CFPB proposes additional mortgage servicing rules
[Update 2: Adds response from Mortgage Bankers Association]
The Consumer Financial Protection Bureau is considering an additional set of rules to change how mortgage servicers interact with customers, as the agency continues to evaluate the industry’s practices.
The considered changes, released by the CFPB late Monday, include proposals to clarify billing statements and give advance warning of interest-rate changes and so-called force-placed insurance.
The agency said these additions to mortgage servicing rules would provide more transparency and accountability. It’s an industry that went mostly unregulated, particularly for nonbank entities, before the creation of the CFPB.
“For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress,” CFPB Director Richard Cordray said in a news release. “It’s time to put the ‘service’ back in mortgage servicing.”
The agency said it plans to make a formal proposal of these rules this summer and finalize them by January 2013.
Other rule changes under CFPB consideration include immediate credit for a monthly mortgage payment and quick consideration or correction of billing or foreclosure errors.
David Stevens, president of the Mortgage Bankers Association, said the proposed changes could give more confidence to borrowers and servicers by creating uniform rules across the country.
“It is important that the final rules don’t give preference to one business type over any other, nor should they inhibit innovation or discourage new companies from entering the marketplace,” Stevens said in a news release.
The possible changes in part follow previous announcements and requirements set out by the Dodd-Frank Act, which formed the CFPB. They also follow, of course, the $25 billion mortgage settlement that set out servicing requirements for the five banks involved.
But the CFPB is also considering additional servicing changes per its own discretion via Dodd-Frank. Those include rule proposals regarding direct access to and early information on foreclosure prevention assistance for borrowers, as well as up-to-date records meant to help employees.
The CFPB released a more detailed look Tuesday at the considered proposals, which will be reviewed by its small business panel.