• CFPB Observer: Recent Developments from Nov. 17-28, 2014
  • February 17, 2015 | Authors: Peter L. Cockrell; Brett M. Kitt; Gil Rudolph; J. Scott Sheehan
  • Law Firms: Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Washington Office ; Greenberg Traurig, LLP - Houston Office
  • CFPB Proposes New Mortgage Foreclosure Rules

    On Nov. 20, the CFPB issued a proposed rule that would expand its mortgage foreclosure protections. These new servicing requirements would expand upon the CFPB’s mortgage servicing rules that went into effect Jan. 10, 2014. Among other things, the proposed rule would do the following:

    • Require servicers to provide certain borrowers with CFPB’s required foreclosure protections more than once over the term of the loan. Under existing regulations, a servicer need only provide certain protections, such as the right to be evaluated for loss mitigation options, once during the loan term. Under the proposal, servicers would be required to provide these protections again for borrowers who have brought their loans current at any time since the last loss mitigation application.

    • Require servicers to provide foreclosure protections to surviving family members and other homeowners. Under existing regulations, if a homeowner dies, then the servicer must provide certain communications and other consumer protections to other persons who have a legal interest in the home (i.e., successors-in-interest). The proposal would expand the circumstances in which a person would be considered a successor-in-interest to include circumstances such as when a property is transferred after a divorce, legal separation, through a family trust or between spouses.

    • Require servicers to notify borrowers when loss mitigation applications are complete. Under existing regulations, servicers need not provide such notice. However the CFPB feels that borrowers would benefit from knowing when their application is complete because certain foreclosure protections take effect when a loss mitigation application is deemed complete.

    • Require servicers to provide additional borrower protections during servicing transfers. The proposed rule would generally clarify that transferee servicers must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer.

    • Clarify requirements to avoid dual-tracking. Under existing regulations, a servicer may not proceed to foreclosure after it has received a complete loss mitigation application from a borrower at least than 37 days prior to a scheduled foreclosure sale. The proposal would clarify what steps a servicer must take to protect borrowers from a wrongful foreclosure sale.

    • Clarify the definition of “delinquency.” The proposed rule would clarify the definition of “delinquency” for purposes of the mortgage servicing rules. For example, the proposed rule would clarify that when a borrower misses a payment but later makes it up, if the servicer applies that payment to the oldest outstanding periodic payment, the date of delinquency advances.

    • Require servicers to provide more information to borrowers in bankruptcy. Under existing regulations, servicers are not required to provide periodic statements or loss mitigation information to borrowers who are in bankruptcy. The proposed rule would generally require servicers to provide such information to borrowers in bankruptcy.

    Comments on the proposed rule will be accepted for 90 days after the rule’s publication in the Federal Register.