CFPB Launches Initiative to Stimulate New Opportunities for Homeowners in the Mortgage Market | Consumer Protection Agency

Washington, DC – The Consumer Financial Protection Bureau (CFPB) is requesting public input on ways to stimulate new mortgage products to help families. The CFPB seeks input on ways to improve mortgage refinancing for homeowners who would benefit from refinancing, particularly for borrowers. have small loan balances. The agency is also seeking any public input on ways to support short-term and long-term automatic abatement assistance for homeowners who are facing financial difficulties. The CFPB will use this information as it evaluates measures to support the financial stability of households and negotiate refinancing markets. Today’s event is part of a broader CFPB effort to promote competition and innovation in the retail financial markets.

“The mortgage market has not provided products that allow all families to save money by refinancing at a low interest rate,” said CFPB Director Rohit Chopra. “We’re eager for input on how borrowers who are taking out loans today can refinance at lower rates in the future.”

Mortgage payments are often a family’s single largest expense, meaning that the terms of a mortgage greatly affect a family’s financial stability. When interest rates fall, many borrowers take advantage of the lower rates by refinancing their loans. For example, researchers at the Federal Reserve Bank of Boston found that the amount of money purchased from mortgage refinancing from January 2020 to October 2020, during the financial recovery, was $5.3 billion annually. each. The average customer saved almost $300 a month ($279) from refinancing during that period. The savings from refinancing a mortgage at a lower rate can translate into increased wealth and equity for borrowers. However, mortgage refinancing can be more difficult for borrowers with smaller loan balances. Black and Hispanic borrowers, who on average have smaller loans, have not participated in recent refinances at the same rate as white borrowers.

The number of refinances has fallen sharply, down almost 70% from last year, as interest rates have risen. New refinance and auto loan products can ensure that those who are buying a home now, or refinancing to pay for other needs , could benefit from another drop in interest rates.

The economic downturn can present many challenges for mortgage borrowers. At the height of the COVID-19 pandemic, for example, millions of borrowers lost jobs and income and put their homes at risk. The forbearance protections, passed by Congress through the CARES Act, allowed millions of homeowners with federally subsidized mortgages to temporarily stop their monthly mortgage payments. Many mortgage servicers who did not qualify for CARES Act protections followed the government’s lead and offered similar protections. During the pandemic, 8.2 million borrowers entered a forbearance program, and in July 2022, 93% have left. Of those who become tolerant, only 5% are tolerant or active. The CFPB is interested in the appearance of these diseases related to the tolerance program that should expand opportunities for borrowers, in particular, if there are ways to use and facilitate the offering of help to reduce losses.

Specifically, the CFPB is requesting information about:

  • Targeted and simplified refinancing programs: Targeted and simplified programs have been used to improve refinancing, often at lower purchase prices than traditional financing. Refinancing programs can lead to lower monthly payments and interest rates for homeowners who were unable or unwilling to refinance.
  • Newly refinanced items, viz automatic refinancing: Such products may automatically trigger an offer to refinance or automatically reduce the interest rate of a loan in certain circumstances. This can help homeowners who currently face barriers to refinancing, including those with low mortgage balances, obtain refinancing.
  • Automatic tolerance and loss reduction aids: Mortgage products with automatic forbearance features can help ensure that homeowners can have their income or financial situation affected by events, such as four natural disasters, financial assistance may be available to help them avoid foreclosure and increase the family’s financial stability. Additionally, such automatic forbearance features can provide benefits for both mortgage servicers and holders.

Competitive mortgage markets promote opportunities for wealth creation and promote greater financial stability for households. Today’s request for information seeks new and relevant ideas to address persistent market failures and to assist borrowers in obtaining refinancing and short-term loss mitigation assistance. . Public input will help inform future policies, rulemakings, and other mortgage competition and innovation.

The request for information released today is an example of the CFPB’s new approach to promoting competition and new products. Like announced in May, instead of providing special regulatory treatment of each company, the CFPB will try to identify stumbling blocks for those who try to challenge the status quo with new products or services. The Paperwork Reduction Act’s authorization for the CFPB’s Compliance Assistance Sandbox and No Action Letter Policies expires on September 30, 2022, so the CFPB will no longer accept or process stand requests. provided by those Policies after that date.

Read the Request for Information on mortgage refinancing and approval . The deadline for submitting information is 60 days after publication in the Federal Register.

Read Director Chopra’s prepared remarks at the Exchequer Club, discussing today’s show.

Read today’s Commentary on Competition and Updates .

Learn more about refinancing and reducing losses.

Learn more about the CFPB’s Office of Competition and Innovation.

Customers who have a problem with a financial product or service can submit a complaint to CFPB online or by phone (855) 411-CFPB (2372).

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The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps the consumer financial market work by making the rules more effective, by consistently and fairly enforcing those rules. , and by empowering consumers to take more control of their financial lives. For more information, visit www.consumerfinance.gov.

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