The rule removes the definition of “loss mitigation application” and replaces it with “loss mitigation review cycle” and “request for loss mitigation assistance.” The CFPB proposes defining the “loss mitigation review cycle” as the period between a borrower’s loss mitigation assistance request and when the loan is brought current or the procedural safeguards in § 1024.41(f)(2)(i) or (ii) are met, so long as the request is made more than 37 days before a foreclosure sale. A “request for loss mitigation assistance” is defined as any oral or written communication where a borrower asks a servicer for mortgage relief. This can include a request for loss mitigation, an interested response to a servicer’s unsolicited offer of loss mitigation, or if the borrower “indicates” an experienced hardship and asks the servicer for assistance making payments, retaining their home, or avoiding foreclosure. The CFPB is also proposing that loss mitigation determinations be subjected to notice of error procedures, and to require servicers to retain records that document actions regarding a borrower’s mortgage loan account until one year after the date of the mortgage loan is discharged or transferred to another servicer.

The Bureau further proposes to require servicers to make a “good faith effort[]” to  make live contact with a delinquent borrower to present loss mitigations options, if appropriate. Good faith efforts may include attempting to reach the borrower by phone more than once or sending written communication encouraging the borrower to establish live contact with the servicer. Servicers would be exempt from the live contact requirement if a borrower is in a forbearance but must resume good faith efforts if a forbearance ends. The proposal would also limit the fees a servicer can charge a borrower while the servicer is reviewing possible options to help the borrower. 

Under the proposed rule, borrowers who received marketing materials in another language may request mortgage assistance communications in that same language, and servicers must provide the notices in English and Spanish to all borrowers, as well as make available oral interpretation services in telephone calls with borrowers.

The proposed rule includes loss mitigation guidelines and would set forth procedures regarding (i) enforcement; (ii) loss mitigation determination notices; (iii) application denial due to missing documents or information not in the borrower’s control; (iv) unsolicited loss mitigation offers; and (v) appeal processes. “Under the proposal, servicers would have more flexibility to review borrowers for each option individually, potentially enabling quicker assistance,” the CFPB said in its press release. Finally, the proposed rule would set forth certain circumstances under which a servicer cannot make the first notice or filing required by law for any foreclosure process. Servicers would generally only be allowed to pursue foreclosure after all possibilities for assistance are exhausted or the borrower has stopped communicating with the servicer.

The proposed rule would not apply to small servicers.

Comments must be received by September 9, 2024