As we previously reported, on October 19, 2016, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register final amendments to its Mortgage Servicing Rules (Final Rule). The Final Rule, weighing in at 900 pages (or 242 pages of the Federal Register), makes significant updates to the Mortgage Servicing Rues in nine areas:
- Successors in interest
- Definition of delinquency
- Early intervention
- Loss mitigation procedures (including transfers of servicing)
- Periodic statement requirements
- Information requests
- Payment processing
- Force-placed insurance
- Small servicers
The CFPB also issued an interpretive rule under the Fair Debt Collection Practices Act (FDCPA) relating to compliance with certain provisions in the Final Rule.
The Final Rule took effect on October 19, 2017, except for the periodic statement requirements for borrowers in bankruptcy and the successor in interest provisions, which will take effect on April 19, 2018. The CFPB chose not to set an effective date with optional early compliance. However, it did issue policy guidance on June 27, 2017, which recognized that the October 19, 2017, and April 19, 2018, effective dates both fell on Thursdays, which could cause operational challenges for servicers. The CFPB stated that it does not intend to take supervisory or enforcement action for violations of existing Regulation X or Regulation Z resulting from a servicer’s compliance with the 2016 amendments to the mortgage servicing rules occurring up to three days before the applicable effective dates to allow servicers time to implement and test their systems over the weekend before the effective dates. The CFPB did not make any changes to the guidance it published with the Final Rule; however, in the instances where the Final Rule adopts new commentary to the existing Mortgage Servicing Rules that clarifies, reinforces or does not conflict with the existing rule and commentary, the CFPB will permit servicers either to continue those practices in compliance with the existing rule or to conform with the new commentary in the Final Rule before the effective date.
On October 4, 2017, only two weeks before the first effective date, the CFPB published an interim final rule with a request for public comment amending the timing for servicers to provide modified written early intervention notices to borrowers who have invoked their cease communication rights under the FDCPA, which will take effect along with the rest of the early intervention changes on October 19, 2017. Also on October 4, 2017, the CFPB published a proposed rule with a request for public comment relating to the timing for servicers to transition to providing modified or unmodified periodic statements and coupon books in connection with a consumer’s bankruptcy case. The 2016 Final Rule provided for a single-cycle billing exemption to the requirement to provide a periodic statement if the payment due date for that billing cycle was no more than 14 days after the date on which one of three triggering events occurred. The proposed rule would instead provide an exemption from the requirements to provide a periodic statement or coupon book for one statement, but thereafter must provide modified or unmodified periodic statements or coupon books that comply with the requirements of Section 1026.41. The deadline for public comments is 30 days from the date of publication in the Federal Register. If finalized, the amended rule would take effect with the rest of the requirements for periodic statements for borrowers in bankruptcy on April 19, 2018.
Given that the implementation of the bulk of the Final Rule is now upon us, we have provided a brief synopsis of the changes in each of the main categories to ensure that servicers are aware of their new obligations.