Recently the Consumer Financial Protection Bureau outlined major new rules that impact mortgage loan servicing. The rules, which revise the Truth in Lending Act and the Real Estate Settlement Procedures Act, are required by the Dodd-Frank Act.
Under the rules servicers must:
- Provide periodic statements for all residential mortgage loans;
- Provide a new notice 6 months prior to interest rate reset on ARM loans;
- Provide notices and establish other requirements for force-placed insurance;
- Credit payments on dwelling-secured loans as of the date of receipt;
- Comply with new rules for handling partial payments;
- Respond to payoff requests within seven business days;
- Comply with revised procedures for error resolution and inquiries;
- Establish reasonable procedures for managing borrower documents and information;
- Make a good faith effort to contact delinquent borrowers no later than 45 days after the onset of delinquency; and
- Provide all borrowers who become 45 days delinquent or who request assistance in avoiding delinquency with direct and on-going access to the servicer’s customer service employees dedicated to serving troubled or delinquent borrowers.
This is a massive undertaking. The proposed rules are expected in July 2012 and final rules are expected in January 2013, with an effective date of early 2014.