On September 18, the Congressional Research Service released a report on the CFPB’s role in regulating the mortgage servicing industry and the Bureau’s approach to policy issues. The report provided an overview of mortgage servicing and loss mitigation generally, the current CFPB Mortgage Servicing Rules, and the amendments to the rules proposed by the CFPB in July 2024 and previously covered by InfoBytes.

The proposed amendments were intended to streamline requirements and introduce new safeguards to mitigate foreclosure risk. They would replace the existing requirement that borrowers submit all necessary information before being evaluated for loss mitigation options with a framework that begins a “loss mitigation review cycle” after a borrower requests loss mitigation assistance and continues such cycle until the loan is brought current, the borrower has been evaluated for all available loss mitigation options and no available options remain, or the borrower has not communicated with the servicer for at least 90 days despite the servicer attempting to communicate with the borrower. The rule remains in the final rule stage, as noted by the CFPB’s regulatory agenda.

The report also noted how mitigating mortgage servicing risks “likely increases” homeownership financing costs. The report cautioned that if servicing rules add costs — especially during periods when foreclosures are unavoidable — these measures may inadvertently impede homeownership opportunities.

The report highlighted greater attention to mortgage servicing issues following two nationwide events marked by a surge in distressed mortgages: The 2008 financial crisis and the COVID-19 pandemic. In response, the CFPB’s servicing rules were designed to fix improper servicing practices, focusing on consumer protection and financial stability. However, the rules do not preempt state regulations and may be supported by requirements from other federal agencies.