Source: http://archive.regulationroom.org/mortgage-protection/issue-posts/earlyintervention/index.html
Timestamp: 2018-11-19 09:00:29
Document Index: 420231393

Matched Legal Cases: ['§1', '§2', '§1', '§1024', '§1024', '§ 1024', '§1024']

For Borrowers in Trouble: “Early Intervention” Help - Home Mortgage Consumer Protection
For All Borrowers:
Who is Servicing Your Loan? (42 comments)
Periodic Statements (65 comments)
Asking For, and Getting, Information (59 comments)
Getting Errors Fixed (15 comments)
For All Borrowers: Adjustable Rate Mortgages (18 comments)
For Borrowers in Trouble: “Early Intervention” Help (20 comments)
For Borrowers in Trouble: Reliable Contact with People Who Can Help (31 comments)
For Borrowers in Trouble: Options for Avoiding Foreclosure (42 comments)
For Borrowers in Trouble: “Force-Placed” Insurance (42 comments)
Home Mortgage Consumer Protection "For Borrowers in Trouble: “Early Intervention” Help"
§1. Reaching out quickly with "live contact"
§2. Following up with a written notice.
§1. Reaching out quickly with “live contact”
During the mortgage crisis, many mortgage servicers did not have good procedures for offering help quickly to borrowers who couldn’t keep up with their payments. Contacting borrowers in trouble right away is essential because the more missed or partial payments a borrower has, the harder it is to avoid foreclosure. To solve this problem for the future, CFPB is proposing that servicers must take “early intervention” steps to give borrowers important information and encourage them to get help.
What this means for consumers. If a borrower misses a payment or makes only a partial payment, the servicer must try to make a “live contact,” in person or by phone, with the borrower. This contact is supposed to make sure the borrower knows that a payment is overdue, and tell him/her whether the servicer offers any alternatives that could help avoid foreclosure (called “loss mitigation options”) such as a change in the loan term, forbearance, or refinancing. A recorded message would not be enough: the servicer must make “good faith efforts” to actually talk with the borrower.
CFPB is proposing that this means trying on at least 3 separate days to reach the borrower by phone. Is this a good definition of “good faith efforts”? CFPB also wonders if email or text messaging should be allowed as well. Would these be as good for getting the borrower and the servicer to start talking about loss mitigation options? If so, what would “good faith efforts” mean in this context?
This first contact must happen within 30 days of when the payment was due. CFPB thought about giving servicers 45 days, but is afraid that by then the borrower might have missed another payment. Some loan programs (e.g., FHA, VA) want servicers to start trying to contact borrowers within 16-20 days, but CFPB fears that contact too soon could upset borrowers who think their payment is on time so long as it’s within their servicer’s grace period. Is 30 days too much time, too little, or about right?
What this means for servicers. The time period for giving notice starts to run one day after the due date, even if there is a grace period. Servicers will want to look at CFPB’s examples of how timing is calculated. Note that a servicer must begin contact efforts no later than the 28th day to be able to meet the good faith requirement of attempted contact on 3 discrete days. Should CFPB consider other ways of demonstrating good faith effort to establish interactive communication with a delinquent borrower? The 30-day period was chosen to harmonize with (1) the timing of the periodic statement (which must disclose late fees; see the Periodic Statement post) and (2) current early intervention standards of FHA, VA, and GSE loans.
Small servicers have told CFPB they often contact delinquent borrowers within several days of a missed payment. CFPB specifically asks whether the 30-day requirement conflicts with existing servicer practices – particularly, small servicers. Does it appropriately balance borrowers’ need for prompt notice with servicers’ need for flexibility in managing borrowers with who are considered more, or less, likely to default on a loan?
Notice requirements don’t apply if the borrower is making timely payments under a loss mitigation option. If the borrower telephones the servicer on his/ her own, the servicer can use this call to tell the borrower in a “live contact” that LMOs may be available, but written notice still must be given. If a borrower makes the missed payment before the 30 days passes, the servicer has no further notice responsibilities.
As part of a general expansion of the scope of Regulation X, the early intervention requirements would apply to subordinate-lien (as well as primary) closed-end mortgages.
Read what CFPB says in the NPRM about oral notice.
Read CFPB’s analysis of early intervention costs and benefits: general; small business.
See the text of the proposed rule and CFPB commentary: §1024.39(a); §1024.31 (“mortgage loan”)
Although the live contact is an important start, CFPB is afraid that borrowers in trouble may not be ready to handle a lot of information or recall details provided in a conversation with the servicer. So it wants to require a second, written contact as well.
What this means for consumers. Within 40 days of when the payment was due, the servicer must send a written notice containing a lot more information. (CFPB has provided sample language, which you can comment on):
1. a statement encouraging the borrower to contact the servicer to get help, with mailing address and phone number.
Sample MS-4(A)
2. brief examples of any loss mitigation options the borrower might qualify for, and how he/she can get more details.
Sample MS-4(B)
3. what foreclosure means, and an estimated time (number of days from date of missed payment) for when the process would start.
Sample MS-4(D)
4. information on how to contact organizations (housing counselors, state housing finance agencies, etc.) that might be able to help the borrower better understand his/her options.
Sample MS-4(E)
Are the samples clear enough?
CFPB’s idea is to give borrowers enough information that they can start working with the servicer (or some other organization) before they get into too much trouble — but not so much information that they feel overloaded. Also, CFPB doesn’t want to add costs to the servicing process that don’t really benefit borrowers, since those costs may be passed along to mortgage consumers. Has CFPB come up with the right balance? Is there more, or different, information that would help borrowers? E.g., should the notice list all loss mitigation options the servicer offers, even though all borrowers may not qualify for all options? Does it help the borrower in trouble to be told how many days after a missed payment the foreclosure process could start? Small servicers are especially worried about cost. Should CFPB allow them to develop a more streamlined notice?
Is 40 days the right time period? Would borrowers in trouble still have enough time to begin working to avoid foreclosure if the notice wasn’t sent until, for example, 65 days?
Although servicers would get a longer time to send the written notice, CFPB is not planning to require that the “live contact” come first. Does it matter if the written notice comes before or after the live contact? The “live contact” requirement would apply every time there is a missed or partial payment, but servicers would have to send the written notice only every 180 days (6 months). CFPB’s theory is that borrowers in trouble aren’t helped by getting the same written notice over and over, but that servicers should continue to reach out to people who haven’t found a solution. Right approach?
The early intervention requirements would not apply if the borrower only misses a payment on late fees. Servicers aren’t allowed to “pyramid” late fees by applying a payment that would cover principal, interest and escrow to outstanding late fees, and then charging new late fees for an “insufficient” payment. So, CFPB assumes that a borrower whose only problem is failure to pay late fees isn’t really in danger of foreclosure. Make sense?
What this means for servicers. Servicers will want to read the specific requirements for content of the written notice (§ 1024.39 (b)(2)). Is it feasible at this point to provide information about loss mitigation options and an estimate of when foreclosure may start? Could small servicers deliver the same benefits to borrowers at a lower cost through more streamlined written disclosure requirements?
The 40-day period was chosen (1) to give borrowers at least 10 days after the live contact to make up the payment (if this happens, no further notice is required); and (2) to harmonize with current written notice requirements of FHA and GSE loans. Servicers will want to look at CFPB’s examples of how timing is calculated. The proposal that written notice need be provided only once in any 6-month period harmonizes with requirements for FHA loans. CFPB wants comments on whether the written disclosure proposals conflict with current requirements of other federal agencies, GSEs or others — and if so how it should handle such conflict.
CFPB recognizes that complying with the proposed notice requirements might, in some circumstances, conflict with servicers’ obligations under other federal or state laws (e.g., Fair Debt Collection Practices Act; Bankruptcy Code) and requests comments on these possible conflicts.
Read what CFPB says in the NPRM about early intervention written notice.
See the text of the proposed rule and CFPB commentary: §1024.39(b)
August 12, 2012 4:19 pm
In contacting a customer, emails & text messages should be allowed, but they should be done in conjunction with the 3 phone calls, not in lieu of them. For example, if the loan servicer has an email address available, after the 3 phone calls, they should be required to try 3 emails.
Starting contact efforts 16 days out should be completely fine if a borrower opts in for text messaging. A simple text of “Your mortgage payment is now due. Payment must be received by (insert last day of grace period) to avoid any late fees or collection efforts. If you are unable to make your payment, please contact (servicer’s name) at (servicer’s phone #) for alternative options.” text would actually be a great customer service option.
What does the CFPB propose in the case… more »
…that on the first call, the lender finds out the phone is disconnected or they have a wrong number? Does a voicemail count as contact? It may be good to mirror these after Fair Debt Collection practices.
The servicing systems need to be updated (or c/s reps trained) to ensure that once a borrower accepts a loss mitigation option, these notification options are properly updated. For example, there’s no need to keep calling someone to say their payment is late if they’ve already begun the forebearance process, the loan term change should update the contact dates, etc.
Also, if a borrower has a HELOC, 2nd mortgage, or is listed as a co-borrower any other property, they should all be considered together at the time of the initial call. These accounts should all be linked so that a borrower facing default on 3 loans for the same property is not overwhelmed, confused, etc. « less
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Do others agree that phone calls should be required, even if a servicer decides to contact a consumer through email or text messages?
Regarding voicemails, 3 attempts to reach a consumer by phone, on 3 separate days, would count as “good faith effort” to make live contact, even if the calls went to voicemail. CFPB wants to encourage servicers to make contact, but in some cases servicers cannot make contact because of forces beyond their control.
Do others agree that a servicer should have to tell a borrower about all delinquent loans in the same contact?
neubauer6
Yes, and after calling 3 times and sending 3 emails, they must send 3 singing telegrams. Let’s be realistic here, the borrower needs to take some responsibility since they should know they are delinquent on their loan. I think three phone calls on three separate days is more than a good faith effort. If the consumer fails to notify the bank that they changed their phone number, it once again points to the negligence of the consumer. These rules are so restrictive that new systems and staff training has to be implemented. This is going to drive up the costs and fees associated with getting a mortgage in the first place.
One phone call or contact of some sort should be more than enough effort on the lender’s side. The consumer knows they are delinquent and needs to take… more »
…some responsibility for their actions. I agree that a change should be made if the borrower has already negotiated terms so that they aren’t repeatedly contacted. « less
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How is sending an email too expensive? As far as I was aware, emails are free to send en masse. The loan servicing software used already produces delinquency reports. That’s how a servicers know to foreclose in the first place. There would be a one-time resource cost to pay somebody for the hour it would take to draft/approve a generic email, but the CFPB is providing most of these templates anyway. Why can a loan servicer not afford to pay the $0.0000000000000000000000001 in electricity & internet connectivity costs it would take every year to send these emails?
frustratedwithbanks
August 28, 2012 11:26 pm
You can advise all you want, but without enforcement, nothing will occur. My bank is completely nonaccoutable. They advertise that they are though.
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August 12, 2012 4:27 pm
The written notice approach seems like it’ll work. The samples are as clear as they can be. Most borrowers won’t understand any of it anyway. The biggest thing is to ensure they know who they can contact and making sure the c/s reps are fully trained on proper options and disclosures.
I would definitely recommend that a written notice of confirmation is sent to the borrower for any changes made to their account as well. While it may not fully assist them, and they may choose to ignore the letters, it will help an attorney in discovering useful foreclosure defense information if it gets to that point.
From a servicer standpoint, it is very simple for a large or small servicer to create letter templates and systematically fill in the appropriate dates, amounts, customer info,… more »
…etc. This technology is built into loan servicing software suites, and if a company can’t afford loan servicing software, they really have no business servicing loans. « less
We have been trying to get help for over 6 years! We were able to salvage our loan six years ago, but unanswered phone calls, lack of replies to mailing and requests for assistance plunged us deeper and deeper into debt.
While we have been struggling for relief, our state and federal government has made numerous settlements with the fraudulent lenders, such as Countrywide, yet the homebuyers get not relief.
At the beginning of our struggle all we wanted was to convert our option ARM loan to a 30 year fixed at a lower interest. Our calls were ignored for months and we were transferred to one person after another, each time we had to begin again with our explanation and information! When at last we had to get another loan to avoid the continuing financial slide, Countrywide sends us… more »
…e-mails telling us what a good customer we were and offering us a 30 year fixed rate. Too little…too late. This should not be allowed! « less
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Renoira, thank you for your comment. Stories like yours are a large reason why CFPB was created in the first place. Do you believe the proposed early intervention rules would help people avoid going through what you had to?
August 28, 2012 11:27 pm
Another case in point. The only way to get them to move toward assisting is to hire an attorney to sue.
Maybe the answer is to have the consumer set up their account with an email alert. Most of the larger servicers offer internet access to your account, so set up the alert.
If this is left to the servicer to send emails, I can just see the next round. Say a couple gets divorced, the servicer only has the wife’s email address, she is not happy doesn’t inform husband who is living in the house. Husband sues servicer for no contact via email. We all need to take a deep breath and realize that the consumer has to take some responsiblity here. If you know you house payment is due and the 1st and you don’t pay it – your late! And don’t forget not everyone has a computer or cares to get one, what to do about them, at least sending a notice in writing is keeping the postal service somewhat alive.
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rharris3011
September 6, 2012 11:15 pm
These rules will be tough on a small lending firm. The consumer needs to take responsibility for his actions. There are just too many regulations.
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September 7, 2012 5:35 pm
Hi, rharris3011. Welcome to Regulation Room. CFPB is concerned with how the proposed rules will affect small servicers. Are there specific aspects of the proposed rule that concern you more than others?
Although some of these regulations are burdensome, email notification and communication is paramount in this age. My servicer does not allow me to communicate via email which makes record keeping difficult for me – unilateral for them since the conversations are recorded.
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September 8, 2012 3:21 pm
Hi wpacello and welcome to Regulation Room. Under the proposed regulations, servers wouldn’t need to make borrowers aware of loss mitigation options via email. Do you think servicers should be required to send an email notice in lieu of, or in addition to an written notice? Can any commenters provide insight into what email notifications would cost servicers?
My comment about email is a more a general one, that it should be a required form of communication due to the prolific use of email at this time. Not sure of the cost but I imagine that most correspondence is boiler plate. Sending an email is less expensive than postal mail. I think our laws lag in this area due to the alleged strain it would put on customer service departments. In my opinion most organizations have divested in this area and consumers experience huge gaps in this area. One of the pitfalls for us with “too big to fail” organizations.
zenguy1965
September 11, 2012 1:09 pm
I think they should be required to send a letter in addition to an email. Phone calls are great but in my experience, the caller does not document accounts thoroughly if at all. All correspondence regarding past due mortgages should be in writing via email or letter. It should be dated and time stamped and posted to view by both parties on the customer’s account. Everything would be there in black and white.
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September 11, 2012 5:35 pm
Hi zenguy1965. Welcome to Regulation Room and thank you for your comment. Please see Section 2 below (Following up with a written notice). CFPB proposes that within 40 days of when the payment was due, the servicer must send a written notice containing a lot more information.
we3reeds
September 18, 2012 12:49 am
What do you do when all you wanted was a loan modification and Chase would not discuss/negoiate with us until we where behind in our payments, and the attorney we hired to help us told us we had to stop making payment before they could do anything (got it in writing) And i still cant find a decent interest rate. 6.75% for 20 years just because i have 1 year left. My credit is perfect besides that Someone help me!
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we3reeds, it sounds like you’ve had a terrible time. Regulation Room can’t help negotiate with your servicer, but we suggest you contact either CFPB’s complaint center or a HUD approved housing counselor to see if they can help.
loanswithjorge
LOL…again, your kidding…since VOIP systems were implemented, calling across the globe costs nothing!
Why are we loosing CONTACT with each other? This is like walking into an emergency room, your practically dying (or believe you are at least) and your greeted by some computer saying…
1. PLEASE ENTER YOUR ILLNESS…
2. PLEASE ENTER YOUR COVERAGE TYPE…
3. HOW WOULD YOU RATE YOUR CURRENT STATE…
Come on, lets rebuild communication…talking to each other.
Okay, argument…”when I call, they never pick up”.
Well, in addition to VOIP (which we all know VOIP; Vonage, Magic Jack, etc.)there are auto dialers (same one collection companies use, even our government uses it for elections).
I am positive everyone has received at… more »
…least 1 automated call in the past.
Add the number to the system and it will call everyday, 10 times a day if you want…until you make a connection.
To the point…phone calls cost as much as sending an email and if your the mortgagee, you surely have the invested interest in creating a dialog with a distressed client.
Anytime a client had a problem, they always had NUMEROUS methods of speaking to me and when I see issues with thier accounts, forget email, letter, whatever…I WANT TO RESOLVE THIS NOW, AND AS A BUSINESS, I SIMPLY CALLED!
8 out of 10, I was able to find the underlying issue the client is having; was able to express my motivation to help them resolve the issue; was able to rebuild the confidence and relationship with that client. « less
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