Waters calls for more FHA loan foreclosure protections

House Financial Services Committee Chair Maxine Waters, D-Calif., issued two letters late last week that urged federal agencies to provide more buffers against foreclosure in order to bridge a gap between the ban’s end and enforcement of new rules regarding the servicing of loans coming out of CARES Act-related forbearance.

In one letter sent late last week, Waters called upon three housing agencies to follow the lead of the Federal Housing Finance Agency to make Consumer Financial Protection Bureau rules for foreclosures that start Aug. 31 effective earlier for loan products insured or guaranteed by the Federal Housing Administration, the Department of Agriculture and the Department of Veterans Affairs.

That letter also urged the Department of Housing and Urban Development to double the six-month term it offers for more recent forbearance requests on Federal Housing Administration loans. It also called on HUD to ensure protections for certain equity withdrawal loans for seniors are adequate.

In a second letter sent Friday, Waters urged government agencies overseeing banks and consumer protections — the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, the Conference of State Bank Supervisors, and the National Credit Union Administration — to enforce compliance with foreclosure rules.

“Providing clear guidance to mortgage servicers and enhancing supervision and enforcement during this period is critical to ensure homeowners do not face unnecessary foreclosures during the month of August and before housing counseling funds and homeowner assistance funds provided through the American Rescue Plan Act have reached communities and households,” Waters wrote.

Mortgages guaranteed by the FHA and the VA have had relatively higher forbearance rates than the GSEs. The FHA/VA rate was 6% compared to 2% for the GSEs in Black Knight’s latest weekly report. A total of more than 1.86 million borrowers were in forbearance in the latest week tracked by Black Knight, down 71,000 from the previous period.

Foreclosures generally have fairly long processing timelines, particularly in states where they move through the court system. Between that and extended forbearance available, forecasts have suggested very few foreclosures would get underway in July alone. The FHA offers forbearance for up to six months to borrowers that request it between July 1 and Sept. 30. Some earlier forbearance requests had longer terms. Forbearance expirations are expected to spike this fall.