The federal watchdog agency in charge of protecting consumers' financial standing has been busy proposing a number of new rules, but one special interest group says that some of them don't go far enough in extending safeguards to potential homebuyers.
Americans for Financial Reform, a consumer group that aims to significantly overhaul the financial system to provide more security in the lending industry for borrowers, wants the federal Consumer Financial Protection Bureau to change some of its proposed rules, according to a letter the AFR sent to the agency. However, while there has often been opposition to proposed CFPB rules for lenders, these often come from the side of financial giants who think they are too restrictive. Few come from consumer advocates who say the rules do not go far enough.
"We appreciate the CFPB's attention to the problems of homeowners, recognition of the need for uniform servicing standards to right the pervasive problems in the servicing system, and the steps in the proposal to increase transparency and responsiveness to homeowners," the AFR's letter said. "We are deeply concerned, however, that the loss mitigation provisions, including but not limited to the provisions on dual track, are inadequate to solve the servicing problems that cause unnecessary foreclosures and which are imposing profound and damaging costs on households, neighborhoods and our economy as a whole."
Specific issues addressed
The particular rules the AFR would like to see the CFPB rewrite include those related to disclosures about home loan costs, and the extent to which servicers must assist borrowers who are undergoing the mortgage modification process, the report said. The group, which is comprised of a number of well-known organizations including the AFL-CIO and NAACP, says that the CFPB may have lost sight of the lessons it and other regulators should have learned in the wake of the recent housing meltdown: that more must be done to stave off foreclosure, which should remain only as a final option.
As such, the AFR says the CFPB needs to do more to ensure that consumers who are behind on payments receive more options from lenders or servicers when it comes to keeping their mortgages current, before they enter the foreclosure process, the report said. It asked that the agency withdraw its current proposals and re-write them so that more protections are in place for the average borrower.
Requests from the AFR
The group asked that the CFPB, which is often caught trying to please two masters simultaneously, to introduce a few new practices into its current proposed rules so that consumers have greater assurance of financial protection, the report said. These are designed to prevent unnecessary foreclosures and other abuses that have plagued troubled homeowners in recent years.
For instance, it wants the CFPB to allow for more error resolution when consumers feel there is a mistake with how their lenders or servicers have handled their home loan, the report said. They would like the coverage of the rule expanded so that any consumer who wants to avoid foreclosure can undergo the resolution process. It further notes that the proposed rule will actually be a step backwards for borrowers, effectively stripping away some of their rights to get errors resolved.
Further, it also believes that the proposed rule related to mitigation of loss doesn't do enough to change the mortgage servicing industry, which it says has "failed spectacularly," the report said. This is because the CFPB's proposed rule does not lay out specific requirements for what servicers must provide to consumers, but rather simple procedures for how they should do it. For instance, the rule only has to be followed for servicers that offer loss mitigation protection in their ordinary courses of business.
How this affects consumers
These proposed rules have not yet gone into effect, but when and if they do, it could significantly impact the ways in which consumers deal with their mortgages, lenders and servicers. For this reason, it will likely be wise for potential homebuyers to look at all their options for protecting this major investment.
However, before you enter into a mortgage or any other type of lending agreement, it's often a good idea to know exactly where you stand financially. Ordering a copy of your credit report prior to seeking any type of credit line can help you to determine the various accounts listed in your name, and also potentially identify any unfair markings that may be having an adverse effect on your overall credit standing. Fortunately, you may be able to work with a credit repair law firm to clear up these issues and put your credit score back to where it belongs.