Washington, D.C. — The Consumer Financial Protection Bureau today released its final rulemaking on mortgage-servicing standards under the Real Estate Settlement Procedures Act. The bureau is the first agency able to regulate mortgage servicing across all mortgage owners and servicers, and today’s rulemaking underlines the importance of this function.
Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress, issued the following statement in response to the announcement:
The new rule takes a critically important step toward providing comprehensive standards for all mortgage servicers. While bad lending practices and risky products triggered the housing crisis, the abject failure of the mortgage-servicing industry to mitigate losses or to follow the law when pursuing foreclosures greatly exacerbated the damage done to homeowners, communities, the housing market, and the larger economy. The rule addresses some of the most pernicious practices causing unnecessary damage to families, including dual-tracking foreclosures and force-placed insurance. What’s more, individual homeowners now have the ability to enforce these rules, a crucial piece that has been missing from previous foreclosure-prevention programs.
But due to concerns about the extent of its authority, the Consumer Financial Protection Bureau missed an opportunity to mandate that all servicers offer affordable loan modifications to homeowners who qualify. We urge the bureau to work closely with other regulators to ensure that affordable and sustainable loan modifications remain broadly available after the Home Affordable Modification Program expires this year.
Today’s rule improves on the Consumer Financial Protection Bureau’s original proposal in several important ways:
- By establishing a standard 120-day period for servicer outreach and review of completed borrower applications before initiating foreclosure, servicers will allow homeowners to apply for foreclosure alternatives before the foreclosure is initiated, which helps the homeowner avoid significant legal fees and avoid unnecessary credit-score damage.
- By prohibiting servicers from proceeding to foreclosure judgment or sale up until 37 days before the sale is scheduled, homeowners have more time to seek help before foreclosure takes place. While this is a significant improvement from the 90 days originally proposed, it remains to be seen how useful this standard will be to borrowers in the many states where the timeline from foreclosure initiation to sale is less than 37 days or where foreclosures are scheduled less than 37 days before they take place; Fannie Mae and Freddie Mac, as well as the National Mortgage Settlement, establish a more universally useful deadline of 15 days before sale.
- By providing a catch-all in the “error resolution” rule rather than providing a finite list of specific errors that servicers must correct, the bureau has created a better, more useful, and more flexible standard that can address the unforeseen problems of tomorrow as well as the well-known problems of today.
To speak with a CAP housing expert, contact Katie Peters at 202.741.6285 or email@example.com.