CFPB 2016 Mortgage Servicing Rule Changes NAFCU Webinar November - - PowerPoint PPT Presentation

NAFCU Webinar November 30, 2016 Presented by John H. DeLoach

Post Office Box 4128 · Tallahassee, Florida 32315 (800) 377-3325 jdeloach@wggdlaw.com www.williamsgautier.com

CFPB 2016 Mortgage Servicing Rule Changes

Disclaimer – No Legal Advice

The information in this presentation is intended for general informational purposes only and does not constitute legal advice. DO NOT act upon this information without first consulting directly with your attorney regarding the specific application of the laws and regulations referenced herein to your specific

• circumstances. No attorney-client relationship is formed

as a result of this presentation.

Mortgage Servicing Rule Changes

• Promulgated by CFPB on November 20, 2014.
• Final rule completed on August 4, 2016, and published in

Federal Register on October 19, 2016.

• Known as “2016 Mortgage Servicing Rule.”
• Most provisions effective on October 19, 2017.
• Successor-in-interest provisions effective on April 19,

2018.

Mortgage Servicing Rule Changes

• 10 major areas of changes:
• Successors in interest.
• Definition of delinquency.
• Requests for information.
• Force-placed insurance.
• Early intervention.
• Loss mitigation.
• Prompt payment crediting.
• Periodic statements.
• Small servicers.
• FDCPA Interpretive Rule.

Question #1

• John Brown, the sole borrower on his home mortgage

loan, dies. John’s son, Sam, continues to make all loan payments (including escrow). What are our options?

• A.

Declare the loan in default and foreclose.

• B.

Tell Sam he must assume the loan or we will foreclose.

• C.

Do nothing as long as Sam continues to make all payments.

Successors in Interest

• New definition of “successor in interest” includes any

person who receives an ownership interest in property securing a mortgage loan from an existing borrower/owner via transfer:

• By devise, descent or law resulting from borrower’s

death.

• To a relative resulting from borrower’s death.
• To borrower’s spouse or children.
• To borrower’s spouse via divorce or separation.
• To an inter vivos trust with borrower as a beneficiary

and without a transfer of occupancy rights.

Successors in Interest

• Servicers must adopt policies and procedures to confirm

the identity and ownership interests of successors and promptly communicate such confirmation to successors.

• Confirmed successors are considered borrowers under

all Mortgage Servicing Rules (including information requests with limits on certain personal information on any other borrower).

• Don’t forget the Garn-St. Germain Act.

Definition of Delinquency

• “Delinquency” begins on the date a payment sufficient to

cover principal, interest and (as applicable) escrow becomes due and unpaid (regardless of any late fee grace period).

• Important for calculation of 120-day foreclosure waiting

period.

• New definition matches Fannie Mae/Freddie Mac note

standards.

Definition of Delinquency

• What about FDCPA “default” vs. “delinquency?
• What about non-monetary defaults under mortgages?

Requests for Information

• Requests for information regarding owner/assignee of

mortgage loans if Fannie Mae/Freddie Mac owns loan or acts as trustee of securitization trust.

• If no express request for the name or number of the

trust/pool, servicer can comply by providing Fannie/Freddie name and contact information.

• If express request for the name or number of the

trust/pool, servicer must provide trust name, trustee’s name and contact information.

Force-Placed Insurance

• New model form for initial notice to borrowers with

insufficient (rather than expired or expiring) hazard insurance coverage.

• New model form for reminder notice to borrowers with

insufficient (rather than expired or expiring) hazard insurance coverage.

• Servicers may include mortgage loan account number
• n new notices.

Question #2

• How many mortgage loans does your Credit Union

service?

• A.

None.

• B.

5,000 or less.

• C.

More than 5,000.

Early Intervention

• Only one written notice required in any given 180-day

period.

• If borrower is 45 days+ delinquent at end of any 180-day

period, servicer must provide notice within 180 days following date of prior notice.

• If borrower is less than 45 days delinquent at end of any

180-day period, servicer must provide notice within 45 days following the payment due date.

Early Intervention

• Live contact exemption if:
• Any borrower is in bankruptcy; or
• Servicer is FDCPA debt collector, and any borrower

invokes FDCPA cease communication protection.

• If either exemption applies, servicer exempt from written

notice requirements if no available loss mitigation option.

• If any available loss mitigation option, no exemption from

written notice requirements unless both exemptions apply.

Early Intervention

• Early intervention requirements resume once bankruptcy

case is closed/dismissed or borrower reaffirms personal liability for loan.

• If “ride through” bankrupt borrower discharges personal

liability, early intervention requirements resume if borrower makes any partial or periodic payment after commencement of bankruptcy.

Loss Mitigation

• Requirements apply throughout the life of loan for

borrower who cures delinquency at any time between prior application and subsequent application..

• Junior lien servicer can join a foreclosure action by

senior or junior lienholder even if borrower is not 120 days’ delinquent on servicer’s loan.

• Servicer has reasonable flexibility in setting a deadline

for returning documents for a loss mitigation application.

Loss Mitigation

• Detailed description of steps required to delay or dismiss

foreclosure action to avoid sale upon receipt of complete loss mitigation application more than 37 days before foreclosure sale.

• Notification to borrower required within 5 business days

following servicer’s receipt of a complete loss mitigation application with specific disclosures regarding expected time of review (30 days), borrower’s rights and protections and possible need for additional information.

Loss Mitigation

• Servicer required to exercise reasonable diligence in
• btaining all required information (including third party

information). Denial of application generally not available based on servicer’s failure to receive third party information.

• Notice of lacking information must be sent to borrower

within 30 days after receipt of complete application.

• Servicer permitted to offer short-term repayment plan

based on incomplete application (up to 6 months). Notice following offer must provide specific plan terms.

Loss Mitigation

• Servicer can stop collecting information from borrower

for particular loss mitigation option if servicer confirms that borrower is ineligible for option.

• Servicer may not stop collection information for any
• ption based solely on borrower’s stated preference.
• Servicer may only stop collecting information based on

borrower’s preference in conjunction with other information set forth in loan owner’s requirements.

Loss Mitigation

• Transfer of servicing does not affect loss mitigation rights

and foreclosure protections. Transferee servicer subject to same timelines applied to transferor servicer except:

• Additional 10 business days for acknowledgment

notice.

• 30 days to evaluate application if application was

complete before transfer.

Prompt Payment Crediting

• Periodic payments under temporary loss mitigation

programs must be credited according to loan agreement and can be applied as partial payments.

• Periodic payments under permanent loan modifications

made in accordance with the modification must be credited under terms of permanent loan agreement and cannot be applied as partial payments.

Periodic Statements

• Amended periodic statement disclosures for closed-end

mortgage loans that have been accelerated, are in temporary loss mitigation programs or have been permanently modified. Slightly different disclosure changes for each scenario (particularly “amount due” disclosures).

• Periodic statements (or coupon books as applicable)

generally required for bankrupt borrowers subject to specific exclusions related to cease communication requests, property surrender, lien avoidance and other circumstances.

Periodic Statements

• No periodic statements required for charged-off loans if

servicer will not charge additional fees or interest and provides final periodic statement with additional disclosures related to effects of charge-off.

• Bankruptcy-related periodic statement changes effective

April 19, 2018.

Small Servicer

• Definition of “small servicer” revised to exclude certain

seller-financed transactions from the “more than 5,000” count.

• More importantly, the proposed rule does not expand the

coverage of the Mortgage Servicing Rules as applied to small servicers. All existing small servicer exemptions remain in place.

FDCPA Interpretive Rule

• Safe harbor from FDCPA liability for services that take

following actions (as long as such actions otherwise comply with Mortgage Servicing Rule):

• Communications about a loan with a confirmed

successor in interest.

• Written early intervention notice to a borrower who

has invoked FDCPA cease communication protection.

• Response to borrower-initiated communication

concerning loss mitigation after borrower has invoked FDCPA cease communication protection.

Question #3

• What is the statute of limitations for a TILA/RESPA claim

for a mortgage loan?

• A.

1 year.

• B.

3 years.

• C.

There is no statute of limitations for a TILA/RESPA claim.

What’s Next?

• Implementation Plan.
• Review of Final Rule.
• Policies.
• Procedures.
• Vendor Requirements.
• Forms and Mapping.
• Training.
• Quality Control/Audit Plan.
• What about the Trump administration’s plans?

Question #4

• Please rate this webcast

– Excellent – Good – Fair – Poor

ANY QUESTIONS?

THE END