It’s not just homeowners facing foreclosure who are concerned about their mortgages. Plenty of consumers in good financial standing have been griping about the handling of their loans.
The Consumer Finance Protection Board has been studying those complaints. On Friday it announced new proposed rules that would take effect in January 2013, if enacted.
The provisions cover the mortgage industry broadly and set high standards for customer service, CFPB Director Richard Cordray told a press conference. “The proposed rules would help consumers know exactly where they stand,” he said.
Much of the language of the proposals is wonky, though. For instance, many people don’t understand the difference between mortgage servicers, which may be a second party that bought your loan, and the company you originally signed with for your mortgage.
Reuters talked with Guy Cecala, publisher of the Inside Mortgage Finance newsletter, to sort through the details:
Q: If my mortgage is not in trouble, do the new rules matter to me?
A: It’s very significant because these are the first national set of mortgage standards that apply to everyone. There have never been any laws on the books to service a mortgage in a certain way – that you have to answer the phone and be polite.
These rules are basically building in a lot of safeguards that haven’t existed in the past. Anyone who has a mortgage is going to be better off, whether it’s from day one or down the road.
Q: One proposed rule sets standards for how mortgage statements will look. What should I expect?
A: If you have a loan from bigger servicers, they will look like they look now. None of this stuff is revolutionary. It will list your monthly payments, outstanding balance, what your fees are. One place for improvement – statements now are not quite as good at listing potential interest-rate adjustments or calling attention to fees.
Q: How do I know who is servicing my mortgage?
A: When you buy a home or get a mortgage, it lists your servicer then and there. Then there is fine print that says: this mortgage may be sold, and you’ll receive some notification of that. If you haven’t heard anything, then it is probably with the original bank you signed with for your mortgage.
It can get confusing, though. For instance, if you regularly make payments to Wells Fargo, and you get a note saying your loan is going to Chase, sometimes you make a mistake and cross payments. These rules don’t really address that, but clearer information on mortgage statements might help.
Q: There is a proposed rule to modify how “force-placed” insurance is administered. This seems complicated.
A: Something that people take for granted – which they should – is that in most new mortgages, an escrow account is set up to pay taxes and insurance. It forces you to pay insurance on an installment plan. To a lot of borrowers, it’s mind-boggling that it could lapse, and it’s distressing to think that can even happen. But we’ve had cases where the servicer has failed to pay, and the borrower is on the hook for it. Hopefully, this will fix that.
I’ve actually had this happen to me. I got a notice from my insurance company years ago that my insurance was going to lapse for lack of payment. I said, “How is that possible?” I contacted the servicer. They said, “Oh, yeah, we’re a little behind in paying for it.” I don’t know why I was responsible for all of these things. But ultimately the borrower is responsible for it.
Q: In the future, if a mortgage servicer violates these rules, will I end up getting cash back like some of the other recent settlements with mortgage lenders and banks?
A: Don’t hold your breath on getting a big, fat lottery check down the road.
One of the big aspects of this is supposedly accountability, but the CFPB didn’t cover it in any of the documents they released. The laws do give the CFPB the authority to go after violators and get a settlement. If there is widespread abuse, they will go after them. And the laws do have provisions that allow customers to sue their services.
The truth, though, is that a lot of abuses don’t cost you any money.
Q: How can I complain effectively to get my problem resolved?
A: There are deadlines built into these rules, and most of them are that the company has to respond in 30 days. But you’ve got to go through the set procedures, and hopefully you’ll be advised of what those procedures are, like a dedicated complaint line or a written form. You can’t just bitch on the phone to a customer service rep.
The other thing, too, is that the CFPB is one big complaint bureau. They already have extensive processes for fielding complaints. It’s a good system for reporting problems to the cop on the beat.