Gov't consumer lending watchdog issues new rules for all mortgage holders and foreclosure process

WASHINGTON, D.C. - To avoid another costly housing crisis, the government's consumer lending watching issued new rules to prevent bad service and unexpected fees. These rules will impact everyone with a mortgage and those facing foreclosure.

"For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures,” said Consumer Financial Protection Bureau (CFPB) director Richard Cordray. "Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes."

We saw big changes to our credit card statements a few years ago, and you will soon see big changes to your mortgage statement. These new rules will make it clearer where your money is going.

The CFPB said mortgage servicing companies must provide clearer monthly mortgage statements itemizing the fees and payments. This statement will include the amount and due date of the next payment, and a breakdown of the payments by principal and fees. Also, the statement will have your recent transactions.

You'll be warned early if your interest rate is adjusting.

Servicers must also give you better warning if they are going to buy insurance for you. This way you won’t be surprised that the servicer bought insurance for you. You’ll get advance notice and pricing information before you are charged for the insurance that the mortgage company or servicer buys for you. This will, in essence, give you the chance to buy the insurance yourself.

Foreclosure changes
There are also changes to the way a foreclosure is handled. So often, homeowners blame foreclosure on paperwork problems.

The mortgage servicing companies must credit payments promptly, correct errors faster, and keep better internal records.

Also, your mortgage can no longer be subject to what’s known as “dual-tracking.” This is when the servicer moves forward with a foreclosure while working with the borrower to avoid foreclosure. The foreclosure process can’t start if you submit an application for a loan modification or other alternative to foreclosure, and that application is still pending or under review.

Also, the first notice of a foreclosure can’t come until your loan is 120 days delinquent.

These new rules will take effect in January 2014.