Published by REALTOR Magazine | April 6, 2021
The CFPB estimates that 1.7 million borrowers could be at risk of foreclosure by September.
Concerned a foreclosure wave is on the horizon, the Consumer Financial Protection Bureau recently proposed a rule that would prohibit mortgage servicers from foreclosing against delinquent borrowers for the remainder of this year. The CFPB’s proposal would apply to federal and private mortgages on a principal residence.
Foreclosure protections—including moratoriums and forbearance plans—that were put in place due to the COVID-19 pandemic are set to expire by this fall. The CFPB estimates that 1.7 million borrowers could be at risk of foreclosure by September.
“I don’t think anyone has ever before seen this many mortgages in forbearance at one time that are expected to exit forbearance all at one time,” Diane Thompson, senior advisor to the acting director at the CFPB, told CNBC about the reasoning behind the agency’s proposal. “This could put an enormous strain on servicer capacity.”
COVID-19 protections have allowed financially struggling homeowners to suspend their payments as part of forbearance programs. However, while forbearance allows homeowners to defer their payments, it does not forgive missed payments. The government agency says that loans placed in forbearance programs during the pandemic will reach the end of their period by September or October.