New rules that would provide additional protections for
consumers in their dealings with the companies that collect
mortgage payments have been put forward by the Consumer Financial
The proposed rules include requirements that mortgage servicers
give borrowers advance notice of initial rate increases on
adjustable rate mortgages (ARMs), puts limits on so-called "forced
place" insurance and requires that mortgage payments be credited
the day they are received.
The rules also would provide new protections for at-risk
borrowers, including early intervention with delinquent borrowers
to inform them of their options.
Here's a rundown of what the proposed rules would do:
- Mortgage servicers would be required to give ARM borrowers 6-7
months advance notice before the first rate adjustment occurs,
along with advance notice of any subsequent adjustment that would
increase a homeowner's monthly payments.
- Lenders would have to provide homeowners with two months
advance notice before mandating the purchase of "forced place"
insurance in order to give them time to purchase alternative
coverage. Forced place insurance is ordered by the mortgage
servicer when the servicer suspects the borrower's homeowner's
insurance has lapsed, and is controversial because the costs are
commonly much higher than regular homeowner's insurance.
- Mortgage payments must be credited on the day they are
- Mortgage servicers must put in place procedures to ensure they
can keep track of and readily find documents and information
provided to them by borrowers. Lost documentation has been a major
source of complaints among homeowners seeking mortgage loan
- Borrower concerns about potential errors with their mortgage
account must be addressed in a reasonable length of time and
certain requests for information must be honored.
- Delinquent borrowers seeking to avoid foreclosure must be able
to get in touch with the correct people at a mortgage servicer who
are in a position to address their concerns.
- Servicers will be required to make an appropriate review of
applications for loan modifications or other foreclosure avoidance
measures submitted by at-risk borrowers.
The rules implement portions of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, enacted in 2010. The bureau
will collect feedback on the proposed rules through Oct. 9 before
the final rules are issued some time later.
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