On October 4, 2017, the CFPB released an interim final rule and a proposed rule to amend certain provisions of its 2016 Mortgage Servicing Final Rule. While the changes will not drastically change the 2016 Mortgage Servicing Final Rule, it is nevertheless important for mortgage servicers to synthesize the information and adjust implementation efforts as the effective dates quickly approach.
Interim Final Rule – Timing of FDCPA Written Early Intervention Notices
The CFPB’s interim final rule addresses a particular concern that had arisen among the industry over the past year relating to the timing of the provision of written early intervention notices to borrowers who have invoked their cease communication rights under the FDCPA. Under the 2016 Mortgage Servicing Final Rule, a servicer was both required to provide a modified written early intervention notice to a borrower every 180 days while also being prohibited from providing the notice more than once during any 180-day period. In effect, the rule would have required the servicer to provide the notice on exactly the 180th day in order to comply, regardless of whether the 180th day fell on a weekend or holiday.
Recognizing the difficulty of complying with this near impossible task, the CFPB’s interim final rule amends Regulation X to provide for a 10-day window in which servicers must provide the modified notice at the end of the 180-day period. For example, if a servicer provides a written early intervention notice to a borrower who has exercised his or her FDCPA cease communication rights on October 16, 2018, the servicer would be prohibited from providing another written early intervention notice for 180 days. After 180 days, the servicer would have a 10-day window—from April 14 to April 24, 2018—in which to provide the borrower another written early intervention notice, to the extent still required based upon the borrower’s delinquency status.
As the CFPB stated in its press release, this new framework will “provide mortgage servicers more flexibility and certainty around requirements to communicate with certain borrowers,” and “make it easier for mortgage borrowers to receive timely information from their mortgage servicers about available options for saving their home.”
The interim final rule will become effective on October 19, 2017, which is the same effective date as the corresponding provision in the 2016 Mortgage Servicing Final Rule. The CFPB is also seeking comments on the interim final rule. The comment period will close 30 days after the interim final rule is published in the Federal Register.
Proposed Rule – Transitioning to and from Bankruptcy Periodic Billing Statements
Under the current 2016 Mortgage Servicing Final Rule, servicers are provided with a single-billing-cycle exemption from the requirement to provide a periodic billing statement for a borrower transitioning from or to bankruptcy-specific disclosures. Notably, this exemption only applies if the payment due date for that billing cycle is no more than 14 days after an enumerated triggering event. This particular provision received a large number of comments from members of the industry prior to the release of the 2016 Mortgage Servicing Final Rule. The industry almost uniformly requested 60 days instead of the 14 days that ultimately made their way into the final rule.
Fortunately, it appears that the CFPB has recognized the operational challenges and has begun efforts to address the industry’s concerns. The proposed rule replaces the single-billing-cycle exemptions with a categorical single-statement exemption. What this means is that the servicer would be exempted from providing the modified or unmodified version of the next statement regardless of when in the billing cycle a triggering event occurred. Stated differently, this provides servicers with a minimum of one month and a potential of up to 75 days to transition to or from bankruptcy-specific disclosures following a triggering event.
The CFPB is currently seeking public comment on the proposed rule, which has a proposed effective date of April 19, 2018. That is the same effective date as the corresponding provision in the 2016 Mortgage Servicing Final Rule. The comment period will close 30 days after the proposed rule is published in the Federal Register.