#Next wave of mortgage defaults how to

It can issue a compliance and enforcement bulletin directing loan servicers to make a reasonable determination that a borrower has the ability to make all required, scheduled payments in connection with any modification. The CFPB has the authority to identify abusive acts or practices by a wide-range of financial institutions, including issuers and servicers of certain auto loans, credit cards and other installment or revolving loans. This is when a borrower’s ability to repay is intentionally, negligently, or merely inattentively not taken into account during loan modification discussions. We call on the Consumer Financial Protection Bureau to use its authority to prevent what we term modification failures. In a recent paper, we advocate for a public intervention in consumer debt contract modifications designed to steer people into affordable modifications or, if there are no affordable options, guide people to the consumer bankruptcy system.

#Next wave of mortgage defaults how to

Now is the moment for policymakers and financial regulators to learn from their mistakes during the Great Recession in leaving people on their own to determine how to manage their debts. Distressed borrowers were steered toward so-called debt settlement companies, which would collect front-end fees without producing results. The 2008 financial crisis showed us how poorly prepared many lenders were to offer successful debt workouts. Lenders presently are not ready for this barrage, which will have disastrous consequences for families and for the economy. Similarly, a wave of loan modification requests for the range of consumer debts is coming. The Centers for Disease Prevention and Control recently extended the eviction moratorium through the end of July in hopes of preventing mass evictions and of giving states time to figure out how to deliver rental assistance. Part of this fallout will be a need to ask their lenders for loan modifications. Given these households’ pre-existing wealth disparities, Black Americans and other minorities are likely to bear the brunt of the economic fallout of the pandemic.

The pandemic disproportionately harmed communities of color, particularly Black women. And people who did not need forbearance during the pandemic may find themselves in danger of defaulting on their debts.

Many will likely be unable to resume all of their regular debt payments. Yet in the interim, people have faced persistent unemployment and depleted what little savings they may have had. People will have to face the debt obligations that come with mortgages, auto loans, credit cards and student loans. This relief helped many people survive, freeing up money to pay for necessities.īut forbearance does not equal forgiveness. Other people came to agreements with auto loan and credit card lenders about payment. Relief programs created during the COVID-19 pandemic provided many Americans with pauses on their largest debts, particularly mortgages and student loans.