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: CFPB Article