CFPB Issues Implementation Guidance for Mortgage Servicing Rule Amendments

On March 29, 2018, the Consumer Financial Protection Bureau (CFPB) released two important implementation tools that may help mortgage servicers ensure compliance with recent amendments to the mortgage servicing rules in Regulations X and Z. This release comes shortly after the CFPB published a set of Frequently Asked Questions that primarily addressed issues related to the upcoming periodic billing statement requirements for borrowers in bankruptcy, and certain interactions with successors in interest.

First, the CFPB updated its Small Entity Compliance Guide so that it now reflects the status of the law that will become effective on April 19, 2018. The new version 3.1 incorporates the latest timing requirements related to the transition to and/or from modified periodic billing statements that account for a consumer’s status as a debtor in bankruptcy. That change stems from the CFPB’s March 8, 2018, final rule that amended the 2016 Mortgage Servicing Rules. Additionally, version 3.1 now removes aspects of the mortgage servicing rules that will no longer be in effect on or after April 19, 2018. For example, the blanket exemption from sending periodic billing statements to all accounts impacted by bankruptcy is removed, and the guide now reflects the upcoming rule that will soon be in effect.

Second, the CFPB published a Mortgage Servicing Coverage Chart that explains the applicability and exclusions of each section of the mortgage servicing rules in Regulations X and Z. The new version replaces the prior chart that the CFPB released in 2014, and now incorporates all of the CFPB’s amendments to the original rules. This type of document has historically been one of the more valuable and relied upon tools issued by the CFPB.

After comparing the new version to the older one, a few notable changes become evident:

  • The CFPB now clarifies in the escrow context that annual escrow statements are not required for “certain default, foreclosure, or bankruptcy situations, per 1024.17(i)(2).”

  • Early intervention partial exemptions for borrowers in bankruptcy and “certain debt collection-related situations,” meaning borrowers who are protected by the Federal Fair Debt Collection Practices Act and who properly submit a cease communication request, are now included.

  • Small servicer obligations in the loss mitigation and dual tracking context are more accurate and specific. The prior version suggested that small servicers were prohibited from filing foreclosure if a borrower is performing pursuant to a loss mitigation agreement or is less than 120 days delinquent. The new version more accurately explains that a small servicer must comply with “certain prohibitions on foreclosure referral, moving for judgment or order of sale, or conducting a sale.”

  • The new version now specifies that a servicer may be exempt from sending the otherwise required notice in conjunction with the first interest rate change on an ARM loan in “certain debt collection-related situations,” meaning when borrowers who are protected by the Federal Fair Debt Collection Practices Act properly submit a cease communication request.
  • New periodic billing statement exemptions for certain charged off loans and certain consumers impacted by bankruptcy are now included.

  • Applicable mortgage servicing requirements that were not part of the original 2014 rules (e.g., escrow cancellation notices in 1026.20(e) and mortgage loan transfer disclosures in § 1026.39) are not included on the chart.

As mentioned above, the CFPB’s scope chart has long been a valuable tool for mortgage servicers to ensure compliance and assist in deciphering what rules apply in certain scenarios. The newest version appears to be a more complete view into the law as it currently stands.