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Mortgage Servicing Rules

The CFPB had a very busy week last week as some of you may have heard. They issued the supplementary final rule for remittance transfers in the early part of last week. Then as planned, they released two sets of proposed rules for mortgage servicers.

The proposed rules implement requirements of the Dodd-Frank Act and help “address systematic problems in the servicing industry.” These rules would make changes to both TILA and RESPA.. The first set of proposed rules includes the following:

  • Clear Monthly Mortgage Statements. Servicers would be required to provide regular statements which would include: a breakdown of payments by principal, interest, fees, and escrow; the amount of and due date of the next payment; recent transaction activity; and warnings about fees.
  • Warning Before Interest Rate Adjusts. Servicers would have to provide earlier disclosures before the interest rate adjusts for most adjustable-rate mortgages. This disclosure would include information about alternatives and counseling resources if the new payment is unaffordable.
  • Options for Avoiding Costly “Force-Placed” Insurance. Requires servicers give advance notice and pricing information before charging consumers for forced placed insurance. The servicer would also be required to terminate the insurance within 15 days if it receives evidence that the borrower has the necessary insurance and the insurer would refund the force-placed insurance premiums.
  • Early Information and Options for Avoiding Foreclosure. Servicers would be required to make good faith efforts to contact delinquent borrowers and inform them of their options to avoid foreclosure.

 The second set of proposed rules set requirements for handling consumer accounts, correcting errors and evaluating a borrower’s options to avoid foreclosure. These rules include the following:

  • Payments Promptly Credited: Servicers generally would have to credit a consumer’s account as of the date a payment is received.
  • Maintain Accurate and Accessible Documents and Information: Servicers would be required to establish reasonable policies and procedures to provide accurate and current information to borrowers and minimize errors. They would have to submit accurate legal documents that comply with applicable law, help borrowers on options to avoid foreclosure, and provide oversight of their contractors and foreclosure attorneys.
  • Errors Corrected Quickly: If a consumer notifies the servicer that they think there has been an error, the servicer would be required to acknowledge receiving the notification, conduct a reasonable investigation, and, in a timely manner, inform the consumer about the resolution.
  • Direct and Ongoing Access to Servicer Personnel To Assist Delinquent Borrowers: Servicers would be required to provide delinquent borrowers with direct, easy, ongoing access to employees dedicated to help delinquent borrowers.
  • Evaluate Borrowers For Options To Avoid Foreclosure: Servicers that offer options to borrowers to avoid foreclosure, such as loan modifications or other payment plans, would be required to promptly review applications for those options.

The comment period is open for 60 days and will conclude on October 9th. The CFPB has stated that it will issue final rules in January of 2013.

 It may finally be cooling down in the Midwest states, but it definitely seems as though regulatory heat has really kicked in. Hopefully there will be some relief in the near future.

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