Reshaping the Mortgage Market

The Consumer Financial Protection Bureau (CFPB) released new final rules last week aiming to force companies handling mortgage payments to deliver clear information about costs and deal fairly with struggling borrowers. The rules will take effect on January 10, 2014.

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The CFPB is the federal agency holding primary responsibility for regulating consumer protection with regards to financial products and services in the United States. The bureau is an independent unit located inside and funded by the United States Federal Reserve, with interim affiliation with the U.S. Treasury Department. It writes and enforces bank rules, conducts bank examinations, monitors and reports on markets, as well as collects and tracks consumer complaints.

The mortgage servicing industry was built to handle large volumes of loans which only required limited service. In the wake of the financial crisis, the number of distressed borrowers skyrocketed and the servicing industry was unable to keep up. For this reason the CFPB is aspiring to clean up the sorts of servicer practices that made life even tougher for already struggling homeowners.

The CFPB’s final rules cover nine major topics to force lenders to consider a borrower’s ability to repay a loan. One major improvement for homeowners is the immediate crediting of periodic payments. Servicers also have to establish policies and procedures designed to achieve the objectives specified in the rule.

“Our new rules are designed to give strong protections to struggling borrowers. In this market, as in every other, consumers have the right to expect information that is clear, timely and accurate,” said Richard Cordray, CFPB’s director, in prepared remarks.

The American Bankers Association (ABA) opposes the new rules. According to the ABA ”the extensive costs that these additional requirements would impose on thousands of mortgage servicers, we do not believe that there would be a net benefit for consumers to providing this same information on a periodic statement”.

Author: Andreas Weitzell, Trainee BridgehouseLaw Charlotte Office

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