When it comes to buying a home, the role of the mortgage servicer is an important one that bridges the gap between the borrower and the investor who owns the loan. The role of the mortgage servicer is to provide certain customer service tasks such as:
- Collect payments from the borrower on behalf of the investor
- Handle customer service
- Pay/ real estate taxes and insurance on escrowed loans
- Negotiate loan modifications on behalf of the investor
A major problem with the mortgage servicing industry is that borrowers have not been able to pick their mortgage servicer as they did for their lender. This, coupled with the servicer’s insufficient resources left them ill-equipped to handle the mortgage crises. This resulted in inefficiencies such as lack of employee continuity, “runaround” from their servicers, and inconsistency with paperwork.
Continuity of Contact: A major issue for borrowers in trying to work out a solution to their mortgage problems was the lack of access to a particular person or group within a servicer with whom they could speak. Each time they called, it was a new person who answered the phone and there was a constant “reinventing of the wheel.” The Consumer Financial Protection Bureau (“CFPB”) has now mandated that for any borrower who is two or more month’s delinquent, that policies need to be put into place by the servicer to provide these borrowers with easy, ongoing access to a servicer’s employees.
1. The servicer’s personnel will be responsible for making sure that the documents get sent to the proper person for handling of the issue.
2. The person responsible for loss mitigation must have timely access to the borrower’s records and provide the borrower with accurate information about:
a. The foreclosure process and loss mitigation options
b. Procedures a borrower must follow to be eligible for loss mitigation
c. status of any loss mitigation application that the borrower has filed
Dodd-Frank has demanded that mortgage servicers be more responsive and accountable to their customers. Effective January 10, 2014, a new set of servicing rules will go into effect providing borrowers with better tools and options for dealing with their mortgage servicers. I will detail these at a later date in another email. If you have questions before that time on these issues, please feel free to contact me.