New rules protect homeowners from abusive mortgage companies

Many Americans can attest to the desperation of trying to keep their homes while the mortgage company is determined to pursue for foreclosure. With today’s economy, the need to set rules to protect homeowners from abusive mortgage companies is fitting.

The rule, which takes effect on January 2014, involves acquiring the runaround from mortgage servicers. It is not retroactive although it provides protection to homeowners who are facing foreclosure. Other than this, these new rules also aim to provide better transparency in terms of where the payer’s money is heading as well as the timeframe of the charges.

In most cases, consumers who find themselves in the middle of a foreclosure are also the ones who are facing credit problems that their only option is to get bad credit loans. Setting up the rule aims to lower the instances of actual foreclosure due to poor timing and financial stress.

For those who are about to purchase their first home, there are a couple of key points that you have to remember. As part of the effort to minimize cases of foreclosure, here are some things you need to know particularly about the mortgage industry.

First of all, know that your loans are managed by a servicer. During the financial crisis, servicers have gained a bad reputation due to mismanagement of accounts and missing most of the phone calls from irate consumers.

This is why the Consumer Financial Protection Bureau has required servicers to provide regular statements that come with an updated breakdown of payments including interest, latest account activities, fees and escrow, and the principal. This should also provide the amount to be paid on the next due date to inform homeowners of their obligation.

More importantly, servicers are also now required to update homeowner’s accounts on the day of the payment. This helps avoid missing payments that are not reflected on the homeowner’s account. This transparency should help make payment records clearer and more easily accessible to the authorized people involved.

Another main concern that was observed during the crisis was the sudden increase in the mortgage without informing the homeowners. With these new rules, servicers are required to provide advance notice should there be an increase in adjustable-rate mortgages.

More disclosure is also required in the event of forced-place insurance. This case has become a common practice wherein homeowners who are late in their payments are forced into new policies that are more expensive.

Servicers are now prohibited to offer new insurance unless there is reasonable evidence that a homeowner needs insurance on their properties. In the event that this rule is violated, the servicer must cancel the new insurance within fifteen days as well as refund the premiums.

The best part about these rules is that homeowners are given alternatives in the event that their property is beyond saving. Servicers are required to offer you options that do not serve their benefit but yours as well.