On July 10, 2024, the CFPB issues a proposed rule that would modify the requirements for loss mitigation and delinquency procedures. The proposed changes include fairly significant changes to early intervention and loss mitigation procedures, as well as the possibility of a requirement to provide information in Spanish and other languages.
The proposed changes would require additional information in early intervention notices, including a description of loss mitigation options offered and a website where the borrower can obtain a list of the options available from the creditor.
The proposal would also change the overall framework for loss mitigation by defining the âLoss Mitigation Review Cycleâ as the period beginning when an oral or written request for loss mitigation assistance is received, changing the focus of the process and timing to the borrowerâs request for assistance rather than the receipt of the loss mitigation application. The proposal would not require the borrower to be delinquent for a specified period (or at all) or to submit any formal application to begin the Loss Mitigation Review Cycle.
Loss mitigation options could be reviewed sequentially under the proposed rule, eliminating the requirement that the servicer evaluate the borrower for all options at once. Deferrals and forbearances (in addition to modifications) would be included as âloss mitigation.â Decision notices for any of these options would need to include the âkey borrower-provided inputsâ that were the basis for the decision, whether it is an offer or a denial, as well as instructions on where the borrower can obtain a list of the creditorâs loss mitigation options, and information on loss mitigation options that may still be available to the borrower.
While the current loss mitigation rules prohibit creditors from making an initial foreclosure filing or moving for foreclosure sale while the borrower has an open application for loss mitigation, the proposed rule would expand that to prohibit beginning or advancing the foreclosure process during the Loss Mitigation Review Cycle. âAdvancingâ is not defined and the proposed commentary provides limited examples of what does or does not constitute âadvancing.â Itâs not clear, for example, whether attending a case management conference, responding to discovery, or participating in a mediation that is a required step in the foreclosure process under state law would âadvanceâ the foreclosure. It seems likely that âadvancingâ may be a broader prohibition than that in the current rules.
The new rules would also remove the provisions related to the loss mitigation appeal process and place challenges to a loss mitigation determination within the scope of the existing error resolution procedures.
Finally, in the preamble to the proposed rule, the Bureau indicated that it intends to include in the rule certain requirements related to limited English proficiency (LEP) consumers. It does not, however, include proposed text for these requirements. The suggestion in the proposal, however, is that servicers would be required to make translations available for certain written notices and oral communications. Servicers would be permitted to choose the languages that they make available, but Spanish would be required and the servicer must include any other languages necessary to âaddress the needs of at least a significant majority of their non-Spanish speakingâ LEP borrowers. The proposal does not raise the possibility of a de minimis threshold of non-Spanish speaking LEP borrowers or a maximum number of languages a servicer could be required to accommodate to meet this requirement.
The proposal includes a request for comment and includes several questions specifically on which the Bureau is looking for feedback. As always, Compliance Alliance will keep our members updated as more information becomes available.