A. Disclosure Before An Interest rate or Payment Adjusts: On an adjustable rate mortgage, prior to the first adjustment date, a borrower must be given a disclosure with the following information:
1. An estimate of the new interest rate and the monthly payment
2. Comparison to the current interest rate and payment. (Example: Current interest rate is 3.5% and payment is $2,000 per month. New interest rate will be 4.0% and payment will be $2,200 per month.)
3. An explanation as to all aspects of the adjustment
a. how the new payment is determined (e.g. 1 year treasury plus 2.75. That is if the 1 year treasury is .25%, the new payment will be 3.0%)
b. the effective date of the adjustment
c. when the next interest rate adjustment and future adjustments will occur
4. If there is a pre-payment penalty
5. Alternatives that the borrower may pursue if the new mortgage payment is unaffordable
6. A list of housing counselors
B. Monthly Mortgage Statements: Monthly mortgage statements must be made easier to read or more understandable to borrowers. They will need to include:
1. Dollar Amount and due date of the next payment
2. A summary of the mortgage terms such as interest rate and principal amount outstanding.
3. Itemization of payments indicating principal, interest, fees and escrows
4. Recent transactions including breakdown on the fees, charges and payments
5. If the borrower has missed 2 monthly mortgage payments, a notice must be included in the monthly statement about the delinquency, amounts needed to bring current and consequences of failing to do so.
C. Servicing Improvements: The CFPB was very concerned about the operations of the mortgage servicers. Borrowers were complaining of getting the “runaround,” not having mortgage payments credited promptly, losing records, etc. So the CFPB is implementing a number of common sense policies and procedures for the handling of borrower’s accounts:
1. Payments Credited Promptly
a. payments must be credited the day they are received
b. if the payment includes the mortgage payment amount and escrows but is missing some fees (e.g. late fee), it still must be credited the date it is received for the amount included
2. Request for Balances: Servicers must respond to a borrower’s request for a “Payoff Letter” within 7 business days of receiving a request for it. This avoids delays in closing on refinances and sales. (Note. This is probably still a bit too long and should be about 3 business days).
3. Accurate Records: Servicers must maintain all records for at least 1 year after a loan is repaid or transferred.
a. Records must be easily accessible and capable of being compiled quickly
b. Policies and procedures need to be enacted by servicers so they can provide the information quickly to borrowers, investors and the courts
4. Errors Corrected and Information Provided: Servicers are required to acknowledge and respond to borrowers with respect to requests for errors or information requests as follows:
a. Acknowledge the request from a borrower within 5 days of receipt of written notification of an error
b. Within 30-45 days the servicer must (i) correct error and notify borrower of same; (ii) conduct an investigation and notify borrower of the results or (iii) notify the borrower that the information is not available
c. Examples of errors include (i) incorrect calculation of credits and payments; (ii) incorrect payments from escrow account; and (iii) inaccurate information about foreclosure avoidance