The Consumer Financial Protection Bureau ( CFPB ) has issued the much-anticipated final rules that implement residential mortgage reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank ). In a series of reports, PYA is analyzing the impact of each of these new rules, this week looking at the impact of the final mortgage-servicing rules set forth in two notices–one amending Regulation Z, which implements the Truth in Lending Act ( TILA ); and a second amending Regulation X, which implements the Real Estate Settlement Procedures Act ( RESPA ).
The mortgage-servicing rules take effect January 10, 2014, and include a number of exemptions which, in certain situations, will reduce the burden on most community banks and credit unions.
The rules cover nine major topics and implement certain mortgage-servicing provisions of Dodd-Frank that relate to:
1. Periodic-billing statements Creditors, assignees, and servicers must provide a periodic statement for each billing cycle containing the following information:
The rule contains sample forms that may be used.
2. Interest-rate-adjustment notices for adjustable-rate mortgages ( ARMs ) Creditors, assignees, and servicers must provide a consumer whose mortgage has an adjustable rate with a notice between 210 and 240 days prior to the first payment due after the rate adjusts for the first time. Creditors, assignees, and servicers also must provide a notice between 60 and 120 days before payment at a new level is due when a rate adjustment causes the payment to change.
3. Prompt-payment crediting and payoff statements Servicers must promptly credit payments from borrowers as of the day of receipt, including principal, interest, and escrow. If a payment is received that is less than the amount due, the servicer may hold the payment in a suspense account until the amount in the suspense account covers the periodic payment. An accurate payoff balance must be provided to a consumer no later than seven business days after receipt of a written request for such information.
4. Force-placed insurance If a servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance, force-placed insurance may be charged to the borrower after the required notices have been provided. An initial notice must be sent to the borrower at least 45 days before charging the borrower for force-placed insurance coverage, and a second reminder notice must be sent no earlier than 30 days after the first notice and at least 15 days before charging the borrower for force-placed insurance coverage. If a borrower provides evidence of hazard insurance coverage, the servicer must cancel any force-placed insurance policy and refund any premiums paid for overlapping periods in which the borrower s coverage was in place.
5. Error resolution and information requests Servicers must comply with the error-resolution procedures for certain listed errors as well as any error relating to the servicing of a mortgage loan. Servicers are required to acknowledge the request or notice of error within five days. Servicers are required to correct the error and provide the borrower written notification within 30 to 45 days of the correction, or to conduct an investigation and provide the borrower written notification that no error occurred. In addition, servicers are required within 30 to 45 days to acknowledge borrower-written requests for information and either provide the information or explain why the information is not available.
6. General servicing policies, procedures, and requirements Servicers are required to establish policies and procedures reasonably designed to achieve objectives specified in the rule. Examples of specified objectives include:
7. Early intervention with delinquent borrowers Servicers must establish, or make good faith efforts to establish, live contact with borrowers by the 36th-day of their delinquency and promptly inform such borrowers that loss-mitigation options may be available. In addition, a servicer must provide a borrower a written notice with information about loss-mitigation options by the 45th-day of a borrower s delinquency.
8. Continuity of contact with delinquent borrowers Servicers are required to maintain reasonable policies and procedures pertaining to providing delinquent borrowers with access to personnel to assist them with loss-mitigation options where applicable. The servicer must assign personnel to a delinquent borrower by the 45th-day of a borrower s delinquency. These personnel should be accessible to the borrower by phone to assist the borrower in pursuing loss-mitigation options, including advising the borrower on the status of any loss-mitigation application and applicable timelines.
9. Loss-mitigation procedures Servicers will be required to follow specified loss-mitigation procedures for a mortgage loan secured by a borrower s principal residence, including:
View the final rules on mortgage servicing. To discuss the impact of the new mortgage rules on your institution, please contact the expert listed below at PYA, (800) 270-9629.
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