On September 22, 2022, the CFPB announced a new initiative to spur new opportunities by seeking information on refinances and mortgage products to promote competition and support household financial stability. The agency is asking for public input on ways to improve mortgage refinances for homeowners who would benefit from refinancing, as well as to support automatic short-term and long-term loss mitigation assistance for homeowners who experience financial disruptions. This initiative is part of CFPB's effort to promote competition and innovation in consumer finance markets.
According to the CFPB, refinancing volume has dropped almost 70% from 2021 as interest rates have risen. Thus, the agency believes that new streamlined and automatic refinancing mortgage products could make sure that those buying a home now, or refinancing to cover other needs, are able to benefit from the next interest rate drop. The CFPB also noted that at the height of the COVID-19 pandemic, millions of homeowners entered a forbearance program, and as of July 2022, 93% have exited. Of those who have exited forbearance, only 5% are delinquent or in active foreclosure. The CFPB is interested in the features of these pandemic-related forbearance programs and if there are ways to automate and streamline the offering of long-term loss mitigation assistance.
Through this initiative, the CFPB seeks to spur new mortgage and refinance products by is requesting the public for information about:
Targeted and streamlined refinance programs: Refinance programs can lead to lower monthly payments and interest rates for homeowners who previously would have been unlikely or unable to refinance.
Innovative refinancing products, such as automatic refinancing: This could help homeowners who currently face barriers to refinancing access beneficial refinancing by automatically reducing a loan’s interest rate.
Automatic forbearance and long-term loss mitigation assistance: This may help homeowners whose finances are affected by events, such as natural disasters, are able to receive timely payment relief that could help them avoid foreclosure. These features can have benefits for mortgage servicers and holders as well.
The CFPB believes that competitive mortgage markets promote opportunities for wealth creation and promote broader household financial stability. The agency will be accepting comments for 60 days from publication in the Federal Register.
Read the CFPB’s announcement here.
The full Request for Information can be found here.
