CFPB Rule Targets Force-Placed Insurance, More

The Consumer Financial Protection Agency Friday issued two proposed rules designed to make mortgage servicing more consumer friendly, giving borrowers advanced notice of interest rate adjustments and how to avoid costly forced-placed insurance.

The proposed rules also set standards for timely crediting of mortgage payments and assisting borrowers who have fallen behind on their payments.

The “major failures” by the servicers during the housing crisis “demonstrate that all servicers need to meet basic standards of good consumer service,” said CFPB director Richard Cordray.

Under the proposals, all but the smallest servicers must provide periodic billing statements that show the borrower’s payment status and any fees or additional charges assessed by the servicer.

Servicers that process 1,000 or fewer loans (they originated or own) will be exempt from this billing statement requirement.

The CFPB proposal contains model forms for periodic billing statements and notices servicers should send to borrowers with ARMs. The notices must be sent to ARM borrowers 60 to 120 days before their first payment adjustment.

The bureau is issuing the proposed rules for a 60-day day comment period that ends October 9.

Like the state Attorneys General settlement and the federal banking agencies’ consent orders with major servicers, the CFPB expects loan processors to provide a single point of contact (SPOC) for borrowers where this dedicated employee will have excess to all the information necessary to provide guidance and assistance.

 

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Servicing Law and regulation
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