Agency Proposal
For Borrowers in Trouble: Reliable Contact with People Who Can Help
Skip to issue§1. ”Continuity of Contact”
During the mortgage crisis, many borrowers in trouble couldn’t contact a customer service representative who knew what was going on, kept good records of contacts with the borrower, and had authority to help. Often, documents were lost or mishandled, conflicting or misleading information was given, and borrowers were handed off from one department to another and forced to explain their situation over and over. To help solve these problems for the future, CFPB is proposing that servicers must provide borrowers in trouble “continuity of contact” with someone who knows what’s going on and can help. This is a follow-up to the proposed new early intervention rules. See the Early Intervention Help post.
What does this mean for consumers? CFPB proposes that a borrower in trouble must have “readily available telephone access” to a customer service representative, or a team of representatives, designated to help him/her try to work out a way to avoid foreclosure. This person or team must be able to:
- explain what to do if the borrower thinks there has been an error (See the Getting Errors Fixed post)
- explain what options the borrower might have for avoiding foreclosure (called “loss mitigation options” (LMOs)) (See the Options for Avoiding Foreclosure post)
- tell the borrower what he/she needs to do to apply, including any deadlines he/she must meet
- have access to all the borrower’s payment history and all documents he/she submitted to apply for an LMO
- pass along this material to the people who actually make the decision
- tell the borrower what the status of his/her application is
- tell the borrower what the decision is, within 3 business days of when it’s made
- explain if, and how, the borrower can appeal if the LMO application is denied
- explain the circumstances under which the servicer can start foreclosure
Someone helping the borrower (like a housing counselor or a lawyer) must also have access to this person or team. Borrowers who call and don’t get a live response from their assigned representative must be able to leave a message — and get a call back within 3 business days. Will these new requirements give borrowers in trouble the support they need?
Once the borrower seems to be out of trouble, the servicer can stop providing “continuity of contact.” CFPB thinks a good sign of this is when the borrower has made 3 consecutive months of on-time payments under either the original mortgage terms (after making up all the missed payments) or the new plan that was worked out. Is this a good approach to defining when a borrower no longer needs this kind of help?
CFPB wants to avoid having the ball dropped if servicing rights are transferred. See the Who’s Servicing Your Loan? post. The new servicer must set up continuity of contact for the borrower with its own employees within 30 days of when the transfer takes effect. The old servicer cannot stop continuity of contact until 30 days after the transfer takes effect. Should the new servicer be given more time?
What does this mean for servicers? Servicers are required to start providing continuity of contact no later than 5 days after notifying (or making a good faith effort to notify) a borrower about early intervention. (See the Early Intervention Help post.) If a nondelinquent borrower contacts the servicer saying he/she expects to be late in making a payment, the servicer may, but is not required to, provide continuity of contact. The required “readily available telephone access” would mean “mak[ing] phone access available any time during the day when the servicer makes available personnel to receive borrower inquiries by telephone.” It’s up to the servicer to decide whether to assign a single staff person to the borrower through the whole time, or to use a team of people, so long as the required continuity is present.
CFPB thinks it’s important to have “objective standards” for how long the servicer must provide continuity of contact. In addition to the 3-months of consecutive payments test, other circumstances in which continuity-of-contact service can be terminated are: sale of the property through foreclosure or otherwise; refinancing the mortgage; paying off the mortgage; 30 days after servicing rights are transferred.
Servicers may take reasonable steps to determine if someone purporting to act for the borrower is authorized to do so.
As part of a general expansion of the scope of Regulation X, the continuity of contact requirements would apply to subordinate lien (as well as primary) closed-end mortgages.
Read what CFPB says in the NPRM about continuity of contact.
Read CFPB’s analysis of costs and benefits of continuity of contact: general; small business
See the text of the proposed rule and CFPB commentary: § 1024.40; § 1024.31 (“mortgage loan”)
§2. Good information management practices
To make certain that customer service representatives actually have good information about the borrower’s situation, servicers would have to have recordkeeping practices that provide up-to-date, accurate information about the account. This includes information about what “service providers” (law firms, appraisers or inspectors, or other companies hired by the servicer) are doing.
What this means for consumers. Servicers would have to take whatever steps are needed so that the borrower (i) receives accurate, on-time information, (ii) gets errors corrected quickly; and (iii) doesn’t suffer negative actions, including foreclosure, based on inaccurate information.
What this means for servicers. A servicer does not have “reasonable information management policies and procedures” unless appropriate personnel “have access to accurate and timely information about a borrower’s account” and can give it to the borrower or another party (e.g., court in a foreclosure proceeding). Also, the servicer’s procedures must allow it to get information from, and oversee the actions of, service providers. CFPB wants to give servicers flexibility to implement practices that reflect the size, nature and scope of their particular operations, but compliance with the proposed new rules would require at least the following:
- maintaining for each borrower a “servicing file” that contains copies of the mortgage note and deed of trust, schedule of all payments credited or debited (including escrow and suspense accounts), any collection notes created by servicer personnel, report of any data fields created by an electronic system (e.g., telephone communications), and copies of material provided in response to information requests or notices of error (see the Requesting and Getting Information and Getting Errors Fixed posts).
- retaining a borrower’s records for at least a year after servicing rights have been transferred (see the Who’s Servicing Your Loan? post) or the loan paid off.
Also, if there has been a transfer of servicers, the designated contact staff must have access to any documents the borrower submitted to the prior servicer in seeking a loss mitigation option. See the Who’s Servicing Your Loan? post.
When information is not immediately available (e.g., payments haven’t been posted yet or documents from the borrower haven’t been processed), the servicer must respond “within a reasonable time” – which CPFB proposes to define as 3 business days. Should the servicer have longer to respond? Also, conditions beyond the servicer’s control (e.g., phone or computer service disruption; borrower delay in supplying information) can excuse failure to comply.
If the servicer’s personnel regularly cannot perform the tasks identified above, the servicer could be guilty of a “pattern and practice” of violations. This could mean liability for damages in an individual or class action lawsuit, as well as enforcement actions for penalties by federal or state agencies. A single incident of non-compliance would not be considered a violation, but a servicer could be in violation either because of repeated problems with a single borrower or similar incidents with a number of borrowers.
Read what CFPB says in the NPRM about reasonable information management.
Read CFPB’s analysis of costs and benefits of reasonable information management: general; small business
See the text of the proposed rule and CFPB commentary: § 1024.38
Absolutely critical to construct this culture and structure of support for accurate and continual exchange of information with THE main affected party: at-risk owner. How can the Owner make intelligent use of time and energy to save the home without it? I would propose that the Owner have access to the full checklist of documents that he/she must satisfy for the completion of the process in question, and see the same documents that the service can see. Hearing someone tell you over the phone that they can’t find a document that you delivered over and over again is about the most frustrating and alienating and helpless shady experience I had while trying to short sale my home. My continual & repeated efforts where futile and inefficient.
Hi arron banner, and welcome to regulation room. Thank you for your comment reiterating the importance of consumer-servicer continuity of contact. What do you think about the time frames for servicers to establish continuity of contact? Is 5 business days for establishing contact enough time?
@Moderator.
I must answer your Q with a Q. First, statement of fact: Establishing continuity is a front-end task which I believe is already recognized. If you are going to attempt to put a hard number to the window of time (X number of days) it takes to establish the contact, then I must ask:
Q1: what action/event do you expect should trigger the start of this window? (It seemed like a very messy process in my experience at the front end and there was no clear beginning to the conversation with the lein holder).
Q2: Context? What is the speed at which the owner must take action to save the home? Is it 30 business days? Then 5 business days to establish continuity of contact is a minimum. It is 60-90 days? In that case you might allow for up to 10-13business days.
Overall, without… more »
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Thanks for your response, arron. You can read more about the triggering condition here. Basically, servicers are required to begin “early intervention” soon after a borrower misses a payment or makes only a partial payment. See more details in the section I linked to.
If someone were available consistently and knew what to do and how to help, it would relieve stress, mental anguish and perhaps solve the problem before needing other intervention. The need for continuity of contact is described exactly in the opening paragraph. I can’t tell you, but have documented the almost daily calls that require me to repeat the same information then am told that someone else from another department will be in touch because the caller is not the right office. There ought to be a law. Continuity of contact is a good start. introductory paragraph
All of these proposals, rules and regulations are futile if there’s nobody enforcing them. I’ve been working with my mortgage loan servicer for 9 months now trying to get a modification. I’ve had 4 different customer relationship managers and have always gotten voice mail every time I called. Occasionally I would get a call back but usually not. And why do they not accept documents electronically? I have faxed and “fed-exed” my documents numerous times and each time they claim they did not receive them, even though I have fax confirmations and tracked the Fed-ex package to make sure it was delivered. I am completely frustrated with the whole process.
Thanks for your comment, exhaustedinfl, and welcome to Regulation Room. The problems you are having with customer relations managers are exactly what CFPB is trying to prevent. Do you think that the proposed regulations forcing servicers to have an accessible, knowledgeable team of customer service representatives would make the modification process easier for you?
Not unless you have an efficient process to enforce those regulations. What would make it easier would be a requirement that the servicers have a system by which files could be uploaded electronically by the consumer through a secure, log-in to use type site. A site where consumers could see a document check-list and view which documents had been received as well as outstanding documents, due dates, messages, etc. Right now I am at the mercy of the customer relations manager. It’s a “he said-she said” battle because I have sent documents, but they say they didn’t get them. Even though I have fax confirmations and fed-ex tracking numbers that show delivery, I can’t prove what documents were delivered.
We have been contacted over and over by the customer service person to find out if we plan to “default”. They call so often. We learned from one that we spoke to that they track their “attempts to assist” and report it. Meanwhile, they call and call and just reaffirm that they cann’t assist. Hard to believe they pay someone to be that way with their customers.
There is a system by which housing counselors can upload documents electronically to many of the major servicers – that, at least, eliminates one source of frustration. GMAC Mortgage has just started allowing homeowners to upload their own docs. See the website: http://www.homeownerconnects.org . Hopefully, this will expand. Having a Single-Point-of-Contact (SPOC) at the servicer is a step in the right direction, but there is still a quick turn-over (think call-center reps) and often a lack of experience and knowledge on their part.
I have been trying to get my payments lowered and keep sending and resending paperwork now I have been informed that there is nothing that can be done. My partner had to borrow against her 401K plan in order to get our mortgage caught up now we have been informed that our payment will be increased from 2016.26 to 2510, now this just seem very stupid to me since we were having a problem making the lower payment and wanted it lowered so it could be made from one of my paychecks. I feel that mortgages should use net income instead of gross income. That would prevent a lot of problems in my opinion.
Welcome to Regulation Room, rustysdad, and thank you for sharing your story. Was there problems with the customer service not receiving your paperwork that led to the decision to not lower your payment? Would CFPB’s proposed regulation for providing reliable contact have helped?
The problem with paperwork was that they never told us what we were supposed to sign and they made us send everything in at least 4 times. Then when we got it all sent in they informed us that they did not hold the mortgage but it was held by another holding company. Then they said that they were allowed to have the mortgage set at approximately 31% of our income and they are supposedly lower then that
so there was nothing they could or would do. They kept giving us a run around and playing telephone tag. But they would not call back when you called them. It just seems that since we make about $90,000 a year we are just stuck with the payments since we want to keep the house we have to go without so we can make the payments.
We also cannot get the mortgage co. to assist us in any way. We were late in the past due to a significant medical event. The bank nearly foreclosed, then modified, raising our payment. We are now underwater. And the payment is so large, we can barely pay our other creditors. We can’t move, because we can’t pay the deficiency balance on the house in our state of MD. All we are told by the bank is there is nothing available to help us. My spouse, who had the medical issue, is working himself to death to meet the obligation. Its a horrible situation, at 6.25% interest! The bank knows they have us over a barrel, and the government has done nothing (including MD State Govt) to assist. The bank has the control-the government is so weak on this, there is no help for underwater mortgages or excessively high payment mods.
Welcome to Regulation Room, frustratedwithbanks, and thanks for sharing your story. It sounds like you and your spouse are going through a difficult time. We suggest you contact a HUD approved housing counselor to see if they can help.
The CFPB is proposing in this rule that servicers take “early intervention” steps with borrowers in trouble to provide them with important information about foreclosure and how to get help from the servicer or from outside organizations. Could you read the CFPB’s suggested “early intervention” steps and comment if you think alternative approaches would be more helpful to borrowers?… more »
OK! Everyone of us has similar problems and are trying to do the right thing. When does the government “bail” us out. The banks already have theirs. Let’s organize. Now is the time. An election is coming!
Hi youandme. The main goal of the Regulation Room is to provide useful and effective comments to the agency about the proposed rule. Have you still
been experiencing continuity of contact issues in the past two weeks? You may want to contact a HUD approved housing counselor to see if they can help. Do you think the new continuity of contact requirements will give borrowers in trouble the support they need?
I have had over 8 different contact people with my mortgage company in the past 9 months. And these were just the people I dealt with after my application was escalated to the president’s office. The only answer I would get was that my modification was still in review. The last conversation with them was 8/31/12 when they said it was still under review. I just received a letter from my mortgage company stating that my loan was sent to a servicing company and that I would have to deal with them directly with my modification. 9 months of stall tactics and waiting for a response. I gave them all the information they needed but they didn’t act on it. Now I will have to begin the whole procedure all over again with another company. That is if they don’t just foreclose on me.
Hi zenguy1965. Thank you for sharing your experience. You may want to contact the CFPB’s complaint center or a HUD-approved housing counselor to see if they can help. CFPB is proposing that servicers be required to keep account records for at least a year after an account is transferred in case borrowers need information or there has been an error (See the Asking for, and Getting, Information and the Getting Errors Fixed posts.). Do you think these new requirements give borrowers in trouble the support they need?
A single point of contact needs to be as described; and needs to be cross-trained to provide real and accurate answers. If an answer is not available, the SPOC needs to follow up with the client in a reasonable time to provide an answer to their questions. Often times clients are assigned to a SPOC that is unable to assist them, and does not have accurate updates. Another problem is that often times even though a SPOC exists, other account reps from various departments at the same servicer (or affiliated attorney) continue to contact or send letters to the client which confuses them as to which documents have been received, what needs to be provided, and what the status is. For example, a client was approved for a trial mod but after signing and returning her documents, she received a notice… more »
Hi amyrozycki. Welcome to Regulation Room, and thank you for your comment! It sounds like you have first-hand experience working with borrowers, which is helpful. CFPB’s proposal would require servicers to designate a customer service representative, or team of representatives, who troubled borrowers can contact for assistance. Are you suggesting that CFPB should require servicers to channel all communications to distressed borrowers through the designated contact? Do you think that it would be feasible to expect servicers to make such an accommodation? If the designated contact has access to all communications made to troubled borrowers, would that address your concern about borrowers receiving conflicting or confusing information from multiple departments?
Could you read CFPB’s… more »
Thank you for your response… Yes, I think it is feasible to expect servicers to make the accommodation of having a SPOC for ALL outbound and inbound communications with clients and housing counselors, AND that they are able to answer questions (or find the answer and follow up), and have direct contact with underwriters (in order to eliminate rejections based on correctable errors or missing information). It would be ideal if housing counselors were able to have direct communication with underwriters and eliminate the third person in between which would also be more cost effective due to a reduction in communication problems, time, and the amount of re-dos because of inaccurate rejection issues.
Hi amyrozycki. Thank you for your reply. Are you concerned that providing direct access to underwriters might overwhelm servicers and therefore further delays in resolving mortgage modification requests? Do you have any suggestions for how servicers might accommodate the borrower’s interest in both receiving information directly from departments within a lender and having all communications channeled through a single point of contact?
I agree that would be lovely.. for the people who are just now having these issues, what about people like my husband and I who had multiple circumstances causing financial issues, we request a loan
mod. and the lender and attorney we hired said the lender will not even begin to negoiate with us until we where behind on our mortgage, something we where not. Long story short i have the proof they said it all documents covering my hiney and I am 1 year out of short sale and started the whole this in 2007 and due to all the NON-Contact and screwup’s we just finalized it Sept, 2011 our credit was perfect before and after only the one problem due to bad legal advice. We are now trying to buy a home and cannot get a loan with less than 6.7% for 20 years and we have 700 credit scores, with… more »
I have gone to 3 banks , Im told to get a good rate it has to be 2 years and i already have one gone. They wont even consider the extenuating circumstances. 25 years in law enforcement and perm disability guarnteed income and still have to wait 1 year. I need to find a company that does better than the others, its a no brainer we are a great investment.
Pass on any help you can i need it. Thanks
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Welcome to Regulation Room, we3reeds, and thanks for sharing your story. It sounds like you and your spouse are going through a difficult time. We suggest you contact a HUD approved housing counselor to see if they can help. The main goal of the Regulation Room is to provide useful and effective comments to the agency about the proposed rule. Do you think the new continuity of contact requirements will give borrowers in trouble the support they need?
Also I have stacks of documents showing they lost my paperwork , some comments are , they cannot find it , then its been given to collections, which there was no reason for that, then every other time they would misplace “lose” my documents, then switch peole and they loose it. I have the conversations where the realtor and the rep at the bank tell each other they lost my stuff , also the documentation and notes from the attorney we paid to “help” us they marked down man times that there is a hold up do to misplaced papers
I am concerned about underwriters being overwhelmed by calls from clients and understand how difficult it is to constantly be interrupted while trying to review detailed information… however; the reps also interrupt the underwriters to find out information for clients and counselors so it wastes time adding a 3rd person to the mix when the information at hand is critical to the decision making process. I don’t think the average turn around time for evaluation decisions is accurate. Because of the barrier in communication, many clients are being denied due to forgetting to fill something in or check a box when the underwriter could simply call and say, “can you check the box and fax it back in to me, or can you explain… or send me xyz document?” so they are able… more »
Thank you.
RE:
Moderator
September 21, 2012 12:53 pm
“Hi amyrozycki. Thank you for your reply. Are you concerned that providing direct access to underwriters might overwhelm servicers and therefore further delays in resolving mortgage modification requests? Do you have any suggestions for how servicers might accommodate the borrower’s interest in both receiving information directly from departments within a lender and having all communications channeled through a single point of contact?”
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Thanks for your response, amyrozycki. Would lenders be concerned that, by flagging open items, an underwriter might compromise the independence of the review process, even if inadvertently? How would the underwriter be comfortable, for example, that a borrower isn’t checking a box to get approval when, in fact, the original application was more accurate? As an alternative, would it make sense for housing counselors to review materials for accuracy and completeness (i.e., check the box, if appropriate) before submission?
Moderator: Thank you for your response… I understand the lender/servicer’s fears that the integrity or independence of a review may be compromised by the coaching of clients by their underwriters; however, that is not what I was implying, and I doubt it would be an issue as the underwriters are working for the servicers, not the clients; so underwriters would have no incentive to coach clients. What I was implying was for underwriters to follow up and ask questions or confirm obvious small mistakes that are made before simply denying a modification. Yes, in a perfect world housing counselors would catch all errors, but aside from the fact that we are also human and miss things from time to time ourselves, and that every servicer has slightly different requirements; often times clients… more »
It is amazing that this is even a topic/option, of course it should be, or should HAVE been in place.
Where I get lost with this as the mortgagee. As a mortgagee…
MORTGAGEE: I really do NOT care about your house, I want my money. Your home is yours, your families nest. As the mortgagee that extended you the money to purchase your families home, I simply want to make ANY/ALL arrangements possible to collect the money you agreed to for the home you decided was best for you and your family. We are not in the house business, we are in the money business…unfortunatley the money is tied to your home.
The bank DOES NOT want your house…I promise they dont, they want money. Not having a dept/case mgr within a company that will help the company aquire the original reason behind… more »
In a case of asset-based lending, I could see the bank giving the run around, he will make more profit reselling the property…which surely this is the basis behind HOEPA, now prohibiting asset-based lending practices…but does not make sense to properties that are upside down and a borrower trying to make good.
For sure, “Continuity of Contact” (DEPT or CASE MGR)…one guy/gal, one number that can play the role of intermediary reducing the “lost in translation” effect between borrower and company…create more jobs!!! « less
Again, amazing…how can one guy looking at a different screen have different data…thats impossible!
As a fairly tech savy person and experinced programmer, though my screen may be designed differently, with different buttons or colors, it DOES NOT affect data. The DATA is consistent regardless of computer or screen or access…it just might be aranged differently, or maybe certain information is not showing because you might not have clearance.
Fine, okay…but one guy has 8 payments on your account and the other guy has 36 payments on your account, this is just unimaginable!
How can you have different data on the same mortgage? This is just unrealistic to the purpose of maintaining data.
Simple solution, if you have a DATABASE and are considering a servicer/subservicer/whatever…create… more »
Surely push “Good information management” through, its a no brainer. « less