A controversial Federal Reserve staff proposal that would make it harder for borrowers to prevent foreclosures will likely be punted over to the new Consumer Financial Protection Bureau amid pressure from lawmakers, consumer advocates and civil rights groups.

A senior Fed staffer this week announced at a lawyers’ conference that the proposal, which would limit borrowers’ “right of rescission,” won’t move forward at the Fed and will be taken up by the consumer watchdog agency, according to several people who were either at the conference or briefed on the matter.

Leonard Chanin, deputy director of the Fed’s division of consumer and community affairs made the announcement Monday morning at an American Bar Association conference in Naples, Fla., these people said.

Transferring the rescission proposal from the Fed to the Consumer Financial Protection Bureau may ease some consumer advocates’ concerns.

“Even if the rule is not being acted on now, this will still be an issue that will have to be addressed,” said Alys Cohen, a staff attorney who works on foreclosure issues for the National Consumer Law Center. “But we’re heartened that we won’t have a change in rescission rules soon that will gut protections from homeowners. That would be a disaster.”

A Fed spokeswoman didn’t comment and Chanin didn’t immediately respond to a request for comment.

The Fed’s plan, announced in August, would make it harder to force lenders to refinance or modify loans because it would revise the right of rescission, which gives consumers three years to argue in court that lenders broke consumer protection laws by not providing adequate information about their home loans.

Mortgage bankers argued that the rescission proposal provided necessary updates and clarification.

“Uncertainty surrounding existing rescission requirements has led to erroneous holdings by some courts and unnecessary costly litigation, increasing costs to all borrowers,” the Mortgage Bankers Association said in December 22 comments to the Fed. “For this reason, we support efforts by the board to provide clear guidance on rescission at this time.”

But consumer groups and key lawmakers have steadily blasted the proposal and urged the Fed to withdraw the plan.

“The board’s proposal would eviscerate the single most effective tool that homeowners have to stop foreclosures and avoid predatory loans,” according to a Nov. 16 letter signed by hundreds of lawyers and advocacy groups. Signatories included the NAACP and the Service Employees International Union.

The Consumer Financial Protection Bureau, a centerpiece of the Dodd-Frank financial regulatory overhaul, is set to launch in July. The Federal Reserve and several other agencies will transfer key powers to the bureau at that time.

Even in this start-up stage, there are indications that the bureau has already been looking into the rescission issue. A public version of Warren’s calendar shows that Warren discussed the rescission provisions with Fed staffers in November. Also, Warren has repeatedly said mortgage and credit card issues will be top priorities for the bureau. In addition, she has tapped Ohio Attorney General Richard Cordray, a vocal critic of the Fed’s rescission proposal, to lead the consumer watchdog agency’s enforcement division.

“I think it’s more likely that they (the Consumer Financial Protection Bureau) would try to come up with a different proposal taking into account the comments the Federal Reserve received,” said Kathleen Keest of the Center for Responsible Lending.

However, mortgage lenders that backed the provisions are concerned that the plan could be modified or delayed.

“The problem is that by delaying the rule there could be the misimpression that this somehow might not be the appropriate position,” said Mortgage Bankers Association Regulatory Counsel Ken Markison. “If that were the case, that would be a bad thing. We think the clarification should be completed as quickly as possible generally as proposed. I think anyone who looks at this issue, what the board (Federal Reserve Board) proposed, and what the courts have done would make a judgment that this is the right way to go.”