Consumer Financial Protection Bureau Set to Propose New Mortgage Servicer Rules

May 09, 2012

The Consumer Financial Protection Bureau (CFPB) is looking out for you. The agency, not even a year old, has spent its time trying to protect consumers from a broad spectrum of bad business standards. And where have they been spending most of their time and energy?

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Homeowners Could Use A Little Help In Dealing With Mortgage Servicers

Mortgages of course.

The agency is set to introduce new rules this summer to help both consumers and mortgage servicers. The new rules are expected to be finalized in January and take effect no later than 12 months after they are issued.

The proposed new rules will focus on the lack of transparency and the lack of accountability that has homeowners scratching their heads as aggressive mortgage servicers, hired by lenders, do little in the way of service towards borrowers.

“For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress,” said Richard Cordray, the former Ohio attorney general who heads the Consumer Financial Protection Agency. “It’s time to put the ‘service’ back in mortgage servicing.”

The agency is proposing these new rules:

  • Clear cut monthly statements: Mortgage servicers would be required to include a breakdown of payments by principal, interest, fees and escrow. The amount due and the next payment due date as well as alerts and info for delinquent borrowers on loss mitigation alternatives will also appear.
  • Advance warning before imposing interest rate adjustments: Mortgage servicers would have to provide disclosures before the interest rate changes on ARM’s such as when the rate will change and a list of alternatives the consumer can seek out if they cannot afford the new monthly payment.
  • Options for avoiding “force-placed” insurance: Since the onus is on mortgage servicers to make sure borrowers have hazard insurance on their property, they often opt for more expensive insurance than can be found privately by the borrower if they cannot maintain hazard insurance. The new rule would require that advance notice and pricing info before consumers are charged for hazard insurance.
  • Early info and options to help avoid foreclosure: Mortgage servicers would have to utilize good faith efforts to alert delinquent borrowers of their options to avoid foreclosure.

In order to create a a culture of accountability, the CFPB is considering common sense rules like crediting consumer’s accounts promptly after receiving payment, keeping records up to date to minimize errors, correct errors brought to servicers attention by consumers quickly and provide easy access to foreclosure prevention teams.

Do our readers think the proposed CFPB rules will help improve the mortgage issues facing Chicago homeowners?

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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