Consumer bureau proposes ban on most home foreclosures until 2022

The Consumer Financial Protection Bureau (CFPB) is proposing what would effectively be a ban on most residential foreclosures through the end of 2021.

The CFPB on Monday proposed a rule that would bar mortgage lenders and servicers from starting foreclosure proceedings on mortgages for primary residences until the homeowner has been delinquent for 120 days.

Since March 2020, millions of U.S. households have entered mortgage forbearance — a temporary pause on payments due — through federal guarantee agreements with their mortgage servicers. 

The federal government has extended a range of forbearance protections through the end of September, meaning millions of households set to exit those programs would likely be protected from foreclosure until the end of the year under the new proposal.

“Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up. Last week we warned that servicers need to be prepared for a high volume of borrowers exiting forbearance,” said acting CFPB Director David Uejio.

“We will do everything in our power to ensure servicers work with struggling families to find solutions that prevent avoidable foreclosures,” he added. 

The CFPB estimated that there were roughly 3 million homeowners behind on their mortgages as of February, 2.1 million of which were at least 90 days delinquent. The agency said the number of seriously delinquent mortgages is on track to decline to 1.9 million by September.

The proposal, if finalized, would also allow mortgage servicers to offer streamlined repayment options for homeowners and order more frequent communication. The agency is also considering an exemption from the 120-day foreclosure delay in cases where the homeowner has been unresponsive.

The CFPB’s proposal is the latest attempt by the agency to prevent a wave of foreclosures and evictions that advocates fear could derail the recovery from the coronavirus recession. While the U.S. economy is set to rebound sharply in 2021, roughly 10 million households could face homelessness if they’re unable to pick up mortgage and rent payments waived during the pandemic. 

The CFPB last week warned landlords that they could face federal penalties for refusing to abide by the Centers for Disease Control and Prevention’s eviction moratorium, which the agency extended through June.