CFPB Proposes National Mortgage Servicing Rules

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On August 10, 2012, the U.S. Bureau of Consumer Financial Protection (the “CFPB”) released two proposed rules (the “Proposed Rules”) intended to implement the mortgage servicing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in July 2010. If adopted, the Proposed Rules would impose a broad new set of uniform loan servicing requirements on residential mortgage servicers across the U.S.

The first Proposed Rule (the “TILA Proposal”) consists of proposed amendments to Regulation Z, the federal regulation that implements the Truth in Lending Act (“TILA”). The TILA Proposal would prescribe the information borrowers receive about their mortgage loans, and would require servicers to provide borrowers with regular statements that include a breakdown of payments by principal, interest, fees, and escrow, the amount of and due date of the next payment, recent transaction activity and warnings about fees. Servicers would also be required to provide earlier disclosures before the interest rate adjusts on adjustable-rate mortgages (“ARMs”) and to provide increased borrower protections if the servicer purchases “force-placed” property insurance. The TILA Proposal would also require servicers to make "good faith efforts" to contact delinquent borrowers and inform them of their options to avoid foreclosure.

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