Improving how mortgages work
The year old Consumer Financial Protection Bureau (CFPB) seeks to give homeowners better information on outstanding balances and pending interest rate changes by proposing new rules and finalizing their new streamlined mortgage disclosure form which it began to overhaul by reaching out to the graphic design community in early 2011.
New rules proposed include requiring servicers to respond to homeowners’ calls for information or complaints of errors within five days, a simple rule that both sides of the aisle agree to. CFPB Director, Richard Cordray said the rules are simply to eliminate surprises for homeowners, saying that “We want to make sure that at all times consumers can get information about how much they owe, what they are paying, and how their payments are being applied. And if consumers fall behind on their mortgage, we want them to know how to assess their options and take action.”
Other rules include requiring servicers to send regular bills to homeowners each billing cycle that clearly outline payments by principal, interest, fees, and escrow, alongside the amount of the next payment due, the due date, and warnings about any potential fees the homeowner might incur. Servicers would be required to warn homeowners that their interest rate on any adjustable rate mortgage will be changing, as early as seven months prior to any changes made.
Other proposed changes
One major change proposed is servicers’ being required to credit homeowners’ mortgage accounts on the day they receive payment, and they cannot charge borrowers for force-placed insurance unless homeowners have been warned first and a “reasonable basis” is outlined for why the policies are being dropped. If a homeowner gives the servicer proof of insurance, the servicer has to end the force-placed insurance policy within 15 days and refund any premiums.
Earlier this year, a $25 billion settlement was reached with the largest mortgage servicers as state and federal investigations found widespread fraud. Terms of this settlement overlap slightly with the CFPB’s proposal, but for the first time will require servicers to actually communicate with borrowers.
The public can comment on the proposed rules until October 9th, and for the proposed mortgage disclosure form, Americans have until November 6th to comment. The CFPB seeks to shore up and put the new rules into effect by next January.