Do you have a roof over your head?
Right now through October 9, Cornell Law School is giving the American public a unique opportunity to make our voices heard in the Consumer Financial Bureau's upcoming mortgage servicing regulations. This isn't a national election where your voice is just another drop in a bucket full of names, buzz words, and checked boxes. This isn't standing outside with a sign. This is you, in the comfort of your own home, deciding what mortgage servicing options you feel are best for you and your family and voicing your personal opinion directly to the government officials in charge of regulating your mortgage company.
The banks are already speaking up in these regulations. I've already said my piece, but as it stands there is only a small handful of voices against the deafening machine of the financial services industry. If you don't speak up, the banks win. Only you can prevent this from happening.
All you have to do is read the summaries below. Anytime you have an opinion on a section, whatever that opinion may be, click the link at the bottom of that section. It will take you to the comments for that specific section of Cornell University's public viewing of the mortgage servicing regulations at Regulationroom.org. I'm not here to tell you what to think. I'm here to arm you with knowledge. How you feel about that information and whether or not you voice your opinion is up to you to decide.
Proposed Regulation: For All Borrowers - Who is Servicing Your Loan?
1. Updating borrowers - Do you know who owns your loan? Do you know who has serviced it? If you're familiar with the Carfax commercials, you know that before you purchase a car, you should say "Show me the Carfax!" A car and house are major purchases in your life. You wouldn't purchase either without knowing the history. If you're taking a loan out to pay for this purchase, you're not buying it on your own. You're entering a partnership with your mortgage lender. They're loaning you the money, and both of your names are being placed on the deed. You didn't purchase a home. You purchased a loan. Why would you not want to know the history of your loan?
Let's say I give you a TV with the condition that if you don't pay me back $360 by the end of the year, I take the TV and you still owe me the money. We agree to the terms, shake hands, put in writing that you'll pay me $30/month for 12 months, and we sign it. Two months later, I decide to pay my friend Alex to service my part of the contract.
Are you ok with that? Would you want it in writing? How much advance notice would you want?
Now Alex decides to sell his stake to his friend David. At this point, would you prefer a new contract just between you and David or would you prefer to keep the initial contract showing myself, Alex, and David on it? Who do you owe the money to?
If this is confusing you already, imagine how your foreclosure defense attorney feels when they request information from your bank and everyone passes the buck. As it stands now, this process is a mess. The CFPB's proposed fix is to have both your new and old servicer complete a single form and send it to you at least 15 days in advance with no mention of whose responsibility it is to send this letter to you. This still leaves room for the banks to point fingers. Are you comfortable with this?
2. Getting info to the new servicer - Now that Alex has sold the loan to David, David tells you that you still owe $360 even though you already made 2 payments to Alex. David and Alex had a falling out, so when you show the receipts of these payments to David, he won't accept them. He tells you to call Alex and sort it out. When you call Alex, he blows you off. He tells you he sold his stake and that's between you and David. You try to call me since we made the original deal, but I didn't put my phone number on the contract. You have no idea how to find me.
You're now stuck in an impossible situation and risk losing the TV, the $60 you already paid, and the $360 in the contract. Whose fault was it? Should Alex be held responsible for not communicating with David or should David have asked for all the information before taking over the loan? Should I, as the original lender, be held responsible for monitoring Alex & David? How much time should we have to straighten this out?
Or is all of this your fault for not reading the simple contract I originally gave you to sign?
The CFPB is proposing that the old servicer "quickly and correctly" transfer the information to the new servicer. No exact timeframe is given. The old servicer must hold on to your information for 1 year in case you need information. There is no mention for how this would be enforced. Any payments made to the old servicer in the first 60 days after the transfer will count as being paid on time, but the servicer (not you) decides whether or not to return the payment to you or forward it to the new servicer. You can end up having to make a 2nd mortgage payment while waiting for the refund from your old servicer. Are you ok with this?
If you have any opinion on this matter, let Cornell Law School and Obama's CFPB know by clicking here: http://regulationroom.org/mortgage-protection/issue-posts/servicing/.
Proposed Regulation: For All Borrowers - Periodic Statements
This image right here is what the CFPB says your mortgage statement should look like. Nowhere does it state what your escrow balance is. Nowhere does it show transactions to or from your escrow account. Are you ok with having an open account with your mortgage company without knowing the balance or being able to see when money leaves it?
Some mortgages penalize borrowers for paying off the loan early or refinancing. The CFPB is proposing that the periodic statement would have to say if such "prepayment penalties" apply but they are not requiring the servicer to include the amount of the penalty. If the mortgage is an adjustable rate mortgage (ARM), the statement has to give the date the interest rate will reset. If you're more than 45 days past due, the statement must contain a delinquency notice.
Hazard, wind, and flood insurance information (including the necessity of PMI, which is required on certain loans with a low down payment) isn't included. If you're being penalized for not having insurance information, would you like to know what insurance information your mortgage company has on file for you? If you have a 2nd mortgage or Home Equity Line of Credit, would you want all of your accounts shown on 1 bill?
If you have any opinion on this matter, let Cornell Law School and Obama's CFPB know by clicking here: http://regulationroom.org/mortgage-protection/issue-posts/periodic-statements/.
Proposed Regulation: For All Borrowers: Getting Errors Fixed
Imagine you're at an expensive restaurant. You ordered a steak that's pink in the middle with no red and a baked potato with butter, sour cream, and cheese. When your server brings your dinner, it's a rare steak that's cold in the middle with a side of unseasoned green beans, so you wave the server over in order to correct your meal...
The CFPB is proposing that if your mortgage company makes an error like this, they be given 30 business days (approximately 2 billing cycles) to either correct their error or explain why they didn't make a mistake. As you just read above, after 45 calendar days, you're delinquent. If your dinner steak is messed up, are you willing to wait until lunch the next day to have it corrected? What if they tell you they didn't make a mistake; that you ordered a rare steak with green beans? What's your next step? What would you consider a 'reasonable investigation' into your complaint? Should you be given a discount or free dessert to make up for your troubles?
In addition to timeframes and notices, the CFPB has proposed a list of errors that are covered by these regulations. They are as follows:
- Not accepting a payment that was made the way the servicer requires
- Not properly applying a payment to interest, principal, escrow or other charges
- Not crediting a payment on the day it is received, if this results in a late charge or negative credit report
- For borrowers with an escrow account, not making on-time payments of taxes, insurance premiums, etc. or not refunding a balance in the escrow account
- Charging the borrower a fee that the servicer "lacks a reasonable basis to impose"
- Not providing an accurate payoff balance
- Not providing accurate information to a borrower in trouble about loss mitigation options
- Not promptly transferring accurate and current information about the borrower's account to a new servicer
- Not stopping a scheduled foreclosure sale once the borrower has completed an application for a loss mitigation option
Remember that the restaurant messed up both your steak and your potato. Is it acceptable to you that they fix your steak but force you to keep the green beans instead of the potato you ordered? What if the plate was dirty? What if the server gave you an attitude? What if they spit in your food? Should there be a limit to the amount of mistakes they'll correct?
If you have any opinion on this matter, let Cornell Law School and Obama's CFPB know by clicking here: http://regulationroom.org/mortgage-protection/issue-posts/errors/.
These are just a few examples of the many regulations that are currently being imposed by the CFPB. These particular rules affect all borrowers. Next week, I'll highlight some of the rules affecting borrowers who are in trouble, including those of us facing foreclosure, delinquency, loan modifications, and the unethical placement of fraudulent force-placed insurance. I urge you to go to regulationroom.org, read the rules, and voice your opinion before this opportunity expires on October 9. If you want to make a positive difference in your neighborhood and take part in changing the world, this is your chance. Don't let it pass you by.