CFPB Sends Final Mortgage Servicing Rule to the White House for Review

The Consumer Financial Protection Bureau has sent a final mortgage servicing rule to the White House for review.

The move signals a possible overhaul of foreclosure-prevention requirements that could significantly reshape how mortgage servicers handle borrowers experiencing financial difficulties.

The CFPB submitted its final rule, titled “Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties,” to the Office of Management and Budget earlier this month. The agency said the submission is among the clearest indications that it intends to complete a regulatory initiative first proposed in 2024.

The OMB filing provides no details about the rule’s provisions, and the CFPB has not publicly commented on its contents.

Industry observers, however, expect the final version to differ substantially from the proposal issued under former CFPB Director Rohit Chopra.

The proposed rule would have expanded foreclosure protections, eliminated certain application requirements, and restricted servicers from advancing foreclosure proceedings while borrowers pursued loss mitigation assistance.

Rooted in the Financial Crisis

Law firm Troutman Pepper Locke said the mortgage servicing regulations, established in 2013 under Regulation X, were designed to address widespread servicing failures exposed during the 2008 financial crisis, when millions of homeowners faced foreclosure.

The rules established borrower protections intended to prevent avoidable foreclosures and improve communication between mortgage servicers and homeowners, the CFPB noted.

The COVID-19 pandemic prompted another major shift in servicing requirements. In 2020, the CFPB temporarily relaxed several requirements to help borrowers and servicers manage financial disruptions.

Among those changes, servicers generally were permitted to evaluate borrowers for loan modifications and other assistance without first obtaining a complete loss mitigation application.

In 2024, the CFPB proposed making several pandemic-era policies permanent while introducing additional protections for borrowers.

Expanded Foreclosure Protections

According to Troutman Pepper Locke, the 2024 proposal would have eliminated the requirement that borrowers submit complete loss mitigation applications before servicers could evaluate assistance options.

It also introduced a loss mitigation review cycle that could begin when borrowers simply requested assistance. CFPB noted the review would continue until borrowers became current on their loans or when all available assistance options were exhausted.

During that period, servicers generally would have been prohibited from beginning or advancing foreclosure proceedings, Troutman Pepper Locke said. Existing regulations provide narrower protections that were generally tied to borrowers submitting complete applications.

Mortgage Industry Pushed Back

The proposal drew significant opposition from mortgage industry groups concerned about operational complexity and potentially prolonged foreclosure delays.

Troutman Pepper Locke noted that in a June letter to Acting CFPB Director Russell Vought, the American Bankers Association urged the CFPB to abandon what it described as “sweeping changes and overly expansive borrower protections” in favor of more targeted regulatory revisions.

The ABA said that servicers should be allowed to evaluate loss mitigation options sequentially rather than simultaneously, and that borrowers should request assistance before foreclosure protections take effect.

The ABA also called for clear deadlines and defined conditions under which servicers could terminate loss mitigation reviews.

The ABA criticized the proposal’s standards for ending reviews involving borrowers with no remaining assistance options or those who failed to respond to servicer communications. It warned that the provisions could result in “prolonged or indefinite foreclosure pauses.”

Final Rule May Be Narrower

Although the final rule’s contents are unknown publicly, industry comments and the CFPB’s recent regulatory direction suggest a substantially narrower approach than the 2024 proposal.

The CFPB received more than 80 comments in July from consumer advocates, mortgage trade associations, industry participants, and state regulators.

Since the beginning of President Donald Trump’s second term, the CFPB has rescinded previous guidance and indicated a preference for more clearly defined regulatory requirements rather than expansive frameworks that could create uncertainty for regulated entities.

The final rule could permit servicers to review loss mitigation options sequentially, require borrowers to explicitly request assistance before foreclosure protections apply, and establish more limited notice requirements for ending protections when borrowers become unresponsive.

Other potential changes include eliminating restrictions on fee accrual during loss mitigation reviews, dropping language-access requirements, and preempting conflicting state loss mitigation laws to create a more uniform national framework.

Those provisions remain speculative until the final regulatory text becomes public, Troutman Pepper Locke noted.