Compliance Blog

Written by Steve Van Beek

Last Friday, the CFPB issued the latest mortgage proposals - covering the mortgage servicing side via Regulation Z (TILA) and Regulation X (RESPA).  These proposals cover quite a broad scope of issues and the best starting point may be to get a firm understanding of which areas the CFPB is proposing to change.  

Along with the proposals, the CFPB issued a 7-page Summary that provides a snapshot of the upcoming changes.  There are 9 main proposed changes (although there will be numerous other changes within each proposed change) with 3 changing Regulation Z and 6 changing Regulation X.  Below are the CFPB's summary for the Regulation Z proposed changes.  

Note:  This blog post includes the summaries for the first 3 proposed changes along with the summary, preamble, regulatory text, official staff commentary and any model forms.  Those extras will be linked directly below each summary.  We'll look at the RESPA changes later this week.  

Regulation Z (TILA)

1.  Periodic billing statements (TILA proposal):   The Dodd-Frank Act generally mandates that servicers of closed-end residential mortgage loans (other than reverse mortgages)must send a periodic statement for each billing cycle.  These statements must meet the timing, form, and content requirements provided for in the rule.  The proposal contains sample forms that servicers could use.  The periodic statement requirement generally would not apply for fixed-rate loans if the servicer provides a coupon book, so long as the coupon book contains certain information specified in the rule and certain other information is made available to the consumer.  The proposal also includes an exception for small servicers that service 1000 or fewer mortgage loans and service only mortgage loans that they originated or own.  

• Summary of Periodic Statement (2 pages)
• Preamble of Proposed Periodic Statement Requirement (24 pages)
• Proposed Regulatory Text for Periodic Statement Requirement (4 pages)
• Proposed Official Staff Commentary for Periodic Statement Requirement (5 pages)
• Proposed Model Forms for Periodic Statement Requirement (4 forms)

2.  Adjustable-rate mortgage interest-rate adjustment notices (TILA proposal):  Servicers would have to provide a consumer whose mortgage has an adjustable rate with a notice 60 to 120 days before an adjustment which causes the payment to change.  The servicer would also have to provide an earlier notice 210 to 240 days prior to the first rate adjustment.  This first notice may contain an estimate of the rate and payment change.  Other than this initial notice, servicers would no longer be required to provide an annual notice if a rate adjustment does not result in an increase in the monthly payment.  The proposal contains model and sample forms that servicers could use.

• Summary of Adjustment Notices (4 pages)
• Preamble of Adjustment Notices (43 pages)
• Proposed Regulatory Text for Adjustment Notices (6 pages)
• Proposed Official Staff Commentary for Adjustment Notices (9 pages)
• Proposed Model Forms for Adjustment Notices (4 forms)

3.  Prompt payment crediting and payoff payments (TILA proposal):  As required by the Dodd-Frank Act, servicers must promptly credit payments from borrowers, generally on the day of receipt.  If a servicer receives a payment that is less than a full contractual payment, the payment may be held in a suspense account.  When the amount in the suspense account covers a full installment of principal, interest, and escrow (if applicable), the proposal would require the servicer to apply the funds to the oldest outstanding payment owed.  A servicer also would be required to send an accurate payoff balance to a consumer no later than seven business days after receipt of a written request from the borrower for such information. 

• Summary of Prompt Crediting and Payoff Amounts (1 page)
• Preamble of Prompt Crediting and Payoff Amounts (5 pages)
• Proposed Regulatory Text of Prompt Crediting and Payoff Amounts (3 pages)
• Proposed Official Staff Commentary of Prompt Crediting and Payoff Amounts (2 pages)

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NAFCU Webcast on September 5th.  Just a reminder that NAFCU will be hosting a September 5th webcast titled "Inside the CFPB's Mortgage Proposals."  I'll be analyzing the CFPB's mortgage proposals over the last couple of weeks - including these mortgage servicing proposals.  If you are interested, sign up by August 29th to Save $100.  

Bonus: The September 5th webcast will be a full 3-hours of regulatory fun (2 p.m. to 5 p.m. EDT).  As always, NAFCU's webcasts and conferences are open to anyone - you do not need to be a NAFCU member to attend.  And, remember that you (or your colleagues) can watch the archived verson for up to one year.    

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