FINAL RULE ANALYSIS 2016 MORTGAGE SERVICING RULE AMENDMENTS (REG X) 2016 TRUTH IN LENDING AMENDMENTS (REG Z)

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1 FINAL RULE ANALYSIS 2016 MORTGAGE SERVICING RULE AMENDMENTS (REG X) 2016 TRUTH IN LENDING AMENDMENTS (REG Z) The following provisions have been amended or added by this final rule: Force-Placed Insurance Early Intervention Borrowers In Bankruptcy Periodic Statements Loss Mitigation Successors In Interest FORCE-PLACED INSURANCE (effective October 19, 2017) ( ) Insufficient insurance coverage: Currently, before a credit union can assess a charge for force-placed insurance, written notices must be sent that state that the borrower s hazard insurance is expiring or has expired this required notice does not provide for the situation where a borrower has insufficient insurance coverage. The new mortgage servicing rule amendments will require a statement that: (A) The borrower s hazard insurance is expiring, has expired, or provides insufficient coverage, as applicable; (B) The servicer does not have evidence that the borrower has hazard insurance coverage past the expiration date or evidence that the borrower has hazard insurance that provides sufficient coverage, as applicable; and (C) If applicable, identifies the type of hazard insurance for which the servicer does not have evidence of coverage. Unacceptable Insurance Company: The Bureau declined to modify the notices any further, such as to include the situation where the insurance company used by the borrower is not acceptable to the lender. The CFPB notes that such additional information can be included on a separate piece of paper with the same transmittal. Loan account number: The new rule will allow credit unions to include the borrower s mortgage loan account number on the notices. The Bureau agrees that including this information on the written notices will help borrowers identify the loan for which the 1

2 written notice applies and would facilitate communication between the borrower and credit union. Putting the loan number on the notice is optional. Dollar amount of coverage needed: The Bureau did not agree that putting information, such as the dollar amount of coverage needed, should be allowed on the notices, stating it could obscure the required information and create information overload. Notices must be formatted in the same manner: Technical corrections have been made to the regulation to clarify that when the same information appears in both the initial notice and the reminder notice, that information must be formatted the same in both notices. Updating notice with borrower information: A comment to the new rule clarifies that if a written notice was put into production no more than 5 days (excluding legal holidays, Saturdays, and Sundays) prior to the credit union delivering or placing the notice in the mail, you are not required to update the notice with new insurance information recently received. The regulation states it must be put into production within a reasonable time, this comment to the rule clarifies that five days is the maximum period of time that would be considered a reasonable time. Additional information required in reminder notice: When a credit union has received hazard insurance information after delivering the initial notice, but has not received evidence demonstrating that the borrower has had hazard insurance coverage in place continuously, the required reminder notice for this situation must include: A statement that the insurance the credit union has purchased or purchases may: (A) Cost significantly more than hazard insurance purchased by the borrower; (B) Not provide as much coverage as hazard insurance purchased by the borrower. As well as the information currently required: The date of the notice; The credit union s name and mailing address; The borrower s name and mailing address; A statement that requests the borrower to provide hazard insurance information for the borrower s property and identifies the property by its physical address; The credit union s telephone number for borrower inquiries; If applicable, a statement advising the borrower to review additional information provided in the same transmittal; A statement that the notice is the second and final notice; 2

3 The cost of the force-placed insurance, stated as an annual premium, except if a credit union does not know the cost of force-placed insurance, a reasonable estimate must be disclosed and identified as such; A statement that the credit union has received the hazard insurance information that the borrower provided; A statement that requests the borrower to provide the information that is missing; and A statement that the borrower will be charged for insurance the credit union has purchased or purchases for the period of time during which the servicer is unable to verify coverage. EARLY INTERVENTION (effective October 19, 2017) Live Contact ( (a)) The CFPB has made two clarifying changes to the early intervention live contact requirements of the mortgage servicing rule: 1. Highlighted the bankruptcy and FDCA exceptions from the live contact requirements; 2. Clarified that early intervention live contact obligations recur in each billing cycle while a borrower is delinquent. Exceptions: Mortgage servicers have been concerned over the live contact requirements for borrowers in bankruptcy and when borrowers have invoked certain rights under the Fair Debt Collections Act (FDCA). The amended rule clarifies that the live contact requirements apply, except as otherwise provided in the rule. Bankruptcy and FDCA exceptions are provided for in other sections of the rule ( (c) & (d)) Recurring Live Contact Obligations: Apparently, many mortgage servicers were applying the written contact limitations that allow the credit union to provide the notice only once in a 180-day period, to the live contact requirement. The CFPB amended the live contact provision to clarify that credit unions are expected to make good faith efforts to establish live contact, or to attempt to make live contact, by the 36 th day after each payment due date for the duration of the borrower s delinquency. The credit union s early intervention live contact obligations recur in each billing cycle while a borrower is delinquent. A single live contact for two missed payments. Credit unions may time their attempts to establish live contact in such a way that a single attempt will meet the contact requirements for two missed payments. EXAMPLE: The borrower makes no payments during the period January 1 through April 1, although payments of $2,000 each on January 1, February 1, and March 1 are due. The credit union is in compliance with the live contact requirements if it makes a 3

4 good faith effort to establish live contact with the borrower, for example, on February 5 and again on March 25. The February 5 attempt meets the requirements for both the January 1 and February 1 missed payments. The March 25 attempt meets the requirement for the March 1 missed payment. Establishing Live contact: Live contact with a borrower includes: (1) speaking on the telephone; (2) conducting an in-person meeting; (3) live contact established at the borrower s initiative; (4) combining live contacts with a contact made with the borrower for another reason, such as, by telling the borrower on collection calls that loss mitigation options may be available. NOT considered live contact: leaving a recorded phone message. Good Faith Effort : A good faith effort to establish live contact consists of reasonable steps, under the circumstances, to reach the borrower, and may include: (1) telephoning the borrower on more than one occasion; or (2) sending a written or electronic communication encouraging the borrower to establish live contact with the servicer. The length of the borrower s delinquency, as well as a borrower s failure to respond to a credit union s repeated attempts at communication are relevant circumstances to consider. Examples: (1) A borrower with two consecutive missed payments might require a telephone call for a good faith effort at communication. (2) An unresponsive borrower with six or more consecutive missed payments might require no more than including a sentence requesting that the borrower contact the servicer with regard to the delinquencies in the periodic statement or in an electronic communication. Circumstances that call for information about loss mitigation options: It is within a credit union s reasonable discretion to determine whether informing a borrower about the availability of loss mitigation options is appropriate under the circumstances. For example: (1) A borrower notifies a credit union during live contact of a material adverse change in the borrower s financial circumstances that is likely to cause the borrower to experience a long-term delinquency for which loss mitigation options may be available a credit union should provide information about the availability of loss mitigation options. 4

5 (2) A borrower has missed a January 1 payment and notified the credit union that full late payment will be transmitted to the credit union by February 15 - a credit union does not need to provide information about the availability of loss mitigation options. How and when to provide loss mitigation information: A credit union may inform borrowers about the availability of loss mitigation options orally, in writing, or through electronic communication, but the credit union must provide such information promptly after the credit union establishes live contact. A credit union need not notify a borrower about any particular loss mitigation options at this time. A credit union need only inform borrowers generally that loss mitigation options may be available. Live contact and loss mitigation options may be provided to borrower s agent : The rule does not prohibit a credit union from satisfying these requirements by establishing live contact with and, if applicable, providing information about loss mitigation options to a person authorized by the borrower to communicate with the credit union on the borrower s behalf. A credit union may undertake reasonable procedures to determine if a person that claims to be an agent of a borrower has authority from the borrower to act on the borrower s behalf, for example, by requiring a person that claims to be an agent of the borrower to provide documentation from the borrower stating that the purported agent is acting on the borrower s behalf. Communication about loss mitigation meets the live contact requirements : If the credit union has established and is maintaining ongoing contact with the borrower under the loss mitigation procedures, including during the borrower s completion of a loss mitigation application or the credit union s evaluation of the borrower s complete loss mitigation application, or if the credit union has sent the borrower a notice that the borrower is not eligible for any loss mitigation options, the credit union complies with the live contact requirement and doesn t need to make additional good faith efforts to establish live contact at this point, continued attempts by the credit union to establish live contact may frustrate or even harass a borrower who was recently denied for loss mitigation. However, a credit union must resume compliance with the live contact requirements for a borrower who cures a prior delinquency, but subsequently becomes delinquent again. Written Notice ( (b)) A credit union must provide a written notice to a delinquent borrower no later than the 45th day of the borrower s delinquency, but is not required to send the notice more than once in any 180-day period. The new rule clarifies that: If a borrower is 45 days or more delinquent at the end of any 180-day period after the credit union has provided the written notice, the credit union must provide the written notice again not later than 180 days after providing the prior written notice; 5

6 If a borrower is less than 45 days delinquent at the end of any 180-day period after the credit union has provided the written notice, the credit union must provide the written notice again no later than 45 days after the delinquent payment due date. New examples are included in the Official Interpretation to the rule to further illustrate the written notice requirements. Servicing transfers: A transferee servicer is required to comply with the written notice requirements regardless of whether the transferor servicer provided a written notice to the borrower in the preceding 180-day period. However, if the transferor provided the written notice within 45 days of the transfer date, the transferee servicer is not required to provide another written notice until 45 days after the first post-transfer payment due date. Example: Assume a borrower has monthly payments, with a payment due on March 1. The transferor servicer provides the written notice on April 10. The loan is transferred on April 12. Assuming the borrower remains delinquent, the transferee servicer is not required to provide another written notice until 45 days after May 1, the first posttransfer payment due date i.e., by June 15. Successors in interest: Confirmation of a successor in interest does not restart the 180-day period if the prior notice triggering the 180-day waiting period was provided to a transferor borrower. The CFPB has recognized that this would be unnecessarily burdensome and a confirmed successor in interest has the option to obtain information from mortgage servicers using a request for information, to which servicers must respond. Frequency of written notice: A mortgage servicer must provide to a delinquent borrower a written notice no later than the 45th day of the borrower s delinquency, but is not required to send the notice more than once in any 180-day period. If the borrower remains delinquent or becomes delinquent again after the 180-day period expires, the servicer must provide the written notice again no later than 180 days after the provision of the prior written notice. If a borrower is less than 45 days delinquent at the end of any 180-day period after the servicer has provided the written notice, a servicer must provide the written notice again no later than 45 days after the payment due date for which the borrower remains delinquent. If within the 180 period the borrower cures the delinquency but becomes 45 days delinquent again, another written notice is not required until the 180 day period expires. Examples: Assume a borrower becomes delinquent on March 1, the amount due is not fully paid during the 45 days after March 1, and the servicer provides the written notice on the 45th day after March 1, which is April 15. Assume the borrower also fails to make the payment due on April 1 and the amount due is not fully paid during the 45 days after April 1. The servicer need not provide the written notice again until after the 180-day 6

7 period beginning on April 15 i.e., no sooner than on October 12 and then only if the borrower is at that time 45 days or more delinquent. i. If the borrower is 45 days or more delinquent on October 12, the date that is 180 days after the prior provision of the written notice, the credit union is required to provide the written notice again on October 12. ii. If the borrower is less than 45 days delinquent on October 12, the credit union must again provide the written notice 45 days after the payment due date for which the borrower remains delinquent. For example, if the borrower becomes delinquent on October 1, and the amount due is not fully paid during the 45 days after October 1, the credit union will need to provide the written notice again no later than 45 days after October 1 i.e., by November 15. Foreclosure and loss mitigation programs: Credit unions are not exempt from the written notice requirements even if the timing of the notice is close to a scheduled foreclosure sale or where the borrower is performing on a temporary loss mitigation program. Additional information allowed on notice: A credit union may provide additional information in the written notice that would be helpful or which may be required by applicable law or the owner or assignee of the mortgage loan. BORROWERS IN BANKRUTCY (effective October 19, 2017) Partial exemption from Early Intervention Requirements ( (c)) The new mortgage servicing rule states that while any borrower on a mortgage loan is a debtor in bankruptcy, a mortgage servicer, with regard to that mortgage loan: Is exempt from the live contact requirements; Is exempt from the written notice requirements if: o no loss mitigation option is available (a loss mitigation option is available if the owner or assignee of a mortgage loan offers an alternative to foreclosure that is made available through the servicer and for which a borrower may apply, even if the borrower ultimately does not qualify), or o if any borrower on the mortgage loan has provided a Fair Debt Collection Practices Act (FDCPA) notification, notifying the servicer that the borrower refuses to pay a debt or that the borrower wishes the servicer to cease further communications, with respect to that mortgage loan. If there is an available loss mitigation option and /or no borrower on the mortgage loan has provided a FDCPA notice, the servicer must comply with the written notice requirements as follows: 7

8 If a borrower is delinquent when the borrower becomes a debtor in bankruptcy, a servicer must provide the written notice not later than the 45th day after the borrower files a bankruptcy petition. If the borrower is not delinquent when the borrower files a bankruptcy petition, but subsequently becomes delinquent while he or she is a debtor in bankruptcy, the servicer must provide the written notice not later than the 45th day of the borrower s delinquency. A mortgage servicer must comply with these timing requirements regardless of whether the servicer provided the written notice in the preceding 180-day period. Payment Request: The written notice may not contain a request for payment. Frequency. A servicer is not required to provide the written notice more than once during a single bankruptcy case. Joint obligors: If any of the borrowers is a debtor in bankruptcy, a servicer may provide the written notice to any of the borrowers. Resuming compliance. A servicer must resume compliance with the live contact and written notice requirements after the next payment due date that follows the earliest of the following events: (A) The bankruptcy case is dismissed; (B) The bankruptcy case is closed; or (C) The borrower reaffirms personal liability for the mortgage loan. Exception: With respect to a mortgage loan for which the borrower has discharged personal liability, a servicer: Is not required to resume compliance with the live contact requirements; and Must resume compliance with the written notice requirements if the borrower has made any partial or periodic payment on the mortgage loan after the commencement of the borrower s bankruptcy case. Bankruptcy case revived: If the borrower s bankruptcy case is revived, for example, if the court reinstates a previously dismissed case or reopens the case, the partial exemption requirements will once again apply. However, a servicer is not required to provide the written notice more than once during a single bankruptcy case. Periodic Statements: Except for reaffirmations, a servicer is exempt from the periodic statement requirements for borrowers in bankruptcy that meet certain criteria or may provide a modified periodic statement for borrower s in bankruptcy that do not meet those criteria. 8

9 Periodic Statements: Exemption or Modified Statements and Coupon Books Exemption: Except for reaffirmations, a servicer is exempt from the periodic statement requirements with regard to a mortgage loan if: (A) Any borrower on the mortgage loan is a debtor in bankruptcy or has discharged personal liability for the mortgage loan; and B) With regard to any borrower on the mortgage loan: (1) The borrower requests in writing that the servicer cease providing a periodic statement or coupon book; (2) The borrower s bankruptcy plan provides that the borrower will surrender the dwelling securing the mortgage loan, provides for the avoidance of the lien securing the mortgage loan, or otherwise does not provide for, as applicable, the payment of pre-bankruptcy arrearage or the maintenance of payments due under the mortgage loan; (3) A court enters an order in the bankruptcy case providing for the avoidance of the lien securing the mortgage loan, lifting the automatic stay with regard to the dwelling securing the mortgage loan, or requiring the servicer to cease providing a periodic statement or coupon book; or (4) The borrower files with the court overseeing the bankruptcy case a statement of intention identifying an intent to surrender the dwelling securing the mortgage loan and a borrower has not made any partial or periodic payment on the mortgage loan after the commencement of the consumer s bankruptcy case. Reaffirmation or borrower request to receive statement or coupon book. A servicer ceases to qualify for an exemption, if the borrower reaffirms personal liability for the loan or any borrower on the loan requests in writing that the servicer provide a periodic statement or coupon book, unless a court enters an order in the bankruptcy case requiring the servicer to cease providing a periodic statement or coupon book. Exclusive address. A mortgage servicer may establish an address that a borrower must use to submit a written request to cease the periodic statement or coupon book or reaffirmation, provided that the servicer notifies the borrower of the address in a manner that is reasonably designed to inform the borrower of the address. If a servicer designates a specific address for these requests, it must designate the same address for purposes of all of these requests Modified periodic statements: While any borrower on a mortgage loan is a debtor in bankruptcy under title 11, or if such member has discharged personal liability for the mortgage loan, the periodic statements with regard to that mortgage loan are subject to the following modifications: 9

10 Requirements not applicable. The periodic statement may omit the late payment information, the delinquency date and risk information, as well as the notice of whether the first notice or filing for foreclosure has been made. The requirement that the amount due must be shown more prominently than other disclosures on the page will not apply. Bankruptcy notices. The periodic statement must include the following: (i) A statement identifying the borrower s status as a debtor in bankruptcy or the discharged status of the mortgage loan; and (ii) A statement that the periodic statement is for informational purposes only. Chapter 12 and Chapter 13 borrowers: With regard to a mortgage loan for which any borrower with primary liability is a debtor in a Chapter 12 or Chapter 13 bankruptcy case, the periodic statement requirements are subject to the following modifications: (i) In addition to omitting the information listed above for Chapter 11 cases, the periodic statement may also omit the account history information showing the amount remaining past due and any payments that were fully paid, loss mitigation programs agreed upon, the total amount required to bring the account current and the homeownership counseling information. (ii) The amount due information may be limited to the date and amount of the postpetition payments due and any post-petition fees and charges imposed by the servicer. (iii) The explanation of amount due information may be limited to: (A) The monthly post-petition payment amount, including a breakdown showing how much, if any, will be applied to principal, interest, and escrow; (B) The total sum of any post-petition fees or charges imposed since the last statement; and (C) Any post-petition payment amount past due. Transaction activity. The transaction activity information must include all payments the servicer has received since the last statement, including all post-petition and pre-petition payments and payments of post-petition fees and charges, and all post-petition fees and charges the servicer has imposed since the last statement. The brief description of the activity need not identify the source of any payments. Pre-petition arrearage. If applicable, a servicer must disclose, grouped in close proximity to each other and located on the first page of the statement or, alternatively, on a separate page enclosed with the periodic statement or in a separate letter: (A) The total of all pre-petition payments received since the last statement; 10

11 (B) The total of all pre-petition payments received since the beginning of the borrower s bankruptcy case; and (C) The current balance of the borrower s pre-petition arrearage. Additional disclosures. The periodic statement must include, as applicable: (A) A statement that the amount due includes only post-petition payments and does not include other payments that may be due under the terms of the borrower s bankruptcy plan; (B) If the borrower s bankruptcy plan requires the borrower to make the post-petition mortgage payments directly to a bankruptcy trustee, a statement that the borrower should send the payment to the trustee and not to the servicer; (C) A statement that the information disclosed on the periodic statement may not include payments the consumer has made to the trustee and may not be consistent with the trustee s records; (D) A statement that encourages the borrower to contact their attorney or the trustee with questions regarding the application of payments; and (E) If the borrower is more than 45 days delinquent on post-petition payments, a statement that the servicer has not received all the payments that became due since the borrower filed for bankruptcy. Multiple obligors. For a mortgage loan with more than one primary obligor, the mortgage servicer may provide the modified statement to any or all of the primary obligors, even if a primary obligor to whom the servicer provides the modified statement is not a debtor in bankruptcy. Modified Coupon Books. A mortgage servicer that provides a coupon book instead of a periodic statement, as allowed by the regulation, must include the following disclosure in the coupon book, as applicable: A statement identifying the borrower s status as a debtor in bankruptcy or the discharged status of the mortgage loan; A statement that the periodic statement is for informational purposes only; A statement that the amount due includes only post-petition payments and does not include other payments that may be due under the terms of the borrower s bankruptcy plan; If the borrower s bankruptcy plan requires the borrower to make the post-petition mortgage payments directly to a bankruptcy trustee, a statement that the borrower should send the payment to the trustee and not to the servicer; 11

12 A statement that the information disclosed in the coupon book may not include payments the member has made to the trustee and may not be consistent with the trustee s records; A statement that encourages the member to contact their attorney or the trustee with questions regarding the application of payments; and If the member is more than 45 days delinquent on post-petition payments, a statement that the servicer has not received all the payments that became due since the member filed for bankruptcy. These disclosures may be included anywhere in the coupon book or on a separate page enclosed with the coupon book. Upon request by the member, the mortgage servicer must make available the prepetition arrearage information similarly as required for the modified periodic statement. The request may be made via telephone, in writing, in person, or electronically, if the member consents. Requirements not applicable. The coupon book may omit the late payment information, the delinquency date and risk information, as well as the notice of whether the first notice or filing for foreclosure has been made. The requirement that the amount due must be shown more prominently than other disclosures on the page will not apply. Chapter 12 and Chapter 13 borrowers: With regard to a mortgage loan for which any borrower with primary liability is a debtor in a Chapter 12 or Chapter 13 bankruptcy case, the coupon book requirements are subject to the following modifications: (i) In addition to omitting the information for Chapter 11 cases as previously listed, the coupon book may also omit the account history information showing the amount remaining past due and any payments that were fully paid, loss mitigation programs agreed upon, the total amount required to bring the account current and the homeownership counseling information. (ii) The amount due information may be limited to the date and amount of the postpetition payments due and any post-petition fees and charges imposed by the servicer. (iii) The explanation of amount due information may be limited to: (A) The monthly post-petition payment amount, including a breakdown showing how much, if any, will be applied to principal, interest, and escrow; (B) The total sum of any post-petition fees or charges imposed since the last statement; and (C) Any post-petition payment amount past due. Transaction activity. The transaction activity information must include all payments the servicer has received since the last statement, including all post-petition and pre-petition payments and payments of post-petition fees and charges, and all post-petition fees 12

13 and charges the servicer has imposed since the last statement. The brief description of the activity need not identify the source of any payments. Additional disclosures. The coupon book must include, as applicable: (A) A statement that the amount due includes only post-petition payments and does not include other payments that may be due under the terms of the borrower s bankruptcy plan; (B) If the borrower s bankruptcy plan requires the borrower to make the post-petition mortgage payments directly to a bankruptcy trustee, a statement that the borrower should send the payment to the trustee and not to the servicer; (C) A statement that the information disclosed in the coupon book may not include payments the member has made to the trustee and may not be consistent with the trustee s records; (D) A statement that encourages the member to contact their attorney or the trustee with questions regarding the application of payments; and (E) If the member is more than 45 days delinquent on post-petition payments, a statement that the servicer has not received all the payments that became due since the member filed for bankruptcy. Exemption: These requirements do not apply to fixed-rate loans if the servicer: Provides the member with a coupon book that includes: Amount due. Grouped together in close proximity to each other and located at the top of the first page of the statement: (i) The payment due date; (ii) The amount of any late payment fee, and the date on which that fee will be imposed if payment has not been received; and (iii) The amount due, shown more prominently than other disclosures on the page and, if the transaction has multiple payment options, the amount due under each of the payment options. Provides the consumer with a coupon book that includes, anywhere in the coupon book: The amount of the outstanding principal balance; The current interest rate in effect for the mortgage loan; The date after which the interest rate may next change; 13

14 The existence of any prepayment penalty, as defined in (b)(6)(i), that may be charged; The Web site to access either the Bureau list or the HUD list of homeownership counselors and counseling organizations and the HUD tollfree telephone number to access contact information for homeownership counselors or counseling organizations; A toll-free telephone number and, if applicable, an electronic mailing address that may be used by the consumer to obtain information about the consumer's account, located on the front page of the statement. Provides information on how the member can obtain: The monthly payment amount, including a breakdown showing how much, if any, will be applied to principal, interest, and escrow and, if a mortgage loan has multiple payment options, a breakdown of each of the payment options along with information on whether the principal balance will increase, decrease, or stay the same for each option listed; The total sum of any fees or charges imposed since the last statement; and Any payment amount past due. Provides the following items, grouped together in close proximity to each other and located on the first page: (i) The total of all payments received since the last statement, including a breakdown showing the amount, if any, that was applied to principal, interest, escrow, fees and charges, and the amount, if any, sent to any suspense or unapplied funds account; and (ii) The total of all payments received since the beginning of the current calendar year, including a breakdown of that total showing the amount, if any, that was applied to principal, interest, escrow, fees and charges, and the amount, if any, currently held in any suspense or unapplied funds account. Provides a list of all the transaction activity that occurred since the last statement. Transaction activity means any activity that causes a credit or debit to the amount currently due. This list must include the date of the transaction, a brief description of the transaction, and the amount of the transaction for each activity on the list. Provides partial payment information. If a statement reflects a partial payment that was placed in a suspense or unapplied funds account, information explaining what must be done for the funds to be applied. The information must be on the front page of the statement or, alternatively, may be included on a separate page enclosed with the periodic statement or in a separate letter. Provides the member, in writing, for any billing cycle during which the member is more than 45 days delinquent: 14

15 (i) The date on which the member became delinquent; (ii) A notification of possible risks, such as foreclosure, and expenses, that may be incurred if the delinquency is not cured; (iii) An account history showing, for the previous six months or the period since the last time the account was current, whichever is shorter, the amount remaining past due from each billing cycle or, if any such payment was fully paid, the date on which it was credited as fully paid; (iv) A notice indicating any loss mitigation program to which the member has agreed, if applicable; (v) A notice of whether the mortgage servicer has made the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process, if applicable; (vi) The total payment amount needed to bring the account current; and (vii) A reference to the homeownership counselor information. Triggering events for transitioning to modified and unmodified periodic statements. A mortgage servicer transitions to providing a periodic statement or coupon book with the modifications or to providing a periodic statement or coupon book without such modifications when one of the following three triggering events occurs: (1) A mortgage loan becomes subject to the requirements for a modified periodic statement or coupon book; (2) A mortgage loan ceases to be subject to the requirements for a modified periodic payment or coupon book; or (3) A servicer ceases to qualify for an exemption from the periodic statement of coupon book requirements with respect to a mortgage loan. Transitional single-billing-cycle exemption. A mortgage servicer is exempt from the periodic statement requirements with respect to a single billing cycle when the payment due date for that billing cycle is no more than 14 days after the date on which one of the triggering events listed above occurs. Timing of first modified or unmodified statement after transition. When one of the triggering events occurs, a mortgage servicer must provide the next modified or unmodified periodic statement or coupon book that complies with the requirements by delivering or placing it in the mail within a reasonably prompt time after the first payment due date, or the end of any courtesy period for the payment s corresponding billing 15

16 cycle, that is more than 14 days after the date on which the applicable triggering event occurs. PERIODIC STATEMENTS Regulation Z has been amended to include the length of the member s delinquency, rather than the date on which the member became delinquent, as part of the delinquency information required on the periodic statement. An additional item has been added to the transactions not considered when determining whether a servicer is a Small Servicer: transactions serviced by the servicer for a seller financer that meets all of the criteria identified in the rule. Exemptions: Borrowers in Bankruptcy (see previous section) Charged-off loans: A mortgage servicer is exempt from the periodic statement requirements for a mortgage loan if the servicer: (A) Has charged off the loan in accordance with loan-loss provisions and will not charge any additional fees or interest on the account; and (B) Provides, within 30 days of charge-off or the most recent periodic statement, a periodic statement, clearly and conspicuously labeled Suspension of Statements & Notice of Charge Off Retain This Copy for Your Records. The periodic statement must clearly and conspicuously explain that, as applicable: the mortgage loan has been charged off and the servicer will not charge any additional fees or interest on the account; the servicer will no longer provide the member a periodic statement for each billing cycle; the lien on the property remains in place and the member remains liable for the mortgage loan obligation and any obligations arising from or related to the property, which may include property taxes; the member may be required to pay the balance on the account in the future, for example, upon sale of the property; the balance on the account is not being canceled or forgiven; and the loan may be purchased, assigned, or transferred. Resuming compliance (A) If a mortgage servicer fails at any time to treat a mortgage loan that is exempt as charged off or charges any additional fees or interest on the account, the obligation to provide a periodic statement resumes. 16

17 (B) A servicer may not retroactively assess fees or interest on the account for the period of time during which the exemption applied. LOSS MITIGATION (effective October 19, 2017) ( ) 120 Day Pre-Foreclosure waiting period: Credit unions have struggled with the 120 day pre-foreclosure waiting period requirement, particularly when it comes to abandoned property. CUNA has requested relief from this requirement in cases where the borrower intentionally walks away from the property. We have argued that this situation leaves the mortgage collateral vulnerable to disrepair and even vandalism. Disappointingly, although the CFPB recognizes that mortgage servicers could be disadvantaged by this rule if the property deteriorates, the Bureau declined to add any new exceptions to the 120 day pre-foreclosure waiting period in this amended rule. By way of explanation, the Bureau reiterates its 2013 position that additional exemptions would create uncertainty and could potentially be construed in a manner to permit evasion of the requirements. The Bureau continues to believe that borrowers may be harmed by the risks associated with a broader set of exemptions from this requirement. On the brighter side, the lienholder exception to the rule ( (f)(iii)) has been amended to include foreclosure action of not only subordinate lienholders, but superior lienholders as well. Under the new mortgage servicing rule, you are not allowed to make the first notice or filing required for any 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 superior or subordinate lienholder. Receipt of a loss mitigation application: Successor in interest: If a mortgage servicer receives a loss mitigation application from a potential successor in interest before confirming that person s identity and ownership interest in the property, the servicer may, but isn t required to, review and evaluate the loss mitigation application. If a servicer complies with the loss mitigation requirements for a complete loss mitigation application submitted by a potential successor in interest, the rule s limitation on duplicative requests applies, provided the servicer s evaluation of loss mitigation options available to the person would not have resulted in a different determination due to the person s confirmation as a successor in interest. 17

18 If a servicer receives a loss mitigation application from a potential successor in interest and elects not to review and evaluate the loss mitigation application before confirming that person s identity and ownership interest in the property, the servicer must preserve the loss mitigation application and all documents submitted in connection with the application, and, upon such confirmation, the servicer must review and evaluate the loss mitigation application if the property is the confirmed successor in interest s principal residence. The servicer must treat the loss mitigation application as if it had been received on the date that the servicer confirmed the successor in interest s status. If the loss mitigation application is incomplete at the time of confirmation because documents submitted by the successor in interest became stale or invalid after they were submitted and confirmation is 45 days or more before a foreclosure sale, the servicer must identify the stale or invalid documents that need to be updated in a notice of loss mitigation application. Gathering application documents from borrower: A mortgage servicer has flexibility to establish its own application requirements and to decide the type and amount of information it will require from borrowers applying for loss mitigation options. In the course of gathering documents and information from a borrower to complete a loss mitigation application, a servicer may stop collecting documents and information for a particular loss mitigation option after receiving information confirming that, according to the requirements established by the owner or assignee of the borrower s mortgage loan, the borrower is ineligible for that option. A servicer may not stop collecting documents and information for any loss mitigation option based solely upon the borrower s stated preference but may stop collecting documents and information for any loss mitigation option based on the borrower s stated preference in conjunction with other information, as prescribed by any requirements established by the owner or assignee. A servicer must continue to exercise reasonable diligence to obtain documents and information from the borrower that the servicer requires to evaluate the borrower as to all other loss mitigation options available to the borrower. For example: i. Assume a particular loss mitigation option is only available for borrowers whose mortgage loans were originated before a specific date. Once a servicer receives documents or information confirming that a mortgage loan was originated after that date, the servicer may stop collecting documents or information from the borrower for that loss mitigation option, but the servicer must continue its efforts to obtain documents and information from the borrower that the servicer requires to evaluate the borrower for all other available loss mitigation options. Assume applicable requirements established by the owner or assignee of the mortgage loan provide that a borrower is ineligible for home retention loss mitigation options if the borrower states a preference for a short sale and provides evidence of another 18

19 applicable hardship, such as military Permanent Change of Station orders or an employment transfer more than 50 miles away. If the borrower indicates a preference for a short sale or, more generally, not to retain the property, the servicer may not stop collecting documents and information from the borrower pertaining to available home retention options solely because the borrower has indicated such a preference, but the servicer may stop collecting such documents and information once the servicer receives information confirming that the borrower has an applicable hardship under requirements established by the owner or assignee, such as military Permanent Change of Station orders or employment transfer. Although a servicer has flexibility to establish its own requirements regarding the documents and information necessary for a loss mitigation application, the servicer must act with reasonable diligence to collect information needed to complete the application. A servicer must request information necessary to make a loss mitigation application complete promptly after receiving the loss mitigation application. Reasonable diligence includes, without limitation, the following actions: i. A servicer requires additional information from the applicant, such as an address or a telephone number to verify employment; the servicer contacts the applicant promptly to obtain such information after receiving a loss mitigation application; ii. Servicing for a mortgage loan is transferred to a servicer and the borrower makes an incomplete loss mitigation application to the transferee servicer after the transfer; the transferee servicer reviews documents provided by the transferor servicer to determine if information required to make the loss mitigation application complete is contained within documents transferred by the transferor servicer to the servicer; and iii. A servicer offers a borrower a short-term payment forbearance program or a short-term repayment plan based on an evaluation of an incomplete loss mitigation application and provides the borrower the required written notice. If the borrower remains in compliance with the short-term payment forbearance program or shortterm repayment plan, and the borrower does not request further assistance, the servicer may suspend reasonable diligence efforts until near the end of the payment forbearance program or repayment plan. However, if the borrower fails to comply with the program or plan or requests further assistance, the servicer must immediately resume reasonable diligence efforts. Near the end of a short-term payment forbearance program offered based on an evaluation of an incomplete loss mitigation application, and prior to the end of the forbearance period, if the borrower remains delinquent, a servicer must contact the borrower to determine if the borrower wishes to complete the loss mitigation application and proceed with a full loss mitigation evaluation. 19

20 Review of loss mitigation application: If a mortgage servicer receives a loss mitigation application 45 days or more before a foreclosure sale, a servicer must: Promptly upon receipt of a loss mitigation application, review the loss mitigation application to determine if the loss mitigation application is complete; and Notify the borrower in writing within 5 days (excluding legal public holidays, Saturdays, and Sundays) after receiving the loss mitigation application that the servicer acknowledges receipt of the loss mitigation application and that the servicer has determined that the loss mitigation application is either complete or incomplete. If a loss mitigation application is incomplete, the notice must state the additional documents and information the borrower must submit to make the loss mitigation application complete and the applicable date. The notice to the borrower must include a statement that the borrower should consider contacting servicers of any other mortgage loans secured by the same property to discuss available loss mitigation options. Foreclosure sale not scheduled. If no foreclosure sale has been scheduled as of the date a servicer receives a loss mitigation application, the servicer must treat the application as having been received 45 days or more before any foreclosure sale. Time period disclosure: The notice to the borrower must include a reasonable date by which the borrower should submit the documents and information necessary to make the loss mitigation complete. In general, 30 days after the date the servicer provides the notice is considered reasonable and must never be less than seven days after providing the notice. The reasonable date must be no later than the earliest of: i. The date by which any document or information submitted by a borrower will be considered stale or invalid as required by any loss mitigation option available to the borrower; ii. The date that is the 120th day of the borrower s delinquency; iii. The date that is 90 days before a foreclosure sale; iv. The date that is 38 days before a foreclosure sale. Evaluation of loss mitigation applications: Complete loss mitigation application. Except as in the case of an acceptable delay, if a mortgage servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving the complete loss mitigation application, a servicer must: 20

21 (i) Evaluate the borrower for all loss mitigation options available to the borrower; and (ii) Provide the borrower with a notice in writing stating the servicer's determination of which loss mitigation options, if any, it will offer to the borrower. The mortgage servicer must include in this notice the amount of time the borrower has to accept or reject an offer of a loss mitigation program, if applicable, and a notification, if applicable, that the borrower has the right to appeal the denial of any loan modification option as well as the amount of time the borrower has to file such an appeal and any requirements for making an appeal. A servicer may combine other notices required by law, including an adverse action notice or a Fair Credit Reporting notice. Short-term loss mitigation options. A mortgage servicer may offer a short-term payment forbearance program or a shortterm repayment plan to a borrower based upon an evaluation of an incomplete loss mitigation application. Short-term payment forbearance program. A payment forbearance program is a loss mitigation option in which a servicer allows a borrower to forgo making certain payments or portions of payments for a period of time. A repayment plan is a loss mitigation option with terms under which a borrower would repay all past due payments over a specified period of time to bring the mortgage loan account current. A short-term repayment plan allows for the repayment of no more than three months of past due payments and allows a borrower to repay the arrearage over a period lasting no more than six months. Promptly after offering a payment forbearance program or a repayment plan, unless the borrower has rejected the offer, the servicer must provide the borrower a written notice stating: the specific payment terms and duration of the program or plan, that the servicer offered the program or plan based on an evaluation of an incomplete application, that other loss mitigation options may be available, and that the borrower has the option to submit a complete loss mitigation application to receive an evaluation for all loss mitigation options available to the borrower regardless of whether the borrower accepts the program or plan. If a borrower is performing under the terms of a payment forbearance program or repayment plan, a servicer must not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process, and must not move for foreclosure judgment or order of sale or conduct a foreclosure sale. 21