The Consumer Financial Protection Bureau addressed borrowers’ access to appraisals in a new rule released Jan. 18 and issued new standards for mortgage servicing Jan. 17. The appraisal rule is designed to increase transparency of the valuation process while the mortgage standards are designed to protect borrowers from faulty foreclosure practices.
The appraisal rule will take effect Jan. 18, 2014. The mortgage standards will take effect Jan. 10, 2014, and apply to most servicers; smaller lenders (those holding 5,000 or fewer loans) are exempted.
The new appraisal rule, which is included in an amendment to the Equal Credit Opportunity Act, makes it easier for borrowers to review a valuation before getting a loan. Specifically, the rule requires lenders to tell mortgage applicants within three days of applying for a first mortgage that they are entitled to receive a free copy of any valuation, including appraisals, automated valuation models and broker price opinions after the reports are completed or three days before the loan closes, whichever comes first.
A summary of the new appraisal rule is available here.
As for the new national mortgage standards, one rule prevents servicers from initiating a foreclosure until a borrower has been delinquent at least 120 days. Servicers also have to advise borrowers of loss mitigation options after they have missed two consecutive mortgage payments.
Servicers will be required to give borrowers direct and easy options (as well as access to personnel) to help them with loan issues in the event of mortgage delinquency. Servicers also cannot deny borrowers access to foreclosure alternatives that do not directly benefit the servicer.
Additional rules state that servicers have to give borrowers time to review and accept foreclosure alternatives before they can initiate a foreclosure judgment or sale. Servicers also will not be able to foreclose if the borrower reaches a loss mitigation agreement.
Servicers will have to start providing clear monthly statements that outline the amount a borrower owes on the mortgage; the due date of the next payment; and a breakdown of the payment into principal, interest, fees, escrow and recent transactions. They also will have to provide notice to borrowers who have adjustable rate mortgages when rates are scheduled to change.
The CFPB will not permit servicers to require that borrowers buy forced-place insurance.
Under the new national standards, servicers must promptly credit borrowers’ accounts when payments are received and respond to requests for balance payoffs within seven days. The CFPB also will require servicers to respond to written notices of errors in borrowers’ accounts within 30 days, launch a reasonable investigation and provide borrowers with an explanation for the error.
A summary of the final mortgage servicing rules is available here.