Consumer protection bureau to propose new federal mortgage rules
WASHINGTON — New federal rules would require banks to provide homeowners with better information about their mortgages to avoid costly surprises, such as sharp interest rate increases, and provide better service to help them avoid foreclosure.
The rules, to be proposed Friday by the Consumer Financial Protection Bureau, are designed to prevent a repeat of the foreclosure crisis. They track an outline released in April by the agency, which was created in 2010 in part to help protect borrowers.
The public will have two months to comment on rules, and the consumer bureau aims to make them final in January.
“From processing payments to evaluating struggling homeowners and helping them avoid foreclosures, the bottom line is to treat consumers fairly by preventing surprises and runarounds,” said Richard Cordray, the bureau’s director.
Some of the rules mirror requirements agreed to by large mortgage servicers, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., as part of a $25-billion settlement with federal and state officials over foreclosure abuses.
The bureau’s proposed rules would apply to all mortgage servicers, with some exceptions for small companies, and focus on two areas: providing clear and timely information for homeowners about their loans and helping them avoid bureaucratic hassles.
Servicers would have to send homeowners a clear monthly statement with a breakdown of payment information and due dates; provide a warning 210 to 240 days before the first interest rate change on an adjustable-rate mortgage, along with an estimate of the new rate; give advance notice of plans to charge homeowners for property insurance if their policies lapse; and make a good-faith effort to contact borrowers who fall behind on their payments to tell them of ways to avoid foreclosure.
Foreclosure prevention is the focus of another set of proposed rules. They include acknowledging a request to fix errors or other complaints within five days, then conducting an investigation and providing those results in 30 to 45 days.
The rules also would require a prompt review of applications for loan modifications and direct access to mortgage servicers’ employees to better help borrowers.
