On January 17 of this year, the Consumer Protection Bureau (CPB) released the new rules that apply to mortgage servicers in an effort to protect homeowners from foreclosures.
A mortgage servicer is a company that collects loan payments on behalf of the bank, provides customer service, processes loan modifications, and handles foreclosures. Beginning January 1st of 2014, the CPB will restrict some of the practices of mortgage servicers to give homeowners in trouble more of an opportunity to get help. Here is a summary of a few of the new rules:
1) When a homeowner has missed two consecutive mortgage payments, the bank must let the homeowner know about the alternatives to foreclosure. The information must be provided in writing, and describe all the options available from the loan owner – not just the ones that are most financially favorable to the bank.
2) Once a homeowner submits an application for a loan modification, the bank cannot start the foreclosure proceedings until the application review is complete. To give borrowers enough time to submit such an application, the bank cannot start the foreclosure process until a loan is more than 120 days overdue.
3) Even if the homeowner fails to submit an application for a loan modification within 120 days and foreclosure proceedings begin, the homeowner still has a chance for a reprieve. If a late application for a loan modification is submitted at least 37 days before a scheduled foreclosure sale, the bank must halt the sale to respond to the application.
This should not come as a surprise. The banks as well as mortgage servicers have been moving in this direction for the last couple of years. It seems as though the banks would prefer to go to the short sale route rather than the foreclosure route. We have already seen a dramatic drop on foreclosures here in Colorado. My real estate brethren in other states report the same information. Since servicers know that these new rules are coming in less than a year, they will start to adopt these policies now. Why would they? Because of this little new rule from the CPB that says, “If banks violate any of these provisions, they can face charges by the Consumer Protection Bureau, or the homeowner can file suit in court.” A few states like Hawaii already have State laws that allow homeowners to sue banks and their mortgage servicers for improper actions in a foreclosure proceeding.
As I mentioned, foreclosures have already been dwindling; now combine these new rules and I predict that this will be the last year of the foreclosures. Get the best deals now before they are gone.
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