Changes have been finalized on the mortgage servicing rules that provides more borrower protections on foreclosures and expands protections beyond the original borrowers.
Servicing rules previously finalized by the Consumer Financial Protection Bureau that originally went into effect in January 2014 were intended to address widespread problems.
Amendments to the rules were proposed by the regulator in November 2014, and on Thursday the regulator issued a final rule that amends the original mortgage servicing rules.
The final rule adopted many of the proposed provisions as well as making changes to the proposal based on public comments.
Among the provisions is a requirement that servicers provide foreclosure protections more than once if the borrowers have brought their loans current at any time since submitting the prior complete loss mitigation application.
“This change will be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship — such as the loss of a job or the death of a family member — that could otherwise cause them to face foreclosure,” the CFPB’s statement said.
Successors in interest — including widows, ex spouses and other people who receive title to the property upon the death of a relative or joint tenant — will now be afforded the same protections as the original borrower under the latest updates.
Another change requires servicers to provide bankrupt borrowers with periodic statements tailored for bankruptcy. It also requires that
a modified written early intervention notice is provided to bankrupt borrowers to let them know about loss mitigation options.
“Servicers also currently do not have to provide early intervention loss mitigation information to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act,” the statement said. “Today’s final rule generally requires servicers to provide modified written early intervention notices to let those borrowers also know about loss mitigation options.”
Servicers will now be required to promptly notify a borrower in writing when
a loss-mitigation application is complete so that borrowers will be aware of the status of foreclosure protections.
The final rule requires that when loan servicing is transferred, the new servicer must send an acknowledgment within 10 days of receiving a loss-mitigation application
if it is submitted shortly before the transfer.
If the application was completed prior to the transfer, the new servicer has 30 days from the transfer date to evaluate it. If more information is needed to evaluate the application, foreclosure protections will be preserved in the interim.
When a borrower submits an appeal, the new servicer has 30 days to make a decision.
The new rule clarifies that when a loss-mitigation application is received more than 37 days prior to a scheduled foreclosure sale,
servicers and their foreclosure counsel cannot move for a foreclosure judgment or order of sale even if a third party conducts the sale proceedings. Exceptions are allowed when the borrower’s loss-mitigation application is properly denied or withdrawn, or when the borrower fails to perform on a loss-mitigation agreement.
“The clarifications will aid servicers in complying with, and assist courts in applying, the dual-tracking prohibitions in foreclosure proceedings to prevent wrongful foreclosures,” the CFPB stated.
One more clarification requires that when a borrower misses a payment then subsequently makes it up and if the servicer applies that payment to the oldest outstanding periodic payment, the date delinquency began advances.
“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,” the announcement indicated. “The increased clarity will help ensure borrowers are treated uniformly and fairly.”
Other changes in the servicing rules include
providing servicers flexibility to comply with certain force-placed insurance and periodic statement disclosure requirements; clarification of several requirements regarding early intervention, loss mitigation, information requests, and prompt crediting of payments; the small servicer exemption; and exempting servicers from providing periodic statements in certain circumstances when the loan has been charged off.
Most of the final rule’s provisions take effect 12 months after the rule is published in the Federal Register, though provisions related to successors in interest and periodic statements for borrowers in bankruptcy will take effect 18 months after publication.
National Association of Federal Credit Unions Director of Regulatory Affairs Alexander Monterrubio issued a statement indicating skepticism about some aspects of the final rule.
“NAFCU will thoroughly analyze this 900-page final rule on mortgage servicing for its full impact on credit unions,” Monterrubio stated. “At first glance, there appear to be a number of provisions that will substantially impact credit unions. For example, the projected implementation dates for some portions of this rule are likely to coincide with credit unions’ ongoing compliance preparations under CFPB’s revised Home Mortgage Disclosure Act rule.
“The HMDA rule changes alone will excessively tax the resources of many credit unions.”
A joint statement from the California Reinvestment Coalition and the Housing and Economic Rights Advocates, though, praised the final rule for the successors in interest provision.
