Written by Brandy Bruyere, Regulatory Compliance Counsel
We hope everyone successfully survived last Friday’s mortgage rule compliance deadlines! While many of us spent Monday settling into the new regulatory regime, NCUA released two Regulatory Alerts— 14-RA-03 and 14-RA-04 (Alerts). These Alerts provide an overview of the new mortgage servicing rules under Regulation X (RESPA) and Regulation Z (TILA). Most of these rules went into effect on January 10th and these Alerts are helpful basic summaries of these rules.
Together, these two Alerts address the nine mortgage servicing provisions. The first three are under Regulation Z and the last six are under Regulation X:
- Periodic statements;
- Adjustable Rate Mortgage (ARM) disclosure notices;
- Prompt crediting and payoff statements;
- Force-placed insurance;
- Error resolution and information requests;
- General servicing policies, procedures, and requirements;
- Early intervention with delinquent members;
- Continuity of contact with delinquent members;
- Loss mitigation
Generally, the Alerts address the scope of the regulations as well as the content and timing required for various notices and statements. Also, both Alerts summarize the definition of the small servicer exemption:
“How Does a Credit Union Qualify for the Small Servicer Exemption?
Your credit union is considered a small servicer under both the TILA and RESPA Mortgage Servicing rules if:
• Together with any affiliates, you service 5,000 or fewer mortgages, and you (or an affiliate) are the creditor or assignee for all of them.
An affiliate is defined as any company that controls your credit union, is controlled by your credit union, or is under common control with your credit union.6 For example, a credit union service organization (CUSO) that is owned by a credit union is considered an affiliate.
If you service any mortgages you (or an affiliate) did not originate or do not own, you do not qualify as a small servicer, even if you service 5,000 or fewer loans overall. For example, if you service 2,000 loans—1,999 of which you own or originated and one of which you neither own nor originated but for which you own the servicing rights—you do not qualify as a small servicer because you service a loan for which you (or an affiliate) are not the creditor or assignee.
To determine if you are a small servicer, count “mortgage loans” only. A mortgage loan is a closed-end consumer credit transaction secured by a dwelling. Do not include reverse mortgages, timeshare plans, or loans you voluntarily service for a creditor or an assignee that is not an affiliate and for which you do not receive any compensation or fees.
The small servicer exemption is determined each calendar year based on the loans you and your affiliates service as of January 1 for the remainder of the year.
You can lose the small servicer exemption if you:
• Service more than 5,000 loans; or
• Take on the servicing of a loan you do not own or did not originate.
If you lose the exemption, you have six months from the date you stopped being a small servicer or until the next January 1 (whichever is later) to comply with the RESPA/TILA mortgage servicing requirements from which you were exempt as a small servicer.”
Just remember, the small servicer exemption is only available for a few of the mortgage servicing rules. Here is a past NAFCU blog which clarifies which rules are eligible for this exemption.
CFPB Updates. Also, on Friday the CFPB released two items that may be of interest. The first details changes to certain consumer information brochures (Sample Letters to Mortgage Servicers to Guide Consumers). The second is a notice regarding updates to its examination manuals for mortgage origination and servicing.
Shameless Plug Alert—Webcast: On Wednesday, February 5th, NAFCU will host a webcast titled Getting Complaints – What to Do Next to Safeguard and Improve Your Credit Union. A properly activated complaint management process helps satisfy NCUA requirements for documenting and responding to customer criticisms. Register by Jan. 29 to save $100 and learn the steps your credit union should be implementing.
I’ll end on a palate cleanser, at least for those who love dogs. My husband and I adopted our dog from a local rescue two years ago, and during that time my dog has almost grown as big and robust as mortgage regulations. It’s hard to believe he was ever so “small.”