August 2016 CFPB Servicing Rule Amendments - Early Implementation Chart 1

Transcription

1 August 2016 CFPB Servicing Rule Amendments - Early Implementation Chart 1 Amended CFPB Rule/Topic Successors in Interest P&P Requirements. Servicers must have policies and procedures reasonably designed to facilitate communication with any potential or confirmed successors in interest, determine the documents reasonably required to confirm the potential successor in interest s identify and ownership interest and communicate the requirements to the potential successor in interest and, upon receipt of documents from a potential successor, promptly make a determination and notify the person either that additional documents are required, the individual is confirmed or the individual is not a successor. 12 CFR (b)(1)(vi). Confirmed Successor in Interest = Borrower. A confirmed successor in interest is considered a borrower for purposes of [relating to escrow accounts], [relating to general disclosure requirements], [relating to servicing transfers], [relating to timely escrow payments and the treatment of escrow account balances], [relating to notices of error], [relating to requests for information], [relating to force-placed insurance], [relating to general servicing policies and procedures], [relating to early intervention], [relating to continuity of contact], [relating to loss mitigation], (c) through (e) [relating to ARM rate change notices and escrow account cancellation notices], (c) [relating to payment processing and payoff statements], [relating to mortgage transfer disclosures], and [relating to periodic billing statements]. 12 CFR (d); (a)(11). Likely yes. It is likely reasonable to go ahead and adopt (early) policies and procedures reasonably designed to facilitate communication with any potential or confirmed successors in interest, determine the documents reasonably required to confirm the potential successor in interest s identify and ownership interest and communicate the requirements to the potential successor in interest and, upon receipt of documents from a potential successor, promptly make a determination and notify the person either that additional documents are required, the individual is confirmed or the individual is not a successor. Please note, however, that there is some risk particularly from a privacy perspective in sending many of the CFPB mortgage servicing notices (i.e. force-placed insurance notices, billing statements, etc.) to confirmed successors in interest before the amended rule s effective date. No. There is risk that early compliance with the CFPB s mortgage servicing rules with respect to confirmed successors in interest would run afoul of existing federal law, particularly in the privacy context. Put another way, there are privacy concerns associated with sending confirmed successors in interest force-placed insurance notices, billing statements, etc. There are, however, likely a few areas within the Confirmed Successor in Interest = Borrower rule that might be acceptable to implement early. In particular, there is likely not substantial risk associated with providing the loss mitigation protections to a confirmed successor in interest, so long as servicers are cognizant not to disclose nonpublic personal financial information and presuming that loss mitigation options likely cannot be accepted until the successor in interest assumes the mortgage loan. 1 This chart provides a preliminary analysis of whether or not it would be permissible to implement prior to the applicable effective date the more important and substantial provisions of the CFPB s August 2016 Amendments to the 2013 Final Mortgage Servicing Rules. Please note that this chart does not outline and analyze each and every requirement of the CFPB s August 2016 release; instead, it merely provides high level guidance as to whether or not the major, more fundamental components of each CFPB amendment topic can be implemented early. There may be more minor provisions/requirements within each of the outlined topics that are not analyzed in this chart and early implementation of those provisions should be assessed independently.

2 Requests for Information Potential Successors in Interest. Upon receipt of a written request from a potential successor in interest that includes the name of the original borrower and sufficient information to identify the mortgage loan account, a servicer must respond by providing the potential successor in interest with a written description of the documents the servicer reasonably requires to confirm the person s identity and ownership interest in the property and contact information, including a telephone number, for further assistance. Said response generally must be provided in the form and under the timeframes outlined in the request for information rules, particularly 12 CFR (c) through (g). 12 CFR (i)(1). Owner of Mortgage Loan - Fannie/Freddie. If FNMA or FHLMC is the owner or trustee of a loan held in a trust, and the request for information does not expressly request the name or number of the trust or pool, the servicer only has to provide the name and contact information for FNMA or FHLMC without necessarily providing the name of the trust. If FNMA or FHLMC is the owner or trustee, and the request for information does expressly request the name or number of the trust or pool, the servicer has to provide the name of the trust and the name, address, and appropriate contact information for the trustee. Comment 36(a)-2.ii Yes, in part. Communicating with potential successors in interest in the manner, and under the timeframes, outlined in the request for information provisions of 12 CFR should not run afoul of any current CFPB requirement. Please note, however, that it would not be prudent to inform a potential successor in interest of his/her right to resubmit a substantive request for information upon confirmation, given that there is risk in responding to substantive requests for information from confirmed successors in interest. No. Early compliance with this rule would run afoul of the current requirement. Definition of Delinquency Revised Definition and Extended Applicability. Delinquency means a period of time during which a borrower and a borrower s mortgage loan obligation are delinquent. 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. 12 CFR The definition is applicable throughout the mortgage servicing requirements of Regulation X and also applies to the periodic billing statement requirements in Regulation Z. Payment Tolerance. For any given billing cycle for which a borrower s payment is less than the periodic payment due, if a servicer chooses not to treat a borrower as delinquent for purposes of any [mortgage servicing requirement], that borrower is not delinquent as defined in Comment 31-Delinquency.3. Yes, in part. It is reasonable to conclude that the current rules contemplate this revised, amended definition and it is also reasonable to go ahead and apply this definition throughout the servicing requirements in Regulations X and Z. Likely Yes. There is some risk in applying a payment tolerance and not considering a borrower to be delinquent when a payment is due and not fully paid. However, the CFPB recognizes in the preamble to the 2016 final rule that some servicers already elect to apply a payment tolerance, and that some servicers are required to do so.

3 Application of Funds and Creditor s Contract Rights. If a servicer applies payments to the oldest outstanding periodic payment, a payment by a delinquent borrower advances the date the borrower s delinquency began. Comment 31- Delinquency.2. However, nothing in subpart C of Regulation X prevent[s] a creditor from exercising a right provided by a mortgage loan contract to accelerate payment for a breach of that contract. Failure to pay the amount due after the creditor accelerates the mortgage loan obligation in accordance with the mortgage loan contract would begin or continue delinquency. Comment-31- Delinquency.4. Yes. The amendments simply clarify, and expand upon, the existing requirements. Force-Placed Insurance Initial and Reminder Content Requirements. The initial and reminder forceplaced insurance notices must include a statement that the borrower s hazard insurance is expiring, has expired, or provides insufficient coverage, as applicable. 12 CFR (c)(2)(v)(A). The notices will also have to include a statement that 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. 12 CFR (c)(2)(v)(B). The notices may also now include the account number. 12 CFR (c)(4); 12 CFR (d)(4). No. Early compliance with this rule would run afoul of the current requirement. Early Intervention Bankruptcy Partial Exemption. Servicers will continue to be exempt from the live contact obligation for borrowers in bankruptcy. 12 CFR (c)(1)(i). However, servicers will be required to send the written notice unless no loss mitigation option is available, or a borrower on the mortgage loan has provided a cease communication request pursuant to section 805(c) of the FDCPA and the servicer is a debt collector under the FDCPA with respect to that account. 12 CFR (c)(1)(ii). There are also slight content and timing adjustments related to a written notice provided to a borrower in bankruptcy. 12 CFR (c)(1)(iii). Likely Yes. There is some risk in sending correspondence to a consumer that is in bankruptcy, unless such communications are mandated by applicable non-bankruptcy law. And, obviously, until the subject bankruptcy early intervention requirements become effective, there is no mandate to provide the early intervention written notice to borrowers in bankruptcy. However, the risk can be minimized by strictly adhering to the content requirements set forth in 12 CFR (b)(2) and 12 CFR (c)(1)(iii)(B). Further, it would be prudent to include a disclaimer in the notice that the servicer recognizes that the consumer is protected by the automatic stay and that the notice is being sent for informational purposes only. Servicers might also consider sending the notice to the consumer s bankruptcy attorney and ask that the attorney forward the notice to the consumer as he or she sees fit.

4 FDCPA Partial Exemption. Servicers will continue to be exempt from the live contact obligation if the servicer is a debt collector under the FDCPA with respect to a mortgage loan account and a borrower on the account has properly submitted a cease communication request pursuant to section 805(c) of the FDCPA. 12 CFR (d)(1). However, a servicer will only be exempt from the written notice requirements if no loss mitigation option is available, or while any borrower on the account is a debtor in bankruptcy. 12 CFR (d)(2). There are also slight content and timing amendments related to a written notice provided to a borrower who has submitted an FDCPA cease communication request. 12 CFR (d)(3). Recurring Obligations. Generally, a servicer must establish, or make good faith efforts to establish, live contact with a delinquent borrower no later than the 36 th day of a borrower s delinquency, and again no later than 36 days after each payment due date so long as the borrower remains delinquent. 12 CFR (a). Similarly, a servicer must generally provide to a delinquent borrower a written notice with certain, requisite content no later than the 45 th day of the borrower s delinquency and again no later than 45 days after each payment due date so long as the borrower remains delinquent. However, a servicer is not required to provide the written notice more than once during any 180-day period. If a borrower is 45 days or more 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 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. 12 CFR (b). Live Contact & Good Faith Efforts. Although a servicer is required to establish, or make good faith efforts to establish, live contact with a delinquent borrower no later than the 36 th days of a borrower s delinquency, a servicer may time its attempts to establish live contact such that a single attempt will satisfy the servicer s obligations for two missed payments. Comment 39(a)-1.B. Additionally, servicers may also combine contact made pursuant to [the live contact obligation] with contacts made with borrowers for other reasons, for instance, by telling borrowers on collection calls that loss mitigation options may be available. Comment 39(a)-2. No. Early implementation would run the risk of violating the FDCPA, especially as the interpretive rule providing FDCPA relief in the context of this amended rule is not effective until the amendments become effective. Yes. The amended rule is intended to be a clarification of the existing requirements and memorializes guidance that was previously issued in CFPB Bulletin Yes, in part. These amendments are, for the most part, intended to clarify the existing requirements and memorialize guidance that was previously issued in CFPB Bulletin However, the aforementioned bulletin does not suggest that it is acceptable to cease making live contact attempts after sending a determination notice indicating that the borrower is ineligible for all loss mitigation options. Until the effective date, a servicer should consider continuing to make those contacts unless an enumerated exception applies.

5 When considering what constitutes a good faith effort at establishing live contact with a delinquent borrower, a servicer may consider relevant circumstances such as the length of the borrower s delinquency, as well as a borrower s failure to respond to a servicer s repeated attempts at communication. Comment 39(a)-3. Finally, a servicer is considered to meet its live contact obligation and need not otherwise establish or make good faith efforts to establish live contact once it has established and is maintaining ongoing contact with the borrower under the required loss mitigation procedures, including during the borrower s completion of a loss mitigation application or the servicer s evaluation of the borrower s complete application, or if the servicer has sent an evaluation notice indicating that the borrower is not eligible for any loss mitigation options. However, a servicer must resume compliance with the live contact requirements for a borrower who becomes delinquent again after curing a prior delinquency. Comment 39(a)-6. Written Notice & Servicing Transfers. A transferee servicer is required to comply with the written notice obligation regardless of whether the transferor servicer provided a written notice to the borrower within the preceding 180-day period. However, a transferee servicer is not required to provide a written notice if one was provided by the transferor within 45 days of the transfer. Comment 39(b)(1)- 5. Yes. It is reasonable to conclude that the amended rule would not run afoul of the current rule. Loss Mitigation Potential Successors in Interest. If a servicer receives a loss mitigation application from a potential successor in interest, it may evaluate the application in accordance with the requirements of Comment 41(b)-1.i. If a servicer chooses to not evaluate an application submitted by a potential successor in interest, it must retain the application and consider it to be received upon the successor in interest s confirmation. Comment 41(b)-1.ii. Duplicative Requests. Servicers must comply with the loss mitigation requirements in Regulation X for any loss mitigation application received, unless the servicer previously complied with the requirements... for a complete loss mitigation application submitted by the borrower and the borrower has been delinquent at all times since submitting the prior application. 12 CFR (i). Likely Yes. There is some risk that satisfying the CFPB loss mitigation-related rules for potential successors in interest could create privacy issues/concerns. However, it is likely reasonable to consider a potential successor in interest s request for loss mitigation, so long as servicers are cognizant not to disclose nonpublic personal financial information and presuming that loss mitigation options likely cannot be accepted until the successor in interest assumes the mortgage loan. Yes. Compliance with the amended rule merely goes above and beyond the current CFPB requirements and would not run afoul of any current requirement.

6 Short-Term Repayment Plans. Servicers may offer short-term repayment plans based upon an evaluation of an incomplete application, so long as it 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. 12 CFR (c)(iii); Comment 41(c)(2)(iii)-4. Once a short term repayment plan or a short term forbearance plan is offered, a written notice with certain, requisite content as outlined in the rules must be provided to the borrower within five business days. 12 CFR (c)(2)(iii); Comment 41(c)(2)(iii)-5 & 6. Notice of Complete Applications. Any time a servicer receives a complete loss mitigation application, the servicer must provide the borrower with a notice in writing within five business days. The notice must include certain, requisite content, including, but not limited to, the date the servicer received the complete application and that the servicer expects to complete its evaluation within 30 days. 12 CFR (c)(3). Missing 3 rd Party Documents. If a servicer is unable to fully evaluate a complete application because it is missing necessary third party information, the servicer must, within the 30-day evaluation period or promptly thereafter, send the borrower a written notice with certain, requisite content (including, but not limited to, the documents the servicer lacks and that the servicer will complete its evaluation upon receipt of the missing documents). 12 CFR (c)(4)(ii)(B). Upon receiving the missing information and/or documentation, the servicer must promptly complete the evaluation of the borrower for all loss mitigation options and send an evaluation notice in accordance with 12 CFR (c)(1)(ii). 12 CFR (c)(4)(ii)(C). Servicing Transfers In-Flight Loss Mitigation. As a general matter, the transferee servicer must apply the same protections to a borrower and a borrower s loss mitigation application that the transferor would have otherwise provided based upon the date the application was received by the transferor. However, there are specific timing requirements for certain steps of the loss mitigation process for applications that are in-flight at the time of transfer, including timing requirements surrounding the acknowledgment letter, evaluation notice, and appeal evaluation notice. There are also unique dual tracking protections afforded to certain loans with in-flight loss mitigation. 12 CFR (k). Yes. Based on unofficial guidance from the CFPB, it is reasonable to conclude that the current rule permits the offering of short term repayment plans based on incomplete applications and, therefore, early compliance with the amended rule including the new notice requirement would not run afoul of the current requirements. Yes. The amended rule merely goes above and beyond the current requirements and would not run afoul of any current requirement. Likely No. There is some risk that early implementation would run afoul of the CFPB s current mandate to evaluate a complete application within 30 days of receipt of the same. Yes. There are no explicit requirements related to the manner/timing in which to comply with the loss mitigation requirements upon receipt of in-flight loss mitigation in the servicing transfer context. It is reasonable to conclude that the amended rule would not run afoul of the current rule s loss mitigation servicing transfer-related policy and procedure requirements of (b)(4) and the CFPB s loss mitigation servicing transfer-related requirements outlined in the Official Interpretation to (i).

7 Further, if a loan is transferred before the transferor completes its review of a timely submitted appeal, or if a borrower timely submits an appeal after a transfer, the transferee must make a determination on the appeal if it is able to do so or, if it is unable to do so, must treat the appeal as a pending complete loss mitigation application. And if a loan is transferred while a borrower still has the ability to accept or reject a previously offered loss mitigation option, the transferee must allow the borrower to accept or reject during any remaining allotted time that was given by the transferor. 12 CFR (k). Reasonable Date in Acknowledgment Letters. A servicer generally satisfies the requirement to include a reasonable date by including a date that is 30 days away. Comment 41(b)(2)(ii)-1. However, the date must not be later than the earliest remaining of the CFPB-provided milestones and the date must never be less than seven days away. Comment 41(b)(2)(ii)-2 & 3. Document Collection. A servicer may stop collecting documents and information for a particular loss mitigation option after receiving information confirming that the borrower is ineligible for that option. A servicer may not stop collecting information and documentation for a particular option based solely upon the borrower s stated preference. Instead, a servicer may stop collecting certain documents or information based upon a borrower s stated preference in conjunction with other information, as prescribed by any requirements established by the owner or assignee. Comment 41(b)(1)-1. Dual Tracking. The dual tracking restrictions in Regulation X prohibiting moving for judgment or order of sale or conducting a sale may require a servicer to act through its foreclosure counsel. If a servicer has received a complete application, the servicer must instruct its counsel promptly not to make a dispositive motion for foreclosure judgment or order of sale. If such a dispositive motion is pending, the servicer must instruct its counsel promptly to avoid a ruling on the motion or issuance of an order of sale. Where a sale is scheduled, the servicer must instruct its counsel to prevent the sale from occurring until it is acceptable to proceed. A servicer is not relived of its obligations because its foreclosure counsel s actions or inaction caused a violation. Comment 41(g)-3. Unless one of the conditions specified in 12 CFR (g)(1) are met, the conduct of a foreclosure sale violates Regulation X, even if a person other than the servicer administers or conducts the sale. Comment 41(g)-5. Yes. It is reasonable to conclude that the amended rule would not run afoul of the current rule. Yes. It is reasonable to conclude that the amended rule would not run afoul of the current rule. Yes. The amended rule merely goes above and beyond the current requirements and would not run afoul of any current requirement.

8 Periodic Billing Statements Close Proximity. Items in close proximity may not have any unrelated text between them. Text is unrelated if it does not explain or expand upon the required disclosures. Comment 41(d)-1. No. Early compliance with this rule would run afoul of the current requirement, which states that items required to be in close proximity to one another must not have any intervening text. Charged-Off Accounts. If a loan has been charged off in accordance with loanloss provisions, additional fees and/or interest will not be charged on the account, and a final statement is sent to the borrower within 30 days of charge-off or the most recent periodic statement then a servicer is not required to send periodic billing statements. The final billing statement must contain certain, requisite content. 12 CFR (e)(6)(i). Accelerated Accounts. If the balance of a mortgage loan has been accelerated but the servicer will accept a lesser amount to reinstate the loan, the amount due... must identify only the lesser amount that will be accepted to reinstate the loan. Comment 41(d)(1)-1. If a lesser reinstatement amount is reflected as the amount due for an account that has been accelerated, then the explanation of amount due section of the billing statement must contain both the reinstatement amount that is disclosed as the amount due and the accelerated amount but not the monthly payment amount that would otherwise be required. Comment 41(d)(2)-1. Accounts in Loss Mitigation. If a borrower has agreed to a temporary loss mitigation program, disclosures that identify how payments were and will be applied must identify how payments are applied according to the loan contract, regardless of the temporary loss mitigation program. Comment 41(d)-4. Impacted disclosures include the explanation of amount due and past payment breakdown sections of the statement, as well as any partial payment disclosures. If a borrower has agreed to a temporary loss mitigation program, the amount due may identify either the payment due under the temporary loss mitigation program or the amount due according to the loan contract. Comment 41(d)(1)- 2. However, if the amount due reflects the payment amount under the temporary loss mitigation program, then the explanation of amount due section must include both the amount due according to the loan contract and the payment due under the temporary loss mitigation program. Comment 41(d)(2)-2. Additionally, the first page of the billing statement or a separate page included No. Early compliance with this rule would run afoul of the current requirement, as there aren t any exemptions to the recurring billing statement obligation for an account that has been charged off. No. Early compliance with this rule would run afoul of the current requirement. The CFPB has suggested that the Amount Due on a periodic statement for an account that has been accelerated should reflect the full accelerated balance. Yes. It is reasonable to conclude that the amended rule would not run afoul of the current rule.

9 with the statement, or a separate letter would have to include an explanation that the amount due is being disclosed as a different amount because of the temporary loss mitigation program. Finally, if a borrower has agreed to a permanent loss mitigation program and the contract has been permanently modified, the amount due on the statement should be only the amount due under the modified loan contract. Comment 41(d)(1)-3. Borrowers in Bankruptcy. Servicers will generally be required to send periodic billing statements to all borrowers irrespective of an ongoing bankruptcy case, unless an enumerated exception applies. Statements for consumers in active bankruptcy and for those who have received a discharge have modified content requirements. For example, information about late fees and foreclosure cannot be included on the billing statement, while addition disclosures will have to be included for these consumers. Additional adjustments apply for borrowers in chapters 12 or 13 bankruptcy. Consumers will also be able to request that statements be sent when an exemption otherwise might apply, and will be able to request that statements cease. 12 CFR (e)(5) & (f). Likely Yes. There is some risk in sending documents to a consumer that is in bankruptcy or that has received a discharge in bankruptcy, unless such documents are mandated by applicable nonbankruptcy law. And, obviously, until the subject bankruptcy periodic billing statement requirements become effective, there is no mandate to provide the billing statement to borrowers in bankruptcy. However, the risk can be minimized by strictly adhering to the content requirements set forth in 12 CFR (f). Without limitation, the required content contains substantial bankruptcy disclaimers, as well as account information specifically tailored to reflect the bankruptcy status of the consumer s account. Prompt Payment Crediting Payments Under a Temporary and Permanent Loss Mitigation Program. If a borrower is in a temporary loss mitigation program and the loan contract has not been permanently modified, the amount sufficient to cover principal, interest, and escrow (if applicable) for a given billing cycle under the loan contract will be considered a periodic payment, regardless of the amount due under the loss mitigation arrangement. Comment 36(c)(1)(i)-4. If a borrower has permanently modified the loan contract through a loss mitigation option, then a periodic payment would be an amount sufficient to cover principal, interest, and escrow (if applicable) for a given billing cycle under the modified loan contract. Comment 36(c)(1)(i)-5. Yes. Based on current, unofficial guidance from the CFPB, it is reasonable to conclude that the amended rule would not run afoul of the current rule.

10 Small Servicer Revised Definition. In making the small servicer determination, servicers can exclude loans voluntarily serviced for a non-affiliate of the servicer, and for which the servicer does not receive any compensation and transactions serviced for a seller financer that satisfies all criteria in (a)(5). 12 CFR (e)(4). No. Early compliance with this rule would run afoul of the current requirement.