The CFPB previewed mortgage loan servicing rules under consideration. Generally, the rules would implement requirements of the Dodd-Frank Act, which would go into effect on January 21, 2013, unless final rules are issued on or before that date. The concepts in the rules being considered outside the Dodd-Frank provisions are consistent with servicing requirements in the recent mortgage servicing consent orders and related Fannie Mae and Freddie Mac guidelines. Rulemaking is planned in eight areas:
Monthly Mortgage Statements. Servicers would be required to provide borrowers with monthly statements containing certain information, such as a summary of loan terms; breakdown of payments by principal, interest, fees, and escrow; late fee warnings; and information about loss mitigation options for delinquent borrowers.
ARM Adjustment Disclosures. Earlier disclosures of interest rate changes on most ARMs would be required. The disclosures would include an explanation of how the new payment is determined and when the change goes into effect; amount of the new payment; list of alternatives that may be pursued if the new monthly payment is unaffordable; contact information for housing counselors; and amount of any prepayment penalty.
Force-Placed Insurance. Servicers would be required to provide two notices to borrowers before charging for forced-placed insurance. The notices would include a good faith estimate of the insurance cost.
Communication of Loss Mitigation Options. Servicers would be required to make good faith efforts to contact delinquent borrowers to inform them of their options to avoid foreclosure. In these contacts, servicers would have to provide borrowers with information about the foreclosure process, loss mitigation options, and housing counselor availability.
Payment Crediting. Payments would have to be credited to the account on the day received. Partial payments may be retained in a suspense account, but must be applied to the earliest delinquent payment when the suspense account balance reaches one full monthly payment.
Error Resolution. Servicers notified of certain servicing-related errors by borrowers would generally have to acknowledge receipt of the notice within five days and conclude the investigation in 30 days. Shorter timeframes would be imposed on errors relating to payoffs and foreclosures.
Access to Servicer Foreclosure Prevention Team. Servicers would be required to provide delinquent borrowers with direct, ongoing access to staff dedicated to servicing troubled borrowers.
Recordkeeping. Servicers would have to establish information management policies designed to minimize errors; maintain records of borrower contacts; and facilitate loss mitigation by managing information submitted by borrowers and providing servicing personnel access to borrower records.
Greater details of the rules are contained in an outline prepared by the CFPB for the Small Business Regulatory Enforcement Fairness Act Panel convened to consider the potential impact of rulemaking on small businesses. The outline includes model disclosures that have been undergoing testing. The CFPB also provided the Panel with questions to consider in its evaluation. The CFPB indicated that it expects to formally propose these rules this Summer, and to finalize them in January 2013. Click here for the CFPB’s fact sheet on the rules under consideration, here for the outline and here for the panel questions.