Federal Officials Issue New Rules for Mortgage Servicers Aimed at Protecting Homeowners from Foreclosure:
Restrictions on foreclosure proceedings while borrower seeks a mortgage modification: Referred to as “dual-tracking,” servicers will no longer be able to start foreclosure proceedings on borrowers while they are actively seeking a loan modification or other alternative to foreclosure. To give borrowers time to apply for a modification, servicers cannot file the first foreclosure notice until the borrower falls at least 120 days behind on payments.
No foreclosure sales until alternatives are considered: If a borrower applies for a loan modification at least 37 days before their foreclosure auction is scheduled, the servicer must consider and respond to the request. They also must give the borrower enough time to accept an alternative to foreclosure before proceeding with the sale.
Consider all foreclosure alternatives: After a borrower has missed two consecutive payments, the servicer must send a written notice with examples of alternatives to foreclosure the borrower can pursue.
Provide direct access to help: Servicers will be required to provide borrowers with easy access to employees who are dedicated and empowered to help them.
Publish clear mortgage statements: Servicers will have to break down mortgage payments by principal, interest, fees, and escrow (to pay property taxes and insurance premiums) and include the amount and due date of the next payment, recent transactions and alerts about fees.
Offer early warnings on rate hikes: For most adjustable-rate mortgages, servicers must notify borrowers about upcoming interest rate changes that will affect their payments. If the new payment is unaffordable, servicers must provide information about alternatives and counseling.
Avoid overpriced “force-placed” insurance: Mortgage borrowers are nearly always required to insure their homes but if they don’t have coverage, their servicers can buy insurance for them and charge the premiums to the borrower. This “force-placed” insurance can be very expensive and the CFPB would require servicers to give advance notice and pricing information before putting clients into this coverage. If servicers buy the insurance but receive evidence that it was not needed, they must terminate it within 15 days and refund the premiums.
Credit payments and correct errors quickly: Servicers must credit a consumer’s account on the date a payment arrives. They will also have 7 business days to respond to written requests from borrowers to pay off the balances of their mortgages.
Also, within 30 days, servicers must conduct an investigation and either correct an error or dispute it.
Maintain accurate, accessible documents and information: Servicers must store borrowers’ information in a way that allows it to be easily accessible. They must also have policies and procedures in place to ensure that they can provide timely and accurate information to borrowers, investors, and in any foreclosure proceeding, the courts.
If you or someone you know is having trouble keeping up with mortgage payments, or need assistance in in any aspect of real estate, banking, or finance law, do not hesitate to contact us for a free consultation with an attorney. We are experienced in foreclosure law, including loan servicer’s liability, bankruptcy, foreclosure trustees’ responsibilities and duties. Our firm has successfully handled numerous similar cases from litigation, settlement, and all the way through trial. CALL US TODAY!