The Consumer Financial Protection Bureau on Friday proposed two multifaceted rules that intend to improve the service consumers receive from their mortgage servicers.
“Millions of homeowners are struggling to pay their mortgages, often through no fault of their own,” CFPB Director Richard Cordray said in a release. “These proposed rules would offer consumers basic protections and put the ‘service’ back into mortgage servicing. The goal is to prevent mortgage servicers from giving their customers unwelcome surprises and runarounds.”
The first set of CFPB’s proposed rules aims to provide consumers with clear and timely information about their mortgages and bring greater transparency to the market. Proposed requirements include regular monthly statements that would include a breakdown of payments by principal, interest, fees, and escrow, the amount of and due date of the next payment, recent transaction activity and warnings about fees.
Servicers would also be required to provide earlier and more complete disclosures before interest rates adjust for most adjustable-rate mortgages.
The CFPB would also require servicers to give advance notice and pricing information before force-charging consumers for homeowners insurance if they do not provide it themselves.
Servicers would be required to terminate the insurance within 15 days if it receives evidence the borrower has the necessary insurance, and insurers would be required to refund the force-placed insurance premiums.
Servicers would also be required to make good-faith efforts to contact delinquent borrowers and inform them of their options to avoid foreclosure.
The bureau says a second set of proposed rules would impose what it called common-sense requirements for handling consumer accounts, correcting errors and evaluating borrowers for options to avoid foreclosure.
These “no-runaround” rules would include a requirement to apply a payment to a consumer’s account as of the date it is received, maintain accurate and accessible documents and information, correct errors in a timely manner, provide delinquent borrowers with “easy, ongoing access to employees” dedicated to helping them, and offer options to borrowers to avoid foreclosure, such as loan modifications or other payment plans.
Servicers would be prohibited from proceeding with a foreclosure sale until a review of the borrower’s modification application is complete. Servicers would also be required to let borrowers know when applications are incomplete and to allow them to appeal certain servicer decisions.
The new rules come after borrowers complained about problems seeking loan modifications and other ways to avoid foreclosure. Public comment will be collected until Oct. 9 with a final rule anticipated in January, the CFPB said.
