Could New Rules From The Federal Government Help Underwater Homeowners Avoid Foreclosure?

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Recently, the federal government's Consumer Financial Protection Bureau (CFPB) proposed new rules that would change the way that mortgage servicers work with borrowers, including those seeking underwater mortgage help. A mortgage servicer is the company that collects your mortgage payments, handles loan modification requests and processes foreclosures.

Since the real estate crisis in 2008, people have complained about the actions of some of mortgage servicers, including allegations of fraud. To prevent future problems and help struggling homeowners avoid foreclosure, the CFPB has proposed the following guidelines for mortgage servicers.

1. Provide homeowners with clear monthly statements. Homeowners would receive statements that clearly indicated principal, interest, fees, escrow and due dates.

2. Warn homeowners prior to rate changes on certain adjustable rate mortgages (ARMs). In addition to letting homeowners know in advance that their rates were going to be adjusted, mortgage servicers would also have to explain how they determined the new rate and let you know when to expect future adjustments. In addition, they would have to let you know about alternative options if you can't afford your new mortgage payment, information which could help some homeowners avoid foreclosure.

3. Provide underwater mortgage help to struggling homeowners. In the future, mortgage servicers would be required to reach out to homeowners who are having trouble making mortgage payments and let them know about foreclosure help options available to them.

4. Act quickly to address errors. If a homeowner notifies their mortgage servicer of a possible error, the servicer will be required to promptly investigate the error, let the homeowner know the results of the investigation and, if necessary, correct the mistake.

5. Provide homeowners access to staff who can answer questions about their mortgage. Mortgage servicers will be required to keep accurate and easily accessible records. Homeowners who have questions or concerns about their mortgage will be able to contact someone who works for the mortgage servicer and who can access those records and help the homeowner resolve their issue.

If the proposed rules are adopted, they should promote transparency in the mortgage industry and create greater clarity for homeowners. With accurate and easy-to-understand information about their mortgages, homeowners who need foreclosure help are more likely to get the answers they need. In the meantime, Homeowner 101 offers the Underwater Homeowners Assessment and Action Plan. We sit down with homeowners who are seeking underwater mortgage help and work with them to evaluate their options, giving them the answers, information and resources they need to make a decision that works for them.

Homeowner 101 is an organization designed to give underwater homeowners Answers, Information, and Resources (A.I.R.). We offer the Underwater Homeowners Assessment and Action Plan, a resource for every homeowner who owes more than her house is worth whether youre having trouble making your mortgage payment or not.

by: Molly Castelazo

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