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CFPB Releases New Regulations for Mortgage Servicers

by Reno Manuele

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Just a week after releasing landmark regulations of residential mortgages, the CFPB has released new industry-wide rules for mortgage servicers.

Just a week after releasing new standards for residential mortgages, the Consumer Financial Protection Bureau (CFPB) is at it again this week, releasing the first nationwide standards for mortgage servicers.

Looking to curb the abuse of the robo signing scandals, the CFPB’s servicing rules, which includes restrictions on dual-tracking and required consideration of loan modifications, will take effect in January 2014, and will apply to all mortgage servicers, though smaller operations that service fewer than 5,000 loans will be excluded.

CFPB Mortgage Servicing Rules

As previously stated, the CFPB’s mortgage servicing rules intend to stop an phenomenon like the robo signing scandals – the abuses of which have been documented far and wide – from ever repeating itself. To accomplish that, the mortgage servicing rules include such provisions as:

  • Dual-tracking, where a servicing company simultaneously conducts modification proceedings and foreclosure proceedings on a home, will be significantly restricted, and mortgage servicers will be forbidden from starting foreclosure proceedings if a completed application for either a modification or foreclosure alternative (a short sale, for instance) has been submitted.
  • Also, if a borrower has missed two consecutive payments, mortgage servicers are now required to provide the borrower with all loss mitigation options in the form of a written notice.
  • A good deal of the CFPB’s rules also deal with communication – mortgage servicers must allow delinquent borrowers to easily contact employees with loan issues, and notify borrowers when segments of modification applications are incomplete, along with providing constant updates on the progress of loan modifications.
  • Additionally, servicers must provide borrowers with clear monthly statements, which will provide information on the amount due, the date of the next payment and the costs of the loans principal, interest, fees, escrow, etc.

Richard Cordray – New Rules Remedy Flaws of the Past

The CFPB has reported that half of its consumer complaints in the second half of 2012 related to mortgage servicing, and the agency’s director, Richard Cordray, said the rules were a direct outgrowth of the housing meltdown.

“Servicers were unprepared to work with borrowers that needed help to deal with their individual problems,” Cordray said. “People did not get the help or support they needed, such as timely and accurate information about their options for saving their homes.  Servicers failed to answer phone calls, routinely lost paperwork, and mishandled accounts.”

But what are your thoughts? Will these rules help homeowners and avoid another robo signing scandal?

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