On October 4, 2017, the Consumer Financial Protection Bureau (CFPB) issued an interim final rule amending a provision of Regulation X relating to the timing servicers must observe when communicating 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 periodic written notices regarding 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). However, the rule also provides that, if the borrower has invoked his or her right not to be communicated with pursuant to the FDCPA, the servicer may not send these early intervention notices more than once during any 180-day period. Taken together with other timing provisions of Regulation X, mortgage servicers have expressed concern that the 2016 rule requires them to send a subsequent early intervention notice on exactly the 180th day after sending the previous notice—a proposition raising serious operational challenges for servicers, who 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 in which to the 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 CFPB also issued a separate proposed rule further amending the 2016 Mortgage Servicing Final Rule, this time concerning the timing for servicers to provide periodic statements for a borrower’s bankruptcy case. 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 providing periodic statements in connection with a borrower’s bankruptcy case.
The interim final rule concerning early intervention notices given to borrowers who have requested not to be contacted under the FDCPA will become effective October 19, 2017—the same day that most of the provisions of the 2016 Mortgage Servicing Final Rule go into effect. The proposed rule concerning the timing of periodic disclosures given to borrowers in bankruptcy will go into effect on April 19, 2018, which is the date that the relevant provisions of the 2016 Mortgage Servicing Final Rule will take effect. The CFPB has invited comment from stakeholders for both the interim final rule and the proposed rule, and those comments will be due 30 days after the interim rule and proposed rule are published in the Federal Register.
The 2016 Mortgage Servicing Final Rule and its various amendments will undoubtedly have a dramatic impact on how servicers conduct their businesses, so servicers are encouraged to familiarize themselves with the interim final rule and the proposed rule and submit comments if they believe additional feedback would be helpful.