Consumer Financial Protection Bureau Outlined Rules to Simplify Mortgage Points and Fees

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Now,As a response to many complaints about the lack of transparency in mortgage companies, the Consumer Financial Protection Bureau (CFPB) is considering implementing a new set of rules designed to make mortgage servicers more accountable towards homeowners. The new rules will be formally proposed this summer, and the CFPB hopes to have them finalized by January 2013.

Proposed Mortgage Servicer Changes

Mortgage servicers operate as the go-between for the owner of the loan and the borrower. They handle collections, loan modifications, and foreclosures, and are supposed to provide customer service for the borrower. As many people already know, borrowers do not get to choose their mortgage servicer, and this has led to many borrowers being unhappy with the way their mortgage services treats them. Complaints range from surprise interest-rate adjustments to a complete lack of notification about foreclosure. To deal with these problems, the CPFB hopes to implement the following policies:
1. Clear Monthly Mortgage Statements – Requires mortgage servicers to provide monthly bills that list a complete breakdown of all payments, and clearly include the amount and due date of the next mortgage payment. They must also provide delinquent borrowers with adequate information about how they can avoid foreclosures. This change means to address issues of transparency between mortgage servicers and borrowers.

2. Early Warning on Adjustable Interest Rates – Well before any interest-rate changes on an adjustable mortgage, the mortgage servicer must provide advance notice to the borrower. They must also list resources the homeowner can use if the new rate is unaffordable. In the past, many homeowners complained about having no notice that their interest rates were going to change.

3. Ways to Avoid “Force-Place” Insurance – Mortgage servicers must give advanced notice to borrowers who do not have hazard insurance on their home that they must purchase this insurance by a certain date, or else the servicer will purchase it for them. This is to avoid past problems of homeowners forced to pay high insurance premiums on a policy that the mortgage servicer purchased without notifying the borrower.

4. Additional Foreclosure Options – Mortgage servicers must make all possible efforts to provide information and options for delinquent buyers to help them avoid foreclosure. They must also respond to borrowers who have difficulty paying their loans in a timely manner. This is due to complaints many homeowners had about their mortgage servicer not giving them accurate notice that their house was going into foreclosure.

5. Greater Customer Service – Designed to implement customer-friendly policies, these new rules would force mortgage services to immediately credit payments, keep all records up-to-date, and quickly correct any errors.

Helpful Additions or Too Little, Too Late

Clearly, the CPFB is trying to help homeowners with these new rules. That the CPFB feels the need to enforce basic concepts like immediate payments and up-to-date records, shows exactly how out-of-touch many mortgage servicers were to their borrowers. The effectiveness of these new rules seems to hinge on a homeowner’s financial status. Those in sound financial standing will be able to stay better informed about their payments. Delinquent borrowers will at least be provided with options on how to handle their future payments and avoid foreclosure. However, for those homeowners already trapped in the foreclosure process because of bad policies on behalf of mortgage servicers, it seems like there will be little relief. These new rules are designed to prevent foreclosures, but offer lackluster options for a homeowner whose house has already been foreclosed. Furthermore, these new rules do not consider the option of letting a borrower choose their own mortgage servicer. If borrowers were able to choose a mortgage servicer, then these companies would have to compete for their business. This would naturally lead to mortgage servicers enforcing better business practices.

About the Author: Ryan Devereux is a writer who knows that foreclosures are terrible burdens. He is specialized to provide information on good mortgage refinance rate at an affordable price.