New Mortgage Servicing Rules Issued by CFPB
In remarks to a Mortgage Servicing Field Hearing this morning, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), announced the release today of CFPB's final Mortgage Servicing Rules spoke and personally about the need for the new regulations. The rules set for the responsibilities of servicers to their borrowers, outlining requirements for servicers to meet in collecting payments and maintaining performing loans in their portfolios and in managing delinquent and defaulted loans from initial collection contacts through foreclosure.
Cordray told of the first time in encountered a "foreclosure crisis." It was in 2004, several years before the nationwide and ongoing one. As treasurer in his Ohio county he noticed there was suddenly an unusual number of people losing their homes. This was puzzling to because there appeared to be no underlying economic cause. Local officials organized a "Save our Homes" task force and mounted a public information campaign advising people to "call your lender."
The Director said this was the first time he realized that a problem had been building for years and that foreclosure filings in Ohio had set a new record each year from 1996 to 2009. "Predatory lending, equity stripping, and outright fraud created many of the problems," he said, but a notable feature of the situation was how often people with a problem were entirely unable to find a solution. 'Call your lender,' we had advised," but then we discovered a disconnect - "the direct link between borrower and servicer had snapped." "'Call your lender' was not the answer if people did not know whom to call and could not get help even if they did know. People were trapped in a broken system, with deeply tragic consequences."
Cordray said the CFPB has been writing rules to address the main flaws of that broken system. Americans have about $10 trillion in mortgages on their homes most of these mortgages are managed by servicers. "Because of what servicers do and the size of the market, their effects on borrowers can be profound."
The new mortgage servicing rules achieve two main objectives. First, they will help prevent all borrowers from being caught off guard by surprises and getting the runaround from their servicers. Second, there are special protections for borrowers who a