The Consumer Financial Protection Bureau (CFPB) unveiled the 900-page finalized set of rules on mortgage servicing on Thursday, designed to ensure that homeowners, struggling borrowers, and property heirs are treated fairly by mortgage servicers.
The finalized rules dictate that servicers must provide certain borrowers with foreclosure protections more than once over the life of the loan. According to the CFPB, this change will be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship, such as the loss of a job or the death of a family member, that could otherwise cause them to face foreclosure.
Servicers must also clarify borrower protections when the servicing of a loan is transferred and provide important loan information to borrowers in bankruptcy.
The updated rules also more clearly define various roles in the foreclosure process. For those who inherit property, the potential foreclosure process has been especially perilous. The updated rules establish a broad definition of “successor in interest” that generally includes persons who receive property upon the death of a relative or joint tenant, via divorce or legal separation, through certain trusts, or from a spouse or parent and gives them, generally, the same protections outlined under the CFPB’s mortgage servicing rules as the original borrower.
These amendments also require servicers to notify borrowers when loss mitigation applications are complete and provide greater protection for struggling borrowers during servicing transfers. The rules also clarify servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures, as well as when a borrower becomes delinquent.
“When a borrower misses a periodic payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date the borrower’s delinquency began advances,” the CFPB stated.
CFPB Director Richard Cordray said, “These updates to the rule will give greater protections to mortgage borrowers, particularly surviving family members and other successors in interest, who often are especially vulnerable.”
The finalized rules were released at a time when the CFPB is also considering a set of consumer protection principles to guide mortgage servicers, investors, government housing agencies, and policymakers as they develop new foreclosure relief solutions, now that the federal Home Affordable Modification Program (HAMP) is coming to its end.