Question: We recently sold a portfolio of mortgage loans to a third party. We believe the third party is a “covered person” as defined by the statute. What we want to know is who must notify the borrower if the loan is sold to a third party? Also, when does the third party have to provide the mortgage transfer disclosure?
Answer
A “covered person” is a person who acquires more than one mortgage loan in a twelve-month period and becomes the owner of an existing mortgage loan by acquiring legal title to the debt obligation, whether through purchase, assignment or other transfer. [75 FR 58489, 58501, codified at 12 CFR § 226.39(a)(1)]
However, a servicer is not treated as the owner of an obligation if the servicer holds title to the loan, or title is assigned to the servicer, solely for the administrative convenience of the servicer in servicing the obligation. [75 FR 58489, 58501, codified at 12 CFR § 226.39(a)(1)]
Unless there is an exception, a covered person must provide a notice to the consumer when the covered person becomes the owner of an existing home-equity plan or mortgage loan by acquiring legal title to the debt obligation, whether through purchase, assignment or other transfer. [75 FR 58489, 58501, codified at 12 CFR §§ 226.39(a), 226.39(b)]
For the purposes of the transfer obligations, a mortgage loan is any open-end or closed-end consumer credit transaction that is secured by the principal dwelling of a consumer. [75 FR 58489, 58501, 58502, codified at 12 CFR § 226.39(a)(2); 12 CFR Supplement I to Part 226, Official Staff Commentary § 226.39(a)(2)-1]
With respect to when a covered person must provide the mortgage transfer disclosure, unless an exception applies, a covered person must provide this disclosure on or before the thirtieth calendar day following the date of transfer. [75 FR 58489, 58501, codified at 12 CFR § 226.39(b)]
As to determining a date of transfer, this date is at the option of the covered person, as either the date of acquisition of the mortgage loan recognized in the books of the acquiring party, or the date of transfer of the mortgage loan recognized in the books of the transferring party. [75 FR 58489, 58501, codified at 12 CFR § 226.39(b)(2)]
Jonathan Foxx is president and managing director of Lenders Compliance Group, Brokers Compliance Group, Servicers Compliance Group and Vendors Compliance Group, national companies devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted by phone at (516) 442-3456, by e-mail at [email protected] or visit LendersComplianceGroup.com.
