Mortgage Servicing Rules – Deadlines, Small Servicers Update and Refresher
Written by Brandy Bruyere, Director of Regulatory Compliance
I'm trying something new today and providing the blog as the long and the short, with the idea that if you want the details, wonderful, and if you just want a couple of key takeaways, then the end of the blog has a short summary. Some of our readers who spend time on various social media may call this approach TLDR or TL;DR, shorthand too long, didn't read, aimed at those who scroll through long posts straight to the conclusion. Of course, as a regulatory attorney, I prefer the long, but some days it's helpful to be able to distill a few items as a starting point.
The Long: We've been blogging about recent changes to the CFPB's mortgage servicing rules, and we finally have an answer to one key frequently asked question: what are the effective dates? Well, we can finally answer that one for you. On Monday, the Bureau announced the following deadlines:
- Successor in interest provisions: April 19, 2018 (18 months after publication)
- Bankruptcy periodic statements: April 19, 2018 (18 months after publication)
- All other rules: October 19, 2017(12 months after publication)
Then, on Tuesday the Federal Register announced that formal publication was scheduled for October 19, 2016. At least the CFPB let us know the deadlines a few hours earlier than we would have found out otherwise.
It is worth noting that the 2016 rules do not make significant changes to the definition of small servicer, here's how the CFPB summarized the changes to this definition:
"The Bureau is finalizing certain changes to the small servicer determination. The small servicer exemption generally applies to servicers who service 5,000 or fewer mortgage loans for all of which the servicer is the creditor or assignee. The final rule excludes certain seller-financed transactions and mortgage loans voluntarily serviced for a non-affiliate, even if the non-affiliate is not a creditor or assignee, from being counted toward the 5,000 loan limit, allowing servicers that would otherwise qualify for small servicer status to retain their exemption while servicing those transactions."
As a reminder, currently these are credit unions who, together with any affiliates, service 5,000 or fewer mortgage loans, not counting:
- Mortgage loans voluntarily serviced by the credit union for a creditor or assignee that is a non-affiliate and for which the credit union does not receive any compensation or fees.
- Reverse mortgages
- Mortgages secured by timeshares
There are two changes to the definition of small servicer, found in section 1026.41(e)(4), exempting from the 5,000 loan threshold:
- Loans voluntarily serviced for all non-affiliates, even if that entity is not a creditor or assignee (the requirement that the credit union does not receive compensation or fees remains); and
- Loans serviced for non-certain seller financers that meet all of the criteria identified in §1026.36(a)(5) (seller-financier for one property in a 12 month period, etc.)
While these are not large changes, it could impact some credit unions that service these kinds of loans, or perhaps those who occasionally service either of these two categories of exempt loans and are rather close to either exceeding or have barely exceeded the 5,000 threshold.
The 2016 rules do not change which rules the small servicer exemption applies to, here is a summary of various mortgage servicing rules as a refresher or for reference:
|
Rule and Current Version |
Small Servicer Exemption? |
|
Section 1024.32, general disclosure requirements |
No |
|
Section 1024.33, mortgage servicing transfers |
No |
|
Section 1024.34, timely escrow payments and treatment of escrow account balances |
No |
|
Section 1024.35, error resolution procedures |
No |
|
Section 1024.36, requests for information |
No |
|
Section 1024.37, force-placed insurance |
No |
|
Section 1024.38, general servicing policies, procedures and requirements |
Yes |
|
Section 1024.39, early intervention requirements for certain borrowers |
Yes |
|
Section 1024.40, continuity of contact |
Yes |
|
Section 1024.41, loss mitigation procedures |
Partial exemption for small servicers (article available with NAFCU log in) |
|
Section 1026.20(c), rate adjustments with a change in payment Section 1026.20(d), initial rate adjustment notices Section 1026.20(e), escrow account cancellation notice |
No |
|
Section 1026.39, mortgage transfer disclosures |
No |
|
Section 1026.41, periodic statements for residential mortgage loans |
Yes |
Some of the more complex requirements, like periodic statements for borrowers in bankruptcy, are subject to the small servicer exemption. Other rules, like error resolution requirements, force-placed insurance notices and certain loss mitigation procedures, are amended by the 2016 rules but small servicers are not exempt.
The Short: The mortgage servicing rules largely go into effect on October 19, 2017 although provisions relating to successors in interest and periodic statements for certain borrowers in bankruptcy will go into effect on April 19, 2018. These rules do not make significant changes to the current definition of small servicer and do not change which rules contain an exemption for small servicers. However, credit unions may want to review the small changes to the small servicer definition closely, especially if relying on small servicer status or if the credit union is fairly close to the 5,000 limit, give or take a few loans.