United States

CFPB publishes loss mitigation principles


The Consumer Financial Protection Bureau (CFPB or Bureau) issued a document outlining four key principles to be a framework for discussions about the future of loss mitigation. Although the principles may sound familiar, they are distinct from the Bureau’s mortgage servicing rules. The principles do not create binding legal requirements, but are intended to add to ongoing discussions involving industry, consumer groups and policymakers relating to the future development of loss mitigation programs.

The principles were initially presented in a meeting hosted by the Department of Treasury (Treasury) in November 2015, and presented in the Federal Housing Finance Agency (FHFA) symposium in February 2016. A white paper published by Treasury, FHFA and Department of Housing and Urban Development titled, Guiding Principles for the Future of Loss Mitigation, discusses the principles in more detail.

Loss mitigation options should vary according to each borrower’s circumstances and may include forbearance agreements, repayment plans, modifications, short sales, deeds-in-lieu, and any other option that may assist borrowers in finding solutions to difficulty in paying their mortgage as originally agreed. The four principles are:

  • Accessibility includes the ease of obtaining information about options and process from servicers, submitting requests that only include necessary documentation and that result in timely responses, and fair and equal consideration for loss mitigation options.
  •  Affordability focuses on repayment plans and modifications that are affordable and flexible, provide meaningful payment reductions and which do not require the payment of upfront fees.
  • Sustainability requires loss mitigation and modification options that are workable throughout the original or extended loan term.
  • Transparency is found in explanations of terms and vocabulary used as well in the information provided to consumers.