New Servicing Guidelines Going Into Effect January 10, 2014

by Baker Donelson

CFPB Focus

The new Consumer Financial Protection Bureau (CFPB) servicing rules effective January 10, 2014 will change the legal landscape for mortgage servicers tremendously. Servicers now have very little time to accommodate the new rules. 

These changes begin with the early intervention rules put in place by the CFPB. As of January 10, 2013, when a borrower defaults, a servicer must make a good faith effort to establish contact with the borrower by 36th day of their delinquency.  If the borrower's default continues after the attempted contact, the contact must be made for each delinquent payment, though written notice of the delinquency is required once every 180 days. Next, the servicer must provide the delinquent borrower with written notice specifying the available loss mitigation options, if available, by the 45th day of delinquency. There is an exemption in these rules for small servicers, for borrowers in bankruptcy, and for debt collectors where a borrower has exercised his right to demand that communications cease.

The next set of rule changes involve what the CFPB terms "continuity of contact." For all delinquent borrowers, the loan servicer must maintain reasonable policies to provide delinquent borrowers with access to personnel to assist with their loss mitigation efforts. Servicers must assign specific personnel to the delinquent borrower by the time the servicer provides written notice of loss mitigation options. The specified personnel should be accessible to the borrower by phone and should be able to advise the borrower on the status of any loss mitigation application, access all of the information provided by the borrower, and provide that information to those responsible for evaluating the borrower for loss mitigation options. Small servicers are exempt from these rules. Fortunately, the CFPB has stated that it will supervise servicers for compliance with the "continuity of contact" rules and that borrowers will not maintain a private right of action arising from the violation of these rules.

There also are substantial changes to the rules that govern a servicer's review of a borrower for loss mitigation options. Basically, if a borrower submits a loss mitigation application more than 45 days prior to foreclosure, the servicer must acknowledge receipt of the application in writing within five days, and must either tell the borrower that the application is complete or, if it is incomplete, must tell the borrower what information is needed to complete it. If additional information or documentation is necessary, the servicer must provide the borrower with a reasonable date by which the missing information should be submitted. The CFPB has declared that it would be impractical for a borrower to obtain and submit financial documentation in less than seven days.

Then, if a complete loss mitigation application is received more than 37 days before a foreclosure sale, the servicer must evaluate the borrower within 30 days for all loss mitigation options available under investors' eligibility rules, including retention and non-retention options.

The servicer must then provide a written decision including explanations for any denial.

If, on the other hand, loss mitigation is granted, the notice must specify the time and procedures for the borrower to accept or reject the servicer's offer. If the borrower does not respond within the appropriate time, the servicer may deem the borrower to have rejected the loss mitigation offer. If the borrower does not accept the offer formally but instead begins making payments in accordance with the offer by the deadline, the servicer must give the borrower a reasonable opportunity to complete the documentation necessary.

Next, the borrower may appeal the decision so long as the completed loss mitigation application is received 90 days or more before foreclosure sale. If the borrower is eligible to appeal, the denial notice must give the deadline for appealing and describe any requirements for making the appeal.

Finally, the CFPB rules bar dual tracking. If a complete loan application is submitted before the servicer has made the first notice or filing required for foreclosure, the servicer may not initiate foreclosure until: (a) it informs the borrower that the borrower is not eligible for loss mitigation options and any appeal has been exhausted; (b) the borrower rejects all loss mitigation offers, or (c) the borrower fails to comply with the terms of the loss mitigation option that was offered.

If the borrower submits a complete application after the foreclosure process commenced, but more than 37 days before sale, the servicer may not move for foreclosure judgment or conduct a sale until one of the same three conditions has been satisfied. While small servicers are exempted from these rules, please be aware that borrowers will have a private right of action.

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.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson

Baker Donelson 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.