Loss Mitigation Principles

The CFPB and the U.S. Department of Housing both recently released principles for loss mitigations (CFPB, HUD).  The papers result from the mortgage crisis and phasing out of the Home Affordable Modification Program (HAMP).  The documents do not establish any new requirements, but outline principles that should be incorporated into loss mitigation strategies.  The CFPB outlines four principles:  accessibility, affordability, sustainability and transparency, while HUD adds accountability to the list.

HUD defines each of the principles, for which the CFPB generally mirrors, as:

  • Accessibility: Ensuring that there is a simple process in place for homeowners to seek mortgage assistance and that as many homeowners as possible are able to easily obtain the needed and appropriate level of assistance.
  • Affordability: Providing homeowners with meaningful payment relief that addresses the needs of the homeowner, the servicer and the investor, to support long-term performance.
  • Sustainability: Offering solutions designed to resolve the delinquency and be effective long-term for the homeowner, the servicer and the investor.
  • Transparency: Ensuring that the process to obtain assistance, and th terms of that assistance, are as clear and understandable as possible to homeowners, and that information about options and their utilization is available to the appropriate parties.
  • Accountability: Ensuring that there is an appropriate level of oversight of the process to obtain mortgage assistance for the protection of all parties.

For the full picture, I recommend taking a look at HUD’s principles.  It presents in a well-developed public facing document while the CFPB’s is more of a ‘nice job guys, but remember, we make the rules’ recap.

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