Q&A with Lysbeth L. George
Regulations to provide added protection for borrowers
Q: Explain the proposed amendments and how they differ from the current mortgage rules.
A: In the wake of the 2008 financial crisis, financial institutions are looking for ways to keep borrowers in their homes and avoid foreclosure. The primary way financial institutions are achieving this is by allowing borrowers to modify their mortgage loan, create flexible repayment plans or enter into temporary forbearance plans while the borrower looks for additional sources of income or new employment. To streamline this process and set expectations for both financial institutions and borrowers, the Consumer Financial Protection Bureau (CFPB) has issued a series of rules to govern these processes, covering mortgage loan origination and servicing, including regulation of fees earned by loan originators, timing for filing foreclosure, regulations assisting borrowers in default with alternative payment options and more.
Q: What impact would these amendments have on Oklahoma consumers and banks?
A: The primary protection these rules provide is the requirement that a borrower must be delinquent for 120 days before a financial institution files for foreclosure. Currently, financial institutions are governed by requirements set by the investors for the mortgage loans (Fannie Mae, VA, FHA, etc.), which provide the time frame in which a financial institution should file foreclosure post-delinquency. The CFPB 120-day rule would set the minimum amount of time at 120 days post-delinquency before a foreclosure could be filed. This 120-day delinquency requirement builds in sufficient time to allow borrowers the opportunity to seek a loan modification, repayment plan or forbearance agreement. Additionally, these rules set specific deadlines for submission of documents by the borrower seeking alternative payment options, as well as deadlines by which the financial institution must notify the borrower of any deficiencies in the documents submitted. The rules also provide certain safeguards against foreclosure once a borrower has submitted a complete application for alternative payment options.