If you have a mortgage it is very probable that your lender does not “service” the mortgage. Servicing a mortgage means collecting payments, take care of escrow accounts, perform customer service tasks, loan modifications, collections and foreclosures. The lenders usually contract with a company called a mortgage servicing company to take care of these tasks with little oversight from the lender.
Since these companies were under little regulatory rules and virtually no lender supervision an unknown portion of the national foreclosure mess lies with these companies. Since most borrowers have no say in who services their mortgages, customer service has been just a phantom for most companies – their customers are locked in and they have had no incentive to provide good, let alone any customer service. Well, if the CFPB has its way that will all change in 2013 when proposed rules are finalized this summer and put into effect in January of next year.
It is the aim of the CFPB to restore “service” for companies that engage in mortgage servicing. Their motto for these rules is: “No surprises, no runaround.”
The proposed rules would help borrowers by:
- Clear monthly statements that include a summary of terms of the mortgage such as interest rates and principal amount, monthly fee breakdown to include principal, interest, fees and escrow amounts, due date and amount of next payment, summary of recent transactions, late fee warnings and for those who are delinquent alerts and ways to mitigate the problem.
- For those with adjustable rate mortgages the servicing company will have to notify borrowers when the rate change will take effect, how it is calculated and alternatives if the new monthly payment is unaffordable as well as other important information.
- Sometimes borrowers must pay “forced-placed” insurance premiums. These are premiums that are passed on to the borrower by the mortgage servicing company for insurance the mortgage servicing company obtained for the property when they believe that the property insurance has been allowed to lapse by the borrower. Under the proposed rules the mortgage servicing company is required to give two notices to the borrower that they are going to begin charging for insurance – the first at least 45 days before they begin and tell the borrower a fair, good faith estimate of the added cost. Mortgage servicing companies will be required to accept reasonable proof of insurance from the property owner to avoid the additional charges.
- Early information and ways to avoid foreclosure, the information must be sent when the borrower is in arrears of when the borrower contacts the mortgage servicer that they are having difficulty making mortgage payment. The information must include advice on contacting housing counselors.
Additional rules that are meant to avoid borrowers getting the runaround include:
- Immediate crediting of payments
- Current, accessible and correct records
- Quick corrections of errors
- Service teams employed by the mortgage servicing company dedicated to preventing foreclosure on property of troubled borrowers
It seems that after the appointment of the CFPB director Richard Cordray the bureau has been moving with considerable speed for a government agency in putting in place consumer protection in the financial market place. Cordray said the proposed rules will be published this summer and following a comment period the final rules will be published no later than January 21, 2013.