New Mortgage Rule Provides Homeowners in Bankruptcy with Increased Transparency

The Consumer Financial Protection Bureau (CFPB), a government agency that ensures consumers are treated fairly by lenders and financial companies, has finalized new rules that require loan servicers to offer more transparency and communication. Specifically, the rule will give homeowners, or those who have borrowed mortgages, the right to demand periodic reporting statements from banks or financial companies that service their loans.

The new regulation is a pivotal change and a victory for consumer rights. Under previous guidelines, companies that serviced mortgages were not required to provide borrowers involved in bankruptcy proceedings with timely statements or information regarding early intervention loss mitigation. The new mortgage rule will likely also implement penalties for companies that fail to prepare for the change and fairly inform their customers.

While the rule has big implications for loan servicers, it also provides mortgage borrowers with more rights and the ability to obtain the information they need. If you have a mortgage and have filed for bankruptcy, here are a few key points you should know about the new CFPB rule:

• You have the right to obtain periodic statements from your loan servicer if you intend to keep your house. This is common in Chapter 13 bankruptcy cases, where reorganization and repayment plans can prevent foreclosure and allow you to keep your home.
• Periodic statements given to you must contain information specifically regarding bankruptcy.
• Statements must include an early intervention notice, which can provide you with information and options for mitigating losses.
• Not all loan servicers are required to abide by the new rule. Companies will be exempt if they service less than 5,000 mortgages a year or service “charged-off” loans.

The new rule stems from long-running efforts that were first proposed in 2013. According to the CFPB, it is intended to alleviate much of the confusion and complexity borrowers experience when they have filed for bankruptcy. This change is in line with the overall intent of the bankruptcy process, and shows that the U.S. government created bankruptcy as a way to help people struggling with debt and in need of help – not to punish them or put them through overly complex and overwhelming proceedings.

While the new mortgage rule will likely cost loan servicers additional time, resources, and money, the CFPB and supporters of the regulation made it clear fair treatment for consumers is more important than a financial company’s bottom line. The rule will take effect in February 2018 in order to allow companies time to prepare for and comply with new procedures. Still, some current cases in U.S. Bankruptcy Court have resulted in fines for servicers that did not provide adequate information to borrowers.

The bankruptcy process may seem complex, especially when you own a home, but with the assistance of experienced attorneys, you can ensure that your rights are protected and that you are treated fairly by lenders, collection agencies, and other organizations that may be involved in your case. At Atlas Consumer Law, we are committed to protecting the rights of good people who have fallen on hard times, and we make it a point to not only help them pursue the best outcome possible, but to also provide them with the information they need.

If you have questions about the new CFPB mortgage rule, bankruptcy, foreclosure, or any other issue involving debt, place your trust in a proven team passionate about helping those in need of financial relief. Our consumer law attorneys at Atlas Consumer Law proudly serve residents throughout Chicago and the surrounding areas of Illinois. Contact us today to learn more about how we can help you.