WASHINGTON (Reuters) - The U.S. regulator for mortgage servicers on Wednesday loosened the timing requirements for communicating with struggling borrowers under new rules that take effect later this month to help prevent wrongful home foreclosures.
The Consumer Financial Protection Bureau said last year it would begin requiring servicers, the conduits for mortgage payments, to grant certain foreclosure protections to struggling borrowers more than once over the lives of their loans and to give borrowers in bankruptcy information on possible interventions.
But servicers were confused about the frequency of sending intervention notices to customers who had requested under the Fair Debt Collection Practices Act that companies limit contacting them, raising concerns about how they could follow different federal rules that had conflicting requirements.
The CFPB extended the timing for sending notices to those customers once the rules go into effect on Oct. 19, the CFPB said.
The CFPB said it was also looking into giving servicers greater certainty about providing periodic statements in connection with a borrower’s bankruptcy case, after realizing the timing requirements there could be subject to different legal interpretations.
When mortgage defaults spiked during the 2007-09 financial crisis, servicers came under intense scrutiny for missing paperwork, incomplete documentation and “robosigning,” where employees signed off on foreclosures without review.
The CFPB, created after the crisis to protect individuals from predatory lending, has sought over the past five years to strengthen oversight of servicers. In April, it sued Ocwen Financial Corp (OCN.N) for alleged misconduct that included foreclosure abuses.
Reporting by Lisa Lambert; Editing by Peter Cooney