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National mortgage standards coming this summer

By: 26 April 2012 One Comment

The United States Consumer Financial Protection Bureau (CFPB) announced on April 9 that it will formally propose rules this summer establishing national mortgage servicing standards.

The CFPB plans to finalize those rules in January. To get an idea of the extent of those rules and what the CFPB hopes to achieve by implementing them, point your favorite Internet browser to

A mortgage servicer, of course, collects payments from a borrower on behalf of the original owner of the loan. If you took out a mortgage at a local bank but make payments to another institution, you are dealing with a mortgage servicer. Over the past few years, questions about practices of servicers, concerns over high foreclosure rates and the general shakiness of mortgage markets have led to the development of the proposed rules.

“The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds,” said CFPB Director Richard Cordray in a news release. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing.”

The national Mortgage Bankers Association had some input on the proposed rules and the group will stay involved in the process.

“National standards that apply to all residential loan servicers have the potential to create more confidence and certainty in the real estate market for both borrowers and servicers alike,” Mortgage Bankers Association President David H. Stevens said in statement. “Borrowers would be protected by a single standard regardless of where they live and servicers would have one set of rules to comply with everywhere they operate.

“The reforms that Director Cordray outlined appear to closely track the issues we have talked to him and the CFPB staff about and MBA looks forward to working with the CFPB and other policymakers and stakeholders to ensure that the process used to develop the standards includes servicers of different sizes and business models.

What are some of the new rules? A partial list follows:

? Clear monthly mortgage statements. The CFPB has proposed statements that tell borrowers how much they are paying in principal and interest, late fee warnings, options for borrowers who are delinquent, etc.

? Warning of future interest rate increases. Under this rule, borrowers would learn of changes to interest rates in advance and estimates of how much their future mortgage payments should be.

? Alternatives to foreclosure. If a borrower is at risk of losing a home through foreclosure, a servicer will be obliged to provide information about the foreclosure process and alternatives to it.

There are also proposed rules requiring servicers to deal with errors quickly, apply payments to accounts immediately and keep records accessible to borrowers and any staffers working on assisting people behind in their loan payments.

It remains to be seen what final rules will come out of the process and, indeed, if they achieve the stated goals of helping borrowers keep informed about their mortgages. The CFPB has been working on a standard set of rules for some time now, and those will continue to evolve. It’s well worth keeping an eye on how the process develops in the months to come.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

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