CFPB Encourages Attorney Representation for Distressed Homeowners

By: Michael Powers

In December of 2013, the Consumer Financial Protection Bureau (CFPB) announced a new campaign. The campaign seems to convey that the CFPB encourages attorney representation for distress homeowners. They call it “a campaign to educate the public about the new protections provided by the Bureau’s mortgage rules.” The CFPB’s publication consists of lengthy educational materials for homeowners trying to avoid foreclosure. Among the materials is a “factsheet”, with detailed information on the new CFPB rules. Additionally, a “foreclosure checklist” has been included. It encourages troubled homeowners to “Take Control”, “Go Pro”, “Get it Done” and “Stand Up for Your Rights”.

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CFPB Campaign to Educate the Public…

The most important document amongst the materials is a 104 page guide for housing counselors on new servicing requirements. The guide details the loss mitigation process, including a servicer’s liability for failure to comply with the loss mitigation rules. It also includes foreclosure prohibitions, rules on processing and applying payments, and limits on fees and charges. it also covers the error resolution process, and requests for information and payoff statements. The guide will likely prove most helpful for professionals currently engaged in foreclosure prevention assistance. Unfortunately, it will be difficult for consumers to fully understand and apply on their own. In fact, the guide is written in a manner which might best serve foreclosure defense attorneys looking for causes of action. In short, the guide proscribes rules to protect homeowner rights.

CFPB Encourages Attorney Representation…

While the materials stop short of explicitly encouraging homeowners to sue their lenders, it makes clear that the CFPB encourages attorney representation. The materials cover new laws to protect distressed homeowners, and encourage them to seek professional legal assistance. The specific reference was “If you had a fire in your house, you’d call a professional firefighter.” The article then goes on to say that the “professional” they are referring to is a HUD approved housing counselor. But, have you already been down that road? How many homeowners have already tried for mortgage assistance on their own and/or with the assistance of a “housing counselor”? How many of them still find themselves facing foreclosure after multiple rejections?

Anyone who has been in the trenches of the mortgage crisis since the beginning knows that “going pro” means hiring an attorney. To this very day, that means hiring a foreclosure defense or loss mitigation attorney to help you obtain a loan modification or foreclosure alternative. In more rare instances, even pursuing litigation is appropriate. Most encouraging is the fact that most of the lawsuits filed against lenders today are being settled before reaching trial. This fact lends itself to the idea that attorneys are in a better position to negotiate on your behalf. In other words, those homeowners were able to get a settlement that they considered meaningful and fair enough to create a lasting solution. So, for those attorneys, the new set of “rules” will only serve as further ammunition to create causes of action in their lawsuits against lenders.

CFPB Encourages Legal Action…

So, do the new educational materials published by the CFPB encourage homeowners to sue their lenders? Well, that question is open to individual interpretation. On its face, the answer is “no”. However, for attorneys and professional housing counselors who have been helping homeowners for years, the materials could easily be interpreted that way.