In the latest effort to help homeowners avoid foreclosure and get a better understanding of their monthly mortgage payments, the federal government is proposing new rules this week for banks and borrowers. The department known as the Consumer Financial Protection Bureau is in charge of the proposed changes and here are some of the new rules and regulations that they have been discussing:
- Mortgage servicers would be required to give all home loan borrowers a standardized monthly statement for paying their installment.
- Home loan lenders would need to give borrowers a warning when they are about to receive an interest rate increase or a change in their homeowners insurance.
- For borrowers who are in danger of facing foreclosure, the lender would have to make reasonable efforts to contact those borrowers and provide them with potential options to avoid losing their house.
- If a borrower needs foreclosure counseling, the lender would be required to provide it as part of the proposed rules and regulations.
- Mortgage servicers would be required to keep better records on all of their transactions and clients.
The proposal has not been formally presented to Congress or to the public. These are just some of the ideas that they have been discussing behind closed doors. The agency said that it plans to formally present these new rules sometime in the summer and if they pass, they hope to finalize them early in 2013.
The proposed new rules come on the heels of a foreclosure crisis that resulted in about 8 million American homeowners facing the problem of losing their home since 2006 when the housing bubble burst. Many of the homeowners that were affected blame mortgage companies because, as the homeowners say, the lenders did not verify the information on the foreclosure documents which meant that many people were wrongfully kicked out of their home. You may remember the “robo-signing” scandal in which employees in many of the major banking and lending institutions were told to simply sign documents for approving foreclosures without reading the papers to ensure they were legally required to move out of their home.
Just a couple months ago, five of the most well known mortgage lenders in the country decided to do an overhaul of their practices when providing mortgages to borrowers and they also paid a combined $25 billion to the various states in order to help people who were victims of the unlawful foreclosure process.
Maybe if these new rules go into effect, we will see the housing market start to turn around as buyers will have more confidence in the mortgage lending industry. Does that sound reasonable?