washington dc – The Consumer Financial Protection Bureau (CFPB) is seeking public input on how to promote new mortgage products to help families. The CFPB is seeking insights on how to improve mortgage refinancing for homeowners who benefit from mortgage refinancing, especially for borrowers with low loan balances. The agency is also seeking public input on how to support automatic short- and long-term loss mitigation assistance for homeowners experiencing economic turmoil. The CFPB will use this information when considering actions to support household financial stability and address refinancing market gaps. Today’s initiative is part of a broader CFPB effort to foster competition and innovation in the consumer finance market.
“The mortgage market does not offer a product that allows every household to save money by refinancing at a lower interest rate,” said Rohit Chopra, director of the CFPB. “We are keen to provide information on how current borrowers can refinance to lower interest rates in the future,” he said.
Mortgage payments are often the largest household expenditure, so mortgage terms have a significant impact on a household’s financial stability. When interest rates fall, many borrowers benefit from lower interest rates by refinancing their loans. For example, researchers at the Federal Reserve Bank of Boston found that consumers saved $5.3 billion a year from refinancing their mortgages during his refinancing boom from January 2020 to October 2020. Did. A typical consumer saved about $300 ($279) per month by refinancing for that period. Savings from refinancing mortgages at lower interest rates translate into increased wealth and assets for borrowers. However, refinancing a home loan can be difficult for borrowers with low loan balances. Black and Hispanic borrowers, who loan less on average, have not participated in the recent refinancing boom as much as white borrowers.
As interest rates have risen, the volume of refinancing has fallen dramatically, down almost 70% from last year. A new streamlined, automatic refinancing mortgage product will ensure that people buying a home now, or refinancing to cover other needs, will benefit from the next interest rate drop. There is a nature.
Periods of economic turmoil can pose significant challenges for mortgage borrowers. For example, at the height of the COVID-19 pandemic, millions of renters lost their jobs and incomes and were at risk of losing their homes. Tolerance protections passed by Congress via the CARES Act allowed millions of homeowners with federally-backed mortgages to temporarily stop their monthly mortgage payments . Many mortgage servicers not covered by the CARES Act have followed the government’s lead and offered similar protections. Over the course of the pandemic, 8.2 million borrowers have entered the moratorium program, with 93% completed as of July 2022. Only 5% of those who have stopped tolerating are in arrears or have been seized. The CFPB is interested in the features of these pandemic-related tolerance programs that need to be made more generally available to borrowers. In particular, we are interested in whether there is a way to automate and streamline the provision of long-term loss mitigation assistance.
Specifically, the CFPB is requesting the following information:
- A targeted and streamlined refinancing program: Targeted and streamlined refinancing programs have been used to improve refinancing, typically at lower transaction costs than traditional refinancing. Refinancing programs can lead to lower monthly payments and interest rates for homeowners who were previously unlikely or unable to refinance.
- Innovative refinancing products such as Automatic refinancing: Such products may automatically trigger refinancing offers in certain circumstances or automatically reduce the interest rate on the loan. This could help homeowners who currently face refinancing barriers, such as those with low mortgage balances, access beneficial refinancing.
- Automatic Tolerance and Long-Term Loss Mitigation Assistance: Mortgage products with automatic moratoriums could help homeowners whose incomes and financial situation are impacted by events such as natural disasters to avoid foreclosures and increase financial stability in a timely manner. help ensure that you can receive reasonable payment relief. In addition, such auto-forbearance features could also benefit mortgage servicers and holders.
A highly competitive mortgage market promotes wealth creation opportunities and promotes broader household security. Today’s call for information seeks innovative and timely ideas to address persistent market failures and enable borrowers to take advantage of beneficial refinancing along with short- and long-term loss mitigation assistance. Public input helps inform future policy initiatives, rulemaking, and other mortgage competition and innovation initiatives.
The Request for Information announced today is an example of the CFPB’s new approach to promoting competition and new products.As Announced in MayRather than offering special regulatory treatment to individual companies, the CFPB seeks to identify obstacles for companies seeking to challenge the status quo with new products and services. Paperwork Reduction Act approval of the CFPB’s Compliance Assistance Sandbox and No Action Letter Policy expires on September 30, 2022, and the CFPB will not accept or accept applications submitted through these policies after that date. will not be processed.
Consumers who have problems with consumer financial products or services should: CFPB Online Or call (855) 411-CFPB (2372).
The Consumer Financial Protection Bureau (CFPB) is a 21st-century agency that strives to make its rules more effective, enforce them consistently and fairly, and give consumers more control over their economic lives. Helping consumer finance markets work. For more information, see: www.consumerfinance.gov.