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» VISIT US ONLINE @ DSNEWS.COM POLICY PERSPECTIVE Servicing Without Surprises A peek at the potential—and highly likely— impact of the CFPB's proposed servicing rules. By George FitzGerald I n August, the Consumer Financial Protection Bureau (CFPB) released an outline of its proposed "borrower-friendly" mortgage servicing rules based on items specifically stated in the DoddFrank Wall Street Reform and Consumer Protection Act. The idea behind the release of the outline was to provide both the public and the servicing industry with an idea of how the mandated Dodd-Frank items might be implemented, and it gives a good indication of what servicers can expect in the official rules. The CFPB was expected to release the actual rules sometime this fall; servicers have already been told they must meet a January deadline for compliance with new regulatory directives, yet as of this writing, no new servicing standards have been finalized. If for some reason the CFPB does not issue final rules on the Dodd-Frank items by next month, they will take effect automatically, as written. This being the case, it's important for mortgage servicers to understand what is currently being proposed, the intended benefits for consumers, and the potential impacts for servicers. The CFPB's outline breaks down expectations for servicers into eight overarching rules meant to aid borrowers: » Clear Monthly Mortgagee Statements » Warning Before Interest Rate Adjusts » Early Information and Options for Avoiding Foreclosure » Options for Avoiding Costly "ForcePlaced" Insurance » Payments Immediately Credited » Records Kept Up-to-Date and Accessible » Errors Corrected Quickly » Direct and Ongoing Access to Servicer's Foreclosure Prevention Team While this article will examine the impact of these rules as they're currently written, readers should remember that although these items will likely be a part of the final rules and regulations, they should by no means be considered the CFPB's servicing standards in their entirety. No Surprises The first four of the eight rules are presented by the CFPB under the heading of "No Surprises," and that is the motivating principle behind each: to provide the borrower with more information, so that he or she is not caught unawares by factors or changes related to the mortgage terms. The first of these rules calls for servicers to provide "Clear Monthly Mortgagee Statements," with seven specific points of disclosure cited: » Summary of the mortgage terms, such as interest rate and principal obligation » Breakdown of payments by principal, interest, fees, and escrow » Amount of and due date for the next payment » Recent transaction activity, including itemization of fees and charges » Amount of any prepayment fee to be charged » Late-fee warnings » Information about loss mitigation options for those delinquent 83

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