Home > News > Watchdog Proposes Rules to Protect Homeowners From Bad Foreclosures

Comments 0 Comments
Advertiser Disclosure


The Consumer Financial Protection Bureau Thursday proposed new rules that would offer U.S. homeowners additional protection from foreclosure. The proposals are part of the CFPB’s ongoing effort to protect struggling homeowners and make the mortgage process easier to understand.

The expanded protections cover a variety of issues, from clarity about loan delinquency to additional help for people who have previously faced foreclosure. The goal is to ensure no one is wrongly foreclosed upon. Here are some of the requirements the CFPB proposes enacting.

Multiple Chances

Mortgage servicers are required to evaluate whether a borrower meets the CFPB’s standards for foreclosure protection at least once during the life of the loan. The new rule would require servicers to again evaluate borrowers for foreclosure protection eligibility if they became current on the loan since the last loss mitigation application (the process where a third party helps the borrower and lender negotiate loan terms to avoid foreclosure).

“This change would be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship – such as the loss of a job or the death of a family member – that could otherwise cause them to face foreclosure,” according to a CFPB release on the proposals.

Protections for Surviving Family Members

The proposals would extend foreclosure protections to family or “successors in interest” of a borrower who dies. It would also expand communication to successors or other homeowners following not just death but also a property transfer after circumstances like divorce and legal separation.

Better Communication

Foreclosure protections take effect after borrowers complete loss mitigation applications, but borrowers don’t always know when those applications are complete and they have access to the protections. This proposal would require servicers to promptly notify applicants of their completion status.

Servicers cannot go forward with foreclosure once they receive a complete loss-mitigation application, but that rule hasn’t adequately prevented servicers from going forward with foreclosure proceedings or sales. The new rules clarify those requirements.

More Information

The CFPB also wants servicers to more clearly communicate to borrowers at which point a loan is in default and maintain better contact with borrowers going through bankruptcy. Additionally, servicers would be required to proactively supply these troubled borrowers with information about options for avoiding foreclosure and statements tailored to borrowers going through bankruptcy.

“The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray in a news release. “Today’s proposal would give greater protections to mortgage borrowers.”

Facing foreclosure is intimidating, but the good news is you may be able to avoid it (and possibly save your credit standing) if you explore your options.

More on Mortgages & Homebuying:

Image: Jupiterimages

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team