The Consumer Financial Protection Bureau issued new rules on Thursday to protect struggling homeowners facing foreclosure. The rules also protect mortgage borrowers from costly surprises and runarounds by their servicers.
“For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures,” said CFPB Director Richard Cordray. “Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”
Mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. Generally, borrowers have no say in choosing their mortgage servicers. Lenders frequently sell loans to investors after the mortgage deal is signed, and the investors, not the consumers, often choose the servicers.
CFPB said it will now permanently require mortgage servicing companies to provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure.
The rules are stricter in some respects than a proposal outlined by the agency in August. For example, companies may not proceed with the foreclosure process while they work with borrowers on steps that could prevent foreclosure. Under former rules, borrowers could lose their homes to foreclosure while they were in the process of seeking lower monthly payments.
The rules are part of a sweeping overhaul of mortgage rules by the agency. Consumers can find a fact sheet describing all the new regulations here.