CFPB issues final mortgage servicing rule

Aug. 4, 2016 -- A final rule implementing amendments to mortgage servicing regulations under RESPA and TILA, mostly effective in one year, were released today by the CFPB.

According to the bureau’s notice, the 900-plus page final rule clarifies, revises, or amends provisions regarding force-placed insurance notices, policies and procedures, early intervention, and loss mitigation requirements under servicing provisions of Regulation X (Real Estate Settlement Procedures Act, or RESPA); and prompt crediting and periodic statement requirements under servicing provisions of Regulation Z (Truth in Lending Act, or TILA).

CFPB also stated that the regulation additionally addresses proper compliance regarding certain servicing requirements when a person is a potential or confirmed successor in interest, is a debtor in bankruptcy, or sends a “cease communication” request under the Fair Debt Collection Practices Act (FDCPA). The final rule also makes technical corrections to several provisions of Regulations X and Z.

Additionally, CFPB stated it is issuing concurrently with the final rule an interpretive rule under the FDCPA relating to servicers’ compliance with certain mortgage servicing rules.

Most of the provisions of the final take effect 12 months after publication in the Federal Register. The provisions relating to successors in interest and the provisions relating to periodic statements for borrowers in bankruptcy will take effect 18 months after publication in the Register.

In a summary of the proposed changes issued in late 2013, NASCUS pointed out the proposal was intended to clarify the relationship between disclosure requirements under TILA and RESPA in relation to bankruptcy law and FDCPA. NASCUS noted that – earlier that year -- the bureau issued three final mortgage rules pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act): the 2013 RESPA Servicing Final Rule; the 2013 TILA Servicing Final Rule; and the 2013 HOEPA Final Rule. These rules, the NASCUS summary noted, detailed various disclosure and other requirements for mortgages servicers.

However, NASCUS wrote, after promulgation of the final rules, mortgage servicers reported confusion surrounding disclosure requirements under the rules when the borrower has declared bankruptcy or is in default. In particular, servicers were concerned about confusing borrowers under the protection of bankruptcy law with regard to their status in bankruptcy, and exposing themselves to legal liability for failing to properly navigate the complex relationship between the servicing rules and bankruptcy law.

In addition, the rules were unclear regarding when a borrower’s “cease communication” request under the Fair Debt Collection Practices Act (FDCPA) would override disclosure requirements under the rule.

CFPB final rule, mortgage servicing
NASCUS Nov., 2013 proposed rule summary: Amendments to the 2013 Mortgage Rules