New Proposed Rules Designed to Bring Accountability to Mortgage Servicers
The Consumer Financial Protection Bureau (CFPB) summarized rules under consideration in an effort to prevent mortgage holders from facing unexpected and expensive costs. Those rules are expected to be proposed this summer and finalized in January 2013.
The premise of these rules evolves around two principles -- protecting homeowners from surprise costs and preventing them from getting the runaround from their services. The rules specifically apply to mortgage servicers, who are responsible for collecting monthly payments, handling customer service, loan modifications and other requests, as well as foreclosures.
Stemming from a lack of transparency and a lack of accountability on the behalf of mortgage servicers, the rules being proposed are intended to address complaints by many borrowers who stated that they didn't receive enough information to prevent foreclosure or that they were not able to get their questions answered or found it difficult to get their servicer to respond to them.
The rules as outlined propose:
A change in monthly mortgage statements. This statement should include a breakdown of the charges (principal, fees, interest, escrow), the amount due, the due date, and should also include information or notices for those who are delinquent, with information on how to receive counseling.
Advanced notice of interest rate adjustments. This notice would contain information letting them know when the rate change will take effect and provide homeowners with information about possible alternatives, in the event the new monthly payment is not affordable. Again, information on how to contact housing counselors would also be included.
Options for avoiding force-placed insurance. When a homeowner doesn't carry insurance on their residence, a servicer can purchase insurance for them and add the premium to their mortgage payment. This insurance is often very costly and much more expensive than private insurance. The CFPB rules would require advance notice and options homeowners may have to avoiding this insurance.
Early information and information on how to avoid foreclosure. The rules would require that mortgage servicers contact borrowers who are behind on their mortgage payments and advise them of any options they may have to prevent or avoid foreclosure. Under the rules, if a servicer is contacted by a borrower who is struggling to make their payment, the servicer would have to respond within a certain timeframe and provide them correct and complete options.
In an effort to promote better service by mortgage servicers, the CFPB rules would also require that payments immediately be credited to a mortgage holder's account, and that the servicers resolve to keep all documents and records accurate, up-to-date and accessible. If a consumer should notify their servicer of a potential error, the servicer will be required to acknowledge receipt of the notification, conduct an investigation, and provide the consumer with the outcome and resolution. Last, servicers will be required to provide delinquent homeowners or homeowners seeking mortgage assistance with direct and easy access to the servicer's personnel or staff who are qualified to assist them.
Information on the proposed rules can be found in writing here. It is vital to have the knowledge and information to be your own best advocate.
Anna Cuevas, ex-bank executive turned homeowner advocate known as "America's Loan Modification Guru," has empowered and guided thousands of Americans in keeping their homes from foreclosure through loan modification self-advocacy. A popular blogger (askaloanmodguru.com), Cuevas has been called a "superhero of the loan modification industry" and has been nominated for CNN's Heroes. She is the #1 bestselling author of SAVE YOUR HOME Without Losing Your Mind or Money.