As the next in a series of rule makings by the Consumer Financial Protection Bureau, the agency this week laid out its plans to ramp up protections by implementing rules for mortgage servicing companies.
Targeting servicing processes specific to struggling homeowners and borrowers facing foreclosure, the rules aim to simplify the process for borrowers and hold servicers more accountable.
“For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures,” said CFPB Director Richard Cordray. “Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”
During the housing crisis and influx of struggling homeowners, many servicers were ill-prepared to adequately assist those borrowers, the CFPB said, noting the many borrowers who are still struggling and are attempting to modify their loans.
The new rules target dual tracking by restricting the ability for servicers to simultaneously commence foreclosure proceedings and work on foreclosure avoidance with the borrower. Under the rules, servicers cannot commence foreclosure proceedings until a borrower is 120 days delinquent on his or her loan account.
Additionally, servicers are required to notify borrowers of foreclosure alternatives; provide direct access to servicing personnel; offer a fair review process; and consider all other alternatives before foreclosure.
In requesting a loan modification, the borrower also has the right to appeal a servicer’s evaluation, according to CFPB officials.
The new rules will take effect in January 2014.
Written by Elizabeth Ecker