Blogging for Change

Federal agency announces new rules to protect against foreclosure

by Jesse Campbell on
1/21/2013
in Housing and Homeownership

 

The Consumer Financial Protection Bureau (CFPB) recently announced new rules aimed at mortgage servicers with the goal of protecting homeowners potentially facing foreclosure. The rules primarily serve to promote two ends: keeping consumers out of homes they can’t afford and making it harder for financial institutions to foreclose on those homes once the consumer starts to fall behind.

The CFPB is a federal agency created in 2011 and tasked with regulating consumer protection as it regards to financial products and services. The agency's jurisdiction includes banks, credit unions, securities firms, debt collectors and mortgage-servicers, among other financial institutions.

The new rules, which go into effect Jan. 10, 2014, include the following:

Firmer regulations on ‘dual tracking’

Dual tracking occurs when a financial institution processes a potential home loan modification for a borrower while simultaneously moving forward with a foreclosure.

Under the new rules, if the borrower applies for a modification at least 38 days before a scheduled foreclosure auction the lender must consider and respond to the application before moving forward with the foreclosure. If a modification is agreed upon, the lender cannot begin foreclosure proceedings unless you fail to meet your end of the agreement.

In addition, lenders cannot file for foreclosure until the borrower has fallen at least 120 days delinquent.

Improved communication and early intervention

Lenders will now be required to provide a detailed periodic statement every billing cycle, including a breakdown of the principal, interest, fees and escrow included in the payment due. Lenders must also advise borrowers with an adjustable rate mortgage of their estimated new rate and payment amount at least seven months before those changes go into effect.

If a borrower begins to fall behind on their payments, their lender will be required to make a good faith effort to contact the borrower and create a solution to the issue, assigning the borrower a dedicated point of contact in order to facilitate communication.

Also, servicers will now be required to credit your account for payments on the day the payment is received. The new rules also set specific guidelines for how quickly reported errors must be investigated and corrected.

Restrictions on force-placed insurance

Force-placed insurance is homeowner’s insurance purchased by your mortgage servicer on your behalf. It’s often significantly more expensive than the insurance you would purchase for yourself. The new rules require that servicers provide advanced warning and pricing information before purchasing this insurance.

The Ability-to-Repay rule

These new changes come on the heels of the recently announced Ability-to-Repay rule, which places a higher burden on lenders to verify that the loans they are selling to consumers can truly and reasonably be paid back under the agreed upon terms. This means more stringent verification of borrower assets and income to ensure that consumers are not stuck with loans they cannot afford.

For more information on the Consumer Financial Protection Bureau and these new rules, visit their website at ConsumerFinance.gov.

If you’re currently struggling with your mortgage and aren’t sure what programs and options are available to you, Money Management International (MMI) offers free housing counseling 24 hours a day, 7 days a week, by telephone, Internet and in-person (in certain local markets).

You don’t have to struggle alone — contact us today and let us help you find a solution.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

Recommended Articles

Young couple standing in front of home that is for sale.
Housing Counseling & Resources
MMI offers a variety of housing counseling options. Connect with one of our trained counselors for one-on-one assistance.
Learn More
Learn more
  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.