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CFPB begins mortgage rule discussions
WASHINGTON (4/11/12)--The Consumer Financial Protection Bureau (CFPB) this week said it is considering a series of new mortgage rules that aim to increase transparency and accountability in the market.

"The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds," CFPB Director Richard Cordray said. "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," he added.

The CFPB said it would release an advanced notice of proposed rulemaking this summer, and release the rules for public comment before finalizing them in January of 2013. The agency said it could provide an implementation period of up to one year, but has not decided how long of a transition period is necessary yet.

According to the CFPB, some of the rules under consideration would require:

  • Mortgage servicers to provide regular mortgage statements covering the mortgage loan's principal, interest, fees, and escrow, the amount of and due date of the next payment, and, in some cases, information on financial and foreclosure avoidance counseling;
  • Servicers to warn mortgage holders before interest rate changes are made to their adjustable-rate mortgages; and
  • Increased contact with mortgage holders before foreclosure proceedings can be initiated.
Lenders could also be required to provide greater information on help that is available to homeowners facing foreclosure.

Some of the rules would also address force-placed insurance, which can be purchased by mortgage servicers when mortgage borrowers do not maintain hazard insurance on their properties. Force-placed insurance can often be far more expensive than privately purchased insurance. Under one of the proposals, alternatives to force-placed insurance could be offered to consumers, and warnings and disclosures would need to be provided before force-placed insurance is purchased.

Other proposed rules could require servicers to post mortgage payments promptly after they have been received, to increase mortgageholder ease of access to their own account information, and to quickly correct account errors.

The agency said it may also work with other regulators to collaboratively address mortgage servicing issues. The CFPB said it would meet with a Small Business Review Panel to discuss the proposal and "will also be conducting other outreach to gather feedback from consumer groups, industry, and other agencies."

The CFPB also continues to work on revised mortgage applications and mortgage loan closing documents, and proposed forms of these disclosures are scheduled to be released in July.

For more on the CFPB's potential mortgage servicing rules, use the resource link.
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