August.09.2016
On Thursday, the CFPB issued its long-awaited final amendments to the mortgage servicing provisions of Regulations X and Z. The Bureau had sought comment on the proposed rule in December 2014, more than 18 months ago. Spanning 900 pages, the final rule makes significant changes that will impact servicers even as it clarifies several points of confusion with the existing regulations. Most significantly, the amendments extend existing protections to successors in interest and borrowers who have previously been evaluated for loss mitigation under the rules, brought their loans current, and then experienced new delinquencies. The amendments also require servicers to provide modified periodic statements to borrowers in bankruptcy. In coordination with the final amendments, the Bureau published an interpretive rule under the Fair Debt Collections Practices Act (FDCPA) to address industry concerns about conflicts with the servicing rules.
A summary of the key amendments is provided below. Unless otherwise stated below, the amendments take effect 12 months from the date of publication of the rule in the Federal Register, which has not yet occurred. If recent experience is any guide, we anticipate that publication in the Federal Register may be delayed for as long as a month, given the length of the final rule, commentary, and preamble.
CONFIRMED SUCCESSORS IN INTEREST ARE BORROWERS AND CONSUMERS FOR ALL PURPOSES
These provisions are effective 18 months after publication of the rule in the Federal Register.
LOSS MITIGATION REQUIREMENTS
Servicers must evaluate a borrower for loss mitigation more than once in certain circumstances. A borrower is entitled to the loss mitigation procedures and protections from foreclosure in Regulation X more than once in the life of the loan. Thus, a servicer must apply the loss mitigation procedures in § 1024.41 a second time for borrowers who become current on payments between the borrower’s prior complete loss mitigation application and a subsequent loss mitigation application. In addition, a transferee servicer must comply with §1024.41– within the relevant timelines – even if a borrower was previously evaluated for loss mitigation by the transferor servicer.
LIVE CONTACT AND EARLY INTERVENTION NOTICE REQUIREMENTS
PERIODIC STATEMENTS AND COUPON BOOKS
These provisions are effective 18 months after publication of the rule in the Federal Register.
Modifications for all borrowers in bankruptcy or who have discharged personal liability for the loan:
SERVICING TRANSFERS
OTHER PROVISIONS OF THE FINAL RULE
Questions regarding the matters discussed may be directed to any of our lawyers listed in this alert, or to any other Orrickattorney with whom you have consulted in the past.