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New U.S. Mortgage Rules Aim to Stop Wrongful Foreclosures

The U.S. agency charged with protecting consumers’ finances approved rules on Thursday that will help prevent wrongful home foreclosures, as the regulator continues to press on with reforming the country’s massive lending market.

The rules by the Consumer Financial Protection Bureau (CFPB), created in the aftermath of the U.S. housing bust that began in 2006, build on current regulations requiring a mortgage servicer to grant certain foreclosure protections to a struggling borrower once over the life of the loan.

Now, servicers, the conduits for mortgage payments, must provide those protections more than once, offering them to borrowers who make current payments after they have worked out an agreement to avoid foreclosure.

“This change will be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship – such as the loss of a job or the death of a family member – that could otherwise cause them to face foreclosure,” the CFPB said in an outline of the new rules.

The rules also expand consumer protections to surviving family members and require servicers to give borrowers in bankruptcy information about possible interventions.

They bolster requirements related to loss mitigation, a foreclosure alternative that allows people to stay in their homes and pay some money to lenders, as well.

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