CFPB proposes changes to mortgage servicing rules in regs X, Z

December 18, 2014

WASHINGTON (12/19/14)--The Consumer Financial Protection Bureau (CFPB) has proposed amendments to its mortgage servicing rules that were first introduced in 2013. The proposal would amend provisions in Regulation X, which implements the Real Estate Settlement Procedures Act, and Regulation Z, which implements the Truth in Lending Act.

According to the CFPB, the proposed amendments focus primarily on clarifying, revising or amending provisions regarding force placed insurance notices, policies and procedures, early intervention, and loss mitigation requirements under Regulation X's servicing provisions. The Regulation Z amendments involve periodic statement requirements under its servicing provisions.

Among other things, the proposal would:

  • Change how a servicer must respond to requests for information asking for ownership information for loans in trust for which Fannie Mae or Freddie Mac is the trustee, investor, or guarantor;

  • Clarify the early intervention live contact obligations and written early intervention notice obligations. The bureau is also proposing to require servicers to provide written early intervention notices to certain borrowers who are in bankruptcy or who have invoked their cease communication rights under the Fair Debt Collection Practices Act;

  • Clarify how servicers must treat periodic payments made by consumers who are performing under either temporary loss mitigation programs or permanent loan modifications. Under the proposal, periodic payments made to temporary loss mitigation programs would continue to be credited according to the loan contract and could be credited as partial payments, while periodic payments made to a permanent loan modification would be credited under the terms of the permanent loan agreement;

  • Exclude certain seller-financed transactions from being counted toward the 5,000 loan limit placed on institutions defined as "small servicers," allowing servicers that would otherwise qualify for small servicer status to retain their exemption while servicing those transactions; and

  • Make several changes to loss mitigation requirements, including requiring servicers to meet the loss mitigation requirements more than once in the life of a loan for borrowers who become current after a delinquency; and clarify that servicers have significant flexibility in setting a reasonable date by which a borrower must return documents and information to complete an application, so long as the date maximizes borrower protections and allows borrowers a reasonable period of time to return documents and information.

The proposed rule also makes technical corrections to several provisions of Regulations X and Z. Comments on the proposal are due March 16.