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The Consumer Financial Protection Bureau (CFPB) recently issued a proposed rule directed toward mortgage servicers, intended to expand foreclosure protections for mortgage borrowers.
According to the CFPB, the proposal would require servicers to provide certain borrowers with foreclosure protections more than once over the life of the loan, provide additional servicing transfer protections, and establish steps to protect borrowers from a wrongful foreclosure sale.
In this proposed rule, there are nine major topics which are outlined below.
►Successors in Interest: There are three sets of rule changes relating to successors in interest including applying all of the Mortgage Servicing Rules to successors in interest once the successor’s identity and ownership interest in the property has been confirmed.
►Definition of Delinquency: Create a general definition of delinquency that would apply to all of the servicing provisions of Regulation X as well as Regulation Z provisions regarding periodic statements.
►Requests for Information: Amend how a servicer must respond to requests for information asking for ownership information for loans in trust for which Fannie Mae or Freddie Mac is the trustee, investor, or guarantor.
►Force-Placed Insurance: Revise the required disclosures when a servicer adds force-placed insurance and the borrower has insufficient, rather than expiring or expired, insurance coverage.
►Early Intervention: Clarify the live contact and written notice obligations.
►Loss Mitigation: The proposal includes, but is not limited, to the following:
1. Mandate servicers to meet the loss mitigation requirements more than once in the life of a loan for borrowers who become current after a delinquency;
2. Allow a servicer to join the foreclosure action of a senior lienholder by altering the existing exception to the 120-day prohibition on foreclosure filing;
3. Require that servicers must promptly provide a written notice once a complete loss mitigation application is received;
4. Address how servicers obtain information that is not in the borrower’s control;
5. Allow servicers to offer a short-term repayment plan based upon an evaluation of an incomplete application;
6. Clarify that servicers may stop collecting information from a borrower in regards to a loss mitigation option after confirming the borrower is ineligible for that option; and
7. Address how loss mitigation procedures and timelines apply to a transferee servicer.
►Prompt Payment Credit: Clarify how periodic payments made by consumers, who are performing under temporary loss mitigation or permanent loan modification programs, must be handled.
►Periodic Statements: Clarify disclosure requirements relating to accelerated loans, loans in temporary loss mitigation programs or have been permanently modified; require servicers to send modified statements to those who have filed for bankruptcy; and provide an exemption for servicers for charged-off mortgage loans provided that the servicer does not charge additional fees or interest on the account and provides a final periodic statement.
►Small Servicer: Modify the definition by excluding certain seller-financed transactions from being counted toward the maximum allowance loan limit.
Comments on the proposed rule must be received on or before March 16, 2015.
Ray Hagan is senior regulatory compliance analyst at AllRegs. First introduced in 1989, AllRegs is used by virtually all of the top 100 lenders, as well as throughout numerous governmental agencies, including Fannie Mae, Freddie Mac, the FHLBs, FHA, VA, RHS, Ginnie Mae and more. For additional information, call (800) 848-4904 or visit www.allregs.com.
This article originally appeared in the January 2015 edition of National Mortgage Professional Magazine.