The Consumer Financial Protection Bureau (CFPB) released new guidelines for mortgage servicers on January 17, 2013 that set out to establish new, strong protections for struggling homeowners facing foreclosure. The CFPB is trying to help protect home owners who may be facing foreclosure with this new rules that take effect in January 2014. The new rules were required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which directed the CFPB to implement reforms for the mortgage servicing industry.
Mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. Generally, borrowers have no say in choosing their mortgage servicers. Lenders frequently sell loans to investors after the mortgage deal is signed, and the investors choose the servicers not the consumer.
Some of the CFPB’s new guidelines from the rule are:
- Mortgage servicers are prohibited from foreclosing on a home owner who is seeking loan modifications. Servicers will be unable to file a foreclosure notice until a home owner is at least 120 days behind on a mortgage payment.
- A foreclosure sale on the home will be prohibited until alternatives are considered. Servicers will be required to give home owners adequate time to accept an alternative to foreclosure before going ahead with a foreclosure sale. Servicers must respond to loan modification requests from home owners who apply for a loan modification at least 37 days prior to a foreclosure auction.
- When a home owner has missed two consecutive payments, servicers are required to send a written notice of foreclosure alternative examples to the home owner, such as deferred payments and loan modifications.
- Servicers must be easily accessible to the home owners for assistance.
- Servicers will be required to publish more clear mortgage statements, which includes mortgage payments broken down by principal, interest, fees, and escrow as well as includes the amount and due date of the next payment.
- Servicers must notify home owners early about any interest rate changes to their mortgage payments.
- Servicers will be required to credit a home owner’s account on the date a payment arrives.
John R. Thomas
Certified Mortgage Planner – NMLS 38783
Primary Residential Mortgage, Inc.
248 E Chestnut Hill Rd
Newark, DE 19713
302-703-0727 DE Office
410-412-3319 MD Office
610-906-3109 PA Office
Branch Manager / Loan Officer - NMLS 38783