By Tony Pugh, McClatchy Newspapers –
WASHINGTON — The Consumer Financial Protection Bureau on Tuesday will consider a host of new rules that would force the nation’s mortgage servicers to provide greater accountability and transparency in their dealings with borrowers.
Responsible for collecting payments on behalf of mortgage lenders, mortgage servicers typically calculate interest rates on adjustable-rate loans and handle customer service requests about taxes, escrow accounts, foreclosures and loan modifications.
But in the housing meltdown that preceded the Great Recession, mortgage servicers were strongly criticized for providing faulty information to struggling borrowers, failing to correct errors in a timely manner and generally not providing enough assistance to help homeowners avoid foreclosure.
New rules being considered by the bureau would make it easier for borrowers to get information from and communicate with their loan servicers.
“For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing,” said bureau Director Richard Cordray.
Proposals under consideration include requiring servicers to provide regular monthly statements with a breakdown of payments by principal, interest, fees and escrow. Another proposal would require servicers to make good-faith efforts to contact delinquent borrowers and explain their options to avoid foreclosure.
The bureau also will consider requiring servicers to provide advance warnings to borrowers about interest rate changes on their adjustable-rate mortgages. A similar advance-notice requirement is also being considered before mortgage servicers could attach costly “forced-placed” insurance on a property when borrowers fail to maintain hazard insurance. Forced-placed insurance is typically more expensive than owner-provided coverage.
The Dodd-Frank Wall Street Reform and Consumer Protection Act gave the bureau statutory authority to draft new guidelines to address problems in the mortgage servicing industry. The bureau will seek input from consumers and industry players before finalizing the new rules in January 2013.