CFPB Issues Guidance on Mortgage Servicing Transfers (CFPB Bulletin 2013-1)

by Reed Smith

With the new mortgage servicing rules under the Real Estate Settlement Procedures Act (Regulation X) ("RESPA") scheduled to go into effect January 10, 2014, the Consumer Financial Protection Bureau’s ("CFPB") decision to issue guidance on the existing servicing transfer regulations may have been unexpected by some. However, given the high volume of recent servicing rights transfers, the CFPB determined that the time was right to provide servicers with notice that their policies and procedures on servicing rights transfers will be closely scrutinized. The guidance serves as "advance notice" of what the CFPB’s examiners will be looking for with regard to transfers of mortgage servicing.

The current rules regarding mortgage servicing transfers, which will be replaced by the new servicing rules, can be found in Regulation X Section 1024.21. The requirements apply to both the transferor servicer and the transferee servicer of first lien mortgage loans. Both servicers are required to provide a written notice of servicing transfer containing specific information. A sample notice is included in the regulation. In addition, if the transferor servicer receives a payment within 60 days of the servicing transfer date, a late fee may not be imposed on the borrower.

In addition to the foregoing rules, the CFPB Guidance references the broad regulatory rubric that establishes its authority over servicers, including, among other things, the prohibitions on furnishing inaccurate information about consumers under the Fair Credit Reporting Act; the obligations on servicers to the extent they act as a debt collector under the Fair Debt Collection Act; the general prohibition against unfair, deceptive, abusive acts or practices; and the overall enforcement of federal consumer financial laws and regulations.

The CFPB Guidance focuses particularly on the negative effect servicing transfers can have on consumers who are in the midst of the loss mitigation process. The CFPB highlights a number of areas it intends to pay particular attention to when assessing whether servicers have appropriately addressed risks to consumers in connection with servicing transfers. These include the transferor servicer’s plans in preparation for the transfer, with particular focus on the transfer of information to the transferee servicer so as not to interrupt servicing to consumers; the transferee servicer’s plans for handling files transferred to it, with particular focus on the data transfer and the transferee servicer’s verification of the accuracy of such information; and the transferor servicer’s and transferee servicer’s processes and procedures for dealing with loans in the process of loss mitigation. The specific issues identified in each of these areas warrant review by all servicers.

In addition to the increased supervisory focus, the CFPB will in appropriate cases require servicers engaged in significant servicing transfers to prepare and submit written plans to the CFPB detailing how they will manage the consumer risks associated with the transfers. The written plans would require, among other things, a detailed description of the transaction and the system testing data, a description of the training plan for staff involved in handling the transferred loans, and a customer service plan for dealing with loss mitigation. The requirement by the CFPB to submit a plan does not mean that the CFPB has the right to approve the servicing transfer.

The guidance also provides more specifics as to what servicing policies and procedures should look like for the purposes of the mortgage servicing rules that take effect January 10, 2014, in particular as they relate to facilitating the transfer of information from transferor servicer to its transferee. The guidance cites Official Bureau Interpretations addressing electronic data transmissions, with particular emphasis on the obligations of both the transferee servicer and the transferor servicer to ensure accurate continuity of information flow reflecting the status of ongoing borrower loss mitigation, including any agreements with the borrower and any analysis by the servicer.

Click here to view the CFPB’s Guidance.

Through its Financial Industry Group and Global Regulatory Enforcement Group, Reed Smith is providing advice relating to (1) developing appropriate mortgage servicing policies and procedures and (2) representing mortgage owners, mortgage servicers, purchasers and subservicers in a variety of transactions, including mortgage servicing purchase and sales.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:

Reed Smith

Reed Smith on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.