In 2014, certain mortgage servicing rules issued by the Consumer Financial Protection Bureau (CFPB) went into effect. These rules are designed to protect consumers by requiring mortgage servicers (companies that handle loan accounts) to:
Also, various other rules direct servicers to provide borrowers with assistance if they are having difficulty making mortgage payments. (Read about the rules that protect homeowners in foreclosure.)
Read on to learn more about the CFPB rules that protect homeowners with mortgages and learn how the rules might be able to help you if you have a home loan.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Real Estate Settlement Procedures Act (RESPA) of 1974, which is implemented by Regulation X, and the Truth in Lending Act (TILA), which is implemented by Regulation Z. These amendments govern how mortgage servicers handle certain residential mortgage loans. The CFPB issued rules in January 2013 to implement the Dodd-Frank Act amendments to RESPA and TILA. The CFPB also issued various amendments to these rules in 2013 and 2014. (This article refers to all these rules collectively as "rules.")
Most of the rules went into effect on January 10, 2014.
Under the rules, mortgage servicers must give borrowers certain information about their mortgage so they are not caught off guard when an interest rate adjusts or they are charged certain fees. (To learn more about fees, see our article What Fees Can the Lender Charge If I'm Late on Mortgage Payments?)
The rules require mortgage services to:
A mortgage servicer must provide a written statement to the borrower each billing cycle, which is usually monthly. The statement must show:
Though, if you have a fixed-rate mortgage and your servicer sends you a book of coupons to send in with your payments, then a monthly statement isn't required.
If a mortgage loan has an adjustable interest rate, the servicer must provide the borrower with a notice containing the new rate and new payment (or an estimate):
Servicers must promptly credit a borrower for the full payment the day it is received. If the borrower only makes a partial payment, that amount may be held in a special account—called a suspense account—but the servicer must inform the borrower about this on the monthly statement. Once the suspense account has sufficient funds to make a full payment of principal, interest, and any escrow, the servicer must credit that payment to the account.
The servicer must provide an accurate payoff balance to a borrower no later than seven business days after receiving a written request asking how much it will cost to pay off the mortgage.
Mortgages require homeowners to have adequate insurance on the property so that the lender’s interest is protected in case of fire or other casualty. If a borrower lets this hazard insurance coverage lapse, the loan servicer can get insurance coverage and add the cost to the loan payment. This is called force-placed insurance.
Under the rules, the servicer:
If a borrower gives the servicer proof of hazard insurance coverage, the servicer must within 15 days:
A mortgage servicer must, in most cases, acknowledge receiving a written information request or complaint of errors—like if a borrower complains that the servicer misapplied a payment or charged improper fees—within five days and respond within 30 days. The servicer may generally extend the 30-day period for an additional 15 days if the servicer notifies the borrower within the 30-day period of the extension and provides the reasons for delay in responding. (Learn more about sending a notice of error or request for information to a mortgage servicer.)
If you think your mortgage servicer has violated any of the rules discussed in this article—especially if you’re facing imminent foreclosure—consider talking to an attorney who can give advice on what to do in your particular situation.
To learn more about the CFPB rules, go to www.consumerfinance.gov and search for "mortgage servicing rules."