Your monthly mortgage bill soon could get easier to understand, and it wouldn’t change each time your loan is sold to a new servicer.
The Consumer Financial Protection Bureau has developed a proposed standardized mortgage servicer statement designed to provide clear information about the loan on a single page.
The prototype released Monday included a breakdown of how much of the monthly payment went to principal, interest and escrow. The form also detailed the outstanding principal, maturity date, prepayment penalty and, for adjustable-rate mortgages, the time when the interest rate could change.
“This information will help consumers stay on top of their mortgage costs and hold their mortgage servicers accountable for fixing errors that crop up,” said Richard Cordray, the agency’s director. “Given the widespread mortgage servicing problems we’ve seen over the past few years, consumers need clear disclosures they can count on.”
Although many servicers already provide such information on their monthly statements, there are no industrywide standards, the agency said.
Such standards are a good idea, and initial reaction from servicers to the agency’s proposal was positive, said Rod J. Alba, senior counsel in the mortgage markets division at the American Bankers Association.
The agency posted a working draft of the standardized statement on its website, ConsumerFinance.gov, to solicit input from the public and industry before a version of the form formally is proposed this summer.
Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said simplified mortgage statements would help resolve the broad mortgage servicing problems that were at the heart of last week’s federal and state settlement with five of the nation’s largest banks over botched foreclosure paperwork.
The consumer agency is required under the 2010 financial reform law to put new mortgage servicing rules in place to help consumers, Cordray said. The law has specific requirements for mortgage statements, including a phone number and email address for the customer to get information about the loan, as well as information about housing counselors.
The new mortgage statement is the latest consumer financial paperwork the agency is trying to simplify.
In May, it released two prototypes for shorter, easier-to-understand disclosure forms that lenders would have to give home buyers before they close on a mortgage. The agency has been receiving comments on the forms and tested them last month in Philadelphia.
And in December, the agency proposed a simplified credit card agreement form to make it easier to understand interest rate terms and comparison shop.
The agency also is developing a new disclosure rule for hybrid adjustable-rate mortgages that would require consumers to be notified months before their first interest rate increase, as well as to be provided with a good-faith estimate of the new monthly payment.
Source: MCT Information Services