The CFPB recently released two new amendments to further protect consumers under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). These new rules will take effect in 2014, but it’s never too early to know what’s coming.
The new rules include:
1. Restrictions on dual tracking: Under the new rules, servicers cannot begin foreclosure proceedings against until payments are 120 days behind.
2. Pursuing modifications and other loss mitigation: The dual tracking restrictions give borrowers time to assess their situation and apply for a modification or other option that may be available to help. If a borrower applies within the 120-day window, the servicer cannot begin foreclosure until the application has been addressed. If the borrower and servicer come to an agreement on an option, the servicer cannot start foreclosure proceedings unless the buyer fails to uphold their end of the agreement.
3. A periodic statement for homeowners: This statement must come every billing cycle and covers basics including an explanation of the amount due, payment and transaction history, account information, and contact information for the servicer.
4. Early outreach when a borrower falls behind: If a borrower becomes delinquent, the servicer has to make a good faith effort to reach out. The servicer also has to assign people to each case and make those people available by phone as a clear and consistent point of contact.
5. Warnings before interest rate adjustments: The servicer must notify each borrower about the first interest rate adjustment at least seven months in advance of the first payment at the adjusted interest rate. The servicer has to provide an estimate of the new interest rate and payment amount, available alternatives and instructions on how to access a HUD-approved mortgage counselor.
6. Good information and good records: Servicers must provide correct information about mortgage loans, whether to a borrower, an investor, or a court during foreclosure.
7. Crediting payments in a timely manner: The servicer must credit full payments to each account on the day they are received.
8. Error resolution: The servicer must reply to all borrower-notified errors in a timely manner. The new rules set timelines and procedures for servicers to investigate and correct errors.
9. Force-placed insurance: Servicers are prohibited from charging a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance and has provided required notices.