Nearly a decade after the housing bubble burst and the government created programs to provide relief for homeowners facing foreclosure, the Consumer Financial Protection Bureau is working to ensure that consumers continue to receive needed assistance tailored to changing home retention needs. Today, the Bureau has released new a new outline to guide the creation of new solutions for foreclosure relief.

The guidelines [PDF], which do not establish binding legal requirements, are meant to complement ongoing discussions among the mortgage industry as the Department of Treasury’s Home Affordable Modification Program (HAMP) nears its expiration date.

Under HAMP, which expires in Jan. 2017, borrowers who could not make their mortgage payments were able to seek changes to reduce their monthly payment and prevent foreclosure.

With the program already beginning to be phased out, the CFPB wants to ensure that mortgage servicers, investors, government housing agencies, and policymakers are able to put in place other program to assist struggling homeowners.

“The modification program was put in place to provide alternatives to foreclosure. Our principles will serve as helpful guardrails for servicers, investors, and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages,” CFPB director Richard Cordray said in a statement.

To help in the process to create new foreclosure relief options appropriate for a post-crisis environment, the CFPB issues several guidelines calling for assistance that is accessible, affordable, sustainable, and transparent.

The guidelines focus on four principles that are applicable to most mitigation programs, the CFPB says in a statement.

“The CFPB believes these principles are flexible enough to encompass a range of approaches to loss mitigation, recognizing the legitimate interests of consumers, investors and servicers,” the agency says.

When considering new programs, mortgage lenders, servicer, federal agencies, and other stakeholders should consider the following principles:

• Accessibility: Consumers should easily be able to obtain and use information about loss mitigation options, and how to apply for those options.

This accessibility could come from using common or readily available forms of applications or companies making available housing counselors and others, who can help them seek loss mitigation and understand the effect of the terms they are
being offered.

• Affordability: Repayment plans and mortgage loan modifications should generally be designed to produce a payment and loan structure that is affordable for consumers.

Any loss mitigation options should be flexible enough to assist special populations or unique circumstances. Additionally, consumers should not be required to pay upfront fees or costs to obtain loss mitigation.

• Sustainability: Loss mitigation options used for home retention should be designed to provide affordability throughout the remaining or extended loan term.

Deficiency balances are not imposed on consumers experiencing hardship as a condition of a short sale or deed-in-lieu on their principal residence.

Programs should, and their resulting outcomes, should be monitored by servicers and investors to determine their impact on re-defaults. Terms should be adjusted to achieve effective outcomes.

• Transparency: Consumers should get clear, concise information about the decisions servicers make. All terms related to the program should be clearly described in a manner that consumers can understand.

The success or failure of programs should also routinely be made public to ensure that loss mitigation programs are effective.

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