The Consumer Financial Protection Bureau will formally introduce a number of proposed rules for the mortgage servicing industry later this summer, aiming to have them finalized by January of next year, according to a report from the new watchdog agency. Oftentimes, consumers don’t even have the option of choosing their own mortgage servicer, as the company is typically hired by the lender issuing the home loans. These rules will be designed to help consumers avoid last-minute charges they did not expect, or difficulties in resolving issues facing them as they deal with what are often sizable monthly home loan bills.
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“The mortgage servicing rules we are considering reflect two basic, common-sense principles—no surprises and no runarounds,” said CFPB director Richard Cordray. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing.”
A mortgage servicer is a company that collects home loan payments from consumers on behalf of their lenders, and also handles customer service and other aspects of the day-to-day management of the mortgage, the report said. The rules proposed by the CFPB would require, among other things, greater clarity in monthly statements, warnings before changes to interest rates for adjustable loans, more options for avoiding force-placed insurance and increased information and options on how to avoid foreclosure.
Further, rules to increase accountability among mortgage servicers have also been proposed, the report said. These include having payments credited to an account immediately upon the servicer receiving them, giving borrowers greater access to up-to-date records, the ability to have errors with their account corrected quickly and expediently, and ongoing access to a foreclosure prevention team provided by the servicer.
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The CFPB has been expanding its operations considerably in the last few months since Cordray was appointed in January. Prior to that, it had been operating in a limited capacity without a top executive since gaining regulatory power.
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