In response to requests for clarifications, the CFPB released a bulletin related to the mortgage servicing rules that take effect in January 2014 (see January 22, 2013 Alert). The bulletin responds to requests for further explanation on the following, among other things:
- Communications with delinquent borrowers under the provisions requiring early intervention. The provisions requiring early intervention with delinquent borrowers requires servicers to make good faith efforts to establish live contact with borrowers by the 36th day of delinquency. The bulletin clarifies that this requirement can be met through various means of contact that a servicer has with a borrower. For example, the live contact requirement is met if the servicer has established and is maintaining ongoing contact with the borrower with regard to the borrower’s completion of a loss mitigation application or by adding a brief script to collection calls to inform consumers that loss mitigation options may be available.
- Servicer obligations to provide certain notices and communications to delinquent borrowers who have exercised rights under the FDCPA prohibiting debt collectors from contacting them. The bulletin provides the CFPB’s advisory opinion relating to the interplay between certain requirements under Regulation Z and Regulation X to provide certain communications and the FDCPA’s “cease communication” requirement. The CFPB concluded that the FDPCA’s “cease communication” provision does not make servicers that are debt collectors liable under the FDPCA if the comply with certain provisions under Regulation Z, including the error resolution, requests for information, periodic statements, loss mitigation, and adjustable-rate mortgage initial interest rate adjustment provisions. However, the CFPB did not extend this to the provisions requiring early intervention with delinquent borrowers or the requirements for ARM interest rate adjustment with a corresponding payment change.
In conjunction with the bulletin, the CFPB issued an interim final rule to clarify compliance with the mortgage rules for borrowers who have filed bankruptcy and in relation to the FDCPA. In response to questions from servicers about how the servicing rules intersect with bankruptcy law and the FDPCA and noting that it could not resolve the issues before the mortgage servicing rules take effect in January 2014, the CFPB created “narrow exemptions” from the servicing rules to allow it time to complete additional analysis. The interim final rule creates a safe harbor from liability under the FDCPA when a servicer responds to certain borrower communications in compliance with the mortgage serving rules even if a borrower has sent a “cease communication.” The interim final rule also exempts servicers from the requirement to provide periodic account statements and certain early intervention contacts with borrowers who are in bankruptcy. Finally, the interim final rule amended the HOEPA rule (see January 22, 2013 Alert) by clarifying the specific disclosures that must be provided before counseling for high-cost mortgages can occur.