New Borrower Protections Proposed
- By:
- Peter KingApril 10, 2012 - MortgageLoan.com
New rules that would provide consumers with greater protections in dealing with their mortgage servicers were put forward today by the Consumer Financial Protection Bureau (CFPB).
The proposed rules are intended to bring increased transparency and accountability to mortgage servicing. Among other things, they would require that servicers immediately credit borrowers for mortgage payments received, take new measures to guard against and correct errors, and provide accurate information to delinquent borrowers about their options for avoiding foreclosure.
"No surprises, no runarounds"
“The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds,” said CFPB Director Richard Cordray. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing.”
The rules are scheduled to be formally proposed this summer with an eye toward final adoption in January 2013, following a period of review and public comment.
Would apply to mortgage billing companies
Mortgage servicers are companies that provide administrative services on mortgage loans, collecting payments from borrowers, handling escrow accounts for taxes and insurance, and initiating foreclosure actions should the loan fall into default. Borrowers typically do not have any say over who their mortgage servicer will be, as the company is frequently not the same one who issued the mortgage.
The rules are a response, in part, to complaints by borrowers in recent years that they were unable to get the information they needed from their mortgage servicers in order to avoid foreclosures, or to correct errors in their accounts.
What the proposed rules would do:
The proposed rules include requirements that: monthly mortgage statements provide a clear breakdown of costs charged; advance warning be given of interest rate changes on adjustable-rate mortgages; options be provided for borrowers to avoid expensive “forced-place” insurance if regular hazard insurance should lapse; and that servicers make a good-faith effort to inform borrowers in default of their options for avoiding foreclosure and provide access to staff with authority to help troubled borrowers.
Other rules would require that mortgage payments be credited to borrower’s accounts the same day they are received; that account records be kept up –to-date and be accessible to borrowers; and that mortgage servicers take timely action to address and resolve borrower reports of errors with their account.
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