Even before the financial crisis, the mortgage servicing industry had experienced problems with bad practices and sloppy recordkeeping. Borrowers complain that servicers lose their applications and paperwork for loan modifications. And borrowers say that when errors arise, they find it difficult to have them corrected.
According to a statement, to protect homeowners from surprises and costly mistakes by their mortgage servicers, the Consumer Financial Protection Bureau (CFPB) has proposed two set of rules. The first set of CFPB’s proposed rules would provide consumers with clear and timely information about their mortgages so they can avoid costly surprises. They would bring greater transparency to the market.
The first set of CFPB’s proposed rules would provide consumers with clear and timely information about their mortgages so they can avoid costly surprises. The proposed rules are clear monthly mortgage statements, warning before interest rate adjusts, options for avoiding costly “force-placed” insurance, early information and options for avoiding foreclosure.
Servicers would be needed to provide regular statements detailing about a breakdown of payments by principal, interest, fees and escrow; the amount of and due date of the next payment; recent transaction activity; and warnings about fees.
Servicers would have to provide earlier disclosures before the interest rate adjusts for most adjustable-rate mortgages. This disclosure would include information about alternatives and counseling resources if the new payment is unaffordable.
The second set of rules would include prompt payment, error correction, direct and ongoing access to servicer personnel to assist borrowers and to maintain accurate and accessible documents and information.
Servicers would also be required to let borrowers know when applications are incomplete and to allow borrowers to appeal certain servicer decisions.
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Edited by Rachel Ramsey