In 2011, regulators found abuses of foreclosure processes at 14 lenders. Ten of those lenders agreed to a $8.5 Billion settlement with regulators. A new federal agency “the Consumer Financial Protection Bureau” (“CFPB”) has been created to develop rules and act as a watch dog on how lenders treat defaulting borrowers. Mortgage loan servicers, which collect loan payments, will have to evaluate troubled borrowers for all loan assistance programs permitted by federal loans through Freddie Mac and Fannie Mae as well as private investors. Currently, no national standard exists for how defaulted borrowers are treated by their lenders and mortgage servicers. The CFPB seeks to standardize rules over all mortgage lenders and servicers to prevent another housing bust and to crack down on abuses against homeowners and their loans.
The agency’s move is the latest in a string of state and federal efforts to regulate the mortgage industry which came under fire after reports in 2010 found banks were foreclosing on borrowers without properly reviewing the documents.
Under the new rules, lenders would be prevented from starting foreclosure proceedings until borrowers have missed at least four months of payments and are required to issue a written notice within 15 days of the second missed payment which explains alternative to foreclosure. Most importantly, servicers are barred from completing a foreclosure if a borrower submits an application for aid more than 37 days before the home is to be re-possessed.
If you have questions about how these new rules may affect you please call 248-656-6800 to speak to one of our real estate attorneys.
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