Written by Angela Meyster, Regulatory Affairs Counsel
By now you’ve probably begun looking at the CFPB’s January 2013 mortgage rules and started thinking about how to comply. The CFPB understands there have been some hiccups with implementing certain provisions of the rules and, accordingly, has been rolling out modifications as part of its implementation plan. On September 13, 2013, the CFPB released amendments to the 2013 Mortgage Rules under the Equal Credit Opportunity Act (Regulation B), Real Estate Settlement Procedures Act (Regulation X), and the Truth in Lending Act (Regulation Z).
Of particular interest to credit unions are the provisions relating to loss mitigation procedures and the pre-foreclosure review period. The newly amended rule, found in § 1024.41(f), reads:
"(1) Pre-foreclosure review period. A servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless:
(i) A borrower’s mortgage loan obligation is more than 120 days delinquent;
(ii) The foreclosure is based on a borrower’s violation of a due-on-sale clause; or
(iii) The servicer is joining the foreclosure action of a subordinate lienholder."
Thus, the rule does not generally allow servicers to make the first notice or filing that is required under state law within 120 days of delinquency.
The September 2013 Amendments specifically address what constitutes the “first notice or filing required by applicable law.” NAFCU had sought clarification that certain state-required notices that are meant to notify borrowers about counseling or other loss mitigation resources are not prohibited under this rule. The CFPB has provided some clarity as to what a credit union can do to comply with state law foreclosure requirements within the 120-day period without running afoul of the CFPB’s prohibition against making the first notice or filing.
In its new commentary, the CFPB clarifies whether a credit union has made “the first notice or filing required by applicable law” prohibited by the 120-day rule. The commentary specifies that, where State foreclosure law requires a court action or proceeding, a document is a first notice or filing if it is the earliest document State law requires a credit union to file with a court or other judicial body to commence the action or proceeding. This could be a complaint, a petition, an order to docket, or a notice of a hearing.
The commentary also explains that if applicable State law does not require an action or proceeding in court, and instead allows the use of a power of sale or the publishing or recording of a similar document, a document is the first notice or filing if it is the earliest document that State law requires that a credit union record or publish to begin the foreclosure process. Where applicable State law requires neither a court action nor the recording or publishing of a particular document, a document is the first notice or filing if it is the earliest document to establish or schedule a particular date for a foreclosure sale.
Finally, the CFPB’s new commentary points out that a credit union doesn't violate this provision if it gives a borrower a document that applicable State law doesn't initially require to be filed, recorded, or published simply because the credit union would have to include that document as an attachment to other documents necessary to initiate a foreclosure.
NAFCU Member Resource - Consolidated Regulatory Text and Commentary for the CFPB’s Mortgage Rules.
And speaking of helping credit unions to comply with the CFPB’s mortgage rules, don’t forget to use this valuable member resource (login required) when researching the rules!
NAFCU has consolidated the regulatory text and commentary for each amended (and added) regulatory section from each of the CFPB's final mortgage rules. The consolidated regulatory text and commentary show how the regulatory sections will look when the final rule(s) are effective in January 2014.
The consolidated regulatory text has been updated with the recent final rule issued by the CFPB on September 13, 2013 (published in the Federal Register on October 1). The final rule discussed above will be incorporated into the consolidated regulatory text when they are published in the Federal Register.
Check out our new webpage where you can download the consolidated regulatory text of each individual amended section or you can download the entire consolidated final rule as amended! You can also link to the consolidated text from NAFCU’s Mortgage Rules webpage.