Help Is On The Way – New Rules For Mortgage Servicers

Mortgage servicers to get new rules for dealing with comsumersLooks like the governments newest agency, the Consumer Financial Protection Bureau, is getting a little more serious.  They have proposed new regulations against Mortgage Servicers, the companies who collect your payments and harrass you when they’re late.

Although you may think that the company you send your monthly mortgage check to is your lender, in the vast majority of cases they are not.  In fact, they are simply a pass through that collects and processes your payment, and they then pay the actual lender.

How do they make their money? In addition to normally making a small amount for the actual processing of the payment, they make the bulk of their money by charging you fees for things such as late payments, a monthly servicing fee, etc.  They are also the ones responsible for actually initiating the foreclosure process if you become too delinquent.

These proposed new rules are an attempt at bringing some transparency to the process and leveling the field for borrowers, so at least they know where they stand.

Mortgage servicing companies would be required to provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure under the proposal by the Consumer Financial Protection Bureau.

The rules also require companies to credit people’s payments promptly, swiftly correct errors and keep better internal records.

“The major failures in this industry demonstrate that all servicers need to meet basic standards of good customer service,” CFPB Director Richard Cordray said in a call with reporters. He said the proposal reflects “two basic, common-sense standards — no surprises and no runarounds.”

Mortgage servicers are central players in the nationwide housing crisis because they are responsible for foreclosing on homes when people fail to make payments. They have faced withering criticism for practices including charging excessive fees, foreclosing without completing the required paperwork and failing to help people stay in their homes by changing their loan terms.

Under the rules, companies would be required to provide billing statements that explain how much of a payment is going to pay down principal, how much to interest and how much to fees.

If an interest rate was set to adjust, the borrower would receive an early estimate of the new payment amount. That would allow people to consider refinancing if they don’t like the new rates.

The rules also help guarantee that borrowers aren’t forced to pay excessively premiums on homeowners’ insurance that servicers require them to carry. In the past, servicers tacked on insurance when they believed someone’s coverage had lapsed. The premiums could be several times bigger than on a typical policy.

The rules would require servicers to notify borrowers twice before charging them for insurance. They would have to cancel the insurance within 15 days if borrowers proved that they already had coverage.

The new agency has focused on mortgage servicers in part because borrowers can’t shop around and choose a mortgage servicer….

More at Consumer agency proposes transparency for mortgage servicers – USA TODAY

Have you been surprised by random charges on your mortgage, or just wondered where all those fees went?  Then we want to hear from you, comment below with your tale of mortgage mayhem.

If these greedy, overbearing companies have successfully dinged you and your credit report, there is action that you can take.  To get started learning the basics take our free Credit Secrets Video course.


Image by mira66 via Flickr

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About Anthony Candella

Anthony is the founder and Directing Attorney of YourCreditAttorney.com and has been helping consumers just like you understand and improve your credit and financial situation since 2003.