Companies that collect mortgage payments should take steps now to prevent a wave of foreclosures this fall, a federal agency has warned.
The Consumer Financial Protection Bureau (CFPB) notified mortgage servicers in a bulletin Thursday that it will be paying close attention to how the companies handle a looming foreclosure crisis. Millions of homeowners could be exposed once federal protections expire later this year.
A moratorium on foreclosures ends June 30, and many borrowers will start to exit pandemic-era forbearance programs in September. With 2.1 million borrowers in forbearance and at least 90 days late on their mortgage payments, and another 242,000 borrowers late on payments but not enrolled in forbearance at all, mortgage servicers likely will need to increase outreach and customer service efforts to avoid a rash of preventable foreclosures, CFPB said.
“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months,” said CFPB Acting Director Dave Uejio in the bulletin. “Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming.”
For its part, CFPB said it will focus on preventing avoidable foreclosures. It recommended mortgage servicers contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help, and be ready to provide necessary information and documents to borrowers in need of assistance. CFPB also said it will look at how servicers work with borrowers who have limited English proficiency, how they evaluate a borrower’s income, and whether they handle calls and inquiries in a timely manner.