Banks and mortgage servicers are in a for a rude awakening come Jan. 10, 2014. Few have seemed to take much note up until recently, but that is the date that the U.S. Consumer Financial Protection Bureau’s new rules on mortgage loan servicing.
Specifically, the government regulator is implementing provisions of the Dodd-Frank Act through the amended Truth in Lending Act’s Regulation Z and the Real Estate Settlement and Procedures Acts Regulation X.
Our Miami foreclosure defense lawyers know that these changes represent a major win for borrowers who are at risk of losing their home to foreclosure. It’s also very bad news for bankers and mortgage servicers.
The changes codify the servicing standards from the National Mortgage Settlement, but they also take it further.
There are a host of meaningful provisions here, but among those that are likely to matter most to borrowers:
- The elimination of loan originator compensation. This practice allowed brokers to be compensated when they sold loans at higher interest rates than what the borrower qualified for.
- A 3 percent cap on compensation lender and broker fees, as well as a cap on pre-payment penalties. The measure also caps maximum borrower debt-to-income ratio of 43 percent and makes it so that a maximum loan term is 30 years. (Fannie Mae and Freddie Mac will work a bit differently, but they will basically be the same.)
- For the most part, only qualified mortgages will be allowed. These kinds of agreements ensure that the borrower actually has the ability to pay. A borrower can challenge the qualified mortgage status and can possibly obtain an injunction against foreclosure.
- New servicing standards under the NMS will now formally be federal law. These include having a single point of contact, freedom from dual-tracking (in which a bank simultaneously pursues a loan modification and a foreclosure) and timeline notification requirements.
- Mortgage servicers will now be required to attempt to contact the borrower every single time a payment is missed. If the borrower is reached, the servicers must offer whatever information is key to getting the borrower back on track.
- Servicers will also b e required to communicate with borrowers anytime there is a situation regarding force-placed insurance, interest rate adjustments, information requests, error resolutions and loss mitigation.
- Borrowers will now have the right under the Truth in Lending Act to sue a bank or servicer not following the rules, and may also receive legal fees and up to three years of interest while doing so.
- Although there is a statute of limitations for bringing a lawsuit against the bank of servicer, (extended from one year to three), after that time the borrower can obtain an injunction against foreclosure at any time during the life of the loan.
- Force-placed insurance imposition when a homeowner allows a lapse in insurance is severely restricted, with requirements for banks to notify consumers first and give them ample opportunity to prove they have their own coverage before forcing their own insurance on the borrower.
- Ensuring that consumer mortgage payments are promptly credited to their loan and issuing periodic statements that are simple for consumers to understand.
Granted, homeowners could have greatly benefited had these rules been initiated much sooner. But now, the new year is looking a bit brighter as homeowners have a better chance than ever to challenge a looming foreclosure in Florida.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z), Issued Jan. 10, 2013 (effective Jan. 10, 2014), Consumer Finance Protection Bureau
More Blog Entries:
Home Equity Loans Could Make for the Next Foreclosure Mess, Dec. 20, 2013, Miami Foreclosure Defense Lawyer Blog