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Friday, October 12, 2012

ABIA Comments on CFPB’s Mortgage Servicing Proposal

The CFPB should remove the aspects of its proposed rule to amend mortgage servicing provisions of the Real Estate Settlement Procedures Act that surpass the Dodd-Frank Act’s mandates, the American Bankers Insurance Association, an ABA subsidiary, said this week in a comment letter.

One of those “aspects” ABIA identified is the proposal’s provision that would require servicers to advance funds to pay a borrower’s hazard insurance premium if the borrower has an escrow account for the insurance—unless the borrower’s policy is cancelled or not renewed for reasons other than nonpayment of premium charges.
[The requirement] for servicers to advance funds, if necessary, where the borrower has an escrow account for homeowners insurance should be removed from the proposed regulation because it is not based on the RESPA provisions promulgated under Dodd-Frank … [and] it fails to consider that mortgage servicers may not have the information necessary to determine why a policy was cancelled.
The requirement also “would dampen the ability of a homeowner’s insurer to fully assess the ongoing underwriting criteria necessary to the management of its business,” the association added.

ABIA also commented on the proposal’s section affecting force-placed insurance. The association said, among other things, that the mortgage servicing final rule should follow the statutory definition of what constitutes a reasonable basis to purchase force-placed insurance, and clearly define what constitutes a sufficient demonstration of coverage.

Read the letter.

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