The Consumer Financial Protection Bureau (CFPB) has published an updated version of its Mortgage Servicing Small Entity Compliance Guide on its Mortgage Servicing implementation webpage; the updates incorporate amendments made to Regulation X and Regulation Z by the 2016 rule amending the mortgage servicing final rule.
According to the version log, changes were made Nov. 30 to the following sections:
Small servicer exemption
The small servicer exemption generally applies to servicers who service 5,000 or fewer mortgage loans for all of which the servicer is the creditor or assignee. The 2016 mortgage servicing rule excludes certain seller-financed transactions and mortgage loans voluntarily serviced for a non-affiliate, even if the non-affiliate is not a creditor or assignee, from being counted toward the 5,000 loan limit.
Successors in interest
The 2016 mortgage servicing rule adds definitions of “successor in interest” to subpart C of Regulation X and to Regulation Z.
It also includes provisions related to how a servicer confirms a successor in interest’s identity and ownership interest in a property. It also generally provides that the mortgage servicing rules apply to successors in interest once a servicer confirms the successor in interest’s status.
Periodic statements
The rule clarifies certain periodic statement disclosure requirements relating to mortgage loans and requires servicers to provide certain borrowers in bankruptcy a modified periodic statement or coupon book. In certain circumstances, servicers generally are exempt from the periodic statement requirement for charged-off mortgage loans.
Force-placed insurance
The rule amends the force-placed insurance disclosures and model forms to account for instances when the borrower has insufficient coverage on the property, and it gives servicers the option to omit a borrower’s mortgage loan account number on certain required notices.
Early intervention
The rule clarifies the obligations for servicers to establish or make good-faith efforts to establish live contact with delinquent borrowers. The rule also revises the exemption from early intervention for borrowers who are in bankruptcy or who have invoked cease communication protection under the Fair Debt Collection Practices Act (FDCPA).
The definition of delinquency
The rule adopts a general definition of delinquency that applies to all servicing provisions of Regulation X and periodic statements for mortgage loans in Regulation Z.
According to a factsheet released by the CFPB: “The 2016 mortgage servicing rule defines ‘delinquency’ as a period of time during which a borrower and the borrower’s mortgage loan obligation are delinquent, and states that a borrower and a borrower’s mortgage loan obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and (if applicable) escrow becomes due and unpaid, until such time as no periodic payment is due and unpaid. The delinquency begins on the date the periodic payment becomes due and unpaid even if the servicer will not assess a late charge if the borrower makes the periodic payment within a certain time frame after the periodic payment is due.”
Loss mitigation
This section received several modifications.
The final rule:
- Requires servicers to meet the loss mitigation requirements more than once in the life of a loan for borrowers who become current on payments at any time between the borrower’s prior complete loss mitigation application and a subsequent loss mitigation application;
- Modifies an existing exception to the 120-day prohibition on foreclosure filing to allow a servicer to join the foreclosure action of a superior or subordinate lienholder;
- Clarifies how servicers select the reasonable date by which a borrower should return documents and information to complete an application;
- Makes clear that servicers cannot move for foreclosure judgment or order of sale, or conduct a foreclosure sale, in certain circumstances;
- Requires that servicers provide a written notice to a borrower within five days (excluding Saturdays, Sundays or legal holidays) after they receive a complete loss mitigation application and requires certain information to be included in the notice;
- Sets forth how servicers must attempt to obtain information not in the borrower’s control and evaluate a loss mitigation application while waiting for third party information;
- Permits servicers to offer a short-term repayment plan based upon an evaluation of an incomplete loss mitigation application;
- Eases document collection requirements in connection with some loss mitigation applications; and
- Addresses and clarifies how loss mitigation procedures and timelines apply when a transferee servicer receives a mortgage loan for which there is a loss mitigation application pending at the time of a servicing transfer.
A nonprofit servicer section also had been added to the guide’s Small Servicer Exemption section.