CFPB Proposes Stronger Foreclosure Protections Under Regulation X

The Consumer Financial Protection Bureau (CFPB) has proposed a critical change to Regulation X, the rule governing mortgage servicers' obligations to borrowers during foreclosure proceedings. This proposal, if finalized, could be a game-changer for homeowners by eliminating a practice known as dual tracking and introducing stronger, clearer protections during the loss mitigation process.

What Is Dual Tracking?

Dual tracking occurs when a lender agrees to work with a homeowner on loss mitigation—such as a loan modification or repayment plan—while simultaneously moving forward with foreclosure proceedings. This practice puts homeowners in a difficult position, as they may believe they are on the path to saving their home, only to find that the bank is still pushing forward with foreclosure behind the scenes.

Dual tracking is prohibited under Regulation X of the Real Estate Settlement Procedures Act (RESPA). Regulation X, specifically Section 1024.41, outlines the requirements for loss mitigation procedures. It prohibits servicers from initiating or proceeding with a foreclosure sale while simultaneously offering or evaluating loss mitigation options for the borrower. However, in practice, it still happens.

The CFPB's proposed regulation change would strengthen protections by requiring banks to halt—or even avoid initiating—a foreclosure until the loss mitigation process is fully resolved. Instead of requiring a complete loss mitigation application before protections kick in, the new framework would begin protections as soon as the borrower requests assistance. The review period would continue until either the loan is brought current or key foreclosure procedural safeguards are met—such as a full review of all loss mitigation options or continued unresponsiveness from the borrower. During this time, foreclosure cannot begin or proceed, and certain fees cannot be charged.

Addressing the “Incomplete Application” Issue

Another key aspect of the proposed change involves the definition of a loss mitigation application. Currently, many lenders use the excuse of an “incomplete” application to delay or deny foreclosure alternatives. Borrowers often submit the required documents, only to be told that the lender is still “waiting” on missing paperwork—sometimes indefinitely.

The new rules would eliminate the over-reliance on complete applications as a barrier to relief. Instead, the emphasis shifts to engaging borrowers in a review process that prioritizes actual resolution over paperwork. Servicers could evaluate borrowers for assistance sequentially or simultaneously, and unnecessary notices about application status would be removed, reducing bureaucratic hurdles.

Early Intervention Requirements Get an Upgrade

The CFPB is also proposing to improve early intervention requirements, ensuring homeowners get timely and useful information before falling too far behind. Under the proposal, lenders or their servicers would have to issue notices that would include:

• The name of the loan owner or assignee
• A brief description of each type of loss mitigation option generally available
• A website listing all available options

For borrowers in forbearance plans, new requirements would also apply to live contact attempts and written notices as borrowers approach the end of forbearance.

This information is incredibly useful to borrowers who are attempting to navigate the loss mitigation process on their own and it provides contact information upfront and clarifies which loss mitigation programs could be available to save the home.

Clearer Notices and Expanded Appeal Rights

Another significant improvement is the expansion of determination notices and appeal rights. Currently, these rights mostly apply to loan modification decisions. Under the proposal, all types of loss mitigation options—including offers and denials—would require a written notice and an opportunity to appeal.

Servicers would need to include clear explanations in their notices of what information was used in the decision or determination of the offer or denial; a list of other options still available (or a statement that no options remain); next steps the borrower can take for further review; and if any prior offers are still available. These expanded rights would give borrowers a clearer understanding of the basis of a denial and allow them the process to correct or appeal any result that is based on inaccurate information.

Additionally, loss mitigation determinations would fall under the existing error resolution process, giving borrowers another layer of protection.

Improving Access for Borrowers with Limited English Proficiency

CFPB's proposal broadens language access. The proposal, if finalized, would require servicers to:

• Provide Spanish-language translations of key written communications to all borrowers
• Make written and oral communications available in multiple languages upon request
• Include brief translated notices that explain how to request full translations
• Ensure borrowers who received marketing in a language other than English receive future early intervention and loss mitigation communications in that same language, if requested

These provisions aim to ensure that non-English-speaking borrowers are not left behind in the loss mitigation process.

Will This Regulation Be Finalized?

Despite the strong consumer protections embedded in this proposal, the future of the regulation remains uncertain. Changes to Reg X must undergo public comment periods, hearings, and often take 12 to 18 months to finalize. As of now, there is no set timeline.

Additionally, recent federal budget cuts to the CFPB may slow down the rulemaking process. While the Bureau has signaled its intent to act, the financial and political environment could influence the pace and outcome of the regulation.

Final Thoughts

The CFPB's proposed regulation change to Reg X could dramatically strengthen foreclosure protections, eliminate loopholes that allow dual tracking, and improve fairness and transparency in the mortgage servicing process. It also addresses longstanding issues such as unclear application standards, limited language access, and insufficient notice of appeal rights.

However, until these changes are finalized, homeowners must remain vigilant. If you're facing foreclosure or navigating loss mitigation, consult a qualified legal or housing counselor. Staying informed and having proper representation can make a critical difference in protecting your home.