Guidance on Mortgage Servicing Rules

CFPB aims to provide “greater clarity to the market” in specific scenarios.

December 9, 2013

This fall, the Consumer Financial Protection Bureau (CFPB) released Bulletin 2013-12 and an interim final rule to provide “greater clarity to the market” concerning mortgage servicing rules that take effect in January 2014.

They explain three servicing issues:

1. Home retention efforts after a borrower dies: In cases in which a borrower dies, the rules the CFPB issued in January 2013 require servicers to have policies and procedures in place to ensure they promptly identify and communicate with family members, heirs, or other parties who have a legal interest in the home.

The CFPB bulletin provides examples of such servicer policies and procedures, including allowing for continued payment on the mortgage as well as evaluating the heir (or whoever acquires the legal interest in the home) for assumption of the mortgage and, if appropriate, for loss mitigation measures.

2. Early intervention requirement to contact delinquent borrowers: The CFPB’s new rules require servicers to attempt to contact borrowers each time they miss a payment, to provide information that can help get them on track.

The bulletin clarifies the requirement may be met through other contact servicers have with such borrowers—for example, when evaluating them for loss mitigation or during collection calls. Also, the method of attempted contact may vary depending on how long a borrower is delinquent or whether the borrower has responded to earlier servicer attempts to communicate.

3. Interplay between the servicing rules, bankruptcy code, and the Fair Debt Collection Practices Act (FDCPA): Both the FDCPA and bankruptcy law provide protections for consumers who decide to invoke them, and restrict certain types of communications regarding their debts. The CFPB: