Federal Regulators to Propose New Rules for Mortgage Servicers
New consumer protection rules will require mortgage servicers to provide more information to borrowers. Learn more in the following article.
June 01, 2012 /24-7PressRelease/ -- The Consumer Financial Protection Bureau (CFPB), a federal agency that supervises mortgage companies and consumer lenders, recently proposed new rules that would require mortgage servicers to give all borrowers standardized monthly statements and warn them about interest rate or insurance changes.
According to a HuffingtonPost.com report, the new rules would also require servicers to make "good-faith efforts" to contact borrowers at risk of foreclosure and provide them with viable options to avoid losing their homes.
Richard Cordray, the agency's director, explained how the new rules would benefit homeowners during a speech last month. "By fixing these root causes of mortgage servicing problems - and securing transparency and accountability for borrowers - consumers would have clearer information about their options to keep their homes and would be in a better position to hold servicers accountable for their decisions," Codray said.
The 2008 housing market crash affected millions of American homeowners. In the aftermath, federal investigations revealed a number of deficiencies that led to illegal foreclosures. Many mortgage servicers failed to have systems in place for proper foreclosure governance, document preparation methods and record keeping. More importantly, regulators found rampant use of "robo-signing," where employees signed foreclosure affidavits attesting to how they had personal knowledge of the accompanying documents when they hadn't read or verified them.
In February, the nation's five largest mortgage lenders agreed to overhaul their mortgage servicing practices and pay $25 billion to U.S. states to help those who lost their homes or face foreclosure. Minnesota homeowners reportedly will be eligible for relief under national settlement, which includes $113 million in monetary and refinancing payments and $167 million in principal reductions and other relief.
In the meantime, the new mortgage servicing rules will be formally proposed this summer, and the bureau hopes to finalize them by January 2013. The new rules are designed to regulate the banks, but may not create a private right of action for homeowners.
Article provided by Blaschko and Associates Law Firm, PLLC
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