The Consumer Financial Protection Bureau announced new proposals on Friday to protect consumers from unexpected costs and shoddy service by companies that collect their mortgage payments.
The Bureau (CFPB) outlined the proposals as two new sets of rules, saying the regulations would make the mortgage servicing industry more transparent and the consumer less vulnerable to bureaucratic red tape.
“Millions of homeowners are struggling to pay their mortgages, often through no fault of their own,” said CFPB Director Richard Cordray. “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.”
The proposed rules would require companies to issue clear monthly mortgage statements, credit customers’ payments promptly, warn borrowers before interest rate hikes, and help them avoid foreclosure. Many borrowers have complained about problems seeking loan modifications or other alternatives to avoid foreclosure. A common complaint is that servicers lose the applications and paperwork for loan modifications.
Mortgage servicers are responsible for collecting payments from the mortgage borrower on behalf of the loan’s owner. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. Generally, the borrower has little say in the choice of mortgage servicer.
The new proposals are open for public comment until Oct. 9. The agency will finalize them in January 2013.