Proposed House Bill Introduces New Servicing Requirements

The Escrow, Appraisal and Mortgage Servicing Improvements Act (H.R.3837), recently introduced in the U.S. House of Representatives by Rep. Paul E. Kanjorski, D-Pa., would amend several previous mortgage servicing laws and require certain new practices of servicers.

According to the bill's text, the purposes of this legislation are ‘to require escrows for certain mortgage loans, to improve mortgage servicing, to promote sustainable homeownership opportunities, to enhance appraisal quality and standards, to better appraisal oversight, to mitigate appraiser pressure’ and to achieve additional unspecified goals. Among the areas of focus are practices related to default, late fees and foreclosure, and the bill instructs the secretary of Housing and Urban Development to study and report to relevant congressional committees on mortgage servicing fraud.

H.R.3837 would specifically amend the Real Estate Settlement Procedures Act of 1974 to ‘proscribe specified practices by the servicer of a federally related mortgage, including obtaining force-placed hazard insurance coverage to protect the mortgagee's interest in the property,’ and amend the Truth in Lending Act to ‘require a creditor, in a consumer credit transaction secured by the consumer's principal dwelling, to establish an escrow or impound account to pay taxes and hazard insurance, and, if applicable, flood insurance, mortgage insurance, ground rents, and any other required periodic payments or premiums.’

In addition, the bill would amend the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to introduce new measures designed to discourage unregulated or dishonest appraisal practices.

H.R.3837 has subsequently been referred to the House Committee on Financial Services, where it awaits further legislative action.


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