While the number of mortgages in forbearance continues to fall, Black Knight said there was a 33,000 reduction over the last week and 172,000 homeowners have exited the various programs over the last month, 2.54 million borrowers remain in forbearance. This is 4.8 percent of all those with a mortgage. Now the Consumer Financial Protection Bureau (CFPB) is alerting mortgage servicers to prepare for what may be a wave of avoidable foreclosures as forbearances come to an end in the fall and the current foreclosure moratoriums expire.

While the GSEs (Fannie Mae and Freddie Mac) and Ginnie Mae, which is responsible for VA and FHA loans, have provided several options for borrowers to pay back any past due mortgage payments that have accrued during the pandemic, many homeowners will need help from their servicers. CFPB warns them that they need to dedicate sufficient resources and staff starting now to ensure they are prepared for any surge.

"There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming," said CFPB Acting Director Dave Uejio. "Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families."

CFPB says of those loans remaining in forbearance programs it estimates 2.1 million are at least 90 days delinquent on their loans. Another 242 mortgages that are not in forbearance are also seriously delinquent. With nearly 1.7 million borrowers expected to leave forbearance in September and subsequent months, many of them may be a year or more behind on their payments. Servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance. The CFPB will closely monitor a servicer's overall effectiveness in helping consumers when it addresses any compliance issues that arise.

CFPB says it will be paying particular attention to how well servicers are:

  • Being proactive. They should contact borrowers before the end of the forbearance period, so they have time to apply for help, ensure they have all necessary information and help them obtain documents and other information needed to evaluate the borrowers for assistance.
  • Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
  • Evaluating income fairly. Where income is used to determine eligibility for loss mitigation options, servicers should evaluate income from public assistance, child-support, alimony, or other sources in accordance with the Equal Credit Opportunity Act's anti-discrimination protections.
  • Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
  • Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.

More information is available in CFPB's April 1, 2021 compliance bulletin.