On Aug. 9, the Consumer Financial Protection Bureau (CFPB) proposed new mortgage servicing rules. The proposed rules would amend both Regulation Z and Regulation X to implement the Dodd-Frank Act provisions that relate to mortgage servicing. Published under the banner “No Surprises, No Runarounds,” the proposal covers the following major topics:
►Periodic billing statements: The proposed rule would generally require that servicers of closed-end residential mortgage loans send a periodic statement for each billing cycle that meets specific timing, form and content requirements. The periodic statement would generally not apply for servicers that provide coupon books, as long as the coupon books meet certain requirements.
►Adjustable-rate mortgage (ARM) interest rate adjustment notices: Under the proposed rule, servicers would have to provide a borrower who has an ARM with a notice 60 to 120 days before an adjustment that causes the payment to change. The servicer would also have to provide a notice 210 to 240 days prior to the first rate adjustment.
►Prompt payment crediting and payoff statements: Servicers would generally be required to credit payments from borrowers on the day of receipt. If the borrower makes a partial payment, the payment may be held in a suspense account until the amount in the suspense account is sufficient to cover a full installment. A servicer would be required to send an accurate payoff balance to the consumer no later than seven days after receiving a written request.
►Force-placed insurance: The proposed rule would prohibit servicers from charging a borrower for force-placed insurance unless the servicer has reason to believe that the borrower has failed to maintain hazard insurance and has provided required notices. Notices would be required at least 45 days before charging for force-placed insurance, and a second notice would be required no earlier than 30 days after the first notice.
►Error resolution and information requests: Servicers would be required to acknowledge a borrower’s written request for information or complaint of error within five days, and correct the error or respond to the borrower with the results of the investigation within 30 days.
►Early intervention with delinquent borrowers: If a borrower’s payment is 30 days late, the servicer would be required to notify the borrower orally and let the borrower know that loss mitigation options may be available. If the payment is 40 days late, a written notice would be required.
►Continuity of contact for delinquent borrowers: Servicers would be required to assign dedicated contact personnel for a borrower no later than five days after providing the first notice of delinquency. Servicers would have to establish policies and procedures designed to ensure that the servicer’s personnel perform certain specified functions where applicable.
►Loss mitigation procedures: Servicers that offer loss mitigation options would be required to ensure that completed loss mitigation applications are evaluated before proceeding with a foreclosure sale. Loss mitigation applications must be reviewed and the borrower notified within five days if the application is incomplete. Within 30 days of receiving a complete application, the servicer must provide a response. If the request for loss mitigation is denied, the borrower must be allowed at least 14 days to appeal the decision. Appeals must be decided within 30 days by different personnel than those who denied the initial application. The servicer shall not proceed with foreclosure unless the servicer has denied the application and the time for the borrower to appeal has expired; the servicer has offered a loss mitigation option which was not accepted by the borrower within 14 days; or the borrower has failed to comply with the terms of a loss mitigation agreement.
The CFPB invites the public to comment on the proposed mortgage servicing rules by Oct. 9, 2012. Formal comments may be submitted to www.regulations.gov; and interested parties may learn about, discuss, and react to the proposed rules in an informal, interactive environment at www.regulationroom.org.
Laurie Spira is chief compliance officer with Torrance, Calif.-based DocMagic Inc. She may be reached by phone at (800) 649-1362, ext. 6446 or e-mail firstname.lastname@example.org.