CFPB: Foreclosure Relief Shouldn't End When HAMP Does

The Consumer Financial Protection Bureau added its voice Tuesday to a chorus of other regulators in calling for sustainable foreclosure relief when the Home Affordable Modification Program expires at yearend.

The bureau released "guiding principles" for mortgage servicers and investors that were almost identical to those described in a white paper last week from the Treasury Department, the Department of Housing and Urban Development and the Federal Housing Finance Agency.

Still, the bureau was careful in pointing out that its principles do not constitute a binding legal requirement for mortgage servicers or investors. Instead, the principles are intended to be part of the discussion about creating a universal loss mitigation program framework for the future.

"We aim to help consumers avoid foreclosures, which upset their personal and financial lives," CFPB Director Richard Cordray said in a press release. "The modification program was put in place to provide alternatives to foreclosure. Our principles will serve as helpful guardrails for servicers, investors, and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages."

The CFPB is calling for mortgage lenders, housing finance agencies and investors to create affordable and sustainable loss mitigation programs that are accessible and transparent for borrowers.

The bureau said the principles are flexible enough to apply to an array of approaches, including forbearance, repayment plans and loan modifications, as well as short sales and deeds-in-lieu of foreclosure.

With HAMP expiring in January 2017, the general agreement among various regulators is that the government's guidelines and procedures on loss mitigation, particularly engaging with borrowers, should continue.

The Treasury said last week that government and private-sector efforts combined led to 10.5 million modification and other "mortgage assistance arrangements" from 2009 to 2016.

The Mortgage Bankers Association, which represents mortgage lenders and servicers, is working on a universal loss mitigation proposal that offers payment relief to borrowers in financial stress. It is unclear whether loan modifications and principal reductions would continue to play a large role among the options offered to distressed borrowers.