Today, the Consumer Financial Protection Bureau (CFPB) released the long-awaited amendments to the existing mortgage servicing rules in Regulations X and Z. For the next 12-18 months, Mortgage servicers will once again be forced to shift some of their focus and energy towards implementing another CFPB rulemaking. We encourage everyone to kick off this implementation period by joining us for the first webinar in our “CFPB Mortgage Servicing Amendments” series, which is scheduled for Thursday, August 11, 2016. More information on the webinar series, including how to register, is at the end of this post.
Today’s release caps a busy week for the CFPB, and one that will undoubtedly have a lasting impact on the mortgage industry, particularly with respect to mortgage servicers. To recap:
- Thursday, July 28 – Proposal to overhaul the debt collection market is released;
- Friday, July 29 – Proposed amendments to the Know Before You Owe rules are released;
- Friday, July 29 – A notice is posted in the Federal Register proposing to would allow consumers to rate companies’ responses to complaints that are submitted through the CFPB portal;
- Tuesday, August 2 – CFPB’s “Principles for the Future of Loss Mitigation” are released; and
- Thursday, August 4 – Amendments to the 2013 Mortgage Servicing Rules are released.
Each of these events has been newsworthy in their own right, but today’s release of final servicing rules will likely have the biggest immediate impact.
As expected, today’s release is generally consistent with their 2014 proposal and touches nearly all aspects of the current mortgage servicing framework in Regulations X and Z. In reading the new document, one thing that immediately sticks out is that the CFPB apparently does not think the final rule will be overly difficult, or burdensome, to implement. The release specifically explains that they “believe that the majority of the provisions in this final rule would impose, at most, minimal new compliance burdens, and in many cases would reduce the compliance burden relative to the existing rules.”
We certainly are skeptical of that claim. While additional clarity in some areas will certainly help from a compliance perspective, history has repeatedly shown—especially in the mortgage industry—that significant regulatory changes require significant compliance and implementation efforts. To fully and effectively operationalize today’s final rule, most servicers will need to make extensive changes in the following areas:
- Successors in interest;
- Borrowers in bankruptcy;
- Loss mitigation protections; and
- Servicing transfers.
Less significant changes are also being made to force-placed insurance notice requirements, payment crediting requirements, the definition of delinquency, and the definition of a small servicer.
Today’s release also provides answers to a number of hot-topic questions that have been circulating throughout the industry and with the trade associations since the proposal was released at the end of 2014. For example, we now know that the CFPB is giving the industry twelve months from the date the final rule is posted in the Federal Register to implement most of the new requirements. Those provisions related to successors in interest and periodic statements for borrowers in bankruptcy, on the other hand, will become effective eighteen months after publication in the Federal Register. The CFPB is not, however, offering a safe harbor for early compliance.
We also now know that the CFPB is largely moving forward with its proposal related to the treatment of, and protections afforded to, successors in interest despite the industry’s concerns. The CFPB notes in today’s final rule that it received comments regarding privacy concerns, but maintains that “complying with the final rule does not cause servicers to violate the GLBA [Gramm Leach Bliley Act] or its implementing regulations,” and that “a confirmed successor in interest’s ownership interest in the property securing the mortgage loan is sufficient to warrant that person’s access to information about the mortgage loan.” However, to somewhat address the industry’s privacy concerns, additional provisions are being added to limit the types of information that a confirmed successor in interest may receive about a borrower, and vice versa.
Now that the final rules have been made public, servicers would be well advised to begin digesting and planning out the next 12-18 months of implementation.