The CFPB recently outlined consumer protection principles to guide mortgage servicers, investors, and policymakers as they develop new foreclosure relief solutions. As the Home Affordable Modification Program (HAMP) is phased out, the CFPB is considering the lessons learned from HAMP: one is loss mitigation that is good for consumers is usually good for investors as well.
The principles build on, but are distinct from, the backdrop of the CFPB’s mortgage servicing rules. Currently, the CFPB’s mortgage servicing rules do not require mitigation options beyond those offered by the investor nor do they define every element of loss mitigation execution. Thus, the four principles provide a framework for discussion about the future of loss mitigation to prevent less desirable consumer outcomes and to ensure the continuance of appropriate consumer protections.
The principles span the spectrum of home-retention options such as forbearance, repayment plans and modifications, and home-disposition options such as short sales and deeds-in-lieu. Although the principles have applicability to most loss mitigation programs, certain recommendations may not align with government insured lending programs such as those offered by the Federal Housing Administration, Veterans’ Affairs, or Rural Housing Service.
The first principle is “Accessibility.” Generally, it states that consumers should be able to easily obtain and use information about loss mitigation options and that consumers should have ready access to individuals to help them understand their options. The second principle, “Affordability,” promotes repayment plans and mortgage loan modifications that generally should be designed to produce a payment and loan structure that is affordable for consumers. The third principle, “Sustainability,” recommends that loss mitigation options used for home retention should be designed to provide affordability throughout the remaining or extended loan term. The fourth and last principle, “Transparency,” states that consumers should get clear, concise information about the decisions servicers make.
These principles do not establish binding legal requirements but are intended to complement ongoing discussions among the industry, consumer groups and policymakers on the development of loss mitigation programs.
The full text of the CFPB Principles is available here: http://files.consumerfinance.gov/f/documents/20160802_CFPB_Principles_for_Future_of_Loss_Mitigation.pdf.