The Consumer Financial Protection
Bureau (CFPB) released a bulletin today in response to requests for further
clarification on three servicing issues. Two of the clarifications are as follows:
January servicing rules require that policies and procedures be in place that
ensure that servicers, upon the death of a borrower, contact the deceased's family
members, heirs or other parties with a legal interest in the home. Today's bulletin provides examples of these
policies and procedures to promote retention of the home such as procedures for
continued payments, possible mortgage assumption, or loss mitigation measures.
second clarification concerns a requirement
the servicer attempt to contact the borrower when he misses a payment. CFPB says such contact, intended to provide
information to get the borrower back on track, can occur jointly with that made
for another purpose such as a collection call.
Also, the method of attempted
contact may vary depending on how long a borrower is delinquent or whether the
borrower has responded to earlier servicer attempts to communicate.
The third and most complex
clarification involves the interplay between the servicing rules, the
bankruptcy code, and the Fair Debt Collection Practices Act (FDCPA) where both
of the latter provide significant protections to borrowers, allowing them to
restrict certain types of communications about their debt.
CFPB says that even if delinquent but
non-bankrupt borrowers have invoked these protections and have instructed
servicers to stop communicating with them certain notices and communications
mandated by the CFPB servicing rules and the Dodd-Frank Wall Street Reform and
Consumer Protection Act are still required.
These include responses to borrower requests
for information, loss mitigation, error resolution, force-placed insurance, initial
interest rate adjustment of adjustable-rate mortgages, and periodic statements.
Servicers will not be required to
provide certain early intervention contacts or ongoing notices of interest rate
adjustments to borrowers who have requested no communication.
Where borrowers have filed for
bankruptcy, servicers are exempted at this time from CFPB requirements to provide
periodic account statements and certain early intervention contacts. CFPB says it will further assess how
bankruptcy protections intersect with these servicing requirements and how to
ensure that the servicing communications do not confuse consumers about the
status of their loans.
"As servicing implementation enters
its final phases, we heard from many sources that it was important to
address these remaining issues to ensure a smooth transition and provide
certainty to the market," said CFPB
Director Richard Cordray. "When mortgage servicers better understand the rules
they have to follow, that is better for consumers."
The Bureau is also releasing an
interim final rule which, among other issues, clarifies a requirement that
borrowers receive housing counseling before taking out a high-cost mortgage. The interim rule will be available late