The federal consumer agency is eyeing new Wells Fargo mortgage guidelines including the mortgage rules of other servicers. Under the new guidelines, servicers like Wells Fargo will be required to provide more transparent information to borrowers. The new rules, to be announced today, are the result of the agency’s displeasure with the way banks and other firms handle defaults and home foreclosures.
Wells Fargo Mortgage Rules Encourages Better Communication
The Consumer Financial Protection Bureau (CFPB) announced Monday that it may soon require major mortgage servicing firms to improve communication with their borrowers.
After reviewing the widespread home foreclosures during and following the housing crisis, the CFPB said many of the issues borrowers faced could have been prevented if top lenders like Wells Fargo, Bank of America, JPMorgan Chase and Citigroup had been more transparent.
Firms should have aggressively reached out to warn borrowers about coming interest rate changes and even applied monthly payments on the same day they were received, the bureau said. The lack of information could have resulted in millions of borrowers defaulting when their monthly payment amounts increased.
New Mortgage Guidelines to Prevent Home Foreclosures
The new guidelines, aimed at eliminating mortgage abuses and reducing foreclosures in the mortgage industry, will require servicing firms to take precise steps when communicating with borrowers in the future.
Some rules the CFPB is considering require servicers to provide borrowers the following:
- Clear monthly mortgage statements with a detailed breakdown of payments
- Estimates of when a mortgage will reset at a higher interest rate and the resulting monthly payment
- Information regarding how to get help if the borrower is falling into trouble
The bureau also said delinquent borrowers would have to receive two warnings before servicers could demand what is known as “force-placed” homeowners insurance, a type of coverage that can be imposed if consumers allow their policies to lapse.
The new rules follow numerous attempts at both the federal and state levels to regulate the mortgage industry. Most recently, servicers including Wells Fargo agreed to a $25 billion settlement to repay borrowers after the “robo-signing” scandal resulted in illegal foreclosures.
The CFPB plans to propose the new rules by this summer and complete them by next January, following a comment period.