Mortgage Professionals Should be Optimistic About the Future

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Th e M Rep o RT | 45 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SERVICING THE LATEST cFPB Proposes to expand consumer Protections New measures address borrowers' rights post-loan- modification, servicing transfers, and bankruptcy cases. t he Consumer Financial Protection Bureau (CFPB) has proposed an additional set of measures designed to expand foreclosure protections for mortgage borrowers. In a late-November announce- ment, CFPB detailed the latest additions to its mortgage servic- ing rules, which went into effect January 2014. Since that time, the bureau says it has continued to engage consumer advocacy groups, industry representatives, and other stakeholders to develop additional provisions to protect consumers and make it easier for the industry to comply with the rules. "The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon," said CFPB Director Richard Cordray in a statement. "Today's proposal would give greater pro- tections to mortgage borrowers." Chief among the newly pro- posed rules is a requirement that servicers provide additional fore- closure protections to borrowers who have previously worked through the loss mitigation pro- cess and recovered. Under the current rules, servicers are required to provide certain protections—including the right to be evaluated under CFPB requirements for foreclosure avoidance options—only once during the life of the mortgage. The proposed rule would require servicers to offer those same protections again for bor- rowers who have brought their loans current at any time since their last loss mitigation applica- tion. The bureau says the rule is largely designed to protect those who obtain a permanent loan modification and then later suffer an unrelated hardship that could create additional struggles, such as a job loss or the death of a family member. Also included in the proposal are a number of provisions to improve borrower and servicer communications and to clarify regulations that have already gone into effect: 1. Protections for mortgage heirs: Currently, servicers are required to identify and communicate with surviving family members or heirs, called successors in interest, in the event of a borrower's death. The latest proposal would expand the bureau's definition of a successor to account for more situations, including when a property is transferred after a divorce, legal separation, through a family trust, between spous- es, from a parent to a child, or when a borrower who is a joint tenant dies. The proposal would also ensure those confirmed as successors receive the same protections as the original borrower. 2. Communications regarding loss mitigation applications: Servicers would be required to notify borrowers when their loss mitigation applications are complete and when their foreclosure protections start. 3. Working with borrowers during servicing transfers: The new proposal offers clarifications to existing rules dealing with servicing transfers between firms. Under the rule, if a borrower's loss mitigation application was complete prior to the transfer, the new servicer must evaluate it within 30 days of when the prior servicer received it. For involuntary transfers, the new servicer has 15 days from the date of the transfer to evalu- ate a complete application. 4. Providing information to bankrupt borrowers: The proposal would require servicers to provide periodic statements to bor- rowers in bankruptcy with information geared specifical- ly for bankruptcy situations. Servicing firms would also have to provide written early intervention notices to let those borrowers know about their loss mitigation options even after they've been told to cease contact. 5. Clarifying the meaning of "de- linquency:" CFPB's proposal would clarify that, for the purpose of its servicing rules, "delinquency" begins on the day a borrower fails to make a periodic payment. If that payment is later made up, the bureau proposes that the date of delinquency be pushed up. The new rule would also cre- ate room for servicers to con- sider a payment as "timely" under certain circumstances even if it's not the full pay- ment. A complete summary of the proposal and its additional measures can be found on CFPB's website, The proposed rule and disclosures are open for public comment for 90 days after their publication in the Federal Register.

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