7 Ways the CFPB Wants to Make Mortgages Better for Homeowners
The Consumer Financial Protection Bureau continues to restructure the country’s mortgage finance system as mandated by the Dodd-Frank Act.
Most recently, the agency proposed new rules under the Truth in Lending Act and the Real Estate Settlement Procedures Act which will require residential mortgage servicers to change the way they do business and interact with borrowers.
For your reference, here’s a look at seven practices the CFPB wants to impose on lenders:
1. Crediting payments when they are received:
“Servicers generally would have to credit a borrower’s account as of the date the payment is received. If a servicer receives a partial payment, the payment may be held in a suspense account. When the amount in the suspense account covers a full contractual payment (including principal, interest and any escrow payments), the servicer must apply the funds to the oldest outstanding payment owed.” (Schnader)
2. Limiting the use of force-placed insurance:
“The ability of servicers to arrange for property insurance is restricted. Among other things, the servicer must have a reasonable basis to believe that the required insurance is not being maintained, and any force-placed insurance must be cancelled and unearned premiums must be refunded to a borrower’s account after the borrower provides proof of coverage.” (Dechert)
3. Providing additional help for homeowners facing foreclosure:
“… like the DOJ Servicing Standards, the CFPB has proposed rules for the processing of loan modification applications to which servicers will be held. While both the CFPB and the DOJ Servicing Standards prohibit servicers from conducting foreclosure sales while a complete loss mitigation application is pending, the CFPB’s proposed rules make clear that servicers may take other steps in the foreclosure process while a complete loan modification is pending, including referring a case to a foreclosure department.” (King & Spalding)
4. Offering alternatives to points and fees:
“If the creditor pays loan originator compensation, the CFPB proposes that the creditor may not impose any discount points or origination points or fees unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees to the creditor, broker, or affiliate of either (‘points and fees’), unless the consumer is unlikely to qualify for such a loan.” (Ballard Spahr)
5. Requiring additional appraisals for higher-risk loans:
“The new requirements apply to loans for which the APR exceeds the average market rate by 1.5 percent for first-lien loans, 2.5 percent for first-lien jumbo loans, and 3.5 percent for subordinate-lien loans… A creditor would have to obtain a written appraisal from a certified or licensed appraiser that is based on a physical property visit of the interior of the property. At application, the creditor would have to issue a disclosure stating the purpose of the appraisal, that the creditor will provide the applicant a copy of any written appraisal, and that the applicant may choose to have a separate appraisal conducted at his or her own expense.” (BuckleySandler)
6. Giving borrowers advance warning of interest rate adjustments:
“Servicers would have to provide earlier disclosures before the interest rate adjusts for most adjustable-rate mortgages. This disclosure would include information about alternatives and counseling resources if the new payment is unaffordable. Existing disclosures for interest rate adjustments that cause a change in mortgage payments would be amended to include improved information and arrive earlier so that borrowers can anticipate consequences of payment changes.” (Leonard, Street and Deinard)
7. Prohibiting mandatory arbitration requirements in credit agreements:
“The CFPB proposes to implement the Dodd-Frank prohibition on the inclusion of a mandatory arbitration requirement in any contract or other agreement for a consumer credit transaction secured by a dwelling.” (Ballard Spahr)
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Read the updates:
• CFPB Addresses Loan Originator Compensation and Origination Fees - Ballard Spahr LLP
• Consumer Financial Protection Bureau Update: The Proposed Mortgage Servicing Rules - Schnader Harrison Segal & Lewis LLP
• U.S. Consumer Financial Protection Bureau Proposes Mortgage Servicing Reforms - Dechert LLP
• CFPB Proposes Changes to Regulations Z And X - King & Spalding
• Federal Regulators Propose New Appraisal Rules - BuckleySandler LLP
• CFPB Proposes Rules Affecting Mortgage Servicers - Leonard, Street and Deinard
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Additional reading:
• CFPB Proposes Mortgage Originator Compensation and Qualification Rule - BuckleySandler LLP
• CFPB tries new method to get input on mortgage servicing proposals - Ballard Spahr LLP
• Feds Offer New Rule for High-Risk Home Mortgage Loans: News Release of the Week - Rosa Eckstein Schechter
• Recent Developments from the Consumer Financial Protection Bureau - Butler, Snow, O’Mara, Stevens and Cannada, PLLC
• CFPB issues two mortgage appraisal proposals - Ballard Spahr LLP
• CFPB Proposes National Mortgage Servicing Standards - BuckleySandler LLP
• CFPB Follows Script in Issuing Servicing Rules - Ballard Spahr LLP
• Scheduled publication dates of CFPB mortgage proposals leave little time for comments - Ballard Spahr LLP
• CFPB defends length of proposal combining TILA/RESPA mortgage disclosures - Ballard Spahr LLP
• Qualified Mortgage Rule Emerges as Critical Issue in Restructuring of Residential Mortgage Market Regulation - Dechert LLP
• Consumer Financial Protection Bureau’s Regulatory Agenda Highlights Numerous Mortgage-Related Rules on the Horizon - Schnader Harrison Segal & Lewis LLP
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