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2021 Mortgage Servicing Covid-19 Rule or Rule 21

On June 28, 2021, the Consumer Financial Protection Bureau (CFPB) issued new rules to reinforce the ongoing economic recovery, with an amendment of the Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X. The new rule is entitled 2021 Mortgage Servicing COVID-19 Rule or Rule 2021. The rules cover loans on principal residences only, generally exclude small servicers, and will take effect on August 31, 2021.

Rule 2021 was enacted to assist borrowers affected by COVID-19 as they exit forbearance. To ensure that borrowers can pursue foreclosure avoidance options, servicers must meet temporary special procedural safeguards before initiating foreclosures for certain mortgages through the end of this year.

Allowing mortgage servicers to help borrowers faster. Under the new temporary rule, servicers can offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all the paperwork for every possible option. These streamlined loan modifications cannot increase borrowers' payments and have other protections built into them.

Explaining to borrowers their options. Servicers will be required to increase their outreach to borrowers before initiating foreclosure and tell borrowers key information about their repayment or other options when they communicate with borrowers who are exiting forbearance or struggling to make mortgage payments.

Rule 2021 temporarily adds to the existing foreclosure protection conditions in certain circumstances. From August 31, 2021, through December 31, 2021, unless an exception applies, before referring certain 120-day delinquent accounts for foreclosure, the servicer must make sure at least one of the temporary procedural safeguards has been met. The procedural safeguards are:

  • Borrower has abandoned the property;

  • Borrower is more than 120 days behind on their mortgage payments and has not responded to specific required outreach from the mortgage servicer for 90 days; or

  • Borrower has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.

The temporary procedural safeguards are not required if:

  • The foreclosure referral occurs (as permitted by applicable law) on or after January 1, 2022.

  • The borrower was more than 120 days delinquent prior to March 1, 2020.

  • The applicable statute of limitations will expire before January 1, 2022.

  • If the servicer has met the temporary procedural safeguards, or if the safeguards do not apply, the servicer may proceed with the foreclosure referral, to the extent permitted by other law and the existing foreclosure protections in the Mortgage Servicing Rules.

The new rules include other important details with which loan servicers must be familiar, such as providing borrowers with the details of available forbearance programs and other information to be provided to borrowers between 10-45 days before the scheduled end of a borrower's forbearance program.