Agency Proposal
For All Borrowers: Periodic Statements
Skip to issue§1. Basic information for ALL borrowers
The mortgage crisis showed that consumers didn’t always get clear and current information about the status of their mortgage accounts. Now, servicers must send borrowers “periodic statements” containing this information. The proposed new rules would settle what specific information must be included and, based on CFPB’s consumer testing, how this information must be organized and presented. Two important proposed exceptions are described in the last sections of this post.
What this means for consumers. CFPB wants borrowers to get the information they need to manage their mortgage loan, without being overwhelmed. Some information would have to go on all periodic statements. (For information that depends on individual borrowers’ circumstances, see the next section). Take a look at the new form for all statements:
Periodic Statement Sample 1How will borrowers benefit from having this information? Servicers will probably have to spend money on new software and other systems to produce this information in the form CFPB wants to require. Those costs might be passed along to consumers. Are borrowers likely, on balance, to come out ahead?
What this means for servicers (and creditors and assignees): The periodic statement rules would cover owners, including the original lender and assignees, as well as servicers (unless they no longer own or service the loan). The servicer and the owner can coordinate to send only one statement to the borrower. Loans covered are closed-end residential mortgages, but reverse mortgages, construction loans, and time shares would be excluded.
Servicers don’t have to use the sample form, but the information must be arranged in the required groupings. Boxes, lines, or white space must set off each group. Other information (e.g., logo, payment methods, details on escrow accounts) can be included so long as the required disclosures remain “clear and conspicuous.“ Servicers can use different terminology than CFPB uses (e.g., “impound account” instead of “escrow”) if that would be clearer for borrowers in some regions.
CFPB proposes a change to providing housing counselor information. Rather than listing specific organizations with contact numbers, the periodic statement would have to give the website and phone number for the HUD Approved Counseling Agencies list or a list that CFPB will develop, as well as the state housing finance authority for where the borrower resides. CFPB has several concerns about servicers’ directing borrowers to specific agencies.
CFPB wants to know how servicers who now provide a combined statement for mortgage loan and other financial products (e.g., checking account; credit card) would handle the proposed new requirements. For example, if both mortgage loan disclosure and credit card disclosures must be on the first page of the statement, how would that look?
What are the likely costs to servicers of storing and accessing the loan-specific information required by the proposal? How far are those costs likely to be offset by (i) borrowers not needing to contact the servicer as often to ask questions, (ii) borrowers managing their loan payments better as they get better information about e.g., late fees, effect of partial payments, etc., or (iii) other changes in borrower behavior? What strategies could servicers use to lower periodic statement costs (e.g., smaller servicers using outside vendors)?
Under the new rules, servicers would be required to have “reasonable information management policies and practices” to ensure that they can “provide accurate and timely disclosures to borrowers.” If notices to borrowers regularly contain inaccurate information or are not provided on time, 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 these parts of the periodic statement and reasonable information management.
Read CFPB’s analysis of costs and benefits of periodic statements (in general) (small businesses) and reasonable information management (general); (small business).
See the text of the proposed rule and CFPB commentary: §1026.41(a),(b),(c),(d);§ 1024.38
§2. Info depending on borrowers’ circumstances
CFPB thinks that borrowers having certain kinds of mortgages will benefit from getting additional information. This information can help a borrower who is getting into trouble keep track of the status of his/her loan. (See the posts on Borrowers in Trouble for other new proposals.)
What this means for consumers. Some mortgages penalize borrowers for paying off the loan early (e.g., by refinancing). The periodic statement would have to say if such “prepayment penalties” apply. (Should the statement have to give the actual amount of the penalty?) If the mortgage is an adjustable rate mortgage (ARM), the statement has to give the date the interest rate will reset. (For more new proposals on ARMs, see the Adjustable Rate Mortgages post).
For borrowers having trouble, information about what the servicer is doing with partial payments would have to be included. You can read about, and comment on, this part of the periodic statement in the Partial Payments post. If the borrower is more than 45 days overdue (a timeframe CPFB chose because it usually means 2 consecutive missed payments) the statement must contain a “delinquency notice.” Take a look at
Periodic Statement Sample 2Would any changes help make this clearer to borrowers? Are there other kinds of information that should be included in the “Messages” section: e.g., a notice if the borrower’s regular payments cover only interest not principal (interest-only loan), or don’t even the cover the interest (a negative amortization loan); or disclosure of whether the borrower could stop paying for private mortgage insurance .
Borrowers with payment-option loans must be able to see each payment option. Take a look at
Periodic Statement Sample 3Would any changes help make this information clearer to borrowers?
What this means for servicers. Servicers will want to look at the proposed definition of prepayment penalty, which tries to reconcile somewhat different approaches CFPB has taken in its other recent proposals. Questions include what to do with a minimum finance charge (currently, included) and loan-guarantee fees (currently excluded).
Is it possible to disclose the prepayment penalty amount or, because the amount might depend on circumstances, should CFPB require disclosure of the maximum possible amount?
The borrower-specific information in the Delinquency Notice complements the proposed new “early intervention” notices. (See the Early Intervention Help post). The Notice must include the date delinquency started because this matters to some loss mitigation options. If the borrower has been accepted into any loan modification program, or if the loan has been referred to foreclosure, this must be stated in the Notice.
Read what CFPB says in the NPRM about these parts of the periodic statement.
Read CFPB’s analysis of costs and benefits of periodic statements: in general; small businesses.
See the text of the proposed rule and CFPB commentary: §1026.41(d)
§3. When and how
In general, a periodic statement would have to be sent for each billing cycle: put in the mail, or delivered electronically, no more than 4 days after the grace period ends for the previous cycle. Borrowers want their statements to show their most recent payment, including whether a late fee was charged because the payment arrived after the grace period. So, the next statement can’t be sent too early. (Servicers are generally required to credit payments on the date received.) On the other hand, if the statement is sent too late, it may not arrive before the due date of the next payment. Has CFPB come up with the best balance?
If the borrower agrees, the periodic statement can be provided electronically . Should servicers have to get separate consent if consumers already receive electronic statements? How about from consumers who already have their payments deducted automatically from their bank account? Should the servicer have to make sure that the borrower in fact has electronic access to information?
Read what CFPB says in the NPRM about timing and delivery of periodic statements.
See the text of the proposed rule and CFPB commentary: §1026.41(a),(b),(c)
§4. The coupon-book exception
Some borrowers make mortgage payments using a coupon book that usually has a year’s worth of coupons. Rather than require a periodic statement plus the coupon book, CFPB proposes a compromise: information that remains the same will have to be included on the coupons, and the borrower can get information that changes (e.g., payments for the year; breakdown of how payments are applied) by asking the servicer. The coupon book would have to explain how to get this information. For borrowers more than 45 days behind at the beginning of a billing cycle, the servicer would have to send a separate written Delinquency Notice. Is this a good solution for consumers? For the mortgage industry? Is there a better alternative?
This exemption would apply only to coupon books for fixed-rate mortgages. (See the Adjustable Rate Mortgages post for new disclosure proposals for ARMs.)
Read what CFPB says in the NPRM about coupon books.
Read CFPB’s analysis of coupon book costs and benefits.
See the text of the proposed rule and CFPB commentary: §1026.41(e)(3)
§5. The “small servicer” exception
CFPB is proposing that small servicers would not have to send periodic statements. A small servicer is one who:
- services only mortgages that it (or an affiliate) currently owns or was the original lender for AND
- services no more than 1,000 closed-end mortgages
CFPB estimates that this would exempt about 7,500 banks, savings and loans, and credit unions, but these companies service less than 1% of all residential mortgages.
The idea behind the proposed exemption is that it might be so expensive for small servicers to set up the systems needed to create and send periodic statements with all the required information that they would stop servicing loans. This would reduce options for borrowers who are looking for a mortgage that will be serviced by a bank or credit union that keeps their loan. These servicers are likely to have ongoing customer relationships with the borrowers who, for example, have checking accounts, debit cards, etc. with them. This should motivate them to stay in touch with borrowers and provide quality service, as compared with large servicers who don’t have the same relationships and whose business is focused more on making money from servicing fees.
Should there be a small servicer exception? If so, is CFPB using the right tests for which servicers should qualify? In particular, should affiliates be included? What about servicers that were the original lender but don’t still own the loan?
Commenters in the industry will want to look at the details of qualifying as a small servicer, including treatment of sub-servicers.
Read what CFPB says in the NPRM about the small servicer exemption.
Read CFPB’s analysis of small servicer costs and benefits.
See the text of the proposed rule and CFPB commentary: §1026.41(e)(4)
This exception is really important. I only have myself, my partner, and our secretary to deal with our files and there’s already a bunch of new paperwork and software requirements we’re struggling to keep up with. Unless there’s a break for small companies, this seems like it just favors big companies because they have a lot more money and resources to keep making these changes.
The statement needs to include an escrow breakdown. There is plenty of space on this document to include it, and I don’t understand why this is not being addressed. This escrow breakdown should state what insurance information is on file for the property, the expiration date, & premium. It should also include a tax breakdown, PMI, and any other fees, along with an escrow balance. If a borrower has an escrow account open in their name, they have a right to know the balance & why. This is all very simple information for loan servicers to provide.
As for passing the costs on to consumers, I completely disagree. How about they take the costs out of the stimulus package they were given in 2009? How is it the consumer’s fault that the servicers didn’t keep their software… more »
As for the actual cost to these servicers to access this loan information? It’s minimal. They already have and store this historical information for a minimum of 6 months. It’s all built into the systems. Even if something needed to change, it wouldn’t be the servicer changing it. They don’t have the capability. It would be the Fidelity Powercell handling this change and/or providing training. « less
Just like with banking statements, a borrower should have the option to opt in for paperless. If they do, everything can be handled via the web, and email/text notifications can be sent. These notifications should contain the exact same information as the paper statement. They would just be received earlier since there’s no physical mail involved. Again, since everything can be done electronically, there needs to be a way for borrowers to view/update their insurance information electronically through the loan servicer, without having to go to Assurant/QBE’s highly deceptive websites.
If a borrower doesn’t want electronic access, that is their choice. Servicers such as Wells Fargo, Bank of America, & JPMorgan already have websites set up. Adding mortgage/insurance information should not be difficult and should already have been done.
I don’t think there should be a small servicer exception. Large or small, mortgage servicing should remain the same. Why would we allow someone to not tell me how much money I owe just because they’re a smaller company? Doesn’t that defeat the purpose of the notification?
Look at a restaurant, for example. When I walk down the street, I can go to McDonald’s or a hole in the wall. My reasons for choosing one or the other are my own, but regardless of where I decide to eat, the transaction is the same. They present me with a menu, I give them my money, they give me a receipt. Why would mortgage service be any different than food service?
Do others agree that adding escrow account details would be useful to most borrowers, rather than overwhelming them?
Does a small, mom & pop restaurant get any leniency on health regulations simply because it’s not a chain? Would you want to eat there if they did?
Does an MD with a private practice get exceptions vs a hospital on the care he provides? Is malpractice defined by the size of the care provider?
Are the safety and manufacturing standards for a small start up automobile manufacturer different than they are for a company like Ford?
When a small college receives accreditation, are they allowed to provide less education or a degree for less credits based on the size of their faculty?
Why would the financial servicing industry suddenly be different? I’m not understanding.
The comparisons you are making have no merit. You are missing the point here. Requirements like these can regulate smaller banks and credit unions right out of business. Then your only option would be to use a Wells Fargo-type bank for your mortgage loan. Small, rural institutions know their customer base and always make themselves available.
How…you’ve given a concrete stance w/ absolutely no statistics to back it up. I’ve given well thought out and detailed arguments for why everything should be treated evenly. Rather than just stating there’s no merit, how about providing actual information?
I don’t have all day to troll on here but I’ll take the time to respond to this one. I don’t know if you have ever had an account with a smaller financial institution that knows your name when you walk in the door. That being said, the top few points you made deal with public health and safety, and the last deals with education. If you can please tell me how they relate to the financial industry that would be swell.
My point is that in a small institution you will be able to speak with a person, either on the phone or face to face. They will always be reachable and in most cases you will be able to talk directly to the person who originated your loan. You would not get transferred 3 times and given the run-around that a large instituion tends to do. A small institution… more »
Thank you kindly for your response, and please allow me to clarify a few points:
1) What I was clearly doing was bringing up examples of other “service” industries in order to illustrate the obvious connection that regulation in every other “service” industry is the same, and yet as soon as the words “mortgage” or “financial” are placed in front of the word “service” the regulations suddenly change. You are failing to see the forest for the trees. I’m not as easily fooled. This is why I compare the health “service” industry to the food “service” industry to the financial “service” industry.
2) In regards to your argument about small businesses being reachable, once again, laws have to… more »
3) I know exactly how much it costs to make a system change. I know what systems are involved. In fact, if your small business is strapped for cash, I’d be more than happy to offer my services to assist in creating the templates necessary to create and send out a monthly bill to a customer. I’ll do it for very cheap, because it’s very easy to do. As a matter of fact, it’s a feature built into any office program. If your mom & pop bank has Microsoft Office, they can do it within an hour. If they don’t, they can download the freeware OpenOffice suite to accomplish the same task in the same amount of time. I can link everything to a SQL database, but as we’re discussing a small mom & pop shop with 1-30 employees, they likely don’t have enough customers to necessitate SQL servers.
As a former employee of the mortgage servicing industry for clients such as JPMorgan, Wells Fargo, Bank of America, Countrywide Home Loans, Aurora Loan Services, IndyMac Federal, OneWest Bank, Financial Freedom, Saxon Loan Services, Select Portfolio Services, PennyMac, Wachovia, Compass Bank, Downey Savings & Loans, GMAC, Homecomings Financial, Ally Financial, and more, I’d be happy more than happy to address any further concerns you may have and provide any additional training or education you may need in order to fully understand these rules as well as I do. « less
It would be beneficial to have a proper breakdown of where a mortgage payment is going. My current lender puts the information on the statement but it is so disorganized that I can’t tell what went to interest, escrow, PMI, etc.
This would be another software change that would require more of an expense to financial institutions. The cost of these changes has to be made up in income, which would ultimately come as a charge to the consumer.
When you state ALL borrowers, it truly should be ALL borrowers. My case is not unlike many thousands of homeowners across the Country, but I’ll bet many have not even heard of this situation. If a homeowner files for bankruptcy but keeps the home and continues to pay on time, don’t you think the deserve to receive statements? Some servicers are now cutting off ALL contact with persons with past bankrutcies, no statements, no web access, no infomation on how much was paid in interest so the homeowner can’t file income taxes etc etc etc… think about how you would deal with a complete and udder blackout of information on your loan? This is happening right now to homeowners everywhere. I think bankruptcy should not be used as an excuse to abuse homeowners who have already… more »
Thank you for sharing your experience, hotblazer. CFPB is particularly interested in the interaction between the proposed rules and other laws, like bankruptcy. Right now, the proposed rule applies to all outstanding consumer mortgages, and so the requirement to provide periodic statements should continue unless it’s blocked by some other law. Are you saying that the servicer stopped providing the information because of the automatic stay (or some other part of the bankruptcy code)? Or do you think there is some other reason the servicer stopped providing the information?
Thank you for giving me a voice and sharing. Let me first give you some background so you can fully understand what has happened. My partner developed cancer without medical insurance. This catastrophic event eventually led me into bankruptcy. My partner died 3 weeks before I recieved the Chapter 7 discharge. Three weeks AFTER the discharge, I signed permanent HAMP modification documents that lowered the payment on my house. Even though it is well over $100,000 underwater, it is still my home and I want to keep it. My servicer honored the permanent agreement and I paid my mortgage every month for over a year with no issues. My servicer provided online access as well as monthly statements. the monthly statements have a disclaimer at the bottom that read: “Aurora Bank is a debt collector.… more »
Eureka! I have found the smoking gun! The servicer cites bankruptcy as a reason to cut off contact and not provide online access or statements. However, the bankruptcy code, specifically 11 USC § 524 – EFFECT OF DISCHARGE, in fact does allow periodic payments when “the creditor retains a security interest in the real property that is the principal residence of the debtor”. So allowing periodic payments means allowing periodic statements to the debtor.
11 USC § 524 – EFFECT OF DISCHARGE
(a)A discharge in a case under this title—
(1)voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title,… more »
(2)operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and
(3)operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(a)(1), or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor’s spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived.
(j)Subsection (a)(2) does not operate as an injunction against an act by a creditor that is the holder of a secured claim, if—
(1)such creditor retains a security interest in real property that is the principal residence of the debtor;
(2)such act is in the ordinary course of business between the creditor and the debtor; and
(3)such act is limited to seeking or obtaining periodic payments associated with a valid security interest in lieu of pursuit of in rem relief to enforce the lien.
(j) Subsections (1)(2) and (3) make it clear that the creditor can provide periodic statements as a normal course of business when they hold a security interest in the real property. With this in mind, CFPB should cite in the rules that ALL borrowers with discharged bankruptcies are entitled to periodic statements persuant of this section of the bankruptcy code. Presently my servicer is refusing statements based on my past bankruptcy, but the policy is unfouded as the law does not bar them from providing the statements. This explains why my previous servicer had no problem providing statements and online access after the discharge. I’m sure Nationstar already knows this, but the claim that they are following bankruptcy law is apparently false! « less
hotblazer, perhaps if you could share with us exactly what phrasing your servicer is using, it would shed some light on the issue. Does your servicer say they would be violating the bankruptcy code by sending you periodic statements? That sending statements to borrowers violates their bank’s internal policies? Some mix of the two, or something a bit different?
Moderator. The servicer stated over the phone that it was their policy to deny online access and not provide statements to anyone with a bankruptcy discharge unless the loan is reaffirmed. I just recieved a response to my direct complaint to the servicer. They state in writing “Please be advised that our records indicate that your account has gone through a bankruptcy that has been discharged. Please know that because of the discharge bankrptcy we will no longer send billing statements unless we receive an affirmation agreement. If you have any questions please contact our bankruptcy department” As you can see they are trying to use the statements as leverage to obtain a reaffirmation. I’d go so far as to call it blackmail. They IMPLY that it is because of bankruptcy laws,… more »
Thanks, hotblazer, for the additional detail. It sounds like the servicer has a policy against sending billing statements to borrowers who have gone through bankruptcy since, strictly speaking, they’re no longer “borrowers” on the loans that have been discharged. In fact, some people may not want to get statements after their mortgage is discharged. But others, like in your case, may want to continue receiving statements in order to continue making payments. So perhaps it makes sense to require servicers to provide statements to discharged borrowers who continue to make payments, but only upon the borrower’s specific request. What do you think? And what do others think about the issue hotblazer has raised?
Thank you! It does make sense to provide statements (and online access!) to discharged borrowers who continue to pay the mortgage. I agree that some may no longer want statements, perhaps because they are walking away. But those who filed bankruptcy in order to save thier homes should be allowed to request and receive statements and online access to properly manage the accout.
UPDATE: After submitting a formal complaint through CFPB, the servicer has partially relented. The “apology” was veiled and sarcastic, I’m not surprised. They agreed to allow online access, but still refuse to provide periodic statements “to preserve certain debt collection rights”. The case also is not closed as they continue to “investigate”. I have to ask, why are they spending so much time, effort and resources to withhold information that the previous servicer readily provided? Also the online information is very rudimentary, not detailed enough to show year-to-date details. The statement area is blocked. This means the HAMP incentive accrual and disbursement is not shown and can not be tracked. Are they planning on keeping the HAMP incentives?… more »
Coupon books should only be for borrowers who request them, at their own peril I might add. If a small servicer wants to only provide coupon books, then they should at least OFFER online access as well so the borrower can track when payments were posted and if any fees are being tacked on. Personally I think coupn books are an outdated tool for the mortgage servicing industry. Why would anyone TRUST a servicer after all of this?!?!
Welcome to Regulation Room, hotblazer. Under CFPB’s proposal, a servicer would have to provide changing information such as transaction activity and payment breakdowns (including fees) upon request. A servicer could provide that information orally, in writing, or electronically. Does this solve some of the problems inherent in using coupon books?
I don’t know, maybe. I just think a coupon book is not realistic in the year 2012. My opinion. But if you give servicers the option to issue coupon books, how many borrowers would suddenly get this once a year book they didn’t want nor were expecting? I guess you just need to think about whether a servicer would abuse the rule. What I can tell you is, not all servicers are bad, my last once was very nice to me. But some are up to no good, and are unapologetic about it. So think about the worst case scenario and word your rules carefully.
We are a SMALL community bank. Assets of about $225 million. We service more than 1,000 loans ergo we’re not a small servicer. CFPB was created by morons (Dodd, Frank and Obama) and is run by morons for the benefit of morons. Consumers are going to get protection – good and hard!
Do you really think insulting language like that is helpful? People will not take your opinions seriously if you are derogatory.
First, I don’t think it is appropriate to call people names, and your disrespect of the President is in poor taste. Now, as a servicer you are directly involved with the business side of what has happened. Many of your counterparts have, and continue to engage in outrageous behaviors that have affected millions of homeowners. The mortgage service industry has been engaging in acts from predatory to outright fraud. You might be small bank, but your bretheren are to blame for bringing shame to your industry. It is not a “few” cases here and there, it is systematic. So go yell at the servicers who turned your industry into the most untrusted “service” this Nation has ever seen. The public DOES NOT TRUST YOU ANYMORE. The Government has to step in because your industry… more »
mjhaha, The purpose of Regulation Room is to provide an environment in which people can learn about important proposed government regulations and discuss them in ways that help the agency make a better final decisions. Everyone who comments on the site is expected to remain civil and respectful. Please see the Terms & Conditions you agreed to when you registered. Comments should address the regulation CFPB is proposing. As a small community bank, you could provide important information on the actual costs the proposals will create for small servicers.
Because of your lack of education on the ACTS that now govern and control how YOU/YOUR ORGANIZATION works with consumers, let it be a “DEMO” of what happens with you make exceptions.
Based on the SAFE ACT…I will say, maybe a long shot…but, you are NOT a LICENSED MLO, maybe just registered…and if an executive of the bank, you did not even submit a background check or credit report.
What makes you so worthy to comment?
loanswithjorge, The purpose of Regulation Room is to provide an environment in which people can learn about important proposed government regulations and discuss them in ways that help the agency make a better final decisions. Everyone who comments on the site is expected to remain civil and respectful. Please see the Terms & Conditions you agreed to when you registered.
I believe that under any circumstances, both people (i.e. husband and wife) who are obligated, should be periodically getting some sort of update. However, if either of them changes the address to a p.o. box, or one separate from the home/property, there ought to be a provision that one monthly statement goes to the residence, unless both parties have a new separate address. Also, even if one person is only a quit claim party, or has signed as the dower, they are just as entitled to some sort of statement if something changes. It’s really important.
Hi djg, and welcome to Regulation Room. The rule as proposed would permit servicers to send only one periodic statement to joint obligors (See proposed comment 41(a)-1). It sounds like you’re saying that if joint borrowers are at separate addresses, each address should receive a periodic statement. Are there any other circumstances when separate statements should be sent?
If adding the breakdown of the escrow payment,as suggested by versability, it might be more informative to show escrow monies received and paid out in the period. When there is an escrow for multiple types of payments – insurance, taxes etc – the regulation requires “aggregate” accounting that saves consumers money by using a cash flow method. Also, an escrow disclosure is mailed annually that shows the complete breakdown of the escrow account. Does it help to have this information monthly as well as annually?
While a coupon book is not appropriate for every person or type of loan, some borrowers like having a physical book. Not everyone is tech savy.
The 4 letter original lender code followed by a dash then loan number needs to be on the closing documents. It is important that this combo can not be altered for the life of the loan. If I punch in on line for example BOFA-123756327 then I should be able to pull up a chain of title linked to property records, leins, taxes etc. We have had the technology for so long. The worst problem is that people can’t defend themselves in court with out a chain of title and banks are adding additional force placed insurance policies by altering the loan number on the policies so they are hard to trace. Make it simple, we have the technology. This way the banks will have to clean up their behavior because they will not have a choice.
If a nationwide database, like what you propose, can’t be put into place, what kind of information or access do you think will be missing from the CFPB proposals? CFPB’s proposals include requiring that borrowers receive periodic statements about the status of their mortgage accounts, ensuring they have the right to tell their servicer, and get a prompt response, when they make an information request or report an error, and requiring servicers to provide borrowers in trouble… more »
Moderator I can show you documents where the account number has been changed on things like over lapping force placed insurance policies for example. When loans change hands to generate expenses you see this. I am saying your “periodic statement” should have the same originating lender code followed by the account number that was assigned at closing on every statement. The lender code is important, in case the loan transfers to a bank that already has the same number. There should be a government place to “report an error” if your account number has been altered or changed. As you seem genuinely interested in this project I would like to send you my case and you will see that there are so many issues that need fixing relating to the big picture. Why fix a few things… more »
transparency, we hope you will continue to comment and give feedback on CFPB’s proposals. It sounds like you’re concerned that CFPB’s proposal doesn’t do enough to ensure continuity of record keeping among the various banks and servicers a borrower might have to deal with over the life of their loan. While a national database is not proposed in this rule, CFPB envisions that standard periodic statements will keep information consistent across banks and give borrowers the information they need.
If you go to the issue posts about periodic statements, requesting… more »
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A standard monthly statements for banks should be set up to allow bank investigators to go into the bank and run a report and identify most problems if the software is set up for maximum use. This asking the banks to tell us what they are doing wrong so they can be punished is not working. Letting the banks pick a friend to investigate them is also a bad option and is slowing our progress. This is causing the entire country to loose hope and faith. It is up to bank investigators to do the investigating and it needs to be easy and efficient using today’s technology if we are going to make any progress from this melt down. Please put all the problems on a flow chart and all the solutions on the chart. Get who ever wrote the software for ancestry.com or Ebay or US Customs that is amazing… more »
Hi transparency. CFPB is proposing a standard Periodic Statement to be given to borrowers. Are you suggesting a standard monthly statement or software that bank regulators could use when investigating banks?
Moderator, the answer is both and they should be one in the same.:-) It is easier to trace a relative that dies a 100 years ago on ancestry.com then it is to trace a $500,00 current note and mortgage. (lack of linked cutting edge computer software is the difference). It is even easie to trace a $1.00 used item sold on Ebay after the sale then a current note and mortgage. I felt like pulling my hair out trying to put together a chain of title with my note and mortgage. If an investigator went into US customs they could pull up, on the computer, any container arriving in the USA, where it came from, where it went and what was in it. Because US customes has current standard technology and an amazing detailed code system that could be adapted for banking. If you want to see the extent of their… more »
can’t get an answer for and then meet with the best program writer. To pick one issue, without a comprehensive plan, that solves all computer problems, that need a solution, is a recipe for disaster. The CFPB should have a report on how many times they have been asked the same question. How many of those questions can be addressed in a comprehensive computer program?
Love your web site! You give me hope.
Do away with coupon books. They allow for shoddy service and harmful practices.
For 30 months I used a coupon book to pay my mortgage with BoA. Consequently, I could not see how my payments were allocated and how the principal was affected. My new servicer, by contrast, sends a monthly statement that details payment allocation and principal balance as of previous statement.
To compare allocations between old & new servicer, I requested a payment history (10 months after the loan transferred) from the old servicer. Lo and behold, I discovered that BoA, did not account for $3700+ of my payment amounts over the 30-month preiod. Since February 2012 I have been trying to get an explanation. All I have gotten to date from bank representatives is: “Forget about the printed record; trust us,… more »
Contacting the CFPB has been no help. As a sole complainant, it seems that I am not worth the bother. Yet, if this happened to me, conceivably it could happen to anyone who makes payment with a coupon book.
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Welcome to Regulation Room, tasheh and thanks for your comment. It sounds like many of the problems you have faced are being addressed in CFPB’s proposal concerning error claims. You can read about those proposed rules and tell us what you think of them here. As to the issue of coupon books, it sounds like you would favor a ban on the use of coupon books. What do you think about marcy’s comment that some borrowers like having a coupon book?
I am not tech savvy, but coupon books have static information and too little information. I would wish that all lenders were trustworthy; but they all are not. Prior to my requesting a payment history, I made payments religiously, in good faith, believing that the lender was so. Now I think differently because almost $4000 of the payments I made is unaccounted for and I do not know how to hold the institution accountable. They have been giving me the runaround for six months. Would anyone want to risk being in these shoes? Yet, with a coupon book and a trusting consumer, this is possible and probable. And, as I’ve said, being able to call and write to the lender/servicer requesting information is guarantee of nothing. I’ve been doing that since February – have even had intervention… more »
I think tasheh has experienced a common problem with coupon books and Marcy has not. Let Marcy request a coupon book, but do not give the servicers the first option to provide. ALL borrowers should recieve periodic statements, and online access if available. The fixed rate exception should be stricken. I think the servicers have been overcharging and sliding in fees for years, it’s quite profitable to take money when the borrower just blindly pays with out question. Perhaps the pushback from the servicers is because it will be lost revenue many consumers never even knew they were paying. If the servicers are allowed to provide coupon books, they will give them to borrowers who do not want them. It is easy for them to rip off people who are not able to see the real numbers every month.… more »
Two points:
1. For most small to mid-size lenders the actual statements are outsourced to a third party due to the cost of creating something in house. Therefore the ability to change the format of a statement is not only limited but very expensive. In a time of ever shrinking margins (Yes, even a credit union needs to earn money) this is a cost that just cannot be easily absorbed.
2. If the CFPB is going to require changes to a statement they should create a safe harbor format to shield FI’s from being sued by lawyers looking to make money and not protect consumers.
cu man, do you think CFPB’s standardized requirements for periodic statements could lower costs over time since the third parties who handle statements would use essentially the same form for all lenders? Or are there other costs that you see?
CFPB has published a sample format for statements that you can see here. Would that form include all relevant information your credit union wants to send borrowers? Would using that form solve the safe harbor problem you identified?
I did look at the from and it does include the information we send. As for safe harbor some other regs specifically state if a FI uses that format they are protected from liability. The CFPB should do the same.
Having spent so long dealing with vendors I do not anticipate a cost savings. If anything, I can see a “compliance surcharge” being added.
A rule is not a rule once you start making exceptions. Ultimately, entities for which the exception was not intended find a way to exploit it.
It sounds like our commenters have had different experiences with coupon books.
Marcy has pointed out that some borrowers like having the physical book, while Tasheh’s coupon put kept him from keeping track of his payment allocation.
CFPB’s proposal would allow servicers to use coupon books, but give consumers the right to request info that isn’t on the coupon books. Hotblazer suggests the opposite: require all servicers to send period statements, but give consumers the right to request a coupon book.
Both suggestions give borrowers the choice to recieve a coupon book, and receive more comprehensive payment info (like payment allocation). The right policy may come down to this: how many borrowers share Tasheh’s experience, and how many share Marcy’s?
To maintain clear information that will prevent people from being “overwhelmed” with fraud would require the bank to give the home owner a choice of servicers at closing. Just like when you buy a computer you pick your service provider. For a servicer to change 4 times in a year, to create multiple annual forceplaced insurance policies, is abuse! Your servicing should not be traded like a stock because, well it’s stupid, leads to fraud and leads to people being “overwhelmed” for no reason. When you buy a car you decide who is going to send you your monthly bill. The banks have proven they are way too irresponsible to make this decision for homeowners. So I ask, why after 4 years, are banks still allowed to do this?
The Periodic Statement is great and you can see that a lot of thought went into this process. However , there is 1 very big problem that will have devastating consequences if not fixed. Under “Transaction Activity” there needs to be three categories. 1) “Charges” 2) “Payments received” 3) “Payments paid out”. This statement still allows banks to generate bogus bills under generic categories like “property inspection fee”. (HUGE PROBLEM) General entries like this allow banks to bill homeowners, without even telling the homeowner who they are obligated to pay, knowing the homeowner has no way to verify the bill and even worse senerio was any service ever provided or just a bill. Any time the bank charges your account for something,… more »
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Hi Transparency. The CFPB’s proposed rule contains requirements for the “Content and layout of the periodic statement,” and require the statement to provide several pieces of information including: the amount due, an explanation of the amount due, a breakdown of past payments, transaction activity since the last statement, and the bank’s contact information (the full list can be seen in the proposed rule.) It sounds like you are suggesting that the statement require billing and contact information for third party service providers, and that the layout should be similar to credit card statements. Do you believe that adding a “who” and “when” to the CFPB’s sample statement would address most of your concerns? What do other users think… more »
I appreciate the financial difficulties small servicers may face. However there are options e.g. subservicing, which can lower cost, improve service and comply with the proposed regulations.
If customer service is the goal then the size of servicer should not be a criteria as there are small servicers that do not provide adequate service.
Welcome to Regulation Room, peekaboo.
One justification that the CFPB gives for the smaller servicer exemption is that smaller servicers are more likely to have regular interaction with customers, usually from providing other services such as debit cards and checking accounts. The CFPB believes that this gives smaller servicers a greater incentive to stay in touch with borrowers and provide greater service. What do you think about this point?
First, I want to thank you for your response. I’m never sure if anyone reads this stuff or cares. What the CFPB does will be very important to borrowers and service providers. I don’t agree that size is a necessary condition for excellent service. We work with financial institutions that service from 10 loans to 10,000 and the largest give as good and sometimes better service than the smallest. Most certainly the largest generally have more products to offer? I believe that most sophisticated financial institutions understand that the total potential relationship a borrower can bring is substantially greater than the value of the servicing strip. These relationships often develop and evolve over a period of time. If the financial does not meet the borrower’s service level… more »
So one of the measures I would use to determine if an institution should be exempted is, Has the institution ever sold servicing? If it has it cannot qualify for exemption regardless of its size. In my opinion this is a necessary but not sufficient condition for exemption. I know of many small institutions that sell servicing. I have never seen a seller of servicing large or small that had a quality of service provided by a purchaser of the servicing as a requirement for sale. It has almost always been determined by the amount the purchaser would pay. There are many companies that will facilitate purchases and sales. I believe they would agree with me on this point.
I have several other thoughts but this is getting almost too long to read.
I realize that my position my seem a bit extreme. What do you think about this point?
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Peekaboo, thank you for sharing your perspective as someone who works for a mortgage servicing company. It sounds like you are saying that size is not the best criteria for deciding who receives an exemption, rather they should be judged on whether they own the mortgage or not. In fact, CFPB only grants the small servicer exception when the servicer “services only mortgages that it (or an affiliate) currently owns or was the original lender for AND services no more than 1,000 closed-end mortgages.” Do you think that the test should only be whether the servicer services only mortgages that it currently owns or originated? What do others think of this proposal?
I agree with peekaboo that servicers large and small provide poor service, and so the size may not be the deciding factor on quality of servicing. But since there is not fiduciary duty between the borrower and the servicer, the quality of service to the borrower is simply “voluntary” at best. The servicers have a duty to the Investor, and do not work for the borrower. So really there should be no exemtions at all, unless a fiduciary duty is imposed there will always be bad behavior and trickey to the detriment of the borrower. Small servicers may (or may not) have a better relationship with the borrowers, but it is not by obligation.
“Periodic Statements”… unless you want to get paid “Peridocially” you should send consumers (your clients) “MONTHLY STATEMENTS”…therefore collecting your payment every time you send a statement. We are talking about MORTGAGES, if not the largest, surely one of the largest investments consumers will make and we see how connected it is to our global economy, as soon as the little guy is NOT making payments, the world practically collapses. It is vital, to not only mortgages, but to any business…you should always maintain a connection with your clients to ensure your relationship is one of good standing that will continue for many years to come.
As to the ITEMIZATION, I find it surprising that NOT all servicers provide this detail of consumers… more »
This is similar as to asking a local community, to pay for the construction, permits, taxes, infastructure and other costs to open a McDonalds on the corner. Yes, I might like thier burgers, Yes it might be convenient right down the street, but how is it my responsibility to cover the costs of being able to get my business?
When the government required fast foods to contain a nutrition label, I didnt get a call from McDonalds saying, since you eat here, we need to charge you X so that I can continue to accept your business.
The burden of being compliant is always on the one providing the services/products in exchange for profits. « less
In response to Info…it should be the standard practice to all businesses…the better informed your client is (whatever… payments, fees, penalties, etc), the better your relationship or the better chances of you (a business) getting paid.
As described in the FRAUD ACT 2006…
Fraud by failing to disclose information.
A person is in breach of this section if he—
(a)dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and .
(b)intends, by failing to disclose the information— .
(i)to make a gain for himself or another, or .
(ii)to cause loss to another or to expose another to a risk of loss.
Simply said, it is considered FRAUD to not provide “INFO”. If your collecting payments for the next… more »
To close, if at any point, your client (mortgagor) is at risk of NOT making payments, it surely becomes your DUTY to protect the contract by offering solutions…or in this case “Info”. « less
WHEN…is surely tough when crediting an account when payments are inconsistant and completely understand the complexity of the matter when providing up to date information to the client in a timely manner (before the next payment).
As I feel there is NO one answer that conforms to ALL needs…I feel what is important is creating an incentive that encourages MOST people to act, ultimatelty streamlining most of whatever process.
In the past, consumers where offered discounts on the mtg interest (.25%) if you signed up for electronic payments. Though this may/may not be an option now, the idea is to add options, not take away…as they say in the service business, different strokes for different folks. And that should be up to company and/or its affiliates. Surely a tough situation… more »
HOW…like mentioned by “versability, August 12, 2012 4:54 pm” the OPTION to be paperless is up to the client (mortgagor not the mortgagee).
I would add though, it is to often that computers become UNRELIABLE therefore making paperless accounting very risky. I know that saving trees is extremely important, but buyer beware with anything electronic. In todays age, an area that works along side with an electronic system is identity theft and viruses.
It is just as improtant, should you decide to go paperless, make sure you print a RECEIPT…because the burden of proof is on the consumer, not the organization! « less
As mentioned, Coupon Books should be for borrowers who request them “AND” should be a solution for when other payment options are exhausted or unavailable.
It is important to address the needs of ALL clients with ALL options. Though a coupon book is an old method, “it works” for those individuals.
If a coupon book is provided, quarterly statements could be implemented to compensate for monthly statements…quarterly reports are done by almost every company and is a great time to execute.
To close…I am positive this data (mortgage balance, escrows, payments, etc) is already “electronic” within the company. This electronic option is NOT an option or solution, it is how data is maintained and should/will always be an available method to all… more »
The rules should not be made to favor one option over another, electronic data must ALWAYS be available to account holders regardless of how they make thier payments. « less
This issue really should be a part of the fair lending/ consumer protection practices… Consumers should have access to their information whenever they need it. Ultimately it should be up to clients if they want to receive periodic statements in the mail; would rather have them emailed; or want neither, but are able to request a statement when it is needed. There are plenty of primative inexpensive software programs available to small businesses. Small servicers should not be exempt from sending periodic statements if the client requests them, but should be allowed to solicit their clients for waivers or alternatives to save money.
Thank you for your comment, amyrozycki. It sounds like you think that consumers generally should be entitled to periodic statements, but that small servicers should be able to solicit their clients for waivers. What do others think of this proposal?
Exceptions are simply loop holes for the opportunity to take advantage of the unsuspecting/uneducated…this is absolutly out in left field.
As mentioned in comments below…in short, equality is vital…big or small…mom and pop vs chains…the rules need to be the same.
In response to another comment…the minute you feel your company is overwhelmed, CREATE A JOB (there are plenty of people that need jobs)…it would be a great time and opportunity to grow your business and take your business to the next level…get out of your comfort zone. You might sit and say, “this is alot for little old me with only 1000 files”, but rest assured that the company with hundreds of thousands of files is saying, “holy cow, this is going to cost me… more »
Equally the same for everyone, big or small. « less
Problem: Every place where there is not transparency in lending there is fraud.
Solution: All account activity directly and indirectly in your account has to be on the monthly statement addressing companies by name not category.
Problem: “depending on circumstances”
Solution: No, ALL circumstances