The Consumer Financial Protection Bureau (“CFPB”) issued its final rule setting forth amendments and clarifications to mortgage servicing regulations on August 4, 2016. The final rule will implement new servicing regulations including the following:
- Additional foreclosure protection for borrowers. If a borrower becomes current on his or her payments after submitting a prior, complete loss mitigation application, mortgage servicers will be required to follow loss mitigation requirements more than once during the life of a loan.
- Definition of “Successor in Interest” and additional protections provided. The definition of “successor in interest” will include individuals who receive property after the death of a relative or joint owner, through a divorce, through certain trusts or from a spouse or parent. The final rule will also require servicers to comply with loss mitigation requirements for successors in interest.
- More information to borrowers in bankruptcy. Servicers will be required to provide borrowers in bankruptcy with certain periodic statements and early written intervention notices regarding loss mitigation options.
- Borrowers must be notified when their loss mitigation applications are complete. Servicers will be required to provide written notice informing borrowers that their loss mitigation applications are complete within five days of receiving a complete application.
- Specific timing requirements when servicing transfer occurs. When loan service is transferred, the transferee servicer will be required to comply with the same loss mitigation requirements within the same timeframes as the transferor servicer. The transferee servicer must also send the borrower a notice of the transfer within 10 business days of the transfer.
- Clarifications regarding dual-tracking. Servicers may not proceed with foreclosure until the after the borrower’s loss mitigation application has been denied, withdrawn, or the borrower fails to perform.
- Clarification as to when a borrower becomes delinquent. A borrower becomes delinquent as of the date a full periodic payment becomes due and is unpaid.
Most of the new requirements become effective one year after the publication of the final rule. As a result, the majority of these new rules will likely become effective in late summer or fall of 2017. Some portions of the new requirements, including those addressing successors in interest and the provision of periodic statements to borrowers in bankruptcy, will not become effective until 18 months after the final rule is published thus making it likely that such rules will become effective in the spring of 2018.