In August 2016, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending many of the mortgage servicing provisions found in both Reg Z (Truth in Lending Act, or TILA) and Reg X (Real Estate Settlement Procedures Act, or RESPA).
Changes to loss mitigation procedures, early intervention requirements, and accelerated and charged-off loan statements were effective Oct. 19, 2017. Changes involving successors in interest and borrowers in bankruptcy statements take effect April 19, 2018.
Let’s see how the CFPB’s final rule might affect your credit union’s mortgage servicing operations.
Loss mitigation procedures
RESPA requires a credit union to promptly evaluate an application for loss mitigation assistance from a borrower who is delinquent on a mortgage secured by their primary residence.
The final rule clarifies that the credit union must comply with this requirement each time the borrower experiences a subsequent delinquency, so long as they have brought the loan current since the last time the credit union reviewed an application for loss mitigation assistance.
Early intervention requirements
For delinquent mortgage loans secured by the borrower’s primary residence, RESPA requires your credit union to make a good faith attempt to establish live contact with the borrower no later than their 36th day of delinquency. In addition, you must provide a written notice of delinquency no later than the borrower’s 45th day of delinquency.
The final rule extends the written notice requirement to borrowers who have filed for bankruptcy. While the credit union is exempt from the 36-day live contact requirement in this situation, it must still provide the written notice of delinquency unless one of the following exceptions applies:
If your cooperative is required to provide the 45-day written notice of delinquency under this provision, the following rules apply:
Accelerated loan statements
The final rule clarifies that if a closed-end mortgage loan secured by a dwelling has been accelerated due to default, subsequent periodic statements must identify the amount the credit union is willing to accept to reinstate the loan.
For example, a member is behind three monthly payments of $1,200 each on their mortgage loan. Because of this default, the credit union has accelerated the loan (calling for immediate repayment of the full outstanding balance).
But if the credit union will instead reinstate the loan upon receipt of the three delinquent monthly payments ($3,600),
that amount must be reflected on the periodic statement as the amount due.
Charged-off loan statements
The final rule also provides that if a closed-end mortgage loan secured by a dwelling has been charged off, the credit union may cease providing a periodic statement so long as: