Aug. 11--The Consumer Finance Protection Bureau has proposed a series of rules that the watchdog agency believes will protect borrowers in their dealings with mortgage servicers.

A key proposal in the package would require servicers to make a decision on any mortgage-relief application within 30 days of receiving it and to not begin foreclosure proceedings during that time.

In announcing the proposed rules this week, bureau director Richard Cordray said they reflected "two basic, commonsense standards: no surprises and no runarounds."

"We want to make sure that, at all times, consumers can get information about how much they owe, what they are paying, and how their payments are being applied," he said.

"And if consumers fall behind on their mortgage, we want them to know how to assess their options and take action."

In response to the proposals, Mortgage Bankers Association president David H. Stevens said Friday that his organization supported this "important step toward bringing certainty to our industry."

Equally important is that "servicing standards must allow lenders to operate efficiently and meet any legal or contractual obligations to their investors," Stevens said.

The American Bankers Association said Friday that it was "concerned about the impact that unrelenting compliance changes and increasingly complex reforms will have on operations and credit availability."

The bureau proposed two sets of rules. The first set would:

Require regular statements that include a breakdown of payments.

Require servicers to provide earlier disclosures before the interest rate is adjusted for most adjustable-rate mortgages, including information about alternatives.

Require affordable options to force-placed insurance, purchased when a borrower doesn't maintain his homeowners' policy.

Require servicers to make good-faith efforts to contact delinquent borrowers and inform them of their options to avert foreclosure.

The second set of proposed rules would impose requirements for handling consumer accounts, correcting errors, and evaluating borrowers for options to avoid foreclosure.

Those would include crediting of prompt payments, maintaining accurate and accessible documents and information, correcting errors quickly, providing delinquent borrowers direct and continuing access to servicer staff, and evaluating borrowers for options to avert foreclosure.

The public will have until Oct. 9 to comment. Final rules will be issued in January. The rules and more information are at www.ConsumerFinance.gov.

Contact Alan J. Heavens

at 215-854-2472 or aheavens@phillynews.com,

or follow on Twitter @alheavens.

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