Tag Archives: Homeowners

U.S. consumer watchdog approves new foreclosure protections, but not blanket ban

By Michelle Price

WASHINGTON (Reuters) -The U.S. consumer watchdog on Monday finalized new protections for homeowners who are struggling to make mortgage payments due to the pandemic, but said foreclosures will be allowed to resume in coming months once those extra protections have been met.

The Consumer Financial Protection Bureau (CFPB) in April proposed, among other measures, a new review process which it said at the time would generally prohibit mortgage servicers from starting a foreclosure until after Dec. 31, 2021.

The agency is trying to prevent a wave of foreclosures as 900,000 homeowners start to exit COVID-19 mortgage holiday or “forbearance” programs in coming months.

Reuters reported last week that the agency was due to proceed with the foreclosure rule but was expected to carve out certain groups of borrowers after industry groups said the proposal was too broad and beyond the CFPB’s legal remit.

On Monday, CFPB Acting Director Dave Uejio told reporters the final rule “takes a different tact” from what was originally proposed. It will require that mortgage servicers temporarily undertake additional pre-foreclosure protections, including making a greater effort to reach out to struggling borrowers, but it will give servicers more flexibility, CFPB staff said.

As of June 14, an estimated 2 million homeowners were in forbearance, according to the Mortgage Bankers Association. Around 900,000 of those are due to expire later this year, real estate industry data provider Black Knight estimates.

Under the new rule, from Aug. 31, 2021 through Dec. 31, 2021, mortgage servicers may only refer 120-day delinquent accounts for foreclosure provided at least one of three new temporary safeguards has been met: the borrower has been thoroughly evaluated and there are no available options to avoid foreclosure; the property is abandoned; the borrower is unresponsive to servicer outreach.

The rule will also allow mortgage servicers to offer streamlined loan modifications, which cannot increase borrowers payments; it also doesn’t require borrowers to submit full paperwork. That flexibility will allow servicers to get borrowers into affordable mortgage payment plans faster, with less paperwork, the CFPB said.

The new required protections do not apply to non-primary residences, borrowers who were more than 120 days behind on their mortgage before March 1, 2020, and small mortgage services.

Speaking to reporters, CFPB officials said they were focused on preventing a cliff of foreclosures and ensuring an “orderly transition” to a normal housing market, but that in some cases foreclosures would resume once the forbearance programs expired.

(Reporting by Michelle Price; Editing by Aurora Ellis)

As California fires blaze, homeowners fear losing insurance

Local residents react as numerous homes burn on a hillside during a wind driven wildfire in Ventura. REUTERS/Mike Blake

By Suzanne Barlyn

(Reuters) – California homeowners and regulators have a new fear about wildfires ravaging the state: that insurers will drop coverage.

Massive, out-of-season fires in northern and southern California are causing billions of dollars in claims and challenging expectations of when and where to expect blazes. State law gives insurers more leeway to drop coverage than to raise rates, and some are taking the opportunity, concerning California Insurance Commissioner Dave Jones.

Homes in the Sierra Nevada foothills were dropped after wildfires swept through the region in recent years, and some other Northern California homes also have been cut from rosters, Jones said.

“We may see more of it,” he added in an interview. Insurers must renew fire victims’ policies once, but after that homeowners could be driven to unusual, expensive policies.

Retired firefighter Dan Nichols of Oroville, California was surprised when Liberty Mutual dropped his coverage this year, following a wildfire in the region.

“I was shocked and angry,” said Nichols, 70, by email.

Liberty Mutual must “responsibly manage” its overall exposure to California’s wildfires as part of a strategy to safeguard its ability to pay homeowners’ claims, a spokesman said. The insurer still issues policies in California and its strategy is not in response to recent fires, he said.

Nichols found a better deal through AAA, but others are not as lucky. In San Andreas, a community northeast of San Francisco, homeowners typically use specialty insurers, known as “surplus lines carriers,” for policies that cost about 20 to 40 percent more than a mainstream insurer, said Fred Gerard, who owns an insurance agency in the area.

Insurers must be cautious by not covering too many homes in one area, said Janet Ruiz, a spokeswoman for the industry’s Insurance Information Institute. “They tend to spread their risk so they can pay claims,” Ruiz said.

COMPUTER MODELS

Drier weather and higher variability of weather patterns often seen as effects of climate change have led insurers to turn to new computer models that provide house-by-house predictions of risk, using factors such as local topography and brush cover, a change from past practices that were based on a region’s history of blazes.

“Relying solely on company history leaves many (insurers) exposed,” said Matt Nielsen, Senior Director, Global Governmental and Regulatory Affairs at modeler RMS. A new wave of models coming out next year will “revolutionize the way insurers understand and manage risk for wildfires,” he said.

“You can’t control mother nature, but you can identify her target zones,” wrote rival Verisk Analytics Inc in a brochure for its FireLine model.

Jones said the state was reviewing the new models, partly in light of drier weather conditions, more frequent, unpredictable and severe fires, and climate change.

A California poll by consumer advocacy group United Policyholders found that computer scoring was a reason for a significant number of policy cancellations in the last few years.

United Policyholders Executive Director Amy Bach said that the differences in scores generated by various models raised questions about their accuracy.

“We want to make sure it’s a fair system,” Bach said.

(Reporting by Suzanne Barlyn; Editing by Peter Henderson and James Dalgleish)