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2013 CFBP Bulletins
CFPB Bulletin 2013-13 Homeownership Counseling List Requirements
CFPB issued Bulletin 2013-13 to provide guidance to lenders regarding homeownership counseling list requirements contained in amendments to the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) that were mandated by Dodd-Frank. The 2013 HOEPA Final Rule expanded the types of mortgage loans that are subject to the Home Ownership and Equity Protections Act of 1994 (HOEPA), imposed a pre-loan counseling requirement on covered loans, and required that consumers receive information about homeownership counseling providers, among other things. The rule is effective January 10, 2014.
Under the new rule, lenders must provide applicants for federally-related mortgages with a written list of HUD-approved homeownership counseling providers. On November 8, 2013 CFPB published an interpretative rule providing list instructions for lenders who choose to generate their own lists of counseling agencies instead of relying on the list available on the Bureau’s website. The bulletin acknowledges that lenders who choose to independently generate a list of counseling agencies must develop significant compliance systems that may not be operational by the January 10th effective date. In order to avoid supervisory or enforcement action, these lenders must direct borrowers to the Bureau’s website until their own systems are up and running. The bulletin provides the following suggested text that may be used for this purpose:
“Housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost.
If you are interested in contacting a HUD-approved housing counseling agency in your area,
you can visit the Consumer Financial Protection Bureau’s (CFPB) website, www.consumerfinance.gov/find-a-housing-counselor, and enter your zip code.
You can also access HUD’s housing counseling agency website via www.consumerfinance.gov/mortgagehelp.
For additional assistance with locating a housing counseling agency, call the CFPB at 1-855-411-CFPB (2372).”The CFPB also provides a Summary of the Interpretive Rule on Provision of Homeownership Counseling Organizations Lists.
CFPB Bulletin 2013-12 Implementation Guidance for Certain Mortgage Servicing Rules
CFPB issued Bulletin 2013-12 to provide guidance to mortgage servicers regarding implementation of the successor in interest, early intervention, and Fair Debt Collection Practices Act (FDCPA) provisions of the 2013 Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) Servicing Final Rules. The RESPA and TILA Servicing Final Rules are effective on January 10, 2014.
Successors in Interest
The RESPA Servicing Final Rule includes a provision that requires servicers to maintain policies and procedures that allow them generally to access and provide timely and accurate information to consumers. Specifically, the rule requires servicers, “upon notification of the death of a borrower, [to] promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan.” (12 CFR 1024.38(b)(1)(vi)) This requirement was adopted to address reports that surviving spouses, children, and other successors in interest were experiencing difficulties in communicating with loan servicers that would sometimes result in unnecessary defaults and foreclosures. The bulletin provides examples of servicer practices that it considers to be reasonably designed to satisfy the objectives of the provision, including:
- Promptly providing to any party claiming to be a successor in interest a list of all
documents or other evidence the servicer requires, which should be reasonable in
light of the laws of the relevant jurisdiction, for the party to establish
(1) the death of the borrower, and
(2) the identity and legal interest of the successor in interest (e.g., death certificate for borrower, executed will, etc.)
- Upon notification of the death of a borrower, promptly identifying and evaluating
any issues that the servicer must consider in reviewing the rights and obligations of successors in interest with respect to the property and mortgage loan
- Promptly providing successors in interest with any documents, forms, or other
materials the servicer requires for the successor in interest to continue making
payments and to apply and be evaluated for an assumption and, where appropriate,
loss mitigation options
- Providing employees with information and training regarding the effect of laws and
investor and other requirements on the servicer’s obligations following the death of a
borrower, and complying with those laws and requirements
The bulletin also encourages mortgage servicers to consider adopting best practices that include postponing or withdrawing pending foreclosure proceedings to allow reasonable time for a successor in interest to pursue ownership rights, and notifying a successor in interest about the possible consequences of assuming a mortgage loan.
Early Intervention Rule
The RESPA Final Servicing Rule also contained a provision requiring mortgage servicers to make good faith efforts to establish live contact with a delinquent borrower within 36 days of the borrower’s delinquency. (12 CFR 1024.39) As part of the live contact, the servicer should inform the borrower about the availability of loss mitigation options. In commentary that accompanied the rule, the CFPB defined “good faith efforts” as “reasonable steps under the circumstances to reach a borrower and may include telephoning the borrower on more than one occasion or sending written or electronic communication encouraging the borrower to establish live contact with the servicer.” (12 CFR 1024.39, Supplement I to Part 1024 – Official Bureau Interpretations, Comment 39(a)-2.) The bulletin provides additional guidance to servicers regarding the CFPB’s expectations for what constitutes “reasonable steps.” The bulletin notes that the rule is designed to provide flexibility for servicers, and provides the following examples of conforming communications:
- Maintaining ongoing contact after consecutive delinquent billing cycles with regard to the application or evaluation of available loss mitigation options;
- Reinitiating efforts to contact the borrower after the borrower stops paying under a loss mitigation plan or becomes delinquent after curing a prior default. The servicer must contact the borrower within 36 days for each of the subsequent billing periods for which the borrower’s obligation is due and unpaid;
- Utilizing live contact initiated by the borrower to discuss the availability of loss mitigation options;
- Combining the loss mitigation discussion with collection calls or other contacts;
- Requesting the borrower to contact the servicer with regard to the delinquencies in a periodic statement or electronic communication, if the borrower has been repeatedly delinquent and unresponsive to previous efforts by the services to establish contact.
FDCPA Cease Communication Provision
The bulletin also contains guidance relating to the relationship between disclosure requirements under the 2013 RESPA and TILA Servicing Final Rules and the cease communication provisions of the Fair Debt Collection Practices Act (FDCPA). Under the FDCPA, debtors can generally bar debt collectors from communicating with them. The CFPB clarifies that the FDCPA cease communication provision does not apply to mortgage servicers that are contacting a delinquent borrower under the following provisions of the mortgage servicing rules:
- Error Resolution (12 CFR 1024.35)
- Requests for Information (12 CFR 1024.36)
- Loss Mitigation (12 CFR 1024.41)
- Force-placed Insurance (12 CFR 1024.37)
- Adjustable-rate Mortgage (ARM) Initial Interest Rate Adjustment (12 CFR 1026.20(d))
- Periodic Statements (12 CFR 1026.41)
Under the first three provisions, the servicer communications would not be subject to a borrower’s “cease communication” request because the borrower would have specifically requested the communication at issue. Therefore, unless the borrower specifically withdraws the request, the servicer must continue to comply with these sections. The latter three provisions involve disclosures that are statutorily mandated by the Dodd-Frank Act. Dodd-Frank makes no provision for cessation of these disclosures under the FDCPA, and the CFPB has determined that a servicer would therefore not be liable under the FDCPA for complying with the requirements despite a debtor’s “cease communication” request.
However, a mortgage servicer could be liable for sending notices and communications required under the Early Intervention Rule (12 CFR 1024.39), and the ARM Interest Rate Adjustment with Corresponding Payment Change Rule (12 CFR 1026.20(c)), if the borrower had invoked a “cease communication” request pursuant to the FDCPA. These two provisions are neither statutorily mandated nor borrower initiated, and the CFPB added exemptions for FDCPA compliance into these sections in the Interim Final Rule.
CFPB issued Bulletin 2013-11 to provide guidance for depository and non-depository mortgage lenders on compliance with HMDA and Regulation C. The bulletin also announces the CFPB’s HMDA Resubmission Schedule and Guidelines and outlines circumstances in which the Bureau may consider taking public enforcement action for violations of the rule.
HMDA and Reg C
The bulletin stresses the importance to CFPB’s consumer protection mission of collecting and reporting accurate and complete HMDA data. The data on mortgage applications, as well as originated and purchased mortgage loans allows the CFPB to monitor the housing market for signs of distress, discrimination, or dysfunction. Regulated entities must develop and maintain HMDA compliance management systems that reflect the scope, complexity, and size of the institution’s lending operation. Although individual programs may vary between institutions, the bulletin notes that an effective system may include, among other things:
- Comprehensive policies, procedures, and internal controls;
- Internal, pre-submission HMDA audits to evaluate data accuracy;
- Appropriate staffing and employee training programs;
- Effective corrective action to address identified deficiencies; and
- Board and management oversight.
HMDA Resubmission Schedule and Guidelines
The bulletin notes that institutions with HMDA data errors that exceed the resubmission threshold will be required to correct and resubmit the HMDA Loan Application Register (LAR). CFPB examination teams were advised that institutions with fewer than 100,000 HMDA LAR entries should correct and resubmit HMDA data when there is an error rate of 10% or more in a data sample. Institutions reporting 100,000 or more HMDA LAR entries should correct and resubmit with an error rate of 4% or more. The CFPB retains the right to require resubmission in certain cases with error rates below the threshold if the errors are concentrated in a particular data field or prevent an accurate analysis of the institution’s lending. For more information on the examination process, see the HMDA Resubmission Guidelines in the CFPB Supervision and Examination Manual.
The Bureau has the authority to take public enforcement actions against institutions that submit inaccurate or incomplete HMDA data. The CFPB may seek civil money penalties, or other corrective action, as appropriate under the circumstances. When determining whether to pursue a public enforcement action, the CFPB will consider, among other things:
- The observed error rate;
- Whether errors were self-identified and independently corrected; and