Starting in January 2014, the Consumer Financial Protection Bureau (CFPB) will issue new mortgage servicing rules to put in place ten strong protections for homeowners facing foreclosure.
Background:
Mortgage servicers collect payments and handle customer service for borrower’s loans. Because borrowers don’t choose these mortgage servicers- the lenders do- customer service has been disastrous in the past for struggling homeowners, especially during the housing crises of the last few years.
Ten New Protections:
1. Restrict Dual Tracking- Servicers can’t start foreclosure proceedings if a borrower has applied for a loan modification or other alternative to foreclosure.
2. Early Notice- Servicers must provide information about delinquency after 2 missed payments.
3. Notification of Foreclosure Alternatives- Servicers must let homeowners know about their options after they have missed 2 consecutive payments.
4. Access to Servicing Personnel- Servicers must have procedures and policies in place to help borrowers get direct, easy access to help.
5. One Application- Servicers must provide a single application for all available options and they must be considered for all options at once.
6. Prompt Review- Timeframes for servicers are: 5 days to notify borrower whether application is complete, 30 days to review and respond to applications.
7. Fair Review Process- All options to prevent foreclosure (allowed by investor) must be considered and servicers cannot steer borrowers to apply for ones more favorable for the servicer or investor.
8. No Foreclosure Sale Until All Other Alternatives Considered- Servicers must consider and respond to a borrower’s application if it is received 37 days before a scheduled foreclosure sale.
9. No Foreclosure Sale With A Loss Mitigation Agreement- If a servicer has come to an agreement with the borrower for loss mitigation they can’t start foreclosure proceedings.
10. Borrower Recourse – Servicers must explain if they reject a borrower’s application and provide specifics.
In addition, the CFBP will put in place rules so that borrowers will not be surprised buy sudden interest rate changes or fees and use clear monthly mortgage statements. They also have addressed the need to avoid the ‘runarounds’ borrowers experienced in the past- where mortgage servicers made mistakes, processed payments too slowly or didn’t have up-to-date account information.
For more information check out this article or fact sheet from the Consumer Financial Protection Bureau.
