“No surprises, No Runarounds.” That is the theme of new rules the Consumer Financial Protection Bureau proposed Tuesday for the companies that “service” your mortgage.
That means your mortgage payment would be immediately credited; your records would be accurate and up-to-date; your statement would be clear and easy to understand; and you would be notified months in advance of a rate adjustment.
The rules would officially be introduced this summer and finished by January 2013, the bureau said, adding it was given authority to impose the rules by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
You do not get to select your so-called mortgage servicer, your bank does. Until the mortgage crisis, many of these companies operated under the radar. They collect your monthly payment; handle customer service, escrow accounts, collections, loan modifications and foreclosures.
In February, the nation’s top servicers – Ally/GMAC, Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo – reached a $25 billion settlement with 49 states and the federal government.
According to www.nationalmortgagesettlement.com: “The agreement settles state and federal investigations finding that the country’s five largest loan servicers routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law.”
Other independent “nonbank” mortgage servicers were not included in that settlement, pointed out the bureau’s director, Richard Cordray, in an opinion piece for Politico.com.
“These nonbank servicers used to receive little or no oversight,” Cordray wrote. “The CFPB is changing that. Our new authority allows us to supervise both banks and nonbanks. Indeed, for the first time, the federal government will have the authority to look into the entire mortgage servicing market. This is a critical improvement: We will be able to monitor all players to make sure they abide by federal consumer financial laws.”
According to the National Consumer Law Center, there is a long way to go in the foreclosure crisis. “In 2012, the U.S. is reaching the mid-point of a devastating foreclosure crisis, expected to result in an additional 10 million homes being lost (nearly 3 million homeowners have already been displaced through foreclosures).”
During the mortgage crisis, the bureau said in its release about the new rules, some borrowers complained they did not receive enough information to avoid foreclosure, others said they could not get answers from their servicers or have errors corrected.
The rules “would provide consumers with clear and timely information about changes to their mortgages so they can avoid costly surprises,” the bureau said.
If you were delinquent on your payments, or fear that you would soon be, the mortgage servicers would be required to offer “direct, easy, ongoing access to employees who are dedicated and empowered to help troubled borrowers.”
What’s more, servicers would have to make “good-faith” efforts to contact you and inform you of options to help avoid foreclosure.
The bureau said the rules under consideration were meant to address two critical problems: “lack of transparency and lack of accountability.”
In announcing the new rules, Cordray said: “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress.”