CFPB Issues Proposal To Amend Mortgage Servicing Rules

Yesterday, the Consumer Financial Protection Bureau (CFPB) proposed additional amendments to Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), and Regulation Z, which implements the Truth in Lending Act (TILA). After implementing extensive amendments to both Regulations in January 2014, the CFPB identified further issues after engaging in "ongoing outreach and monitoring with consumer advocacy groups, industry representatives, housing counselors and other stakeholders." According to CFPB Director Richard Cordray, the CFPB's proposed amendments are designed to "give greater protections to mortgage borrowers" and ensure that "homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon." The proposed amendments, which cover nine major topics, will be open for public comment for a period of 90 days starting on the date they are published in the Federal Register. Although the proposal touches upon many different aspects of a servicer's business, if the CFPB finalizes the rules as they are currently proposed the largest impact is likely to be felt in the areas of loss mitigation and periodic billing statements. Servicers of all sizes should work with legal counsel to review and analyze how these proposals could impact their business and consider submitting an official comment to the CFPB detailing any concerns.

Summary of the Major Topics of the CFPB's Proposal

The CFPB believessuccessors in interest may have difficulty receiving information about the status of a mortgage loan as servicers strive to balance the privacy issues of borrowers with the rights of successors in interest. The proposed amendments will define "borrower" or "consumer" to include successors in interest and would permit a successor in interest to retain "the same rights as the original owner, with no change in substance," including rights related to early intervention, continuity of contact, and loss mitigation assistance.

While the January 2014 amendments defined "delinquency" with respect to some rules, such as the 36-day live contact requirement and the 45-day written notice requirement, delinquency was not defined in other sections of the amendments, such as the 120-day prohibition on foreclosure referrals. The proposed amendments aim to provide a definition of delinquency that will be applicable to the Mortgage Servicing Rules as a whole. The CFPB's newly proposed delinquency definition is "a period of time during which a borrower and the borrower's mortgage loan obligation are delinquent. A borrower and borrower's mortgage loan are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow became...

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