On, Tuesday April 10, 2012, the Consumer Financial Protection Bureau (CFPB) will outline proposed rules to help protect mortgage borrowers from being hit by costly surprises or getting the runaround from their mortgage servicer. The CFPB will propose more rules this summer that will hopefully be finalized by January 2013.
Mortgage servicers are responsible for collecting payments from the mortgage borrower on behalf of the owner of the loan. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. In the vast majority of cases, consumers do not choose their mortgage servicer.
The CFPB Director Richard Cordray recently stated “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.”
To bring greater transparency to the servicing market, the CFPB is considering rules that would provide consumers with clear and timely information about changes to their mortgages so they can avoid costly surprises. Some of these rules under consideration include:
- Clear Monthly Mortgage Statements:Â Servicers would be required to provide regular statements with: a breakdown of payments by principal, interest, fees, and escrow; the amount of and due date of the next payment; and, for delinquent borrowers, alerts and information about counselors who can help them work with servicers and avoid foreclosure.
- Warning Before Interest Rate Adjustments: Servicers would be required to provide disclosures before the interest rate changes on most adjustable-rate mortgages. This disclosure would include information about when the change will take effect and a list of alternatives that the consumer may pursue if the new monthly payment is unaffordable. The first interest rate reset notice would include contact information for housing counselors.
To hold servicers accountable for treating consumers fairly, the CFPB is considering rules that would require common-sense policies and procedures for handling consumer accounts and preventing runarounds. Some of these rules under consideration include:
- Payments Immediately Credited:Â Servicers generally would have to credit a consumerâ€™s account promptly after receiving payment.
- Records Kept Up-to-Date and Accessible:Â Servicers would be required to establish reasonable policies and procedures designed to minimize errors, prevent document loss, provide accurate information to borrowers, and assist with error resolution.
The entire factsheet on the mortgage servicing rules under consideration is available here:http://files.consumerfinance.gov/f/201204_cfpb_factsheet_putting-service-back-in-mortgage-servicing.pdf