Will simplified, standardized billing statements help borrowers understand their loan terms?
- Yes (50%, 4 Votes)
- No (50%, 4 Votes)
Total Voters: 8
The Consumer Financial Protection Bureau (CFPB), established in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), has proposed a standardized mortgage billing statement. The billing statement is crafted to help consumers stay on top of payments, anticipate mortgage rate resets and easily notice mortgage servicer errors. [For more information about the Dodd-Frank Act, see the October 2010 first tuesday article, TILA circa 2010; consumer protection enhancement.]
The proposed billing statement includes:
- a breakdown of how the payment is split between the principal, interest and escrow payments;
- the principal amount remaining to be paid;
- the maturity date of the loan;
- notice of any prepayment penalties; and
- in the instance of an adjustable-rate mortgage (ARM), when and how the rates can reset.
The CFPB is asking for input from industry professionals and the public before implementing a final version of the billing statement this summer. The bureau is also in the process of drafting new disclosure rules required for exotic hybrid ARMs, and rules to protect borrowers from expensive, “force-place” homeowner’s insurance policies.
first tuesday take: The nationwide $25 billion bank settlement has curbed some confusing servicer practices, but it has done nothing to change the practices of non-bank servicers.
This proposed mortgage industry billing statement will hopefully go a long way toward preventing future foreclosures based on transparency of loan conditions. Until the formation of the CFPB, we have never had a consumer protection agency within the federal government. The industry has always vociferously argued the consumer is very well informed and can protect themselves from evil lenders and the like without someone (read: the government) between them and those lenders. However, in light of recent nefarious lender activity, there has been a paradigm shift in attitude concerning consumer protections. Still, courts, it seems, can only get involved after the damage is done. [For more information on the national bank settlement, see the upcoming February 2012 first tuesday article, Is $18 billion enough for CA homeowners?]
To suggest changes for the proposed standardized statements, visit CFPB’s website.
Re: “CFPB outlines plans for mortgage servicers” from the Washington Post and “Prototype of standardized monthly mortgage statement is released” from the Los Angeles Times