After the housing bubble burst in the mid-2000’s, regulations were put in place that allowed mortgage borrowers to take advantage of certain protections against foreclosure one time only over the lifespan of a loan. New rules have now been approved by the Consumer Financial Protection Bureau which would expand those protections and further protect homeowners from wrongful foreclosures, according to NBC News.
Under the new rules, borrowers will be permitted to take advantage of those foreclosure protections more than once if an unrelated misfortune were to occur. For example, suppose a homeowner found themselves in financial straits and was able to modify the terms of their loan in order to prevent foreclosure. But then a few years later he or she lost their job and their ability to pay their mortgage suffered as a result. The new rules would allow that person to take advantage of foreclosure protections once again.
The new rules also require mortgage servicers to better communicate with borrowers. They must let borrowers in bankruptcy know when aid programs are available and they will be prevented from initiating foreclosure actions while loss mitigation applications are being processed.
These protections are especially important in Tennessee, which boasts one of the highest bankruptcy rates in the nation, according to the Memphis Daily News. Because the foreclosure process often happens quickly in Tennessee since there is no court hearing required, these protections should help homeowners who find themselves in financial trouble. Currently, the only option many people have to prevent foreclosure is filing for bankruptcy. Therefore, fewer foreclosures should hopefully then lead to fewer bankruptcy filings.