Consumer Financial Protection Bureau "CFPB" Releases Final Mortgage Servicing Rules
On January 17, the Consumer Financial Protection Bureau (CFPB or Bureau) published its final rules related to consumer mortgage loan servicing.
Typically, mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners and are responsible for collecting borrower payments and handling issues related to customer service, escrows, collections, loan modifications and foreclosures on behalf of the loan owner. Most often, such servicers are selected by mortgage note holders, not consumers.
The final rule contains a number of protections for consumers who are having difficulty with their mortgage obligations, including the following: (1) a provision that prevents “dual tracking” of delinquent loans, which involves the commencement of a foreclosure proceeding at the same time a consumer seeks a loan modification; (2) a provision that prevents servicers from making the first notice or filing required in the foreclosure process until a mortgage loan account is more than 120 days delinquent; (3) a requirement that servicers provide consumers with personnel responsible for assisting them when repayment difficulties arise; and (4) a requirement that servicers consider and respond to a borrower’s application for a loan modification if it arrives at least 37 days before a scheduled foreclosure sale.
In addition, the final rule requires that mortgage servicers provide to all consumer borrowers enhanced disclosures, including monthly mortgage statements that contain prescribed information (including a breakdown of payments by principal, interest, fees and escrow amounts) as well as an “early warning” disclosure to most consumers before their interest rate adjusts.
The final rule includes certain exemptions for small servicers that service 5000 or fewer mortgage loans that they or an affiliate either own or originated.
The final rule goes into effect mid-January 2014.
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