California Foreclosure Law Center Facing
Foreclosure?
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In California, most foreclosures are
nonjudical meaning they don't go through court.
If you are facing a nonjudicial foreclosure in California, it's important to
know what types of notices you'll receive, what deadlines you have to
reinstate the mortgage or redeem your home, whether you'll owe a deficiency
afterwards, and more.
If you are struggling to pay your
mortgage, you should also learn about alternatives to foreclosure in
California, the Keep Your Home California program, and protections
for homeowners in foreclosure provided by the California Homeowners Bill
of Rights.
The Bureau of Consumer Financial Protection
proposes
amendments to Regulation X to assist borrowers affected by the
COVID-19 emergency.
To help ensure that borrowers affected by the COVID-19 pandemic have an
opportunity to be evaluated for loss mitigation before the initiation of
foreclosure.
To establish a temporary COVID-19 emergency
pre-foreclosure review period until December 31, 2021, for
principal residences.
In addition, it would temporarily permit mortgage servicers to offer certain
loan modifications made available to borrowers experiencing a
COVID-19-related hardship based on the evaluation of an incomplete
application.
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also extends the
Homeowners’ Bill of Rights’
anti-foreclosure protections to small landlords, 1-4 units, non-owner
occupied.)
Provides new accountability and transparency
provisions to protect small landlord
borrowers who request CARES-compliant
forbearance, and provides the borrower
who is harmed by a material violation with a
cause of action.
BUT: "3273.12. It is the intent of the Legislature that a mortgage
servicer offer a borrower a
postforbearance loss mitigation option
that is consistent with the mortgage servicer’s contractual or other
authority."
Among other things the Relief Act, requires that a
mortgage servicer, that denies a forbearance
request during the effective time period, provide specified written notice
to the borrower, that sets forth the specific reason or reasons that
forbearance was not provided if certain
conditions are met.
Existing law defines the “effective time period” for
these purposes as the period between the operational date of that act and
April 1, 2021.
This bill would, instead, define “effective time period” for these purposes
as the period between the operational date of the COVID-19
Small Landlord and Homeowner Relief Act of 2020
and September 1, 2021, thereby extending the duty of a mortgage
servicer to provide written notice if the
mortgage servicer denies a
forbearance request.
California Foreclosure Law
Notice of Default
To start the foreclosure, the lender
or trustee records a notice of default in the county recorder’s office and mails a
copy to you within ten business days. The notice of default gives you
three months to reinstate the loan (bring it current). (Cal. Civ. Code §§
2924, 2924b).
Notice
of Sale
After three months expires, the lender
or trustee then issues and records a notice of sale and mails a copy to you
at least 20 days before the sale date. (Cal. Civ. Code §§ 2924, 2924b).
While the notice of sale may be recorded up to five days before the lapse of
the three months, the sale date can’t be earlier than
three months and 20 days after the notice of default's recording
date. (Cal. Civ. Code § 2924).
At least 20 days before the sale, the notice of
sale must also be:
posted in a conspicuous place on the property, usually
on the front door
posted in a public place, and
published in a newspaper.
(Cal. Civ. Code § 2924f).
Look Out for
Legal Changes
In this article, you’ll find details on
foreclosure laws in California with citations to statutes so you can
learn more. Statutes change, so checking
them is always a good idea. How courts and
agencies interpret and apply the law can also change. And some rules
can even vary within a state. These are just some of the reasons to
consult with an attorney if you’re facing a foreclosure.
The Foreclosure Sale
The sale is an auction, open to
all bidders. At the sale, the lender usually makes a bid on the property
using a "credit bid" rather than bidding cash. With a credit bid, the lender
gets a credit up to the amount of the borrower’s debt. Sometimes the lender
bids the full amount of the debt; sometimes, it bids less. The highest
bidder at the sale becomes the new owner of the property.
Right to Reinstate Before a Foreclosure Sale
in California
is when a borrower pays the overdue amount, plus fees and costs, to bring
the loan current and stop a Foreclosure .
Under law,
borrowers may Reinstate the loan at any time until
five business days prior to the date set for the sale
of the property (Cal. Civ. Code § 2924c).
Learn how a
California foreclosure works, including preforeclosure steps, foreclosure
procedures, and homeowners’ rights under both state and federal laws.
Please answer a few questions to help us match you with
attorneys in your area.
Question
I live in California and submitted a
loss mitigation application to my loan servicer to modify the first
mortgage on my home. I have never applied for a mortgage modification or another
type of foreclosure alternative before. The servicer denied my application.
Do I have the legal right to appeal this decision?
Answer
Yes, probably. In California, a law called the Homeowner
Bill of Rights (HBOR) generally gives borrowers the right to appeal a
modification denial.
Under HBOR, in most cases, if the servicer denies a
borrower's application to modify a first lien loan, the borrower can appeal.
(Though, some servicers don't have to provide the right the appeal.) You
must submit the appeal within 30 days from the date of the written denial.
In your appeal, you’ll need to provide evidence that the servicer's
determination was in error.
Information Your Servicer Must Provide in the Denial
Notice
Under HBOR, if your servicer denies your modification
application, the servicer must:
explain your right to appeal
(including the amount of time you have to appeal)
if the investor (the owner of
your loan) is the one that denied your request, give you the specific
reason for the denial
provide the monthly gross
income and property value it used to calculate the net present value (NPV)
(if it denied your application because of a NPV calculation)
if applicable, say that you
were previously offered a first lien loan modification and failed to
successfully make payments under the terms of the modified loan, and/or
describe any foreclosure
alternatives that are still available to you. (Cal. Civ. Code §
2923.6(f)).
The Servicer Can't Proceed with a Foreclosure During the
Appeal Period
The servicer is not allowed to continue foreclosing—for
example, by recording a notice of default or notice of sale or holding the
foreclosure sale—until:
31 days after notifying you in
writing about the denial (if you don’t appeal)
15 days after denying your
appeal
14 days after a first lien
loan modification is offered after appeal but you decline it, or
if a first lien loan
modification is offered and accepted after appeal, the date on which you
fail to timely submit the first payment or otherwise breach the terms of
the offer. (Cal. Civ. Code § 2923.6(e)(1)-(2)).
the property has no more than
four units. (Cal. Civ. Code § 2924.15).
Other Laws That Might Give You the Right to
Appeal the Denial
The federal government implemented new
mortgage servicing rules as of January 2014 that generally require
servicers to give homeowners 14 days to appeal
a loan modification denial. This appeal right kicks in if the servicer
receives your loan application 90 days or more before the foreclosure sale
date.
Getting Help
If you believe that your servicer denied your loan
modification in error or didn't provide you with the proper opportunity to
appeal the denial, consider talking to a foreclosure attorney to get advice
about you what you should do in your particular circumstances.
The California Homeowner Bill of Rights protects
homeowners in foreclosure. By Amy
Loftsgordon
, Attorney
The Homeowner Bill of Rights was part of California's
former Attorney General Kamala D. Harris’ response to the state’s
foreclosure crisis. It largely came about as a result of the national
mortgage settlement between 49 states and individual banks. This law,
size="3"> which went into effect on January 1, 2013,
reformed some aspects of the state's foreclosure process to help
mortgage borrowers. On January 1, 2018, many provisions of the Homeowner
Bill of Rights were replaced with new ones—a change that was widely
considered to benefit lenders and servicers, not homeowners. Then, on
September 14, 2018, Governor Jerry Brown signed Senate Bill No. 818, which
permanently reinstated the Homeowner Bill of Rights' expired provisions that
protect homeowners' interests
The Homeowner Bill of Rights contains several key provisions, including:
a prohibition on dual tracking
the servicer has to appoint a
single point of contact for borrowers
the lender or servicer has to contact, or attempt to contact, the borrower to discuss foreclosure alternatives before
starting a foreclosure, and
homeowners get the right to
sue over violations of the law.
Here's a summary of those provisions.
No Dual Tracking
In the past, a lender or servicer could foreclose even while a loss
mitigation application was pending in a process called “dual tracking.”
The Homeowner Bill of Rights prohibits the dual tracking of foreclosures in
California. Federal
law also restricts dual tracking.
Under
California's Homeowner Bill of Rights, if a borrower submits a
complete application for a first lien loan modification at least five
business days before a scheduled foreclosure sale, a lender or
servicer can't record a
notice of default or notice of sale, or conduct a trustee’s
sale, while the application is pending. The lender or servicer can't
proceed until a written determination is made that:
the borrower isn't eligible,
and the appeal period has expired, or
the borrower doesn't accept
an offer within 14 days, or
the borrower accepts an
offer but defaults or breaches the agreement.
But the prohibition on continuing with the
foreclosure doesn't apply if you already exhausted the loan
modification application process unless you've had a material change
in your financial circumstances since you last applied.
Servicers Must Provide Homeowners
With a Single Point of Contact
During the foreclosure crisis, homeowners who called their servicer to
get help with mortgage problems typically had to explain their circumstances
to several different representatives repeatedly. Under the Homeowner Bill of
Rights, a servicer must promptly
establish a single point of contact upon a borrower's request who asks for a
foreclosure prevention alternative. The servicer also has to give the
homeowner one or more direct means of communication with the single point of
contact.
The point of contact must be an individual or a team of personnel who
can:
communicate the process by
which a borrower can apply for a foreclosure prevention alternative and
the deadline for any required submissions to be considered for these
options
coordinate receipt of all
documents associated with available foreclosure prevention alternatives
and notify the borrower of any missing documents necessary to complete the
application
access current information and
personnel sufficient to timely, accurately, and adequately inform the
borrower of the current status of the foreclosure prevention alternative
ensure that a borrower is
considered for all foreclosure prevention alternatives offered by, or
through, the servicer, if any, and
access individuals with the
ability and authority to stop foreclosure proceedings when necessary.
The single point of contact will remain assigned to the account until all
loss mitigation options are exhausted or until the account is brought
current.
Preforeclosure Help for Borrowers
The Homeowner Bill of Rights requires the lender or servicer to contact,
or attempt
to contact, the borrower to discuss foreclosure alternatives before
starting a foreclosure.
Specifically, a servicer has to hold off for 30 days after contacting the
borrower—or meeting the contact attempt requirements—regarding foreclosure
alternatives before recording a notice
of default, which is the first official step in a California
foreclosure.
While this requirement appears
straightforward, some borrowers in California have sought to prevent or
delay foreclosures by filing lawsuits alleging that their lender or servicer
failed to comply with this requirement because contact was initiated by
the borrower instead of the lender or
servicer.
The borrowers' argument was, under
the Homeowner Bill of Rights, lenders or servicers—not borrowers—are
required to initiate the contact.
But various federal courts disagreed and found that the contact requirement
is satisfied regardless of who initiates the contact, so long as contact is
made and the parties discuss foreclosure alternatives.
Also, on November 7, 2018, the
California Court of Appeal formally agreed with the federal courts'
interpretation of the statute and held that borrower-initiated contact
satisfies the legal requirements. (Schmidt v. Citibank, N.A., 28
Cal.App.5th 1109 (Cal. Ct. App. 2018)).
Homeowners Have the Right to Sue for Violations
Homeowners may sue the lender or servicer for material violations
of certain sections of the California Homeowner Bill of Rights. Potential
relief includes:
injunctive relief (prior to the
recording of a trustee’s deed upon sale),
or
actual economic damages if the
trustee’s deed upon sale has already been recorded.
Also, if the court finds that the violation was intentional,
reckless, or resulted from willful misconduct by a servicer or
lender, the court may award the borrower the greater of
treble actual damages or statutory damages of $50,000.
Applicability of California's Homeowner Bill of Rights
The protections afforded to homeowners by California's Homeowner Bill of
Rights generally apply to first lien mortgage loans for properties that are:
owner-occupied
residential, and
no more than four units.
Smaller servicers
(entities that conduct fewer than 175 foreclosure sales per year or annual
reporting period) are exempt from some of the procedural requirements.
Getting Help
To get specific information about how California's Homeowner Bill of
Rights applies in your situation and whether you have any defenses to a
foreclosure, talk to a foreclosure lawyer. To get more information about
foreclosure alternatives, like a loan modification, consider making an
appointment to speak to a HUD-approved
housing counselor.
Reason #5: You Were Already Approved for a Loan Modification
Your lender will not offer more than one loan modification per year.
If your mortgage company approved you for a loan modification within the
12-month period prior to your new request, then your mortgage company will
deny your modification request. This is automatic, and has nothing to do
with changed circumstances. If you are facing foreclosure and want to keep
the property, you may have to file
for Chapter 13 bankruptcy to delay an auction.
Once the 12-month period has passed, you will be eligible to request another
modification.
Reason #6: You Missed a Trial Modification Payment
Your lender may offer you a three-month trial modification. If you make
all three trial modification payments, then your lender will make your
modification permanent. However if you miss one of those payments (or pay
one of them late), then you have defaulted on the trial modification terms
and will be denied a permanent loan modification.
What Is an NPV Calculation?
When a servicer evaluates a borrower for a loan modification, it looks at
financial information about the borrower, the current terms of the loan, and
the fair market value of the property. It then sometimes makes a comparison
between:
the estimated cash flow the
investor will receive if the loan is modified, and
the investor’s
cash flow if the loan is foreclosed.
If the investor would be better off financially
after a foreclosure rather than a modification—called "net present
value" or "NPV" negative— then the servicer doesn't
have to modify the loan. Sometimes, however, servicers make a
mistake when calculating the NPV.
Under federal law, if a trial or permanent loan modification is denied
because of an NPV calculation, the servicer must include the inputs used in
the NPV calculation in the denial notice.
The One-Action Rule & Foreclosure in California and Utah
Learn about the one action rule in California and Utah.
If you fall behind in your mortgage payments, California’s “one-action
rule” says that your lender can only take one action against you, whether it
is to conduct a trustee’s sale, sue on the
residential foreclosures in California are nonjudicial,
which means the lender does not have to go through state court to foreclose.
Though, sometimes, California foreclosures are judicial and go
through the state court system.
So, a lender is allowed to do only one of the following:
sue the borrower personally on
the promissory note for the balance of the debt.
Relationship to California’s Security-First Rule
Walker v. Community Bank, 10 Cal.
3d 729 (1974)). This concept is known as the “security-first rule.” The
goal of this rule is to prevent a secured lender from suing the defaulting
borrower on the debt itself before foreclosing on the security
interest.
Second Mortgages, HELOCs, and Other Junior Lienholders
What happens to
junior lienholders in a foreclosure. When a senior lienholder
forecloses, any junior liens—like second mortgages and HELOCs, among
others—are also foreclosed and those junior lienholders lose their security
interest in the real estate. A foreclosed lienholder is then referred to as
a “sold-out junior lienholder.”
underwater, you might face lawsuits from those lenders to collect the
balance of the loans.
Anti-deficiency law. But under California
law, a lender can't get a personal judgment (a deficiency
judgment) against you if the loan was:
a purchase money loan (a loan that is used to buy the
property)
a refinanced purchase
money loan that was executed on or after January 1, 2013, except to the
extent that new principal was advanced which is not applied to the
purchase money loan (fees, costs, or related expenses of the refinance are
also not covered by the anti-deficiency protection), or
a seller-financed loan (a loan you take out from the person
or entity selling the property to you).
follow specific out-of-court procedures, which are set out in
state law, to complete a nonjudicial
foreclosure.
How Does a Sheriff’s
Sale Work?
Property Tax Sales
Property tax sales and foreclosure sales are separate processes, but
depending on state law and local procedures, either might involve a sheriff’s
sale. This article focuses on sheriff’s sales for properties in foreclosure
due to unpaid mortgage payments.
Notice of a Sheriff’s Sale
The Foreclosing Bank
Is Usually the High Bidder
credit bid. With a credit bid, the bank gets a credit in the amount of the
borrower's debt. The bank can bid the full amount of the debt, including
foreclosure fees and costs, or it might bid less. Most of the time, the bank
is the winning bidder at the sale because no one else tries to buy the
property. If the bank buys the property at the sale and gets title to the
home, the property is considered “Real
Estate Owned” (REO).
You Might Be Liable for a Deficiency Judgment
deficiency judgment against the foreclosed homeowner. Whether or not the
bank can get a deficiency judgment depends on state
law.
Other Parties Can Also Bid
Again, the Bank Might
Be Able to Get a Deficiency Judgment
What Is a Trustee’s Sale?
A trustee’s sale is effectively the same as a sheriff’s sale. It is the last
step in a nonjudicial foreclosure. The main difference is that a trustee,
the party that handles the nonjudicial foreclosure process in some states,
holds the auction.
What Homeowners Can Do to Stop a Sheriff’s Sale
challenge the foreclosure in court (check the foreclosure
papers you received or consult with an attorney to find out the deadline to
respond to the foreclosure action)
reinstate the loan (again, don't miss
the deadline set by state law or your mortgage contract)
file for bankruptcy, or
pay off the full amount of the mortgage debt.
What Happens After the Sheriff’s Sale
post-sale redemption period, you can repurchase the home and keep it. Or
state law might give you the right to live in the home during the redemption
period, even if you don’t exercise your right to redeem. But if you don’t move
out when your legal right to occupy the home ends, you’ll most likely get evicted.
How to Interview Potential Foreclosure Lawyers During the Coronavirus National
Emergency
At the initial consultation, which might be free, you'll ask
questions, listen to the attorney's assessment, and determine whether you want
to retain that lawyer. An attorney who knows enough about your case might
advise you of your options at the preliminary meeting.
Foreclosure defense involves litigation.
So, you'll want to choose an attorney who’s very familiar with your state’s
foreclosure process, is knowledgeable about common
foreclosure defenses, and can litigate the case in court if necessary. A
foreclosure lawyer might also be willing to help you apply for—and hopefully
get—a loan
modification.
Here are a few questions you should ask when considering hiring
a lawyer to assist you with foreclosure issues:
How much experience do you have
representing homeowners in foreclosures (including how many court cases have
you handled)?
How much experience do you have
in helping homeowners get loan modifications (including how many
modifications have you obtained for clients)?
Have you taken any continuing
legal education courses about strategies in handling foreclosure cases or
alternatives to foreclosure?
What course of action do you
recommend?
How will you or your staff
update me about the progress of the foreclosure?
How much will it cost to hire
you, and what services do the fees cover?
Be sure to ask as many questions as you need to ensure that
you’re comfortable about your hiring decision.
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A preliminary injunction
is an extraordinary and drastic remedy.” Munaf v. Geren, 553 U.S. 674, 690
(2008).
“[T]he purpose of a preliminary injunction is to preserve the status quo
between the parties pending a resolution of a case on the merits.” McCormack v.
Hiedeman, 694 F.3d 1004, 1019 (9th Cir. 2012).
A plaintiff seeking a preliminary injunction must establish that he is
(1) “likely to succeed on the merits;”
(2) “likely to suffer irreparable harm in the absence of preliminary
relief;”
(3) “the balance of equities tips in his favor;” and
4) “an injunction is in the public interest.”
Winter v. Natural Res. Defense Council, 555 U.S. 7, 20 (2008).
“If a plaintiff fails to meet its burden on any of the four requirements for
injunctive relief, its request must be denied.”
Sierra Forest Legacy v. Rey, 691 F. Supp. 2d 1204, 1207 (E.D.
Cal. 2010) (citing Winter, 555 U.S. at 22).
“In each case, courts ‘must balance the competing claims of injury and must
consider the effect on each party of the granting or withholding of the
requested relief.’
” Winter, 555 U.S. at 24 (quoting Amoco Prod. Co. v. Gambell,
480 U.S. 531, 542 (1987)).
A district court should enter a preliminary injunction only “upon a clear
showing that the plaintiff is entitled to such relief.”
Winter, 555 U.S. at 22 (citing Mazurek v. Armstrong, 520 U.S.
968, 972 (1997)).
Alternatively, under the so-called sliding scale approach, as long as the
plaintiff demonstrates the requisite likelihood of irreparable harm and shows
that an injunction is in the public interest, a preliminary injunction can still
issue so long as serious questions going to the merits are raised and the
balance of hardships tips sharply in the plaintiff’s favor.
Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127,
1134-35 (9th Cir. 2011) (concluding that the “serious questions” version of the
sliding scale test for preliminary injunctions remains viable after Winter).
Fraudulent Misrepresentation
The elements of a cause of action for fraud are:
“(a) misrepresentation (false
representation, concealment, or nondisclosure);
(b) knowledge of falsity (or ‘scienter’);
(c) intent to defraud, i.e. to
induce reliance;
(d) justifiable reliance; and
(e) resulting damage.”
Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996). In regard to a fraud
cause of action, --- “a party must state with particularity the
circumstances constituting fraud.”
Fed. R. Civ. P. 9(b). “Averments of fraud must be accompanied by ‘the who,
what, when, where, and how’ of the misconduct charged.”
Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106
In addition, “[t]he plaintiff must set forth what is false or misleading
about a statement, and why it is false.”
Keen v. Am. Home Mortg. Servicing, Inc., 664 F. Supp. 2d 1086, 1098 (E.D.
Cal. 2009) (citing Decker v. GlenFed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).
C. Quiet Title And Declaratory Judgment
oo
D. Violation Of The Federal Fair Debt Collection Act
Plaintiff’s claim that Defendants violated the FDCA is apparently premised
on Defendants’ alleged mishandling of the loan and foreclosure proceedings.
See Compl. at 28.
But nothing in Plaintiff’s Complaint establishes or even alleges that
Defendants are debt collectors under the FDCA.
Moreover, even if Plaintiff alleged as much, “the law is well-settled . . .
that creditors, mortgagors, and mortgage servicing companies are not debt
collectors and are statutorily exempt from liability under the [FDCA].”
Camillo v. Washington Mut. Bank, F.A., No. 1:09-cv-1548 AWI SMS,
2009 WL 3614793, at *10 (internal quotation marks and citations omitted).
Moreover, Plaintiff’s Complaint deals with “the making of the loan and the
beginning of the foreclosure process,” but “the law is clear that foreclosing on
a property pursuant to a deed of trust is
not a debt collection within the meaning of the RFDCPA or the FDCA.” Id.
(internal quotation marks and citations omitted).
For these reasons, Plaintiff’s claim brought under the FDCA is also not
likely to succeed on the merits.
======= ======= ======= =======
CFPB Proposes COVID-19 Rule to Amend Its Mortgage Servicing Rule
and Provide Additional Guidance Related to the Pandemic
Consumer Finance LitigationApril 8, 2021 (No. 4)
On April 5, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a
notice of proposed rulemaking that proposes amendments to its Mortgage Servicing
Rule (the “Proposed Rule”) to provide additional assistance for borrowers
impacted by the COVID-19 emergency. The pandemic has resulted in nearly three
million borrowers with delinquent mortgages, which is more homeowners in default
than any time since the peak of the Great Recession in 2010. Nearly 1.7 million
borrowers will exit forbearance programs in September and the following months
upon expiration of the maximum term of 18 months in forbearance for federally
backed mortgage loans. The Proposed Rule is intended to ensure that these
homeowners have the opportunity to be evaluated for loss mitigation options
prior to their loans being referred to foreclosure.
If finalized, the Proposed Rule would apply to all mortgages on a principal
residence and amend Regulation X (12 CFR 1024) as follows:
Add a new pre-foreclosure review period that
would generally bar mortgage servicers from
commencing foreclosures until after December 31, 2021.
However, the CFPB indicated that it is also seriously considering
exemptions to this rule for situations
where the servicer has:
(1) completed a loss mitigation review and
determined that the borrower is not eligible for any non-foreclosure option;
or
(2) made efforts to contact the borrower and the borrower has not
responded to the servicer’s outreach.
The CFPB has requested comment on whether imposing a date certain for this
pre-foreclosure review period would be prohibitively challenging for servicers,
and whether December 31, 2021 is the appropriate date.
Permit servicers to approve borrowers that
are experiencing COVID-19-related hardship for a loan modification without
reviewing a complete loss mitigation application. The loan modification must
satisfy the following requirements:
(1) it must not extend the loan term by more than 480 months and would
not result in an increase to the borrower’s periodic principal and interest
payment;
(2) if the modification permits a deferral of amounts until certain
triggers, such as when the loan is refinanced or the property is sold, the
amounts would not accrue interest;
(3) the servicer does not charge a fee associated with the loan
modification, and certain existing charges, such as late fees and stop
payment fees, would be waived by the servicer upon the borrower’s acceptance
of the loan modification; and
(4) the preexisting delinquency will be resolved by accepting the loan
modification.
Require that borrowers who were offered a
short-term forbearance based on evaluation of an incomplete loss mitigation
application be contacted by the servicer no later than 30 days prior to the
end of the forbearance plan and, if the borrower requests further assistance,
the servicer must exercise reasonable diligence to complete the application
before the end of the forbearance program.
Propose temporary changes (until August 31,
2022) to servicers’ “live” communications with borrowers. Specifically, for
borrowers that are not yet in a forbearance plan at the time of live contact
with the servicer, if forbearance options are available to the borrower, the
servicer would be required to ask the borrower if they are experiencing a
COVID-19-related hardship. If the borrower confirms such hardship, the
servicer must list and describe available forbearance programs and the actions
the borrower must take to be evaluated for such programs.
For borrowers in a forbearance plan at the time of live contact, the servicer
must identify the date the forbearance program ends and list and describe loss
mitigation options available to resolve any post-forbearance program
delinquency. The servicer must also provide the actions the borrower must take
to be evaluated for those loss mitigation options. This requirement pertains
only to the last live contact required under the existing rule that occurs
prior to the end of the forbearance period.
The CFPB has proposed that any final rule resulting from the Proposed Rule
will take effect on August 31, 2021. Comments must be received on or before May
10, 2021.
If you have any questions regarding the Proposed Rule or wish to submit a
comment, please do not hesitate to contact Blank Rome’s Consumer
Financial Services team.
