Is this Unconstitutional? Are they kicking the can down the road?

Question

In an article by Brad Beckett: Director of Education & Outreach, National Real Estate Investors Association, The CFPB wants to prevent Foreclosure until the end of the year.

A new rule proposed by the Consumer Financial Protection Bureau (CFPB) seeks to prevent a wave of foreclosures as some pandemic protections for homeowners are set to expire. According to CNBC, the rule, which would apply to all mortgages federal & private, will prevent mortgage servicers from initiating a foreclosure against delinquent borrowers through December 31, 2021. The CFPB says 1.7 million borrowers could be at risk of foreclosure when the forbearance program ends in September and this number is higher than anything mortgage servicers have ever seen. The proposed rule will still need final approval.

Here is a quote from Charles Tassell COO of National REIA.
“CFPB’s approach to expediting and simplifying the recasting of loans for those in forbearance is not only a good move, it will be a critical move in helping to stabilize the housing industry, community housing values, and the short and long-term benefit of service providers as well as individual homeowners. In short, this is a win all around for those who have felt the brunt of the Covid-19 pandemic’s economic fallout.” Said Charles Tassell, COO of National REIA.

In my opinion, they left out how it benefits small lien holders and retirements invested in unsecuritized mortgages. Regardless of when it happens, there is going to be a lot of unhappy lien holders looking that want to take back control of their business.

What do you think?

Joseph King · Answer

@John Sayers

This seems like the MO of the FED when they don't completely understand the ramifications of their actions... or maybe they do, and they have a more pressing political plan in the works. Unfortunatly, kicking the can down the road and hoping the problem goes away seems like the new norm. Someone needs to explain the economics of the mortgage industry to them in layman's terms so they get it.

John Sayers · Answer

Not even sure they legally have the authority to impact court processes under pre-existing contracts. Overreach, or not? Courts can decide if someone pushes it.

One article (DSnews.com) I read today had the "kicking can" view noted (bold added); or futility. Of course one will say he has a financial interest in saying so. BUT, any less true, or not true?

"Richard Kruse, a distressed-asset auctioneer with Gryphon USA, says that although he understands the bureau's intent, "the CFPB is effectively demanding an immediate and unrealistic overhaul of lending, investment, servicing and mortgage insurance industries, not understanding that the end result will be worse with these rules than allowing the legal system work."

Kruse goes on to suggest that federal and local foreclosure and eviction bans, which have periodically been extended throughout the course of the COVID-19 pandemic, would allow for nonperforming mortgages to be further along in default status, negatively impacting the homeowner once the ban is lifted. It is the "kicking the can down the road" dissent floated by numerous experts over the past months.

"Call it what you want ... sticking another finger in the dyke, or stacking additional pressure behind a cork that must eventually pop," Kruse said. "The fact remains that throwing these new rules at the problem will not solve homeowners' financial distress; it will only delay it. "

Is this Unconstitutional? Are they kicking the can down the road?

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