On October 4, the Consumer Financial Protection Bureau ("CFPB") issued an interim final rule and a proposed rule related to the 2016 Mortgage Servicing Final Rule to clarify the timing of and facilitate the provision of certain required communications with borrowers.
The CFPB amended its mortgage servicing rules in August 2016, to go into effect in large part on October 19, 2017 (the "2016 Final Rule"). One provision of the 2016 Final Rule requires mortgage servicers to send certain delinquent borrowers early intervention notices, modified for use with a borrower who has requested a cease in communication under the Fair Debt Collection Practices Act ("FDCPA"). The FDCPA allows borrowers to request that servicers and other companies refrain from contacting them except in certain circumstances, such as when a borrower becomes delinquent. The 2016 Final Rule exempts servicers from sending the early intervention notices only in situations where the borrower does not have a loss mitigation option available or where the borrower is a debtor in bankruptcy.
Under the 2016 Final Rule, mortgage servicers, when communicating with consumers who have invoked the FDCPA's cease communication right, were required to provide the consumers modified early intervention notices, but only once every 180 days. Members of the mortgage servicing industry subsequently brought to the CFPB's attention the fact that, when reading the rule together with the provision's other rules regarding the timing of sending out written notices, the rule appeared to require servicers to provide a notice exactly on the 180th day after providing a prior notice. Industry members raised concerns about meeting this very specific deadline, particularly if the 180th day were to fall on a weekend or holiday.
Noting that it did "not intend this result," the CFPB issued the Interim Final Rule to modify the 2016 Final Rule by providing servicers with a 10-day window following the 180-day period to give consumers the written early intervention notice. Although this clarification will become effective, along with much of the 2016 Final Rule, on October 19th, the CFPB is nonetheless seeking comment and notes that it may revisit this issue in the future.
The CFPB's proposed rule would address transition requirements for periodic statements to borrowers in bankruptcy. The requirements to provide periodic statements or coupon books to borrowers who file for a Chapter 11 bankruptcy plan, or who exit such a plan, have presented unique challenges for servicers in preparing to implement the new requirements (which become effective April 19, 2018). In particular, servicers indicated to the CFPB that they often need time to transition to providing a modified periodic statement for a debtor in bankruptcy, and then to transition back to an unmodified statement if necessary. While the 2016 Final Rule attempted to recognize that need for transition time, its exemption for a single billing cycle was difficult to interpret and administer. This proposal would allow that when a transition event occurs, a servicer is exempt from the periodic statement requirement with respect to the next periodic statement that would otherwise be required (i.e., a single statement exemption), and then must thereafter provide the appropriate statement going forward. Since servicers have until April 2018 to implement these requirements, the CFPB is asking for comments in advance of finalizing this proposal.
Originally published October 9, 2017
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