The Consumer Financial Protection Bureau has been rolling out action after action since the necessary and very welcomed recess appointment of Richard Cordray by President Obama. Now the Bureau has announced its latest effort, proposed new mortgage servicing rules.
“For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress," said CFPB Director Richard Cordray. "It’s time to put the ‘service’ back in mortgage servicing.”
Here's what the CFPB is promising homeowners would get with the
proposed rules.
The proposed rules currently under consideration aim to protect consumers from surprises by directing servicers to provide:
- Clear monthly mortgage statements that explicitly breakdown principal, interest, fees, escrow, and due dates
- Warnings before adjusting interest rates on certain adjustable rate mortgages (ARMs) that explain how the new rate was determined, when it will take effect, dates of future adjustments, and a list of alternatives for consumers to consider
- Options for avoiding expensive “forced-placed” insurance, which is insurance charged to borrowers by servicers when their existing insurance appears to have lapsed
- Early outreach to struggling borrowers that informs them of potential options to avoid foreclosure
We also want to address the issue of consumers getting the “run-around” when dealing with servicers. To accomplish this, the Bureau is considering proposals that would require:
- Payments to be credited to consumer accounts the day payment is received
- Implementing new policies and procedures so that records are kept up-to-date and accessible
- Quickly addressing and correcting errors
- Giving homeowners direct and ongoing access to servicer staff members who have access to the homeowners’ records and can actually help address their issue(s)
All of this would make the mortgage servicing business more transparent as well as more accountable, and give the consumer a few extra tools to protect their home. It would require a much more up-front interaction between mortgage servicer and homeowner when the foreclosure looms, as well as a more complete paper trail informing homeowners of their status. If properly enforced, these rules could end many of practices used to fraudulently foreclose on people. Of course, a few convictions of banksters could go a long way toward cleaning up these practices as well, but it's long past time these basic protections for homeowners existed.
The Bureau plans to publish the formal notice of proposed rulemaking sometime this summer, with the rule finalized by January 21, 2013 (the day after the next inauguration), with implementation of the rules over 2013.