CFPB releases 500 Page Mortgage Servicing Proposal

Written by Alicia Nealon, Regulatory Affairs Counsel

CFPB releases 500 Page Mortgage Servicing Proposal

Last week, the CFPB announced a proposed rule that the Bureau claims will“ensure that homeowners and struggling borrowers are treated fairly.” Given its 500 page length, it’s no surprise that the proposal would make several amendments to Regulation Z’s and Regulation X’s mortgage servicing requirements.  Most notably, the proposal would require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan.  Currently, a mortgage servicer must give the borrower certain foreclosure protections, including the right to be evaluated under the CFPB’s requirements for options to avoid foreclosure, only once during the life of the loan. The proposal, however, would require that servicers give these protections again for borrowers who have brought their loans current at any time since the last loss mitigation application.

Here are some other highlights from the proposal:

1. Successors in interest. The Bureau is proposing expand consumer protections to surviving family members and other homeowners. For example, the CFPB is proposing to apply all of Regulation Z’s and X’s mortgage servicing requirements to successors in interest once a servicer confirms the successor in interest’s identity and ownership interest in the property.
2. Definition of delinquency. The CFPB is proposing to add a general definition of delinquency that would apply to all of the servicing provisions of Regulation X and the provisions regarding periodic statements for mortgage loans in Regulation Z. Under the proposed definition, a borrower and a borrower’s mortgage loan obligation are delinquent beginning on the date a payment sufficient to cover principal, interest, and, if applicable, escrow, becomes due and unpaid.
3. Force-placed insurance. The Bureau is also proposing to amend the required disclosures to account for when a servicer wishes to force-place insurance when the borrower has insufficient, rather than expiring or expired, hazard insurance coverage on the property.
4. Early intervention. The Bureau is proposing to require servicers to provide written early intervention notices to certain borrowers who are in bankruptcy or who have invoked their cease communication rights under the Fair Debt Collections Practices Act.
5. Loss Mitigation. As noted above, the proposal would make several amendments to the Loss Mitigation Rule.  It is also worth mentioning that the proposal would require a servicer to provide a written notice to a borrower promptly upon receiving the borrower’s complete loss mitigation application.
6. Prompt payment crediting. The CFPB is further proposing to clarify how servicers must treat periodic payments made by consumers who are performing under either temporary loss mitigation programs or permanent loan modifications. Under the Bureau’s proposal, periodic payments made pursuant to temporary loss mitigation programs would continue to be credited according to the loan contract and could, if appropriate, be credited as partial payments, while periodic payments made pursuant to a permanent loan modification would be credited under the terms of the permanent loan agreement
7. Periodic Statements. The Bureau is also proposing to, among other things, modify the periodic statement and coupon book requirements for certain consumers who are in bankruptcy or have discharged personal liability for a mortgage loan through bankruptcy. The proposal would also provide an exemption from the servicing rule’s periodic statement requirement for loans that have been charged off so long as the servicer will not charge any additional fees or interest on the account

Again, this is a 500 page proposal so this blog is just a very broad overview. However, NAFCU’s Regulatory Affairs team will work on a Regulatory Alert for our members that provides further details.