Mortgage servicers are the latest to come under fire by the Consumer Financial Protection Bureau. The agency said last week that it’s high time to crack down and start enforcing this arm of the mortgage industry to stop impeding desperate homeowners from finding a way around foreclosing and surprising them with fees.
You hear these stories all the time:
A homeowner is behind on their mortgage or struggling to keep up. They are underwater due to a slumping market, but they have the desire to stay in their homes, have a steady job, and just want to find a way to modify their loan. They call and call and are left in the abyss of voicemail or endless phone operating systems. No one at the mortgage servicer’s office seems to want to help – or even talk to them.
The mortgage servicer works for the bank. Why would they have any motivation to help out consumers?
That’s precisely why the CFPB is tackling this problem now. But what exactly are they proposing? Essentially, they want to mandate that mortgage servicers provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure.
The agency has set forth a set of rules that they expect to finalize and put into place in January 2013 after a public comment period. The rules would:
- Require servicers to provide clear monthly statements in order to help borrowers avoid confusion that can lead to problems or extra fees on their mortgage.
- Require servicers to make good-faith efforts to inform delinquent borrowers of their options for avoiding foreclosure.
- Mortgage servicers would not be able to move forward with a foreclosure until a final decision has been reached on a borrower’s application for an option to avoid foreclosure or unless a borrower fails to perform on that option.
- Require servicers to provide earlier disclosures before interest rate adjustments for most ARMs.
- Require payments be credited to a borrower’s account the date the payment is received.
These are pretty sound rules. The potential problem, however, is that rules like these have been laid out in the past and not followed. It’s a little early to say whether this may happen with the CFPB since the agency is new and there is no precedent to look upon for how they’ve enforced things in the past.
For the sake of borrowers everywhere, though, let’s hope these rules help to make the mortgage servicing process more consumer friendly.