The Consumer Financial Protection Bureau will move forward in formulating new reverse mortgage servicing rules beginning in 2012 once its rulemaking on forward servicing is complete, officials told reporters Thursday on a conference call with members of the press.
“Our newly proposed rules reflect two basic, common-sense standards – no surprises and no runarounds,” said CFPB Director Richard Cordray. “The Bureau now has the authority to adopt federal standards that, for the first time ever, apply to mortgage servicers across the entire market, both banks and nonbank firms.”
In announcing proposed rules that would change the way forward servicing is conducted, the agency noted that the differences between reverse mortgages and forward mortgages has led the bureau to address changes separately.
“The Bureau believes that it is more appropriate to address consumer protections relating to reverse mortgages in a separate comprehensive rulemaking,” the agency wrote.
The separate rulemaking can be expected once the forward rulemaking is complete—likely in early 2013.
Because the product is more complicated and distinct from forward loans, and because Dodd-Frank treats them differently, the Bureau will wait until the baseline rulemaking is established in January and then will consider how to apply the rules in the context of reverse mortgages, said agency officials on the call.
The forward changes proposed by the Bureau include new monthly mortgage statements provided by servicers, a warning presented to consumers before an adjustable rate changes, options for avoiding “forced-place” insurance and early information for avoiding foreclosure.
Additionally, a second set of proposed rules address and impose “common-sense” requirements for handling consumer mortgage accounts, correcting errors and evaluating borrowers for options to avoid foreclosure, according to the CFPB.
View a summary of the proposed rules.
Written by Elizabeth Ecker