The Consumer Financial Protection Bureau, the government agency created to protect consumers in the wake of the financial crisis during the last decade, has updated rules related to mortgages, aiming to further protect troubled borrowers.
The rules largely update how servicers — institutions that handle the daily business of mortgages — interact with borrowers during the process known as “loss mitigation,” in which the two parties work together to try and avoid foreclosure.
The new rules require servicers to notify borrowers when their application for loss mitigation is complete, a CFPB blog post explains.
While this may not sound like much, the CFPB says that it’s important for borrowers to know when their application is complete because some protections come into play at that point.
The new rules also require servicers to provide information about loss mitigation to certain borrowers while the loan is still active, the CFPB says. Under the current rules, the information only had to be shared once.
The change also allows for some borrowers to get repeated loss mitigation help, which the CFPB says is important for people who have recently lost their job or who have been diagnosed with a major illness.
It also provides protections to those who acquire loans through a death in the family or through divorce, or through similar means.
According to the agency, loan servicers will be required to give the receivers of loans, known as “successors in interest,” information confirming that they’re now responsible for the loan as well as information that would otherwise be provided to the person who originally had the loan.
Finally, the rules provide extra protections to mortgage holders in bankruptcy, the agency says, by requiring servicers to provide information to applicable borrowers specifically about bankruptcy. They also require early intervention information to be given to borrowers in bankruptcy that lets know about loss mitigation options.
The rules will take at least a year to come into effect, the CFPB says.