Compliance Blog

Hi, Compliance Friends. We are finishing up another awesome week of our Regulatory Compliance School, and we now have a new cohort of NCCO's!

Earlier this month, the CFPB finalized a technical change that will allow credit unions greater flexibility when dealing with a borrower in bankruptcy or transitioning out of bankruptcy. If you can recall, the 2016 Mortgage Servicing Final Rule addresses Regulation Z's periodic statement and coupon book requirements when a person is a debtor in bankruptcy. The bankruptcy requirements will take effect on April 19, 2018. Today's blog will discuss the change and what it will mean for mortgage servicing.

To provide some overview, as early as 2013, the CFPB issued regulations requiring credit unions who meet certain thresholds to provide monthly periodic statements to member borrowers. In theory, the concept of providing periodic statements seems easy, but in implementation, it has proved to be a bit more complicated. In particular, the obligation to provide periodic statements to members in bankruptcy had become troublesome. The recent CFPB amendments give credit unions greater flexibility in complying with the periodic statement requirement for members involved in bankruptcy.

Due to the highly technical nature of the changes, I have extracted two examples from the final rule to demonstrate the CFPB's most recent amendments. Both examples assume that a mortgage loan has a monthly billing cycle, each payment due date is on the first day of the month following its respective billing cycle, and each payment due date has a 15-day courtesy period.

The CFPB's amendment made the following change as demonstrated here:

"i. explains that, if an event listed in § 1026.41€(5)(iv)(A) occurs on October 6, before the end of the 15-day courtesy period provided for the October 1 payment due date, and the servicer has not yet provided a periodic statement or coupon book for the billing cycle with a November 1 payment due date, the servicer is exempt from providing a periodic statement or coupon book for that billing cycle. The servicer is required thereafter to resume providing periodic statements or coupon books that comply with the requirements of § 1026.41 by providing a modified or unmodified periodic statement or coupon book for the billing cycle with a December 1 payment due date within a reasonably prompt time after November 1 payment due date."

Here is another example from the CFPB's recent amendment:

"ii. Provides an example for when a servicer already timely provided a periodic statement or coupon book for a billing cycle in which an event listed in § 1026.41(e)(5)(iv)(A) occurs. It provides that, if an event listed in § 1026.41(e)(5)(iv)(A) occurs on October 20, after the end of the 15-day courtesy period provided for the October 1 payment due date, and the servicer timely provided a periodic statement or coupon book for the billing cycle with a November 1 payment due date, the servicer is not required to correct the periodic statement or coupon book already provided and is exempt from providing the next periodic statement or coupon book, which is the owner that would otherwise be required for the billing cycle with a December 1 payment due date. The servicer is required thereafter to resume providing periodic statements or coupon books that comply with the requirements of § 1026.41 by providing a modified or unmodified periodic statement or coupon book for the billing cycle with a January 1 payment due date within a reasonably prompt time after December 1 or the end of the 15-day courtesy period provided for the December 1 payment due date."

The CFPB stated that it believes these amendments will provide a clearer and more straightforward standard than the timing requirement finalized in the 2016 Mortgage Servicing Final Rule. The Bureau also anticipates that the amendments will offer greater certainty for implementation and compliance, without unnecessarily disadvantaging members.