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April 11, 2012 – The Consumer Financial Protection Bureau plans to issue proposed rules this summer for mortgage servicers that would ensure consumers are faced with "no surprises and no runarounds," CFPB Director Richard Cordray said Monday.

"For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress," Cordray said in an announcement. "It's time to put the ‘service' back in mortgage servicing."

The mortgage servicing rules are aimed at greater transparency and easier access to information homeowners need when they are having difficulty keeping up with their mortgage loans.

The CFPB proposed rules will have eight key elements, the bureau says. These include:

• Clear monthly mortgage statements: Servicers would be required to provide regular statements with a breakdown of payments by principal, interest, fees, and escrow; amount and due date of the next payment; and, for delinquent borrowers, alerts and information about counselors who can help them work with servicers and avoid foreclosure.
• Warning before interest rate adjustments: Servicers would be required to provide disclosures in advance of interest rate changes on most adjustable-rate mortgages. These would include the effective date of the change and a list of alternatives one could consider if the new monthly payment is unaffordable. The first interest rate reset notice would include contact information for housing counselors.
• Options for avoiding costly "force-placed" insurance: The bureau notes that "force-placed" insurance is typically more expensive than insurance the borrower can purchase privately. It is considering a rule to give consumers more rights; these would require servicers to give advance notice and pricing information to consumers before they charge for force-placed insurance.
• Early information and options for avoiding foreclosure: Servicers would be required to make good faith efforts to contact delinquent borrowers and inform them of options to help avoid foreclosure. If a borrower contacts the servicer over difficulty paying the loan, the servicer would have to provide timely, complete and accurate information about available options.
• Payments immediately credited: Servicers generally would have to credit a consumer's account promptly after receiving payment.
• Records kept up-to-date and accessible: Servicers would be required to establish reasonable policies and procedures designed to minimize errors, prevent document loss, provide accurate information to borrowers and assist with error resolution.
• Errors corrected quickly: If a consumer notifies the servicer that she thinks there has been an error the servicer would be required to acknowledge receipt of the notification, conduct a reasonable investigation and inform the consumer about the resolution in a timely manner.
• Direct and ongoing access to servicer foreclosure prevention team: Servicers would be required to provide delinquent borrowers (or borrowers asking for help to avoid delinquency) with direct, easy, ongoing access to employees who are dedicated and empowered to help them.

The CFPB will discuss the proposed rules with its Small Business Review Panel before it issues a proposed rule. It will also conduct other outreach to gather feedback from consumer groups, industry, and other agencies. It plans to issue a final rule by Jan. 21, 2013, and may allow an implementation period of up to one year.

NAFCU plans to weigh in on the servicing proposal and will seek to ensure inclusion of member credit unions in the bureau's outreach effort on this issue.

The CFPB website includes links to a fact sheet on this regulatory initiative, an outline of the proposals that will be provided to the Small Business Review Panel and a set of questions on which the bureau is seeking input.