|October 31, 2013|
Previously published on October 29, 2013
On October 15th, the CFPB issued an Interim Final Rule1 and CFPB Bulletin 2013-12.2 Both provide clarification regarding certain aspects of the CFPB’s recently published Mortgage Servicing Rule (MSR).3 The Bulletin provides guidance regarding: (1) policies and procedures for successors in interest to the property of a deceased borrower; (2) communications with borrowers under the CFPB’s Early Intervention Rule;4 and (3) compliance with MSR requirements when borrowers issue a “cease communication” notice under the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from communicating with them.
The Bulletin’s guidance regarding policies and procedures for successors in interest sets out examples of what practices the Bureau would consider to be part of a compliant set of policies and procedures. For example, upon being notified of the death of a borrower, a servicer would promptly evaluate any issues to consider in identifying the proper successor in interest, such as receipt of acceptable proof of the successor in interest’s identity and legal interest in the property.
Under the FDCPA, borrowers may issue a “cease communication” notice to bar debt collectors from communicating with them.5 The Bulletin clarifies that when servicers who are debt collectors provide certain disclosures and communications required under the MSR after a borrower has issued a “cease communication” notice, the servicers are not violating the FDCPA (e.g., Reg. X §§ 1024.35 (error resolution), 1024.36 (requests for information), 1024.37 (force-placed insurance), and 1024.41 (loss mitigation), and Reg. Z §§ 1026.20(d) (ARM initial interest rate adjustment) and 1026.41 (periodic statement)).
Among other things, the Interim Final Rule also addresses concerns expressed by the industry that the MSR’s disclosure and communication requirements discussed above conflict with prohibitions under the Bankruptcy Code that, similar to the FDCPA, restrict communications with borrowers in bankruptcy. The Interim Final Rule clarifies which of the disclosures and communications required by the MSR are still required to be provided to borrowers in bankruptcy.
The Interim Final Rule also clarifies which disclosures are required to be provided by a creditor before the counseling required for high-cost mortgages under the 2013 Home Ownership and Equity Protections Act Rule6 can occur. In addition, the Interim Final Rule makes certain technical corrections to the mortgage servicing rules. The public will have 30 days to comment on the Interim Final Rule.
1 The Interim Final Rule is available here- http://www.consumerfinance.gov/f/201310-cfpb-mortgage-servicing-interim.pdf.
2 CFPB Bulletin 2013-12 is available here- http://www.consumerfinance.gov/f/201310-cfpb-mortgage-servicing-bulletin.pdf.
3 The “Mortgage Servicing Rule” includes the rules issued by the CFPB as required by amendments made to the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) under the Dodd-Frank Act. See Reg. X at 78 Fed. Reg. 10696 (Feb. 14, 2013); Reg. Z at 78 Fed. Reg. 10902 (Feb. 14, 2013).
4 12 C.F.R. § 1024.39.
5 15 U.S.C. § 1692c(c).
6 Amendments to HOEPA under the Dodd-Frank Act, 78 Fed. Reg. 6855, imposed new counseling requirements for high-cost mortgage loans. See Reg. Z § 1026.34(a)(5)(ii); Cmt. ¶ 34(a)(5)(ii).