Acting under the authority given to it by the Dodd-Frank Act, the Consumer Financial Protection Bureau has proposed strict rules for mortgage service companies. On August 9, 2012, the consumer bureau recommended rules that would require mortgage servicers to provide monthly statements to customers, warn them before interest rates are adjusted, and offer additional options to avoid foreclosure. In announcing the proposals, Richard Cordray, director of the consumer bureau, said “the major failures in this industry demonstrate that all servicers need to meet basic standards of good customer service.” According to reports, recent state and federal investigations into mortgage servicers found widespread examples of lost paperwork, forged signatures and other allegedly unsound foreclosure practices.
The proposed rules will be open to comment until October 9, 2012, and final rules are expected by the beginning of 2013. The new rules will be introduced as amendments to the Truth in Lending Act and the Real Estate Settlement Procedures Act. The American Bankers Association has reportedly been in contact with consumer bureau officials regarding the proposed rules. According to Bob Davis, executive vice president of the bankers association, the association supports clear rules for consumers, although “we want to make sure servicing doesn’t get tangled up in so much red tape that high-quality, responsive servicing is no longer viable, particularly at small banks.” (“Consumer Protection Bureau Proposes to Tighten Rules on Mortgage Servicers,” The New York Times, August 10, 2012).