Compliance Blog

Hello everyone! My name is Tara Simpson, and I hail from the great state of Michigan. I am a new Regulatory Compliance Counsel at NAFCU, and I’m excited to bring to you my first ever blog post!

Before we get started, I’d also like to introduce you to my cat, Quincy, who serves as my unofficial “office manager”. He enjoys jumping up on my desk during the day to ensure I stay alert!

Now, today we’re going to be talking about mortgage servicing transfer notices. In particular, we’ll be discussing the timing and content requirements.

First, we must distinguish between what is a transfer of service and what isn’t. Section 1024.33(b)(1) requires a credit union to provide a notice of transfer for “any assignment, sale, or transfer of the servicing” of a mortgage. According to section 1024.33(b)(2)  of RESPA, the following transfers are not considered assignments, sales, or transfers of servicing:

• Transfers between affiliates;
• Transfers that result from mergers or acquisitions of servicers or subservicers; or
• Transfers that occur between master servicers without changing the subservicer.

For actions that do amount to an assignment, sale or transfer of servicing, then the following question remains:  how do borrowers become aware that their loan is going to be serviced by a new company? Section 1024.33(b)(1) of RESPA provides that “each transferor servicer and transferee servicer of any mortgage loan” (emphasis added) shall provide the notice of transfer. This means that both the original servicer and the new servicer must provide the borrower with a notice of the transfer. It’s like the original servicer saying goodbye and the new servicer saying hello. However, the timing of the notice is different for both.

If a credit union is the transferor servicer, then section 1024.33(b)(3) requires that credit union to “provide the notice of transfer to the borrower not less than 15 days before the effective date of the servicing of the mortgage loan.” (Emphasis added). Conversely, if a credit union is the transferee servicer, then it would be required to “provide the notice of transfer to the borrower not more than 15 days after the effective date of the transfer.” (Emphasis added).

That being said, the regulation does allow for the transferor and the transferee to provide a single notice. In that case, the notice must be provided “not less than 15 days before the effective date of the transfer.” (Emphasis added).

Furthermore, the staff commentary to section 1024.33(b) states that:

 “A servicer mailing the notice of transfer must deliver the notice to the mailing address (or addresses) listed by the borrower in the mortgage loan documents, unless the borrower has notified the servicer of a new address (or addresses) pursuant to the servicer's requirements for receiving a notice of a change of address.”

Additionally, section 1024.33(b)(3)(ii) does allow for extended time to provide notice (not more than 30 days after the effective date of the transfer) so long as the transfer of servicing is preceded by one of the following:

• Termination of the contract for servicing the loan for cause;
• Commencement of proceedings for bankruptcy of the servicer; or
• Commencement of proceedings by the NCUA for appointment of a conservator or liquidating agent of the servicer or an entity that owns or controls the servicer.

Also, the timing requirements are satisfied if the notices are provided at settlement by the transferor and transferee servicers (either as separate notices or as a combined notice).

As equally important as providing the borrower with notice that the servicing of their mortgage is being transferred are the contents of the notice.

Section 1024.33(b)(4) outlines what information must be included in the notices of transfer. The contents must include the following:

• The effective date of the transfer of servicing;
• The name, address, and a collect call or toll-free telephone number for an employee or department of the transferee servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;
• The name, address, and a collect call or toll-free telephone number for an employee or department of the transferor servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;
• The date on which the transferor servicer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments. These dates shall either be the same or consecutive days;
• Whether the transfer will affect the terms or the continued availability of mortgage life or disability insurance, or any other type of optional insurance, and any action the borrower must take to maintain such coverage; and
• A statement that the transfer of servicing does not affect any term or condition of the mortgage loan other than terms directly related to the servicing of the loan.

There you have it! I hope everyone has enjoyed my first blog. I look forward to my future blog contributions

*********************

Credit Unions May Want to Object to DOL FOIA Disclosure

In other news, the Department of Labor has published a notice last month noting that certain reports submitted by federal contractors may be subject to disclosure under the Freedom of Information Act (FOIA) . As we've blogged about previously, credit unions are viewed by DOL as being federal contractors for certain rules, such as the rules pertaining to affirmative action plans. According to the DOL notice, any entity that has submitted a Type 2 Consolidated EEO-1 Report during 2016-2020 may want to comment and object to the disclosure of those reports under FOIA. The deadline to comment and object to such disclosure is Monday, Sept. 19th, 2022. 

*******************

Compliance Roadmap

Sensitivity to market risk. Regulation F. NCUA guidance on service facilities. NAFCU's Credit Union Compliance Roadmap breaks these and other regulations down into easy-to-understand language. One purchase provides access for your entire team.