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The fledging U.S. Consumer Financial Protection Bureau and Director Elizabeth Warren continues to be opposed by Republicans as it is independent of Congressional appropriation and reach and its legality is currently questionable based on similiar case rulings.
“A strong independent consumer agency is good for families and lenders that follow the rules and good for the economy as a whole,” Warren said yesterday in an interview. “I will keep fighting for that.” Read more for details.
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The Consumer Financial Protection Bureau last week proposed rules to protect homeowners and to avoid problems suffered by many borrowers during the housing crisis.
“These rules are about putting the service back in mortgage servicing,” said CFPB Director Richard Cordray, on a conference call with reporters. “The bottom line is to treat consumers fairly by preventing surprises and run-arounds.” The rules provide basic protections, he added.
For instance requiring that the mortgage servicing company provide monthly statements which seems so simple but is not standard; breaking down all the numbers such as deposits, principals, interest rates, fees, due dates and warnings about new or increased fees including ARMs adjustable-rate mortgage reminders in advance.
“A lot of this stuff is common sense,” said Keith Gumbinger, vice president of HSH Associates, a publisher of consumer loan information, of the proposed rules. “You shouldn’t have to codify proper business practices. That’s not to say everyone is a bad actor. But the ones who did it wrong did it so badly, they forced the regulators’ hands on the rest of the industry.”
One of the major surprises occurs when the borrower no longer maintains property insurance and the mortgage servicer has the right to force a policy. The new law requires that forced policy process be transparent and borrower of policy payments to avoid borrower not being ready to pay the cost.
Policies and procedures will be required to be in place so borrowers are able to navigate and find assistance when they need including correcting payment issues and receiving timely payment receipt and corrected documents.
Systems will be required so that the homeowner borrower is able to easily obtain assistance and options to avoid foreclosure when they are in default. The new rules also requires review of file for loan modification and other payment plans application and response in a timely fashion restricting ability to proceed with foreclosure unless these options are applied for first.
“The inadequate performance of many mortgage servicers has helped widen the misery for many Americans,” said Richard Cordray, director of the consumer agency, in remarks to reporters announcing the proposed rules. The rules will take effect next year after a public comment period. “Right now, people have too little protection under federal law if their mortgage servicer surprises them with costly fees or gives them the runaround.”