The federal watchdog agency in charge of protecting consumers’ finances recently proposed a number of rules for the ways in which mortgage lenders and servicers deal with borrowers, but one group thinks these regulatory changes could actually be harmful for Americans.
The consumer advocacy group Americans for Financial Reform, made up of a number of special interests including the AFL-CIO and NAACP, recently asked that the federal Consumer Financial Protection Bureau re-write some of its proposed mortgage servicing rules, according to a letter from the group. In particular, it believes the proposed rule changes related to how disclosures of home loan costs, and those related to how mortgage servicers handle consumers’ accounts, will actually be rollbacks of safeguards already in place.
“We appreciate the CFPB’s attention to the problems of homeowners, recognition of the need for uniform servicing standards to right the pervasive problems in the servicing system, and the steps in the proposal to increase transparency and responsiveness to homeowners,” the AFR’s letter said.
It also believes these protections simply aren’t strong enough to change the inherent problems in the foreclosure process and provide more security for borrowers who have been hit with financial difficulties, the report said. Further, unless consumers are fully aware of all the costs they may face during the course of the borrowing process, they may be more likely to enter into agreements they do not fully understand or cannot afford.
As such, the group would like the CFPB to pull back its current proposals, which have also been criticized by banking groups, and re-write them so that there is more clarity, specifically related to what documents and notifications mortgage servicing companies must provide to consumers at various stages of the borrowing process.
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The CFPB has often received criticism from various sides of the argument on increasing consumer protections. However, it has generally worked well to increase safeguards for various types of credit, with a particular focus on credit cards, which tend to carry higher interest rates than most other loans and can therefore lead to far more debt problems in a shorter period of time. The agency has only had a full-time top executive for 10 months or so, as director Richard Cordray was only appointed to the job in early January.
Image: Images_of_Money, via Flickr