extended loan term.
Transparency: Consumers should get clear, concise information about the decisions servicers make.
The CFPB principles are available here.