The Consumer Financial Protection Bureau (CFPB) has released a bulletin and interim final rule to provide greater clarity to the market concerning mortgage servicing rules that take effect in January 2014.
The clarifications address communications with family members after a borrower dies, contact with delinquent borrowers, and treatment of consumers who have filed for bankruptcy or invoked certain protections under the Fair Debt Collection Practices Act.
"As servicing implementation enters its final phases, we heard from many sources that it was important to address these remaining issues to ensure a smooth transition and provide certainty to the market," said CFPB Director Richard Cordray. "When mortgage servicers better understand the rules they have to follow, that is better for consumers."
Mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. Generally, borrowers have no say in choosing their mortgage servicers. Even before the financial crisis, the mortgage servicing industry experienced problems with bad practices and sloppy recordkeeping. Today, many borrowers continue to experience serious problems seeking loan modifications or other alternatives to avoid foreclosure.
In January 2013, the CFPB issued rules to establish new, strong protections for struggling homeowners, including those facing foreclosure. The rules protect mortgage borrowers from costly surprises and runarounds by their servicers.
These clarifications respond to requests for further explanation on three servicing issues:
- Home retention efforts after a borrower dies
- Early intervention requirement to contact delinquent borrowers
- Interplay between the servicing rules, bankruptcy code, and the Fair Debt Collection Practices Act (FDCPA)
Among other things, the interim final rule also clarifies regulations issued by the Bureau in January to implement a provision of the Dodd-Frank Act that requires consumers to receive housing counseling before taking out a high-cost mortgage. The rule specifies which federally required disclosure must be used as the basis for counseling for a small subset of closed-end loans that are not subject to the Real Estate Settlement Procedures Act.
View the full bulletin:http://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf