Consumer watchdog to mortgage servicers: Do your jobs
The folks who collect your monthly mortgage payments aren't doing their jobs.
So says a federal consumer watchdog agency, which plans to force servicers to do the right thing, like crediting you for the payments you send in, listening when you tell them they made a mistake and being clear about how your loan works when payment changes are ahead.
Amazing that someone has to tell servicers to do these basic things.
"The mortgage servicing rules we are considering reflect two basic, common-sense principles -- no surprises and no runarounds," says Richard Cordray, director of the Consumer Financial Protection Bureau, a regulator created in the wake of the 2008 financial crisis. "For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress."
The CFPB’s plan is to make all servicers follow the same rules about customer service, your escrow account, payment changes, homeowners insurance and helping you when you run into financial difficulties.
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Here’s what the rules say servicers would have to give you:
- A clear monthly statement. This will show the breakdown of your payments by principal, interest, fees and escrow, and when the next payment is due. You likely already get this.
- Information on where to turn if you can’t make your payment. Most servicers are going to be on the phone when your payment is two weeks late, but now they’ll have to mail you information on loan workout programs, too.
- A warning that your payment is about to change. Some servicers warn you that your adjustable-rate loan is about to reset, typically on the statement they send before it resets. Now, they’ll also have to tell you where to go for help if you can’t afford the new payment.
- Insurance warnings. If you don’t buy homeowners insurance, the lender is going to buy it for you and send you the bill. This "forced place" insurance is expensive -- and a hugely controversial practice because lenders often earn a commission from servicers in exchange for the policy. Now, the servicer is going to have to tell you how much forced place insurance will cost you before it buys the policy.
- Foreclosure outreach. The CFPB wants servicers to try to help delinquent borrowers figure out their options, so it’s requiring them to try to get in touch with you when you don’t pay your home loan.
- Timely, complete, accurate foreclosure avoidance advice from a dedicated team that knows what it’s doing. This requirement is the one that could be hard for some servicers to deliver on, depending on how you define timely, accurate and knowledgeable.
- Payments immediately credited, records kept up-to-date and accessible. Really? This is what servicers do for a living. It’s unreal that the CFPB actually has to tell them to do their job.
- Errors corrected quickly. This is going to give bad servicers heartburn. Expect the industry and the agency to argue over how long a servicer should get to look into a complaint and fix the error.
Right now, calling a servicer about anything involves a trip to voice mail hell while you wait to talk to a live person. If you’re calling about foreclosure avoidance, it’s up for debate whether the person who eventually comes on the line can give you complete, accurate information.
Servicers say they’re doing a great job, but consumer advocates disagree.
I say if you’re having payment problems, your best bet is to go to the nonprofit HOPE NOW (www.hopenow.com) where you’re assured of getting someone who knows foreclosure.
Don’t expect any of these changes to happen today.
First, the CFPB has to propose a rule outlining the changes (this summer), then it takes comments (including yours if you like) and then it will publish a final rule (January 2013). After that, the industry gets a transition period to get ready to follow the rules.
Until then, here’s hoping your servicer is already doing its job. If not, a new servicer is just a refinance away.