On October 4, 2017, the Consumer Financial Protection Bureau (CFPB) issued an interim final rule amending a provision of Regulation X regarding the timing for mortgage servicers to communicate with borrowers about foreclosure prevention alternatives. On the same date, the CFPB also issued a proposed rule regarding timing requirements for periodic statements provided to borrowers in bankruptcy. Both the interim final rule and the proposed rule relate to the 2016 Mortgage Servicing Final Rule, which effected several changes to the mortgage servicing rules under Regulation X, which implements the Real Estate Settlement Procedures Act, and Regulation Z, which implements the Truth in Lending Act.
The 2016 Mortgage Servicing Final Rule requires mortgage servicers to send written notices about loss mitigation options, called “early intervention notices,” to delinquent borrowers. Servicers are required to send these notices to a borrower even if the borrower has requested that the servicer cease communications with him or her, as is the borrower’s right under the Fair Debt Collection Practices Act (FDCPA). The rule, however, also provides that if the borrower has invoked the right to have the servicer cease communications pursuant to the FDCPA, the servicer may not send an early intervention notice more than once during any 180-day period. Taken together with other timing provisions of Regulation X, mortgage servicers have expressed concern that under the 2016 rule, they must send a subsequent early intervention notice on exactly the 180th day after sending the previous notice—a proposition raising operational challenges for servicers, which would experience substantial difficulty complying with such a precise timing requirement.
To address this unintended consequence, the CFPB issued the interim final rule, which allows mortgage servicers a 10-day cushion after the 180-day period has concluded to provide the required notice. According to CFPB Director Richard Cordray, “Today’s action should make it easier for mortgage borrowers to receive timely information from their mortgage servicers about available options for saving their home, even if they have submitted a request to cease communication.” The interim final rule will become effective on October 19, 2017—the same day that most of the provisions of the 2016 Mortgage Servicing Final Rule go into effect.
The CFPB also issued a proposed rule amending the 2016 Mortgage Servicing Final Rule. Recognizing that certain provisions of the 2016 Mortgage Servicing Final Rule may be unnecessarily complicated and may be subject to varying interpretations, the CFPB’s proposed rule clarifies the timing for mortgage servicers to provide periodic statements in connection with a borrower’s bankruptcy case. The proposed rule will go into effect on April 19, 2018, the date that the relevant provisions of the 2016 Mortgage Servicing Final Rule take effect.
The CFPB has invited comment from the public for both the interim final rule and the proposed rule. Those comments will be due 30 days after the interim final rule and the proposed rule are published in the Federal Register.
The 2016 Mortgage Servicing Final Rule and its amendments undoubtedly will have a significant impact on how mortgage servicers conduct business. Servicers are encouraged to familiarize themselves with the interim final rule and the proposed rule and to submit comments if they believe that additional feedback would be helpful.