A newly established government agency created to protect consumers against mortgage abuse announced tighter rules last week aimed at protecting homeowners from servicer mistakes, forcing the mortgage industry to stop treating homeowners like beggars looking for a handout.
The new rules, proposed by the Consumer Financial Protection Bureau (CFPB), would also require mortgage servicers to make monthly mortgage statements much easier to understand.
“Millions of homeowners are struggling to pay their mortgages, often through no fault of their own,” said Richard Cordray, director of the CFPB in a prepared statement. “These proposed rules would offer consumers basic protections and put the ‘service’ back into mortgage servicing. The goal is to prevent mortgage servicers from giving their customers unwelcome surprises and runarounds.”
With millions of homeowners in distress, or facing foreclosure, many borrowers have complained about the problems they’ve had while seeking loan modifications or other alternatives to — and information about — avoiding foreclosure.
Under the proposed rules, servicers would have to notify consumers before charging them for insurance, as well as terminate the insurance within 15 days of being notified that the borrower already has insurance. Servicers would also be required to refund the amount overpaid to the consumer.
Public comments will be accepted for 60 days, through October 9, 2012, on the proposed rules. The CFPB will review and analyze the comments before issuing final rules in January 2013. It is too early to predict how the CFPB might enforce its proposed rules. It is a new agency, so there is little precedent to gauge how effectively it might police the mortgage servicers.
Readers, what do you think? Does the federal government need to crack down on banks and mortgage servicers for sloppy foreclosure filings? Or is there enough regulation already in place?