Compliance: CFPB issues updated mortgage services rules

August 8, 2016

The Consumer Financial Protection Bureau’s (CFPB) mortgage servicing requirements will likely add to credit unions’ regulatory burden, CUNA believes, but what do they mean for credit unions from a compliance standpoint? CUNA compliance staff examined the new measures, which are designed to provide protections to borrowers facing foreclosure.

The measures finalize proposed mortgage servicing amendments issued in November 2014. They clarify protections when the servicing of the loan is transferred and ensure that successors in interest who inherit or receive the property are afforded the same protections as the borrower, as well as providing loan information to borrowers in bankruptcy. 

Highlights from the new rule include:

  • Allowing certain borrowers to receive loss mitigation protections more than once, giving borrowers the right to right to be evaluated under the CFPB’s requirements for options to avoid foreclosure more than once. Specifically, borrowers who have brought their loans current at any time since submitting a loss mitigation application will now be eligible for protection again;
  • Defining “successors in interest” more broadly to include persons who receive property upon the death of a relative or joint tenant; as a result of a divorce or legal separation; through certain trusts; or from a spouse or parent. Servicers will now be required to provide information to potential successors in interest about the documents needed to confirm their status. The rule also requires that confirmed successors in interest be given the same notices and documents that the borrower would receive;
  • Requiring servicers to provide specific periodic statements and loss mitigation information to bankrupt borrowers in certain circumstances, such as a modified early intervention notice to inform the borrower of loss mitigation options;
  • Requiring servicers to notify borrowers when their loss mitigation application is complete.  Whether a borrower is entitled to certain foreclosure protections can depend on the date the borrower completes the application, so knowledge of when the application is complete is a crucial piece of information. In the case of a servicing transfer, the new servicer must comply with the loss mitigation requirements within the same timeframes limited extensions can be provided under certain circumstances; and
  • Clarifying the date that a borrower becomes delinquent, and providing that delinquency, for the purposes of servicing rules, begins on the date a borrower’s periodic payment becomes due and unpaid. The final rule also allows servicers the discretion, under certain circumstances, to consider a borrower as having made a timely payment even if the borrower’s payment falls short of a full periodic payment.

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