The Consumer Financial Protection Bureau has begun to make its mark on mortgage lenders through oversight of non-bank institutions, audits and discussions of altering its policy on loan originator compensation. In its most recent announcement, however, the agency is looking to make new rules in the mortgage servicing arena that it hopes to finalize by January 2014.
“The mortgage servicing rules we are considering reflect two basic, common-sense principles—no surprises and no runarounds,” said CFPB Director Richard Cordray. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing.”
Of the rules the CFPB is considering, one requires servicers to provide clear monthly statements including specifics such as loan terms, payments, future payment due dates, recent activity, any late fee warnings and loss mitigation for any delinquent borrowers.
Other initiatives under the CFPB rule making include providing earlier disclosures before any interest rate changes on most adjustable rate mortgages; options for avoiding costly force-placed insurance; and an effort toward providing early information and options for avoiding foreclosure—a rule under which servicers would be required to make good-faith efforts to contact delinquent borrowers and inform them of their options to help avoid foreclosure.
The Mortgage Bankers Association welcomed the changes in a statement made Tuesday.
“National standards that apply to all residential loan servicers have the potential to create more confidence and certainty in the real estate market for both borrowers and servicers alike,” said MBA president David Stevens. “Borrowers would be protected by a single standard regardless of where they live and servicers would have one set of rules to comply with everywhere they operate….It is important that the final rules don’t give preference to one business type over any other, nor should they inhibit innovation or discourage new companies from entering the marketplace.”
The agency is expected to provide more details on the proposed rules on Tuesday.
Written by Elizabeth Ecker