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What the proposed mortgage servicing rules could mean for you

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Delinquencies. Defaults. Foreclosures.

Let’s face it: before the housing crisis, these and many other terms were foreign to many of us. Since 2008, however, they’ve become much more commonplace across America.

There’s no doubt that the mortgage servicing market can be confusing for the average consumer to understand and navigate. And it’s even more overwhelming for homeowners in financial distress. Being aware of what you owe and to whom you should make your payments, understanding changes to your interest rate, and knowing how to get help are important questions that deserve well-considered answers.

Today we announced that the Bureau is considering new proposed rules that would help homeowners better manage their mortgages with mortgage servicers. Mortgage servicers are companies responsible for collecting payments from borrowers on behalf of the actual loan owner. The servicer handles customer service, loan modifications, collections, and foreclosures.

The servicing industry had problems before the financial crisis, and many servicers have failed to keep pace with the increasing number of mortgage delinquencies. Many borrowers have complained that they did not receive the information they needed to stay on track with their mortgage and avoid foreclosure. Other borrowers ran into trouble because they had difficulty getting answers from their servicers. With better information, some people might have been able to save their homes from foreclosure.

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)

We expect to issue a proposal for public comment this summer and to finalize rules by early next year. We believe these rules represent important steps to demystifying the ambiguity of mortgage servicing and providing homeowners with information and assistance before it’s too late.

If you have questions, comments, or a mortgage complaint, you can submit it online or call 1-855-411-CFPB (2372).

  • Dustin

    I looked at the model
    forms inside the link.  The forms themselves are good if you are just judging it based on a traditional statement.  Very
    explanatory, but I don’t think they will help lessen foreclosures or confusion about loan status.

     

    The problem is that most
    people who say they were not aware how close they were to foreclosure when it
    finally happened, is that they didn’t understand statements
    and/or just fell into the entitlement mentality thinking once they “got a
    house”, it was their house.  They knew they had a mortgage payment but
    what happens is that when they miss a payment every other month and nothing
    happens but a couple of late charges, they take more for granted and start missing
    payments for consecutive months.  Then the bank comes and takes their
    house away and they are shocked.

     

    I don’t think an improved
    detailed statement like the model forms provided will help that.  If anything, the mortgage process and written communications need to
    become more serious and immediately make it known to people, “if you don’t
    pay us we are going to take the house you live in away from you.  It is
    not your house until you pay off the loan we gave you”.  Beside that language on a periodic statement have a date a payment needs to be received by or foreclosure will happen.  Then
    maybe people will understand how important it is to make their payments on time. Before the entitlement crowd and others who
    adhere to a victim-based society outlook got mortgages people knew the
    consequences of not paying, but many now think just because they live in a house and they have a mortgage the house
    is theirs and no one can take it away.

    In conclusion, instead of giving the homeowner more and more details at increasing intervals, just let them know immediately in the mortgage process and also through periodic statements in plain language how serious it is to make payments on time and they will either decide a mortgage isn’t for them or they will be great loan customers making payments on time. 

  • Jay

    While the new forms may help with clarity they do not address a MAJOR underlying problem: Standing.

    Servicing companies are NOT parties to a mortgage contract. Therefore, they do not have authority to act unless a party to the contract (noteholder) gives them authority to act AND informs the borrower of the authority of the Servicer. In legal terms it’s called Agency. If a servicer does not have authority to act (Agency) from a note holder THEY CANNOT FORECLOSE on your house. Many servicers are unable to produce (authentic) documents proving their authority to act on behalf of a noteholder. This is where the CFPB needs to come down, HARD, on servicer who are found to act without proper Agency. If a servicer forecloses and is found NOT to have proper authority (Agency) it’s called FRAUD.

    CFPB – this is where America needs you to step up. Protect Americans who were misled, bullied, bowled over, and ignored by servicers who put their own profits ahead of what right and what’s LEGAL.

  • Jhlydic

    Our mortgage was held by Chase, but they “sold” it to someone thousands of miles from us out in CA,(we’re in FL).  Getting any information from the new unknow servicers is impossible!

  • http://cybertron-transformers.blogspot.com/ christina thomas

    My father lost a series of properties purchased in Orlando  - it’s actually still in litigation – due to some unscrupulous lenders at Chase, who apparently sold the lease to some college students that performed false documentation to their auditor.  They simply has neglected to check things out, as is their duty, and now we’re fighting to get it back.  disgusting.

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