CFPB seeks to further streamline refinancing, broaden loss mitigation

The Consumer Financial Protection Bureau on Thursday issued a request for information that could pave the way for more equitable access to mortgage refinancing and distressed borrower assistance.

Potential outcomes could include extending pandemic loss mitigation options like forbearance for permanent use.

“The bureau is requesting comment on the actions it or others can take or should consider taking to spur automatic and streamlined short and long-term loss mitigation offers for borrowers with mortgages impacted by temporary financial hardship more generally,” the RFI states.

In addition, the RFI is aimed at finding ways to reduce challenges in the small-loan mortgage market that research indicates have contributed to inequitable access to refinancing for Black and Hispanic borrowers with affordability constraints.

The CFPB is considering further streamlining of refinances, potentially through some exemptions from underwriting requirements under the ability to repay rule.

“Some stakeholders have asserted that it may be appropriate [in circumstances in] which borrowers would receive a demonstrated benefit [such as lower rates or] monthly payments, and where other protections are in place, such as protections against serial refinances,” the RFI noted.

The CFPB also is exploring the possibility of automatic refinances under particular conditions, acknowledging that while this may have some consumer benefits, it also could create economic challenges in a mortgage market where prepayments affect what loans are worth.

“The bureau notes that there may be impediments or risks associated with the auto-refi mortgage if consumers lack comfort with the concept or creditors find it difficult to price,” Director Rohit Chopra said in the RFI. 

The CFPB will be accepting comments in response to its request for 60 days once it is officially published in the Federal Register.