Consumer Financial Protection Details

by staff on January 18, 2013

Consumer Financial Protection BureauIn one year (Jan. 10, 2014) the new national Consumer Financial Protection Bureau rules go into effect, to protect borrowers and to define what lenders can or cannot do.  Here’s your link to the details of the new rules.

Briefly summarized, here are 9 areas of the major points covered by the new rules.  The Bureau provides sample forms to be used for these purposes.  Some of these points have exceptions for institutions that service less than 5000 loans per year (i.e., community banks and credit unions… presumably because they already have safeguards in place for consumers).

1)  Borrowers must receive regular periodic billing statements with information about fees, payments, and other transaction activities of the loan during the billing period.

2)  A consumer with an Adjustable Rate Mortgage (ARM) must receive written notice from the servicer approximately 210 days prior to any interest rate adjustment.  This notice must include not only the new interest rate but also the new payment amount.

3)  A consumer’s payment of full interest and principal must be credited to the consumer’s account within 1 day, and within 7 days must receive a statement of the updated loan balance.  If a consumer pays only a partial loan payment, it will be held in escrow until the full amount is received and then it is credited to the loan balance on the day that it is complete.

 4)  If a borrower has evidence that they have hazard insurance on the property, the servicer has strict guidelines limiting the use of force-placed hazard insurance.  In the event of overlapping force-placed insurance requirements, the consumer will pay the lesser of the insurance amounts.

5)  If a consumer submits a written request for more information or for error resolution from the servicer, the servicer generally must acknowledge the request within 5 days.  Then, generally within 30-45 days, the servicer must respond to the written request in writing, stating how the error can or has been corrected or why it is not an error.

6)  Loan providers must actually service the loan.  For example, they must provide timely and accurate information to consumers and investors and the courts.  Servicers must maintain written records that allow the lender to assign the loan to a servicing file within 5 days, and they must oversee transfer of loan information as a duty of servicing transfers.

7)  If a borrower is delinquent on loan payments, the servicer must make live contact with the borrower within 36 days of the delinquency, informing the borrower that loss mitigation options are available.  By the 45th day of delinquency the servicer must provide written notice of loss mitigation options to the borrower.

8)  The servicer must provide personnel to inform and assist delinquent borrowers in pursuing loss mitigation options, no later than the 45-day written notice of delinquency.

9)  If a borrower submits an application for loss mitigation procedures on a loan secured by the borrower’s principal residence more than 37 days before a foreclosure sale, the servicer must evaluate the borrower’s options within 30 days.  Information must be provided to the borrower about options such as short sale or loan modification.  There are detailed rules and deadlines for written notification during the entire foreclosure process.

And HERE is information about what will constitute a “Qualified Mortgage”.

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