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What the proposed mortgage servicing rules could mean for you

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).

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