Consumer Financial Protection Bureau New Rules for Mortgage Servicers

The Consumer Financial Protection Bureau has proposed new rules for the mortgage servicing industry, which include a requirement that servicers must make a decision on any mortgage relief applicant within 30 days, and must not begin foreclosure proceedings until completing that process.

Under the Consumer Financial Protection Bureau’s proposal, loan servicers would be required to evaluate homeowners’ applications for loan-assistance within 30 days of receiving an application and would be barred from going ahead with a foreclosure until a final decision has been reached on a borrower’s application for help […]

The consumer bureau’s proposal, along with new bank-capital standards and other regulations, could push some large banks to accelerate sales of poorly performing loans to smaller companies that specialize in managing distressed loans, said Issac Boltansky, a Washington analyst with Compass Point Research & Trading.

“We expect the big bank servicers to offload a sizable portion of their servicing assets,” to smaller companies known as special servicers, he wrote in a note to clients. Some of those companies include Ocwen Financial Corp., Nationstar, and Walter Investment Management Corp.

Large banks are “simply not going to make as much money,” on servicing and are likely to hire other companies to perform many servicing functions, said Ed Delgado, a former Wells Fargo executive and chief operating officer of Wingspan Portfolio Advisors, which performs those functions.

Under the proposed rules, banks and other financial institutions that manage home loans – the servicers – must provide “direct, ongoing access” to staff members to help borrowers fighting to save their homes from foreclosure. Servicers must also halt foreclosure proceedings while borrowers apply for a loan modification and tell homeowners in danger of foreclosure about their options.

David DiJulio

For more information contact David

DiJulio Law Group: Los Angeles real estate attorneys with more than 35 years of experience. Call 888-519-1613 or emal

DiJulio Law Group


During the next few months, short sales will sky rocket. Short Sales are sales of upside down houses for the market value. To make the short sale work the first and second mortgage holders must write down the loans to equal the true market value of the house. Since the first has first call on the funds, the second write down a much large percentage of its loan, often 80-90%. Seconds have been resistant to do so, in hopes that the First would foreclose because under current law, if the First forecloses and makes the Second worthless, the Second the right waive the deed of trust and sue on the note- for the full amount of the second loan.

However, under an amendment of CA Code of Civil Procedure 580, the second cannot get a deficiency judgment in any event on any loan, refinance, or other credit transaction that is used to refinance a purchase money loan, as defined, or subsequent refinances of a purchase money loan.

The law seems to limit these rules to new loans but I believe that holders of Seconds will be fearful that the law will be extended by the courts to all loans. If that happens the Second becomes worthless. I think that this threat will induce the seconds to take what they can get in a short sale.

For more information contact David or a broker that specializes in short sales.

DiJulio Law Group: Los Angeles real estate attorneys with more than 35 years of experience. Call 888-519-1613 or emal

DiJulio Law Group