WASHINGTON – The new federal consumer financial protection agency issued long-awaited guidelines today that will govern how the agency supervises mortgage transactions, from monthly payments to foreclosures.
The agency, created by the overhaul of financial regulations passed last year, will send examiners to banks and other large institutions that service mortgages and use the guidelines to assess whether consumers’ interests are protected.
Among other areas, examiners will review whether the institutions are providing adequate information about loan modifications and alternatives to foreclosure, and that homeowners in default are not charged illegal or duplicative fees.
During the recent foreclosure crisis, some financial institutions failed to keep pace with mortgage delinquencies, lost critical paperwork, and made mistakes in processing. In some cases, homeowners who would have qualified for a new loan lost their homes to foreclosure because of delays and errors by mortgage servicers.
“Mortgage servicing has a huge impact on consumers and is a priority for the CFPB,” said Raj Date, special advisor to the Secretary of the Treasury. “The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems. We are going to take a close and measured look at whether servicers are following the law.”
The entire Consumer Financial Protection Bureau Supervision and Examination Manual can be found here.
The agency was set up by Harvard Professor and US Senate candidate Elizabeth Warren, who left after it opened its doors in July.