Watchdogs at the Consumer Financial Protection Bureau hope new rules they’ve proposed for mortgage servicers will keep home owners from being hit by costly surprises or getting the runaround.
“For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to home owners in distress,” said CFPB Director Richard Cordray. “It’s time to put the ‘service’ back in mortgage servicing.”
The new rules, which will be formally proposed this summer and finalized at the start of next year, tell mortgage servicers how to handle customer service, escrow accounts, collections, loan modifications, and foreclosures:
- Clear monthly mortgage statements: The statement you get from your servicer would have to break down your payments by principal, interest, fees, and escrow; the amount of and due date of the next payment; and, if you paid late, contact information for counselors who can help you.
- Warning before interest rate adjustments: Before the rate on your ARM adjusts, you’d get a notice telling you when the new payment starts and what you can do if you can’t afford the change.
- Options for avoiding costly “force-placed” insurance: If you don’t buy home owners insurance, the lender can buy it for you. This “force-placed” insurance is expensive, so you’d get a warning first telling you how much it’s going to cost if the lender has to buy insurance because you didn’t.
- Early information and options for avoiding foreclosure: If you don’t pay your mortgage or pay late, your servicer will have to try to contact you and tell you how to avoid foreclosure. And, if you call the servicer, it has to give you timely, complete, and accurate information about your options.
- Payments immediately credited: The servicer would have to credit your account promptly when it gets your payment.
- Records kept up-to-date and accessible: Your lender would have to set procedures to minimize errors, prevent document loss, provide you accurate information, and assist with error resolution.
- Errors corrected quickly: When you tell your servicer it made a mistake, it would have to acknowledge you contacted it, conduct a reasonable investigation, and get back to you in a reasonable time frame.
- Direct and ongoing access to servicer foreclosure prevention team: Servicers would have to give you direct, easy, ongoing access to employees who can help you when you’re having financial troubles.