On November 20, the Consumer Financial Protection Bureau proposed measures aimed at mortgage servicers.  These proposed measures provide surviving family members and other homeowners with the same protections as the original borrowers.  Additionally, the proposal seeks to add protections to homeowners and borrowers struggling to make payments under their mortgages.  The new mortgage rules can be found  here.

The main points of the proposal include:

  • Requiring servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan:  Under the proposed rule, servicers would be required to give certain foreclosure protections again for borrowers who have brought their loans current at any time since the last loss mitigation application.  This includes the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure.
  • Expanding consumer protections to surviving family members and other homeowners:  The proposal would expand the circumstances in which consumers would be considered “successors in interest.”
  • Requiring servicers to notify borrowers when loss mitigation applications are complete:  The proposal would require servicers to notify borrowers promptly that the application is complete, so that borrowers know the status of the application and their protections.
  • Protecting struggling borrowers during servicing transfers:  The proposal clarifies that generally a transferee servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer.
  • Clarifying servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosure:  The proposal seeks to explain what steps servicers and their foreclosure counsel must take to protect borrowers from a wrongful foreclosure sale.  The proposed clarifications would aid servicers in complying with – and assist courts in applying – the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures.
  • Clarifying when a borrower becomes delinquent:  The proposal defines delinquency, for the purposes of the servicing rules, as beginning on the day a borrower fails to make a periodic payment.  Under the proposal, when a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances.
  • Providing more information to borrowers in bankruptcy:  The proposal would generally require servicers to provide periodic statements to borrowers in bankruptcy.  These statements would contain specific information tailored for bankruptcy.

These rules place heightened restrictions on mortgage servicers and should be carefully reviewed to ensure compliance.  A summary of the proposed changes can be found here.