The Consumer Financial Protection Bureau which was formed under the Dodd-Frank Act has decided to bring some new rules in the mortgage lending industry. These new rules have been devised in order to reduce the foreclosure rates in the country. The rules have been created to help the struggling and hapless homeowners in the country. If the proposed rules get implemented in the country, then the homeowners will be able to get an accurate picture of their monthly mortgage payments and can possibly avoid foreclosure.
Reasons why CFPB wants to bring new rules
Mortgage servicers are the backbone of the mortgage industry. They handle several things single handedly. For example: mortgage payments, escrow accounts, modification of the loans, customer service, etc. However, these servicers are not much concerned about the needs and requirements of the homeowners nowadays. This lack of initiative on the part of the mortgage servicers has made a terrible impact upon the homeowners. The recent rise in the mortgage problems and foreclosure applications has increased due to the lethargic approach of the mortgage servicers.
Ever since its inception, CFPB has been trying to help the consumers in every possible way. They know that homeowners/borrowers are suffering for the incompetence of the mortgage servicers. They want to fix these problems by implementing some new rules.
The new rules aim to look at the 2 main problem areas -
i)Lack of responsibility
ii)Lack of transparency
In the last few years, several struggling homeowners have complained of not getting assistance from the mortgage servicers regarding various things. Some homeowners have lamented that the mortgage servicers have not given them information about the ways to stay away from foreclosure. Others have argued that their financial situations had deteriorated due to the lack of proper information from the mortgage servicers.
The new rules have been planned to put an end to all these accusations. Hopefully, once the rules come into effect, the percentage of the mortgage servicers' errors will be reduced and homeowners will be able to protect their homes from foreclosure.
CFPB - The proposed rules for the mortgage industry
Check out some rules that are most likely to be implemented in the coming days.
1. The homeowners should get clear statements in every month: The mortgage servicers will have to send a proper statement to the homeowners in every month. The homeowners have the full right to know everything. The statements should reveal the following things:
Principal amount and the interest rates
A complete analysis of the payments
The amount the homeowner has to pay in the following month
The date by which the next payment has to be made
Details about loss mitigation options (this is mainly applicable for the people lagging behind on their payments)
2. The homeowners should be informed about the rate changes: As per the new rule, the mortgage servicers have to inform the homeowners about the possible interest rate changes on the ARMs. They will have to give a disclosure containing the following information:
The date on which the interest rate will be adjusted
The date on which the interest rate will come into effect
The prepayment penalty amount
What can the homeowners do if they can't make new monthly payments
A good faith estimate
How the rate payment will be decided
3. The homeowners should be told how to avoid force placed insurance: CFPB feels that mortgage servicers should not impose force placed insurance upon the homeowners. If a servicer feels that a homeowner didn't pay the property insurance deliberately, then he will have to ask the homeowner for a proper explanation. The homeowner has to show a valid proof before the servicer charges him for the insurance. Moreover, the homeowner should be told how much he will have to pay for the force placed insurance.
The servicer will have to cancel the insurance if the homeowner is able to prove within 15 days that his house is insured. In such a situation, the mortgage servicer will have to refund the premium amount.
4. Homeowners should know about the ways to avoid foreclosure: The mortgage servicers will have to get in touch with the delinquent homeowners and tell them about the ways to avoid foreclosure. The homeowners should be told about the foreclosure process.
Mortgage servicers are accountable to the homeowners. CFPB feels that homeowners should not bear the brunt of the mistakes made by the servicers. For instance: if the mortgage servicers commit any error, then they will have to accept it within 5 days of the incident and proper investigation should be carried out within 30 days.