New Mortgage Servicing Rules

Transcription

1 Aldrich & Bonnefin New Mortgage Servicing Rules Robert K. Olsen, Esq.

2 Disclaimer This presentation is intended solely for educational purposes to provide you general information about laws and regulations and not to provide legal advice. There is no attorney-client relationship intended or formed between you and the presenters or you and the authors of these materials. Consult your institution s legal counsel for advice about how this information impacts your institution.

3 BACKGROUND

4 Background Dodd-Frank revised mortgage loan servicing rules in RESPA and TILA Reg X implements RESPA Reg Z implements TILA CFPB s 2013 final rules effective January 10,

5 Background CFPB s October 2016 final rule amending mortgage servicing rules (MSFR) Most of MSFR effective October 19, 2017 Greatest impact portions effective April 19,

6 Background Both effective dates are Thursdays CFPB permitting MSFR compliance three days early to avoid overnight systems conversions Earlier Monday compliance dates of October 16, 2017 April 16, 2018 Later compliance not permissible (e.g. over the following weekend) 1-2

7 Background May 2017 ABA Staff Summary: FAQs Successors in Interest Informal responses from CFPB Unofficial but helpful Cited to in this presentation 2

8 LIMITED SMALL SERVICER EXEMPTION UNDER REGS X & Z

9 Small Servicers Servicer that services Together with any affiliates 5,000 or fewer mortgage loans For all of which the servicer (or any affiliate) is the creditor or assignee Either you made the loan or you bought it 2

10 Small Servicers Must meet both parts of definition Even one loan serviced for others (unless you made the loan and sold it) will result in loss of exemption Unless serviced for free (freebies not counted) Mortgage loan = closed-end consumer transaction secured by dwelling 2-3

11 Exercise #1

12 Small Servicers Excluded in determining S/S status Reverse mortgages Loans secured by timeshare Transactions serviced for certain small seller financers Effective October 19, 2017 Limited to individual sellers or family trusts One loan per 12-month period Allows trad l contract collections for fee 3-4

13 CONFIRMED SUCCESSORS IN INTEREST (CSII)

14 CSII Main new concept added by MSFR Servicers to treat CSIIs as borrowers under Reg X And as consumers under Reg Z For mortgage servicing rules Effective April 19,

15 CSII CSII = successor in interest (SII) when confirmed SII identity SII ownership interest in a property securing a mortgage loan 4

16 SII Defined SII = person receiving ownership interest in a property securing a mortgage loan from a borrower If the transfer is 4

17 SII Defined: What Transfer resulting from death of joint tenant Applies to join tenants or tenants by entirety Tenants in common not covered (TICs do not succeed to title when other TIC dies) 4

18 SII Defined: What Transfer resulting from death of a borrower Not only auto transfers like jt tenancy Transfer to spouse or children (ditto) Divorce Transfer to living trust Inter vivos Borrower remains beneficiary 5

19 Notices Bureau created option for servicers to inform CSIIs about their status After identity and ownership interest confirmation, servicer may provide Written notice (CSII notice) With separate acknowledgement form (CSII Acknowledgement Form) To a CSII not liable on the mortgage loan obligation 6

20 Notices CSII Notice must explain Servicer confirmed SII s identity and ownership interest SII is not liable for mortgage debt (except in some circumstances) SII is entitled to receive certain notices, by completing Acknowledgement Form SII can submit notices of error See Exhibits A and B 6-8

21 Notices Until CSII executes Acknowledgement Form, servicer not required to provide notices for various Reg X disclosures Or comply with live contact requirements CSII Non-Acknowledgment Exception Applies until CSII assumes mortgage loan or Signs and returns Acknowledgement Form No time limit for returning form 8-9

22 RESPA/REG X MORTGAGE SERVICING RULES

23 Overview Mortgage servicing transfer disclosures Timely escrow payments Force-placing hazard insurance restrictions Error resolution procedures Information requests Loss mitigation procedures Other non-small servicer requirements 9-10

24 CSIIs under Reg X Effective April 19, 2018 Servicers must consider CSIIs as borrowers Whether or not they assume the mortgage loan obligation Servicer not required to provide several Reg X disclosures If already providing them to another borrower/csii on the loan 10-11

25 Mortgage Servicing Transfer Disclosures Small and large servicers must comply with Notice of transfer of loan servicing for mortgage loans 15 days before effective date Borrower includes CSIIs Give them MSTD unless CSII Non-Acknowledgemt Excptn Already giving MSTD to other borrower 12

26 Timely Escrow Payments General: Rules on how much may be escrowed Small and large servicers must comply Focus here on notice requirements in escrow rules Treat CSIIs as borrowers unless CSII Non-Acknowledgemt Exception applies Servicer already giving escrow disclosures to other borrower 12-13

27 Restrictions on Force Placing Hazard General: Before charging borrower, servicers must send 45-Day and 15- Day Notices Servicers must provide CSIIs with forceplaced insurance notices

28 Force Place, cont d MSFR changes to notices Oct. 19, 2017 (next week) Can only include specified contents in 45- Day Notice New form adds ref to insufficient coverage Can add loan account number See Exhibit C 14-15

29 Error Resolution Procedures General: Servicers must respond to notices of error CSIIs treated as borrowers, no exceptions SIIs can assert servicing errors period No exception if SII has not returned CSII Acknowledgemt form 15-16

30 Requests for Information General: Detailed rules on responding to requests for info from borrowers Small and large servicers must comply CSIIs treated as borrowers NO exception for CSII Non- Acknowledgement

31 Requests for Information, cont d New potential SII rules (April 19, 2018) Severely undercuts notion you only must deal with confirmed SIIs Triggering event is written request from person Indicates person may be SII (e.g. informs of death of borrower) Includes transferor borrower name And info that identities the loan account 16-17

32 Requests for Information, cont d CFPB suggests mere notification of borrower death enough to trigger FAQs suggest searching for possible SIIs in event of borrower death notification 16

33 Requests for Information If TRIGGERING REQUEST received Servicer can ask potential SII for updated document copies Must provide potential SII with Request for docs confirming identity and ownership interest Contact information Servicer must treat potential SII (not necessarily CSII) as a borrower for this purpose 17-18

34 Requests for Information If requests falls short of TRIGGERING REQUEST Servicer may (voluntary) respond Indicate type of documents needed More individualized with more information Specifies type of information needed Provides contact information for servicer 18

35 Requests for Information Servicers to be proactive about additional documentation Servicer s info re potential SII s ownership interest = better knowledge of document requests Outside counsel No regulatory deadline for SII providing documentation 18-19

36 Requests for Information Servicer not required to respond to duplicative request But if potential SII provides requested identity confirming info, servicer must Treat new information as new and nonduplicative triggering request Respond accordingly Servicer must respond no later than regular time limits 19-20

37 Loss Mitigation Procedures Most do not apply to small servicers, except Prohibition on initiating foreclosure till 120 days delinquent If borrower is following loss mitigation agreement terms, servicer cannot Make the first notice or filing for any foreclosure process Move for foreclosure judgement or order of sale, or foreclosure sale 21-22

38 TILA/REG Z MORTGAGE SERVICING RULES

39 Overview Reg Z s five mortgage servicing rules Periodic statements for residential mortgage loans Prohibited servicing practices Mortgage transfer disclosures Escrow closing notice Adjustable rate mortgage 22

40 CSIIs Servicer may not require CSII to assume mortgage loan obligation to be considered a consumer If SII assumes loan obligation = SII treated as consumer under all Reg Z Servicer must still comply with all mortgage servicing rules for transferor consumer 23

41 Periodic Statements MSFR changes to rules Information to include on statements when Mortgage balance is accelerated, but servicer will accept lesser amount to reinstate and Borrower enters temporary loss mitigation program or permanent loan modification 23-24

42 Exemptions Loans while consumer is a debtor in bankruptcy Any consumer discharging personal liability for mortgage loan Servicer must provide such consumers with modified periodic statement Two versions of statement Chapter 7 or 11 Chapter 12 or

43 Exemptions Charged off loans, if servicer Has charged off with loan-loss provision and Will not charge any additional fee or interest on account Provides a Suspension of Statements & Notice of Charge Off within 30 days 26

44 Prohibited Servicing Practices Failure to credit payments Effective October 19, 2017 If borrower and creditor enter temporary loss mitigation program (no mod of contract) Short payments continue to be accounted for as short, held in separate account 26

45 Prohibited Servicing Practices Failure to provide payoff statements Applicable to CSIIs on April 19, 2018 No exception for CSII Non- Acknowledgement Servicer may need to provide duplicative payoff statements to original borrower and CSII 27-28

46 Mortgage Transfer Disclosures & Escrow Closing Notices CSIIs also entitled to receive mortgage transfer disclosures and escrow closing notices, unless CSII Non-Acknowledgement Exception applies or Servicer is providing notice to other consumer or CSII on account 28-29

47 ARM Disclosures ARM loan program disclosures CFPB revising sample forms in Reg Z to reflect rate-payment notices now given days in advance (not 25 days) 30-31

48 DUE DILIGENCE OBLIGATIONS

49 For Third-party Providers 3 rd party servicers = large servicer, broader obligations Banks expected to vet all TPPs Any TPP with access to bank s consumers or money = critical vendor Mortgage servicers are critical vendors Critical steps must be taken to assure MSFR compliance for contract servicer 31

50 Thank You We re Adjourned!

51 Speaker Contact Information Robert K. Olsen Principal Aldrich & Bonnefin, PLC Von Karman Ave., Suite 300 Irvine, CA Bus: