Regulating Mortgage Servicers In Bankruptcy

There has been a lot of turmoil in the mortgage industry in recent years, some of which has been pointed at mortgage servicers. While their duty primarily includes collecting payments from borrowers, they are also the managers of escrow accounts, and processors of loan modifications or foreclosures. In January  of this year, the Consumer Financial Protection Bureau (CFPB) issued new rules to better protect homeowners experiencing financial hardship. Included in these rules are how mortgage servicers are to proceed when a debtor seeks bankruptcy.

Regulations

The biggest problem facing delinquent borrowers when dealing with mortgage servicers is the anonymity. Many borrowers have no knowledge of or control over who their mortgage servicer is or how the manage problems with a loan. This is one of the reasons why pursuing loan modifications or other foreclosure solutions has been a challenge among borrowers. The CFPB has yet another set of rules set to be released in January of 2014, namely to address some of these continual problems.

The CFPB will be addressing the issues of:

Home retention after a borrower dies — to which the servicer is expected to allow for continued payment on the home, as well as an evaluation of the heir of the estate for assumption of the mortgage.

Early intervention for delinquent borrowers — to which the servicer is expected to contact borrowers each time they miss a payment and offer solutions for getting them back on track.

Interplay between the servicing rules and bankruptcy code — to which the servicer is expected to adhere to the no contact order implemented by the automatic stay, with the exception of providing communications related to requests for loss mitigation, information requests, error resolution, force-placed insurance, initial interest rate adjustment of adjustable-rate mortgages, and periodic statements.

Mortgage debt and foreclosure defense can be tricky business. If you or someone you know is suffering from a financial hardship that threatens their ability to make a mortgage payment, contact a Tampa bankruptcy  lawyer to find out how to protect the home.



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