01/23/2013 04:18:00 PM EST
CFPB Issues New National Mortgage Servicing Rules
by Donald C. Lampe, Jeffrey E. Jamison,
and Michael B.
On Dec. 17, the Consumer Financial Protection Bureau (CFPB) issued the expected mortgage servicing final
rules. At over 1,000 pages, the final rules will amend the Truth in
Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act
(Regulation X). Consistent with the Bureau's proposal, the rules cover nine
major topics and implement the mortgage servicing provisions of Title XIV
of the Dodd-Frank Act. The rules, which will take effect on January 10,
2014, directly implement Congressionally-mandated servicing reforms but also
include a host of required loss mitigation rules and processes. The CFPB
promulgated these latter rules by way of its general rulemaking authority
under RESPA provided in the Dodd-Frank Act, not pursuant to specific Dodd-Frank
statutory provisions. In prepared remarks for today's field hearing in Atlanta,
CFPB Director Cordray emphasized that these new rules are not only
mandatory for mortgage servicers (with limited exceptions for smaller
servicers), but "are backed by the full supervisory and enforcement authority
that Congress has conferred upon [the CFPB]."
According to Director Cordray, the CFPB's new mortgage
servicing rules were designed to resolve sub-standard mortgage servicing
practices by achieving two main objectives. "First, they will help
prevent all borrowers from being caught off guard by surprises and getting the
runaround from their servicers. Second, there are special protections for
borrowers who are having trouble making their mortgage payments."
The new rules set forth the following regulations and
FOR ALL BORROWERS
Monthly Mortgage Statements:
Monthly mortgage statements must be clearly written and easy to
understand. Monthly statements must also break down payments received by
the servicer by principal, interest, fees, and escrow, as well as include the
amount and due date of the next payment.
Adjustable Rate Mortgages:
Servicers must provide advance notice prior to interest rate adjustments for
most adjustable-rate mortgages specifying the new interest rate, new payment
amount, and when that payment is due, as well as information regarding
alternatives and counseling if the new payment turns out to be unaffordable for
Forced Placed Insurance: Services
must provide advance notice and pricing information before charging consumers
for forced placed insurance and, if, within 15 days of a servicers' purchase of
an insurance policy, the servicer receives evidence that such insurance was not
needed, then servicers must terminate such policy and refund the premiums paid.
Payment Processing: All payments
will be required to be credited the day they are received. Servicers must
also timely acknowledge and investigate payment errors when notified by
consumers, as well as timely inform consumers of how such investigation has
Documentation & Records:
Servicers must maintain accurate and accessible documents and records to be
able to provide accurate and timely information to borrowers, mortgage owners,
Dual Tracking: Servicers are prohibited from
commencing foreclosure proceedings until the borrower has missed payments for
at least 120 days. Further, once the borrower submits a completed loss
mitigation application, servicers are prohibited from commencing or completing
a foreclosure until the loss mitigation application has been reviewed and the
borrower has been given a chance to respond. Servicers are also required
to process loan modification applications prior to continuing foreclosure
proceedings, as long asthe applicationsare received more than 37
days before a foreclosure sale.
Monthly Statements: After the borrower misses
two consecutive payments, the borrower's monthly statement must identify the
date the borrower became delinquent, the amount needed to bring the account
current, and a statement regarding the risks of failing to bring the account
Loss Mitigation: Servicers must proactively
present loss mitigation options to borrowers who have missed payments.
Servicers will also be required to offer a single application for all available
loss mitigation alternatives, as well as review borrowers for all such
alternatives at the same time. Services will need to acknowledge receipt
of a loss mitigation application within five days, inform the borrower if the
application is incomplete, and use reasonable diligence to obtain all
information needed to complete the application. The rules also limit the loss
mitigation options that servicers may offer borrowers. If no loss mitigation
options are available, the servicer must then consider all other options.
If the borrower is rejected for a loan modification, the servicer must provide
the reasons for the rejection and, if the borrower disagrees with those
reasons, she will have the ability to appeal the rejection and have her
application reviewed again by another individual.
Continuity of Contact: Servicers are required
to develop policies and procedures to ensure borrowers have direct and ongoing
access to the individuals responsible for helping delinquent borrowers.
Read more articles about the Consumer Financial Protection
Bureau at Dykema's CFPB Blog
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