The Consumer Financial Protection Bureau is proposing additional measures to ensure, it says, that homeowners are treated fairly by mortgage servicers.
Since the new mortgage rules went into effect on Jan. 10, the CFPB has kept a close eye on making sure servicers maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments and correct errors on request to make sure the financial crisis does not happen again.
This proposal follows the CFPB’s continued focus on making sure the rules are working as intended.
Here are the 6 key changes that will impact servicers:
1. Extended borrower protection
Right now, a mortgage servicer must give the borrower certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. Under the proposed rule, servicers would have to give those protections again for borrowers who have brought their loans current at any time since the last loss mitigation application.
2. Death protection
If a borrower dies, CFPB rules currently require that servicers promptly identify and communicate with family members, heirs, or other parties, known as “successors in interest,” who have a legal interest in the home. The proposal would expand the circumstances in which consumers would be considered successors under the rules, including when a property is transferred after a divorce, legal separation, through a family trust, between spouses, from a parent to a child or when a borrower who is a joint tenant dies.
3. Proper notifications
Servicers will now have to notify borrowers promptly that the loss mitigation application is complete, so that borrowers know the status of the application and their foreclosure protections.
4. Holds servicers to timeframe
The proposal clarifies that generally a transferee servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer. Under the current system, when mortgages are transferred from one servicer to another, borrowers who had applied to the prior servicer for loss mitigation may not know where they stand with the new servicer.
5. Clarifies servicers' obligations
The bureau is proposing to clarify what steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale. Servicers who do not take reasonable steps to prevent the sale must dismiss a pending foreclosure action. This aids servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
6. Delinquent advance date change
It would clarify that delinquency, for purposes of the servicing rules, begins on the day a borrower fails to make a periodic payment. Under the proposal, when a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances.
7. Keep borrower updated, regularly
The proposal would generally require servicers to provide periodic statements to those borrowers, with specific information tailored for bankruptcy, along with requiring servicers to provide written early intervention notices to let those borrowers know about loss mitigation options.
“The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” said CFPB Director Richard Cordray. “Today’s proposal would give greater protections to mortgage borrowers.”
