On August 4, 2016, the Consumer Financial Protection Bureau (“CFPB”) issued its final rule setting forth amendments and clarifications to mortgage servicing regulations. These changes follow a prior round of revisions to mortgage servicing regulations that went into effect in January 2014. Since proposing the amendments to the regulations in November 2014, the CFPB received and reviewed hundreds of comments. At just over 900 pages in length, the final rule addresses numerous areas of mortgage servicing, including the following:
- Requiring servicers to provide a borrower with foreclosure protections more than once over the life of the loan: Servicers must follow loss mitigation requirements more than once during the life of a loan if a borrower becomes current on his or her payments after submitting a prior, complete loss mitigation application.
- Broadening the definition of “successor in interest” and providing that successors in interest should generally receive the same protections as the original borrower: The definition of “successor in interest” is now broader and includes individuals such as those 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 amendments also require servicers to comply with loss mitigation requirements for successors in interest as they would for the original borrower.
- Requiring servicers to provide more information to borrowers in bankruptcy: Servicers will be required—subject to certain exemptions—to provide borrowers in bankruptcy with certain periodic statements and early written intervention notices regarding loss mitigation options.
- Requiring servicers to notify borrowers when their loss mitigation applications are complete: Servicers will be required to provide written notice that borrowers’ loss mitigation applications are complete within five days of receiving a complete application.
- Providing specific timing requirements servicers must follow for borrowers in loss mitigation when a servicing transfer occurs: When a loan is servicing transferred, the transferee servicer will be required to comply with the same loss mitigation requirements within the same timeframes as the transferor servicer, subject to extensions of these timelines under certain circumstances. The transferee servicer must also send the borrower a notice of the transfer within 10 business days of the transfer.
- Clarifications regarding dual-tracking: The new regulations clarify that a servicer may not proceed with foreclosure until after the borrower’s loss mitigation application has been denied, withdrawn, or the borrower fails to perform.
- Clarifying when a borrower becomes delinquent: The new regulations clarify that a borrower becomes delinquent as of the date a full periodic payment becomes due and is unpaid.
On the same day as it issued this final rule, the CFPB also issued an interpretive final rule under the Fair Debt Collection Practices Act (“FDCPA”), which seeks to clarify the interaction between the FDCPA requirements and the amended mortgage servicing requirements.
As to timing, most of the new requirements become effective one year after the publication of the final rule in the Federal Register, such that they will likely become effective in the 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 in the Federal Register, such that they will likely become effective in the spring of 2018.