Washington, DC, United States (4E) – The U.S. Consumer Financial Protection Bureau (CFPB) has completed the rules that require financial firms to exhaust all available options to prevent delinquent borrowers from losing their homes, a move seen as a significant step in fixing the country’s mortgage market.
The rules are intended to help investors of mortgage securities by requiring better transparency from mortgage servicers on loan performance and assistance by servicers to distressed borrowers. Lack of transparency has been a major complaint by institutional investors in recent years.
The consumer bureau said banks must give employees access to information that will alert borrowers, provide status reports on modification requests and ensure safekeeping of documents.
The new measure, which will take effect in January, will also require banks to inform borrowers who have missed making two monthly payments their options to avoid foreclosure. In another provision that will preempt California’s 90-day requirement law, foreclosure proceedings cannot begin until loans become delinquent for 120 days.
Most small banks and credit unions are exempted from the new rules. CFPB officials said they received only a few many complaints about small institutions, which are more likely to include loans on their books instead of selling them. They also generally give individual customers more attention with their mortgage questions.
National Consumer Law Center, a prominent consumer group, criticized the new rules saying servicers will not be required to consider easing the mortgage terms and fearing they may only preempt stronger existing provisions.
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