CFPB Releases Proposed Servicing Standards

On August 9, 2012, CFPB Director Cordray held a media briefing announcing the impending release of proposed national servicing standards to protect consumers especially those undergoing challenges in making their monthly payments on mortgages.

“The major failures in this industry demonstrate that all servicers need to meet basic standards of good customer service,” CFPB Director Richard Cordray said in a call with reporters.

He said the proposal reflects “two basic, common-sense standards — no surprises and no runarounds.”

The comment period is 60 days from publication of the proposed rule in the Federal Register.

The proposed rules cover nine major topics and implement Dodd-Frank Act provisions that relate to mortgage servicing.

 

  • Periodic billing statements (TILA proposal) -Servicers would be required to provide clear billing statements including information on the loan, amount due, and application of past payments.
  • Adjustable-rate mortgage interest-rate adjustment notices (TILA proposal) – Servicers would be required to provide consumers with a new notice 6 to 7 months before the first rate adjustment, as well as earlier and improved notices before rate adjustments causing an increase in a consumer’s mortgage payments.
  • Prompt payment crediting and payoff payments (TILA proposal) – Payments must be applied as of the day they are received, and the handling of partial payments is clarified.
  • Force-placed insurance (RESPA proposal) – Servicers can only charge borrowers for buying insurance on the property when they have a reasonable basis to believe that the borrowers have let their own insurance lapse and have given borrowers two notices estimating the cost of the “force-placed insurance.”
  • Error resolution and information requests (RESPA proposal) -Mistakes happen, but they need to get fixed. Servicers must address borrower concerns about possible errors within certain timeframes and provide the information they request.
  • Information management policies and procedures (RESPA proposal) – Servicers must have reasonable policies to ensure that when borrowers provide documents and information the servicers can find and use them.
  • Early intervention with delinquent borrowers (RESPA proposal) –  Servicers must work with delinquent borrowers with early intervention and information about options available.
  • Continuity of contact with delinquent borrowers (RESPA proposal) – Servicers will insure delinquent borrowers will be able to contact the right people to get information and take steps to avoid foreclosure.
  • Loss mitigation procedures (RESPA proposal) – Servicers would be required to appropriately review borrower applications for loan modifications or other options to avoid foreclosure.

Mortgage servicing companies would be required to provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure. The rules also require companies to credit people’s payments promptly, quickly correct errors and keep better internal records.

The CFPB plans to finalize the rules by January 2013. Comments may be submitted at www.regulations.gov. In addition, the Cornell University e-Rulemaking Initiative (CeRI) and the CFPB are working together to create an online environment for people and groups to learn about, discuss, and react to the proposed mortgage servicing rules, it will be located at www.regulationroom.org

Summary of Proposed Mortgage Servicing Rules

2012 Truth in Lending Act (Regulation Z) Mortgage Servicing Proposal

2012 Real Estate Settlement Procedures Act (Regulation X) Mortgage Servicing Proposal

CFPB Servicing Fact Sheet

SBREFA Report on Servicing

CFPB Forms Testing Report