Consumer Protection Bureau Poposes New Federal Mortgage Rules

Posted on Aug 10, 2012

The Consumer Financial Protection Bureau's new rules are designed to prevent a repeat of the foreclosure crisis.

"From processing payments to evaluating struggling homeowners and helping them avoid foreclosures, the bottom line is to treat consumers fairly by preventing surprises and runarounds," stated Richard Cordray, the bureau's director.

Some of the rules mirror requirements that were agreeed to by large mortgage servicers, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., as part of the $25-billion settlement over foreclosure abuses, with federal and state officials .

The bureau's proposed rules would apply to all mortgage servicers, with some exceptions for small companies, and focus on two areas: providing clear and timely information for homeowners about their loans and helping them avoid bureaucratic hassles.

Servicers will be required to send homeowners a monthly statement with a clear breakdown of payment information and due dates; provide a warning 210 to 240 days prior to the first interest rate change on an adjustable-rate mortgage, along with an estimate of the new rate; give advance notice of plans to charge homeowners for property insurance if their policies lapse; and make a good-faith effort to contact borrowers who fall behind on their payments to tell them of ways to avoid foreclosure.

Foreclosure prevention is the focus of another set of proposed rules. They include acknowledging a request to fix errors or other complaints within five days, then conducting an investigation and providing those results in 30 to 45 days.

The rules also would require a prompt review of applications for loan modifications and direct access to mortgage servicers' employees to better help borrowers.

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