The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes several new requirements related to the servicing of mortgage loans. These new requirements will take effect automatically on Jan. 21, 2013, unless the Consumer Financial Protection Bureau (CFPB) issues final rules prior to that date. On April 9, the CFPB offered a sneak peek at its plan to formally propose mortgage servicing rules this summer and finalize them by January 2013.
The proposed rules under consideration were announced by the CFPB under the banner of “Putting the Service Back in Mortgage Servicing: No Surprises, No Runaround.” To accomplish this goal, the proposed rules being considered would require servicers to provide:
►Monthly mortgage statements that break down principal, interest, fees, escrows and due dates.
►Disclosures before adjusting interest rates on adjustable rate mortgage loans.
►Notices prior to charging the borrower for force-placed insurance, plus special procedures for borrowers with escrow accounts and rules for terminating force-placed insurance.
►Same-day crediting of monthly payments, with special rules for partial payments.
►Timely response to borrower notification of possible errors, and for delinquent borrowers, early information about options for avoiding foreclosure.
►Direct, ongoing access to staff who are dedicated to servicing troubled borrowers.
The rules being considered would also require servicers to establish information management policies and implement procedures designed to minimize errors and facilitate quick corrections.
Also on April 9, the CFPB published an outline prepared for a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, which provides a preliminary assessment of the potential benefits and costs to the types of small business and other small entities that would be subject to the proposals being considered, including community banks, credit unions, independent servicers, small non-profit organizations, and potentially, small government jurisdictions. Included in the outline were prototype periodic statements, adjustable-rate mortgage (ARM) reset notices, and force-placed insurance notices that have been tested with consumers in different parts of the country. Also attached was a detailed description of procedures being considered for error resolution and responding to borrower inquiries.
Accordingly, servicers and lenders that act as either the master servicer or sub-servicer for mortgage loans may wish to monitor developments with this proposed servicing rule.
Laurie Spira is chief compliance officer with Torrance, Calif.-based DocMagic Inc. She may be reached by phone at (800) 649-1362, ext. 6446 or e-mail
[email protected].
