Just after a mammoth judgment against Wells Fargo for providing inadequate mortgage services, the Consumer Financial Protection Bureau has announced mortgage servicers are next on their regulatory agenda. The CFPB wants the mortgage industry to make it easier for homeowners to avoid foreclosure.
Wells Fargo stung with penalty for bad services
Mortgage servicers have been under a microscope as a result of various misdeeds by mortgage lenders. One of the largest, Wells Fargo, was recently handed a heavy penalty for mishandling a customer’s mortgage, according to the Huffington Post.
Wells Fargo was ordered to pay $3.1 million in punitive damages to Michael Jones of New Orleans, as Wells had misapplied payments in accounting to interest on his mortgage, rather than the principal, which resulted in the bank charging Jones $24,000 in penalties and fees, forcing him into default and bankruptcy.
As a result of this and other instances of mortgage service malfeasance, the Consumer Financial Protection Bureau, according to Forbes, is looking to institute new rules for the mortgage service industry.
Agency proposes new rules
The Consumer Financial Protection Bureau has proposed new rules for mortgage services to help increase cooperation between homeowners and servicers to help avoid foreclosures.
Mortgage servicers are outside firms or divisions within banks that administer mortgage loans. They keep accounts, send statements, handle foreclosures and so forth. The CFPB wants mortgage statements to be clearer and regular statements with all information like balances and payment schedules clearly displayed. The CFPB also wants payments credited and errors fixed immediately and all records accurately maintained and immediately accessible by homeowners.
The CFPB also wants homeowners and their mortgage servicers to have a more cooperative relationship to help avoid foreclosures. The CFPB wants mortgage servicers to give ample notice of interest rate changes for people who have adjustable rate mortgages. Also, the agency would like servicers to contact homeowners at risk of delinquency or foreclosure early and often and give them access to foreclosure prevention services.
Finally, the CFPB wants servicers to notify homeowners of “forced-place” insurance, or hazard insurance that is often cheaper for homeowners to buy privately rather than have the lender buy it and charge the customer.
Just a proposal
CFPB director Richard Cordray is looking for ways “to put the ‘service’ back in to (mortgage) servicing” and get mortgage-servicing companies to establish “good faith” practices.
At the moment, the proposed changes to mortgage servicing regulations are just proposals, according to the Washington Post. The CFPB is going to put the proposed new rules before a small business panel for review before posting proposed rules for public comment sometime this summer.