Are There Any Federal Laws Protecting Me from Mortgage Servicers?

Yes. Two federal laws, the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA), both amended by the Dodd-Frank Act of 2010, set the rules mortgage servicers must follow, and the Consumer Financial Protection Bureau (CFPB) spelled them out in Regulation X and Regulation Z, which took effect January 10, 2014. They set deadlines for crediting payments, sending statements, fixing errors, and handling borrowers who fall behind, including a general ban on starting foreclosure until you are more than 120 days late. You can enforce many of them yourself, in writing, through a CFPB complaint, or in court.

What do the federal servicing rules require?

A servicer is the company that collects your payment and runs your escrow account; what loan servicing is covers its full role. The table lists the main protections, what the servicer must do, and whether small servicers (defined below) are exempt.

Loss mitigation means options such as a loan modification, forbearance, or short sale that let you avoid foreclosure. The early intervention, continuity of contact, and loss mitigation rules apply only to the home that is your principal residence. Each protection has its own article: written communication rules, rules for delinquent borrowers, force-placed insurance, and the periodic statement rule.

Which abusive servicing practices do the rules target?

When the CFPB issued the rules in January 2013, it described the problems that surfaced during the 2008 mortgage crisis: records that got lost, payments processed too slowly, borrowers given the runaround, unclear fees and rate changes, and costly force-placed insurance. People often call these practices predatory servicing. The rules answer each one:

• Dual tracking. Servicers pursued foreclosure while reviewing a borrower's request for help. Now a servicer cannot start foreclosure while a complete loss mitigation application is pending, and an application received more than 37 days before a scheduled sale must be decided before the sale goes forward. You can appeal a trial or permanent loan-modification denial if the servicer received your complete application at least 90 days before a sale or during the preforeclosure review period, when foreclosure cannot yet begin. The servicer must allow at least 14 days after its decision notice to appeal, and a timely appeal keeps the sale on hold while it is pending. An agreement you accept and follow also keeps the sale on hold.
• Servicer self-interest. Servicers must consider every option the loan owner offers, including ones that pay the servicer less.
• Hard-to-reach staff. Delinquent borrowers get assigned personnel who can see their file and track their application.
• Surprise charges. Monthly statements must break out fees and charges, RESPA bars fees for answering a valid written request, and force-placed insurance requires advance notice and pricing.

What is a small servicer, and which rules don't apply?

A small servicer is one that, together with its affiliates, services 5,000 or fewer mortgage loans and owns or originated all of them. State housing finance agencies and certain nonprofits that service 5,000 or fewer loans also qualify. For example, a community bank that services 3,000 loans, all of which it made, qualifies; a company servicing 3,000 loans that it neither made nor bought does not. Status is set each calendar year based on the loans serviced as of January 1, and you can ask your servicer whether it claims the exemption.

Two foreclosure limits still apply to small servicers: no first foreclosure filing until you are more than 120 days delinquent, and no foreclosure while you are meeting the terms of a loss mitigation agreement, including a forbearance plan that pauses payments.

What must a servicer's internal procedures cover?

Servicers that are not small must keep policies and procedures reasonably designed to:

• Give you accurate and timely information and documents, and handle your complaints.
• Evaluate loss mitigation applications properly and identify every option you may qualify for.
• Pass all documents, including pending loss mitigation files, to a new servicer at a transfer.
• Tell you how to submit written notices of error and information requests.

They must also keep records of actions on your account until one year after the loan is paid off or servicing is transferred. You do not get the servicing file automatically, but you can request a copy of it in writing through the information request process.

How do you enforce your rights?

1. Write to the servicer first. Send a notice of error or information request, with your name, loan number, and the problem or question, to the address it designates. Receipt starts the applicable response deadlines listed above. For 60 days after receiving a notice of error, the servicer also cannot report negative information about the payment identified in the notice to the credit bureaus; an information request alone does not carry that protection.
2. File a complaint. The CFPB sends complaints to the servicer and publishes them, without your personal details, in its complaint database. Complaining to a government agency lists the agencies and what each handles.
3. Sue if needed. Under RESPA section 6, you can sue a servicer for your actual damages, up to $2,000 more if it shows a pattern or practice of violations, plus court costs and attorney fees. The loss mitigation rules are expressly enforceable this way. You generally have 3 years from the violation to file. TILA separately allows suits against the creditor, with statutory damages of $400 to $4,000 on a closed-end mortgage, generally within 1 year.