The Consumer Financial Protection Bureau has released its new rules governing how mortgage servicers must treat borrowers. They take effect January 2014, and apply to all mortgage servicers with 5,000 or more loans.
The goal of the new regs is to make sure that servicers can’t railroad borrowers who fall behind on their payments. It comes about partly as a result of the “robo-signing” scandal, where those servicers falsified thousands of documents in an effort to foreclose on borrowers.
Certainly you’re much more involved in the buying end of things, but this is the kind of general housing-related information you should be aware of. We’ll keep it short, though.
The new rules, in a nutshell:
- If a borrower has applied for a loan modification or other foreclosure alternative, lenders/servicers can’t start or continue a foreclosure. (Otherwise known as “no dual-tracking”.)
- Servicers have to wait until a loan is at least 120 days delinquent before starting the foreclosure process.
- Here’s an important one: Once a borrower has missed two payments, servicers are now required to tell him, in writing, about all the options available — everything from government programs (think HAMP) to short sales, to… well, everything.
- If a servicer offers an alternative, it must give the borrower a reasonable amount of time to consider and accept the offer — and once accepted, the lenders can’t change its mind and proceed with foreclosure.
- Oh, and servicers can’t try to push borrowers into programs that are best for the servicer — for example, they can’t steer borrowers to short sales over a loan modification (or vice versa).
- Servicers must also make sure that they have the staff to answer borrowers’ questions quickly and clearly — no more runarounds or unreturned calls. And they have to keep borrowers in the loupe about what’s happening with their applications for modifications.
- Borrowers must be given clear monthly statements that show how much is owed — breaking out principle, interest, fees, etc. — and when the next payment is due.
There’s more to the new regulations, especially in the details. But the bottom line is that they’re designed to keep borrowers informed about their loans and their options, and to prevent them from being rushed into foreclosure.