- CFPB Announces Mortgage Servicing Rules
- January 29, 2013 | Author: Alan C. Hochheiser
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cleveland Office
On January 17, 2013 the Consumer Financial Protection Bureau (CFPB) announced their mortgage servicing rules, which will go into effect in January 2014. The goal of the CFPB is to provide additional protection to consumers. Please note that these rules do not apply to servicers that service fewer than 5,000 mortgages and service only mortgage loans that they own.
The major areas covered through these new rules pertain to periodic billing statements, force-placed insurance, prompt payment crediting and the providing of payoff statements, general servicing policies, procedures and requirements, as well as early intervention with delinquent borrowers. The rules also provide enhanced loss mitigation procedures. Lastly, the rules provide for specific guidelines for payment change notices on ARM accounts. The entire rule can be found at the CFPB website at www.consumerfinance.gov.
Some of the key provisions in the areas referenced above are as follows:
Interest Rate Adjustments. Creditors, assignees and servicers will now be required to provide a consumer who has an adjustable rate mortgage with a notice between 210 and 240 days prior to the first payment due, after the first rate adjustment. The documentation must contain an estimate of the new rate and the new payment. You must also provide a notice between 60 and 120 days before a payment at a new level is due when a rate adjustment causes a payment change. One requirement that will not need to be noticed is changes caused by an adjustment in the interest rate but not the payment.
Force-placed Insurance. Servicers will now be required to send the borrower a notice at least 45 days before charging a borrower for force-placed insurance coverage, and a second reminder must be sent no earlier than 30 days after the first notice and 15 days before charging the borrower for force-placed insurance. Please note the rule also provides where the borrower has an escrow account for the payment of Hazard Insurance Premiums, the servicer is prohibited from obtaining force-placed insurance where the servicer can continue the borrowers home owner insurance, even if the servicer needs to advance funds to the borrowers escrow account to do so.
Early Intervention with Delinquent Borrowers. Servicers must create a procedure to establish live contact with delinquent borrowers by the 36th day from the date of the delinquency. They must advise the borrower that loss mitigation options are available. In addition, a written notice with information about loss mitigation must be sent by the 45th day of the borrower's delinquency.
Loss Mitigation Procedures. Under the provision for loss mitigation, the servicer is required to acknowledge the receipt of an application in writing from a borrower within five days, whether or not the application is complete. If the application is lacking information, the servicer must provide the debtor with a description of the information necessary to complete the application. In situations where a loss mitigation application is received more than 37 days prior to a foreclosure sale, the servicer is required to evaluate the loss mitigation application within 30 days. The servicer must provide the borrower with a written decision as to the loss mitigation request. If the request for a loan modification or other loss mitigation option is denied, the servicer must provide the borrower an explanation in writing of the reasons for denying any loan modification or other loss mitigation option. The borrower then may appeal a denial of the loan modification program so long as that application was received 90 days prior to a scheduled foreclosure sale.
The rules put in place by the CPFB will cause some adjustments to the way servicers do business. Although many servicers have put into place similar procedures, the CFPB has now documented the same through their rule.