On August 19, 2014, the Consumer Financial Protection Bureau (CFPB) issued a bulletin outlining the Bureau’s expectations for mortgage loan transfers, putting mortgage servicers on notice that its examiners would be scrutinizing how loans that are under consideration for modification are handled.
In an official statement, CFPB Director Richard Cordray said, “At every step of the process to transfer the servicing of mortgage loans, the two companies involved must put in appropriate efforts to ensure no harm to consumers. This means ahead of the transfer, during the transfer, and after the transfer. We will not tolerate consumers getting the runaround when mortgage servicers transfer loans.”
The bulletin provides specific examples of what CFPB examiners will be looking for when mortgage loans are transferred. Mortgage servicers are encouraged to flag certain loans for special treatment, including those that have been approved for trial or permanent modification or that have pending loss mitigation applications. The Bureau said that failure to properly transfer the modification documentation could harm consumers.
The CFPB’s new mortgage servicing rules went into effect in January 2014, and require servicers to provide consumers with a monthly statement with details on how payments are credited, to fix errors promptly, to credit payments on the day they are received and to provide consumers with Adjustable Rate Mortgages with early notice if an interest rate is about to change.
In addition, mortgage servicers must contact borrowers by the time they are 36 days late on a mortgage payment and cannot initiate a foreclosure action until a borrower is more than 120 days delinquent. The CFPB also requires mortgage servicers to educate borrowers on the loan modification options available to them, and forbids servicers from initiating a foreclosure action while working with a borrower on a loan modification.
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