Earlier this month, the Consumer Financial Protection Bureau (CFPB) enacted new rules aimed at protecting homeowners from lender abuse, unanticipated fees and inadequate service by mortgage servicing companies. Under the newly finalized rules, these companies will aid homeowners in good standing, those seeking loan modifications and those attempting to avoid foreclosures in a variety of ways.
Among the new regulations that mortgage servicing companies will now be subject to are those that compel them to notify borrowers before rate hikes are enacted and to provide monthly billing statements that are clear and easily understood. Better internal record-keeping, swift error correction and prompt payment processing will also now be mandatory practices.
Perhaps most importantly, these companies will now be required to aid homeowners in avoiding foreclosure in active ways. In the past, many companies engaged in a behavior known as “dual-tracking.” This process allowed companies to pursue foreclosures even as the borrower and company were negotiating loan modifications.
Now, companies will no longer be permitted to push for foreclosure while a borrower is working to modify the affected mortgage, or is otherwise actively attempting to avoid foreclosure in good faith. Certainly, specific conditions apply in order for consumers to be protected from dual-tracking, but this is the most aggressive the government has gotten so far in trying to prevent this destructive pattern.
In the end, the director of the CFPB explained the purpose of the rules best when he recently noted that they “will provide a fairer and more effective process for troubled borrowers who face the potential loss of their homes.”
Source: Washington Post, “Consumer finance agency finalizes rules to protect mortgage borrowers from runarounds, fees,” Jan. 17, 2013