Samuel Paler-Ponce, MPA
Associate Editor
Loyola University Chicago School of Law, JD 2026
Earlier this year, the Consumer Financial Protection Bureau (CFPB) announced proposed rule changes to provide additional relief for homeowners struggling to make mortgage payments. The changes aim to amend the 2013 regulations governing mortgage servicing, ensuring that borrowers can more easily access mortgage assistance and therefore reduce the risk of unnecessary foreclosures. This comes at a time when economic uncertainties and evolving market conditions make it critical for homeowners to have quick access to resources to avoid foreclosures. The new proposal, if finalized, is designed to simplify the process for borrowers seeking mortgage assistance, improve communication between borrowers and servicers, and add safeguards to protect homeowners.
The role of mortgage servicers
Mortgage servicers manage the day-to-day operations of mortgage loans, including collecting monthly payments, maintaining records, and working with borrowers who face difficulties making payments. In times of financial distress, the ability of servicers to quickly and effectively guide homeowners toward available assistance options is vital. This not only benefits the borrower by preventing foreclosure, but it also reduces investors’ losses.
The current regulations, in place since 2014, establish rigid rules that mortgage servicers must follow when a borrower seeks assistance, including strict timelines and documentation requirements. The goal was to prevent servicers from rushing borrowers into foreclosure without exploring all possible alternatives. However, over time, these rules have shown limitations, particularly when economic conditions fluctuate, as they did during the COVID-19 pandemic.
Lessons from the COVID-19 pandemic
The COVID-19 pandemic tested the effectiveness of the existing mortgage servicing regulations. During this crisis, many homeowners were able to pause their mortgage payments temporarily through forbearance programs, and most of them successfully resumed payments afterward. The impact of these programs was overwhelmingly positive, but they were not without flaws.
In response to the pandemic, the CFPB also temporarily relaxed some of its rules, allowing servicers to offer assistance without requiring full documentation upfront. This flexibility helped many borrowers, demonstrating that streamlined processes could work effectively. The CFPB’s proposed rule changes aim to create a more flexible system that can better respond to future economic shocks or widespread financial hardship. The new rules are designed to allow servicers to offer assistance more quickly, with fewer documentation requirements, thus benefiting both borrowers and investors.
Key elements of the proposed rule changes
The proposed CFPB rule changes focus on preventing foreclosure by requiring mortgage servicers to exhaust all possible assistance options before pursuing foreclosure. Additionally, the proposal would limit the fees servicers can charge while reviewing a borrower’s request for help, incentivizing quicker and fairer evaluations to reduce the financial burden on struggling homeowners.
To simplify the process, the CFPB aims to streamline paperwork requirements, allowing servicers to assess borrowers for assistance without needing a complete application upfront. This would speed up the process and help more homeowners receive aid in a timely manner. The proposal also mandates improved communication between borrowers and servicers, requiring clearer, more tailored notices that inform homeowners of available assistance options.
Another key provision ensures borrowers can receive assistance in multiple languages. If borrowers initially received marketing materials in a language other than English, they could request subsequent mortgage communications in that same language, including oral interpretation services for phone calls. This would help non-English speaking homeowners better understand their options and access necessary assistance.
The path forward
If the CFPB’s proposal is finalized as planned, it will represent a major shift in how mortgage servicing is regulated, with a clear focus on borrower protection and flexibility. The CFPB is aiming to make the mortgage market more resilient by ensuring that servicers have the tools and flexibility needed to assist borrowers quickly and effectively in times of distress.
Streamlining the process and improving communication would reduce the number of avoidable foreclosures, which not only benefits homeowners but also has broader economic advantages; keeping homeowners in their homes helps stabilize communities and reduces losses for investors.
The proposed changes reflect an evolution in the CFPB’s approach to mortgage servicing, based on lessons learned during the past decade and the extraordinary circumstances of the COVID-19 pandemic. By creating a more flexible, borrower-centric system, the CFPB hopes to reduce the burden of foreclosure and provide homeowners with the support needed to remain stably housed.
As the CFPB reforms these rules, it remains clear that the focus is on creating a system that benefits all parties while making the mortgage market more resilient in the face of future crises.