The Consumer Financial Protection Bureau (CFPB) on Thursday announced that it has issued a request for information (RFI) on mortgage refinances, loss mitigation, and forbearance to determine ways that mortgage refinances might be facilitated for people who can most benefit from them, and how to mitigate risks for consumers who have the ability to pay their mortgage balances interrupted.

The document released Thursday by the CFPB specifically mentions the desire to gain input from older Americans, since that cohort is making up a growing share of total mortgage borrowers in the nation and since they tend to have more product options available to them including reverse mortgages.

The RFI

“America’s housing finance system provides important opportunities for consumers to access credit for housing and strengthen their financial standing,” the RFI says. “When broader macroeconomic forces result in declining interest rates, transparent and competitive markets should allow borrowers to benefit from lower rates, including through refinancing opportunities. These lower interest rates may allow borrowers to improve their financial condition by reducing their monthly payments, allowing borrowers to save more or pay down their mortgages more rapidly, making it easier for them to build wealth and equity.”

When that equity is threatened, however, whether by forces in the broader economy or some kind of disruption in the lives of consumers, products from lenders of policies they can implement that could add some flexibility for repayment options can help to mitigate some of the risks presented by such occurrences, the RFI reads.

“[T]he Bureau is seeking information about ways to help ensure that consumers have access to these opportunities,” the RFI says. “In particular, the Bureau is requesting information about (1) ways to facilitate residential mortgage loan refinances for borrowers who would benefit from refinances, especially borrowers with smaller loan balances; and (2) ways to reduce risks for borrowers who experience disruptions that could interfere with their ability to remain current on their mortgage payments.”

Refinances are the crux of what the Bureau is attempting to gain more information about. There are specific sections in the RFI regarding how more “beneficial” refinances could be facilitated for certain borrowers based on their financial situations and swings in the rate environment, as well as questions regarding the composition of targeted and streamlined refinances, which can function a bit differently than traditional refis.

“Targeted and ‘streamlined’ refinance programs have been used to facilitate refinancing through reduced underwriting and documentation requirements, typically with lower transaction costs than traditional refinances,” the RFI explains. “These programs, which may have specific eligibility requirements, are largely aimed at lowering interest rates and monthly payments for consumers who may otherwise be unlikely or unable to refinance.”

Seniors and mortgages

In a statement released Thursday morning from the CFPB’s Office of Older Americans, the RFI could have a potential impact on mortgage policy that is aimed at seniors even though the cohort is not specifically referenced in the RFI document itself.

“Older adults account for an increasing share of people with mortgages, and more of them are carrying mortgages into retirement while relying on fixed incomes,” the statement reads. They also hold a wide range of mortgage products including home equity loans and reverse mortgages.”

Additionally, the senior cohort is among a larger group of borrowers who are known to refinance their mortgages, which means that the input that could come from seniors and other stakeholders who may serve the senior community specifically within the mortgage sector could make for welcome feedback.

“[Seniors] are among a large number of people who refinance their mortgages. Comments from older adults, advocates, and organizations and companies that provide mortgage products and services to the older population are important. We would welcome comments about mortgage refinance options and mortgage loss mitigation options that could provide benefits or pose risks to older borrowers, including comments relating to specific mortgage products that are designed for or held at higher rates by older adults such as reverse mortgages and home equity loans.”

The issues of seniors and new forward mortgages

According to data released in 2021 by LendingTree, as many as 10 million seniors are still making regular payments on traditional, forward mortgages. The largest share of 65-plus homeowners with a mortgage in the United States is concentrated in three metro areas across two states: Miami, Fla. and both Sacramento and Los Angeles, Calif., according to the data. Across these areas, nearly a quarter of senior residents – 23.64% – have an active, traditional mortgage.

Newly-originated forward mortgages could present unique problems for senior borrowers, as explained on a 2019 episode of The RMD Podcast by reverse mortgage professional and sales trainer Martin Andelman.

“It’s also worth mentioning that [in terms of] 30-year mortgages, I promise you, no one ever sat around and talked about 30-year mortgages thinking they’d be perfect for 70 and 80-year olds,” Andelman said. “30-year mortgages were never meant to be for them. And now, I bump into people all the time who could be 72 years old, just refinanced two years ago, and now has only 28 years to go. What could go wrong?”

Read the RFI at the CFPB. Comments are due no later than November 28, 2022, and can be submitted by clicking here.