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Consumer Bureau Moves To Make Mortgages Clearer, Foreclosures Fewer
Saying it wants "to protect homeowners from surprises and costly mistakes by their mortgage servicers," the Consumer Financial Protection Bureau today proposed new rules it believes would make the home loan process simpler and give struggling homeowners more of a chance to avoid foreclosures.
If the rules go into effect next January as the bureau plans, The Associated Press says, "mortgage servicing companies would be required to provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure."
As The Hill writes:
"The new rules target an industry that has been plagued with problems. ... Complaints have mounted over shoddy servicing as the amount of homeowners struggling to avoid foreclosure skyrocketed after the housing bubble burst. The industry has found itself under fire from lawmakers and the White House, and widespread problems with mortgage servicing resulted in a $25 billion government settlement with some of the nation's largest banks, where they agreed to pay out billions to help cover refinancing costs for homeowners and reimburse them for haphazard foreclosure practices.
"Problems in the industry were highlighted by the practice of 'robo-signing,' in which services would speedily sign off on foreclosure documents without reviewing or verifying their contents."
According to the consumer bureau, the rules would, among other things:
-- "Generally require servicers to provide clear monthly statements."
-- "Require servicers to provide earlier disclosures before interest rate adjustment for most adjustable-rate mortgages."
-- "Require servicers to make good-faith efforts to contact delinquent borrowers and inform them of their options to help avoid foreclosure." And, mortgage servicers could not go ahead with a foreclosure "until after a final decision has been reached on a borrower's application for an option to avoid foreclosure or unless a borrower fails to perform on that option."
-- "Require a payment be credited to a borrower's account as of the day that a payment is received."