New federal loan-servicing rules proposed
The Consumer Financial Protection Bureau says its proposals would eliminate the surprises and runarounds that borrowers experience today.
The federal Consumer Financial Protection Bureau has proposed new rules for mortgage servicers that it says will eliminate surprises and runarounds. Yes, we've heard this before. No, it hasn't happened yet.
The foreclosure crisis revealed numerous problems with how the companies that collect homeowners' mortgage payments do business. Consumers have complained of problems ranging from lost paperwork to unresponsiveness to outright fraud, including a process known as "robo-signing."
Post continues below
"The inadequate performance of many mortgage servicers has helped widen the misery for many Americans," Richard Cordray, director of the consumer agency, said in announcing the proposed rules. "Right now, consumers often struggle to get critical information about their mortgage loans. Many have a hard time correcting errors. They often do not know about options to avoid foreclosure. And when they are trying to keep their homes and find options that make sense, they often get little help from their servicers. … Right now, people have too little protection under federal law if their mortgage servicer surprises them with costly fees or gives them the runaround."
Consumers get no choice in which company services their mortgage. That decision is made by the lender. If you get bad service, you can't switch.
The bureau is seeking public comment through Oct. 9 on the proposed rules, which it first announced in April. Final rules will go into effect early next year.
Among the proposed new rules:
- Mortgage statements would have to clearly state the amount due and how past payments have been applied.
- Borrowers would have to be notified starting six months in advance when interest rates were scheduled to change.
- Servicers could not impose "forced-place" insurance without first giving borrowers two notices estimating the cost.
- Payments would have to be credited the day they are received.
- Servicers would have to review alternatives to foreclosure with delinquent borrowers.
Will these new rules really improve the process? Ben Hallman at The Huffington Pot is skeptical. He writes:
But there is reason to question whether servicers would follow the new rules, and whether regulators would enforce them. The mortgage industry has made promises before -- in deals reached with the Office of the Comptroller of the Currency and other federal agencies last year and as a condition of the $25 billion settlement with 49 states and the federal government six months ago.
The first set of new servicing standards were mostly ignored by the industry, housing advocates said. Early returns on compliance with the attorneys general settlement are not encouraging, they added.
* and balloon payments are history
* leonine closing costs, filing fees, and loan application fees a thing of the past
* loans are not affected by amount in savings and checking accounts
No matter what
and rates can not be changed, no matter what..
and a home buyer can not be evicted if the loan is current no matter what
and there will be no small print meant to fool the borrower no matter what
and the contract will not be sold or bought by no derivative banking products no matter what
and ARM contracts will be avoided at all costs when everybody knows rates will be adjusted upwards
Unless we fund a good enforcement agency and make sure that CEO's etc face stiff penalties then those same companies who are already flouting the law will continue rewarding themselves for non compliance.
Romney and his sham friends have insisted the companies are people so if that's the case then any management team of a company should face the same penalty as a private citizen!
Like this will ever work... Really, it took 1,099 pages? Who agrees that the banks, investment lenders, shady lenders and predatory lenders will either not comply - Pay a fine? Sure, they can afford it... Find or create MASSIVE LOOPHOLES - with Government approval? They're paying taxes so who in Washington cares...
Once again I ask - When did we allow 3 "CRA's" (Credit Reporting Agencies) to rule the roost and guide lenders to become predatory? You fall behind and agree to make payments - the company decides thats not enough and demands payment in full - Collections time - There goes your credit score...
Let's be realistic, for a moment. Unemployment is at 23+%, more than 15+% of people are at or below the "Poverty Level". 1% of the population still controls 96% of the money. Employers are freezing our wages, raising costs for Medical Benefits, so they're not really a benefit. The Housing Market is in the toilet, yet prices have gone up 7+% since the beginning of the year.
Something is DRASTICALLY WRONG, and this "rule" won't help...
Our government is so reliant on the financiall industry that I can't see any reform that puts them in any financial hardship. In other words if they cheat us so that they have more money to contribute to campaigns "new" regulations will have the necessary holes so that the status quo can be maintained.
Having worked in this industry for a number of years I can assure you that the lenders/servicers will either ignore the new rules or find their way around actual compliance. Unless we're willing to provide enough staffing for the regulators to be able to do regular, thorough and also some surprise inspections there is no point in writing new regs. In addition the penalties need to be immediate, draconian, and applied all the way up the command chain. If we go on thinking that the lenders "want" to do the right thing, nothing will change. We have to force them to do the right things.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.