WASHINGTON (Reuters) -The U.S. consumer watchdog on Monday said it was finalizing a rule that would restrict mortgage servicers from foreclosing on borrowers behind on their mortgage payments, throwing a lifeline to hundreds of thousands of homeowners struggling due to the COVID-19 pandemic.
The Consumer Financial Protection Bureau (CFPB) in April proposed, among other measures, a new review process that would generally prohibit mortgage servicers from starting a foreclosure until after Dec. 31, 2021. It aims to help around 900,000 homeowners due to exit COVID-19 mortgage holiday or “forbearance” programs in coming months.
“As the nation shifts from the COVID-19 emergency to the economic recovery, we cannot be complacent about the dangers we still face,” said CFPB Acting Director Dave Uejio.
“An unchecked wave of foreclosures would drain billions of dollars in wealth from the Black and Hispanic communities hardest hit by the pandemic,” he added.
The new rule covers loans on principal residences and is effective from August 31, 2021.
However, it does not generally apply to small servicers and excludes some groups of homeowners, the agency said.
Those include homeowners who have abandoned their property; are more than 120 days behind on their mortgage payments and have not responded to queries from their mortgage servicer for 90 days; or those who have been evaluated and there are no available options to avoid foreclosure.
(Reporting by Michelle Price; Editing by Aurora Ellis)
