Compliance Blog

Written by Steve Van Beek

Today's blog post continues our series of looking at the "nine proposed changes" under the CFPB's mortgage servicing proposals.  

Past mortgage servicing blog posts are available here:

• CFPB Issues Mortgage Servicing Proposals - Friday, August 10th.
• More on the CFPB's Mortgage Servicing Proposals - TILA - Tuesday, August 14th.
• More on the CFPB's Mortgage Servicing Proposals - RESPA (Part 1 of 2) - Wednesday, August 15th.

Below are the final three "proposed changes" under RESPA followed by the preamble, regulatory text, official staff commentary and any model forms. 

Regulation X (RESPA)

(7) Early intervention with delinquent borrowers (RESPA proposal): Servicers would be required to make good faith efforts to notify delinquent borrowers of loss mitigation options.  If a borrower is 30 days late, the proposal would require servicers to make a good faith effort to notify the borrower orally and to let the borrower know that loss mitigations options may be available.  If the borrower is 40 days late, the servicer would be required to provide the borrower with a written notice with certain specific information, including examples of loss mitigation options available, if applicable, and information on how to obtain more information about loss mitigation options.  The notice would also provide information to the borrower about the foreclosure process.  The rule contains model language servicers could use for these notices.

• Preamble for Early Intervention with Delinquent Borrowers
• Proposed Regulatory Text for Early Intervention with Delinquent Borrowers
• Proposed Official Staff Commentary for Early Intervention with Delinquent Borrowers
• Proposed Model Forms for Early Intervention with Delinquent Borrowers 

(8) Continuity of contact with delinquent borrowers (RESPA proposal):  Servicers would be required to provide delinquent borrowers with access to personnel to assist them with loss mitigation options where applicable.  The proposal would require servicers to assign dedicated contact personnel for a borrower no later than five days after providing the early intervention notice.  Servicers would be required to establish reasonable policies and procedures designed to ensure that the servicer personnel perform certain specified functions where applicable, such as 6access the borrower’s records and provide the borrower with information about how and when to apply for a loss mitigation option and about the status of the application.

• Preamble for Continuity of Contact with Delinquent Borrowers
• Proposed Regulatory Text for Continuity of Contact with Delinquent Borrowers
• Proposed Official Staff Commentary for Continuity of Contact with Delinquent Borrowers 

(9) Loss mitigation procedures (RESPA proposal):  Servicers that offer loss mitigation options to borrowers would be required to implement procedures to ensure that complete loss mitigation applications are reasonably evaluated before proceeding with a scheduled foreclosure sale.  The proposal would require servicers to exercise reasonable diligence to secure information or documents required to make an incomplete loss mitigation application complete.  In certain circumstances, this could include notifying the borrower within five days of receiving an incomplete application.  Within 30 days of receiving a borrower’s complete application, the servicer would be required to evaluate the borrower for all available options, and, if the denial pertains to a requested loan modification, notify the borrower of the reasons for the servicer’s decision, and provide the borrower with at least a 14-day period within which to appeal the decision. 

The proposal would require that appeals be decided within 30 days by different personnel than those responsible for the initial decision.  A servicer that receives a complete application for a loss mitigation option could not proceed with a foreclosure sale unless (i) the servicer had denied the borrower’s application and the time for any appeal had expired; (ii) the servicer had offered a loss mitigation option which the borrower declined or failed to accept within 14 days of the offer; or (iii) the borrower failed to comply with the terms of a loss mitigation agreement.  The proposal would require that deadlines for submitting an application for a loss mitigation option be no earlier than 90 days before a scheduled foreclosure sale.

• Preamble for Loss Mitigation Procedures
• Proposed Regulatory Text for Loss Mitigation Procedures
• Proposed Official Staff Commentary for Loss Mitigation Procedures

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Remember:  The CFPB intends to issue final rules on the mortgage servicing requirements by January 21, 2013.  And, the indications are there will only be 12 months for implementation after that date (the CFPB can provide longer timeframe for new requirements that are not mandated by Dodd-Frank).  Now is the time to start reviewing these proposed requirements and how they will impact your credit union's mortgage lending operations.

To get a more depth understanding, consider attending NAFCU's 3-hour webcast covering the CFPB's Mortgage Proposals.  Additionally, NCCOs will earn 3 CEUs for attending.