Withdrawal of portions of CFPB mortgage servicing proposal suggested by consumer advocates

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In their letter commenting on the CFPB’s mortgage servicing proposal, Americans for Financial Reform and numerous other consumer advocacy groups, including Consumers Union, have asked the CFPB to consider withdrawing and reissuing the portions of the proposal that deal with loss mitigation and error resolution.

With regard to error resolution, the groups criticize the CFPB for limiting the types of claims that trigger the resolution procedures and urge the CFPB to add as a trigger “a general ground that covers any borrower request to avoid foreclosure or address other ‘standard servicer dut[y].’” In the area of loss mitigation, the groups take issue with the proposal’s allowance of “dual tracking” by servicers (meaning the ability of servicers to proceed with foreclosure while evaluating a home owner for loss mitigation). The groups assert that dual-tracking should not be allowed and list nine issues they want the loss mitigation rules to address.

Other changes to the servicing proposal sought by the groups include protections from forced placement of insurance for borrowers without escrow accounts and requirements for servicers to provide borrowers “with verification of the servicer’s right to foreclose before initiating [a foreclosure]” and “detailed information about all of the loss mitigation strategies employed by the servicer, the eligibility requirements, and the steps required for homeowners to apply for these options.”

The approach that the consumer groups want the CFPB to take stands in stark contrast to the approach urged by the American Bankers Association in its comment letter on the servicing proposal. In that letter, the ABA asks the CFPB not to adopt “servicing rules that significantly diverge from the express requirements of the Dodd-Frank Act” or additional requirements patterned on the national mortgage settlement. The Mortgage Bankers Association also submitted comments on the servicing proposal in which the MBA indicated that many aspects of the proposal are in need of improvement.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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