CFPB first announced in April that it was considering several proposals to implement requirements laid out in the Dodd-Frank Act, the bill that created the bureau. The bureau reached out to consumer groups, small servicers, industry stakeholders, and government agencies for input. CFPB refined its earlier ideas in response to the feedback.
The first set of proposed rules is designed to bring more transparency to the mortgage market so consumers can avoid costly surprises. CFPB proposes: Clear monthly mortgage statements, including a breakdown of payments, due dates, and fees; warnings before interest rate adjustments with information about alternatives and counseling resources if the new rate is unaffordable; early information and options to avoid foreclosure; and options for avoiding “force-placed” insurance, in which servicers purchase insurance to protect the lender’s interest in the property.
In addition, CFPB proposes a second set of rules to impose “common-sense” requirements for handling consumer accounts, correcting errors, and evaluating borrowers for options to avoid foreclosure.
These rules include: Promptly credited payments; maintenance of accurate and accessible documents and information; quick correction of errors; and direct and ongoing access to servicer personnel for delinquent borrowers.
CFPB plans to finalize and implement the new requirements in January 2013.
“Millions of homeowners are struggling to pay their mortgages, often through no fault of their own,” said CFPB director Richard Cordray. “These proposed rules would offer consumers basic protections and put the ‘service’ back into mortgage servicing. The goal is to prevent mortgage servicers from giving their customers unwelcome surprises and runarounds.”
The public will have until October 9 to review and provide comments on the proposed rules. CFPB will analyze the comments before issuing final rules.
Mortgage Bankers Association (MBA) president and CEO David H. Stevens issued a statement in response to CFPB’s release, applauding the bureau’s commitment to “bringing certainty to our industry.” However, he stressed the importance of uniform standards for all servicers.
“MBA will now begin the process of reviewing the proposed standards and will work to better understand their potential impact on servicers of all sizes and business models, as it is important that the final rules do not give preference to one business type over another,” Stevens said. “It is also essential that they do not inhibit industry innovation or discourage new market entrants.”
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