Today we are updating our mortgage servicing rules and expanding foreclosure protections for struggling borrowers and other homeowners.
Our mortgage servicing rules that became effective in 2014 require that the companies that collect and process mortgage payments, known as servicers, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request. The rules also include strong protections for struggling homeowners, including those facing foreclosure.
Since we issued those rules, we have seen how they are working in the market, talked to those implementing and affected by the rules, and proposed updates to make these rules more effective. Today, we’re finalizing those proposed updates with some changes based on the comments we received. We’re giving servicers a full year (and for some changes longer) to implement these rules, but we want you to see now how they will help consumers, like you.
The rules include many changes, but below are several we want to highlight:
Help for struggling borrowers
Our rule updates the way servicers have to communicate with borrowers who have applied for loss mitigation. Loss mitigation is a process where the servicer works with a struggling borrower to try and find alternatives to foreclosure. For example, the updates require servicers to let borrowers know when their application for loss mitigation is complete. This is important because certain protections don’t begin until an application is complete. Servicers are often prohibited from conducting a foreclosure sale while they are in the process of reviewing a complete application.
These updates also require servicers to give the protections of the loss mitigation rules to certain borrowers more than once during the life of the loan. Currently, a servicer is only required to give those protections under the rule once to a struggling borrower. When the new rule goes into effect, certain borrowers who received help under the rule before may be eligible to get help again. Receiving the protections more than once is important for people who may experience an unexpected hardship, like the loss of a job or a debilitating illness.
Protecting successors in interest
The rule also provides more protections for successors in interest, individuals who didn't borrow the money originally but who acquire ownership rights to a home, often when the borrower dies or as a result of a divorce. The rule defines successors in interest broadly. It includes someone receiving the ownership interest when a property is transferred upon the death of a relative, as a result of a divorce or legal separation, through certain trusts, between spouses, from a parent to a child, or when a borrower who is a joint tenant dies.
The new protections require servicers to provide information to potential successors in interest about the documents that are needed to confirm their status. The rule also ensures that confirmed successors in interest are given access to many of the same notices and documents that the original borrower would receive.
Providing more information to borrowers in bankruptcy
Under our existing mortgage rules, servicers do not have to provide periodic statements or early intervention loss mitigation information to borrowers in bankruptcy. The new rules require servicers to provide statements to these borrowers in certain circumstances, with specific information tailored for bankruptcy, as well as a modified early intervention notice to let them know about loss mitigation options.
Our updates are finalized, but they won’t be in effect for a while in order to give servicers and others in the mortgage industry time to update their systems and to implement the new protections. If you are having issues with your mortgage, you can submit a complaint online or by calling (855) 411-2372.