CFPB’s Mortgage Servicing Rules - Part 6: Early Intervention
Written by Elizabeth M. Young LaBerge, Senior Regulatory Compliance Counsel
As you know, at the end of the summer, the CFPB amended its mortgage servicing requirements with a Final Rule that beats Fyodor Dostoyevsky, Thomas Pynchon and Ayn Rand for page count. The NAFCU Regulatory Compliance Team has already blogged on several topics:
- Successors in Interest;
- Force-Placed Insurance;
- Loss Mitigation;
- Small Servicer Exemption; and
- Periodic Statements.
Also, when we last blogged on this topic, the date of publication had been announced as October 19, 2016. Now we also have the citation: the Final Rule has been published in the Federal Register at 81 Federal Register 72160 (October 19, 2016).
Today, we are going to highlight some changes to the early intervention requirements in section 1024.39 of Regulation X. Early Intervention has two big pieces: establishing live contact with a delinquent borrower and providing written notice. But first, itâÂÂs important to highlight a new definition in Regulation X.
New Definition of Delinquency
Currently, there is discussion about when delinquency starts in the commentary of Regulation X. In its amendment, the CFPB added a formal definition to section 1024.31 for use across Regulation X. The definition does not differ from the existing commentary to early intervention:
âÂÂDelinquency means a period of time during which a borrower and a borrowerâÂÂs mortgage loan obligation are delinquent. A borrower and a borrowerâÂÂs mortgage loan obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid, until such time as no periodic payment is due and unpaid.â 81 Fed. Reg. 72160, 72371.
Establishing Live Contact
Under amended section 1024.39(a), the requirement for live contact is no longer solely required before âÂÂthe 36th day of the borrowerâÂÂs delinquency;â it is required âÂÂagain no later than 36 days after each payment due date so long as the borrower remains delinquent.â See, 81 Fed. Reg. 72372. So establishing or making an effort to establish live contact is required for each delinquent payment.
However, the new commentary also indicates the Bureau is not necessarily requiring the same efforts on a rolling basis. First, amended comment 39(a)-3 states that good faith efforts to establish live contact are relative to the age of the delinquency and responsiveness of the borrower. The amended commentary states that a phone call may be necessary to establish live contact on a new delinquency, but if an account has 6 or more missed payments, a written statement in the periodic statement or an email may satisfy the requirement. See, 81 Fed. Reg. 72381.
Also, an example in the commentary indicates that one attempt to establish live contact can be used to satisfy the requirement for multiple payments. Amended comment 39(a)-1.i.B. provides an example where a borrower has missed January, February and March payments. Where there is overlap in the 36 day period after payments, a single effort to establish contact can be used for multiple payments. See, 81 Fed. Reg. 72381.
Below is a table illustrating this example:
Providing Written Notice
There is a similar requirement in amended section 1024.39(b)(1) to provide the written notice in conjunction with each delinquent payment, rather than just by the 45th day of the borrowerâÂÂs delinquency. However amended section 1024.39(b)(1) only requires written notice to be sent once every 180 days. If, at that expiration of that 180 day period, the account is still more than 45 days delinquent, notice must be provided again. If the account is less than 45 days delinquent, then the credit union must simply provide additional notice no later than the 45 days after the payment due date for which they are delinquent. See, 81 Fed. Reg. 72372.
Written Notice and Bankruptcy. Notice must also be provided within 45 days of any bankruptcy filing, if the member is delinquent at the time of the filling. While the bankruptcy is ongoing, further written notice is not required, regardless of the 180 day rule or further delinquencies. If the member was current with the credit union at the time the bankruptcy was filed, but becomes delinquent during the course of the bankruptcy, the notice must be provided within 45 days of the delinquency, but not again during the bankruptcy. No notice is required if the member is in bankruptcy and has either requested no further contact under the FDCPA, or if there are no loss mitigation options available to that member. See, 81 Fed. Reg. 72372.
Written Notice and the FDCPA. Similarly, if the member has requested to cease contact under the FDCPA and no loss mitigation options are available to the member, the credit union is not obligated to send the written notice, even if no bankruptcy is involved. However, if loss mitigation options are available and no bankruptcy is involved, Regulation X still requires that the notice be sent. Amended section 1024.39(d) contains specific requirements for that notice, including new model clause language in MS-4(D) which will be added to Appendix MS. See, 81 Fed. Reg. 72372.
The amendments are dense, and your NAFCU Regulatory Compliance Team will keep sorting through the changes. NAFCU members should feel free to reach out to us with questions.