The American Bankers Association has sent a letter to the CFPB requesting several clarifications to the mortgage servicing rules. The ABA asks the CFPB to make the clarifications part of “regulatory guidance (or regulatory amendment where necessary) that is readily accessible to all servicers, their vendors and advisors, as well as examiners from other regulatory agencies that will examine banks for compliance with the CFPB rules.” The ABA also requests that any regulatory changes not necessitate major systems modifications.
The ABA requests the following clarifications:
The ABA states that its members need regulatory certainty regarding how to apply the
“120-day rule,” meaning the rule that prohibits a servicer from sending the first notice or filing for foreclosure unless a borrower’s mortgage loan is more than 120 days delinquent. Rather than leave it to the courts to determine if a bank has correctly applied the 120-day rule, the ABA wants the CFPB to specify how the rule applies to “rolling delinquencies,” meaning delinquencies that occur when delinquent borrowers resume making payments without making up past missed payments.
The ABA reiterates its view that servicers should not be required to provide periodic statements for charged-off mortgage loans. However, if the CFPB continues to require periodic statements for charge-offs, the ABA suggests there may be value in the CFPB adopting a provision that parallels the periodic statement exemption for open-end credit. That exemption provision, for open-end credit, states that a periodic statement need not be sent for an account if: (i) the creditor deems it uncollectible, (ii) delinquency collection proceedings have been instituted, (iii) the creditor has charged off the account in accordance with loan-loss provisions and will not charge any additional fees or interest on the account, or (iv) furnishing the statement would violate federal law.
The ABA urges the CFPB to finalize as published its interim final rule providing limited exemptions from the servicing rules in situations where the borrower has filed for bankruptcy. The ABA also recommends that if the CFPB elects to issue a final rule that does not include the current exemptions, it engage in a notice and comment process that will allow servicers to provide input on the rule before it is finalized.