Dear Board of Directors and Chief Executive Officer:
On August 4, 2016, the Consumer Financial Protection Bureau issued a final rule amending certain mortgage servicing rules it issued in 2013. It amends Regulation X, which implements the Real Estate Settlement Procedures Act, and Regulation Z, which implements the Truth in Lending Act. CFPB also issued an interpretive rule that functions as an advisory opinion for purposes of the Fair Debt Collection Practices Act (FDCPA), providing safe harbors from FDCPA liability.
The final rule changes Regulation X provisions regarding force-placed insurance notices, mortgage servicing policies and procedures, early intervention, and loss mitigation requirements. It amends Regulation Z regarding prompt crediting and periodic statement requirements. The rule applies to credit unions that service consumer first-lien mortgage loans retained in its portfolio as the originator or sold in the secondary market, but retained servicing rights.
The FDCPA interpretive rule clarifies the interaction of FDCPA and certain mortgage servicing rules under the Real Estate Settlement Procedures Act and the Truth in Lending Act, and their implementing regulations, Regulations X and Z, respectively.1
Key Provisions to the Mortgage Servicing Rule
The key areas the final rule affects are:
- Successors in Interest: The rule provides that servicers must have policies and procedures in place to confirm the identity and ownership interest of the family member(s) or heir(s), known as “successors in interest,” and ensure prompt notification to them.
- Definition of Delinquency: The rule provides that delinquency begins on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow, becomes due and unpaid, until such time as no periodic payment is due and unpaid.
- Request for Information: The rule changes how a servicer must respond to requests for ownership information for loans in trust for which Fannie Mae or Freddie Mac is the trustee or owner.
- Force-placed Insurance: The rule permits a servicer to force-place insurance when the borrower has insufficient, rather than expiring or expired, hazard insurance coverage on the property.
- Early Intervention: The rule clarifies the obligations for servicers to establish or make good faith efforts to establish live-contact with delinquent borrowers. It allows certain exemptions for servicers from complying with the live contact requirements for borrowers in bankruptcy or who have invoked the right to cease communication under FDCPA.
- Loss Mitigation: The rule changes loss-mitigation procedures to prevent wrongful foreclosures.
- Prompt Payment Crediting: The rule clarifies how servicers must treat periodic payments made by consumers who are performing under either temporary loss-mitigation programs or permanent loan modifications.
- Periodic Statements: The rule contains several changes regarding periodic statements in loss mitigation programs, modification requirements during bankruptcy, and periodic statements for charged-off mortgage loans.
- Small Servicer Exemption: The rule changes the current exemption to exclude mortgage loans voluntarily serviced for non-affiliates that are not creditors or assignees, and certain seller-financed transactions, from the 5,000-loan limit.2
FDCPA Interpretive Rule
The FDCPA interpretive rule provides safe harbors from liability for servicers acting in compliance with specified mortgage servicing rules. Specifically, servicers do not violate FDCPA merely by:
- Communicating about a mortgage loan with confirmed successors in interest in compliance with mortgage servicing rules set forth in Regulations X or Z;
- Providing the written early intervention notice required by Regulation X to a borrower who has invoked the cease communication right under FDCPA; or
- Responding to borrower-initiated communications concerning loss mitigation after the borrower has invoked the cease communication right under FDCPA.
Most provisions of the final rule on mortgage servicing and the FDCPA interpretive rule are effective October 19, 2017, except the successors in interest and bankruptcy periodic statement provisions, which become effective on April 19, 2018.
If you have any questions, please contact NCUA’s Office of Consumer Financial Protection and Access at (703) 518-1140 or ComplianceMail@ncua.gov, your regional NCUA office, or your state supervisory authority.
This document is intended to provide general information about the final rule and interpretive rule, but only the final rule and interpretive rule can provide comprehensive and definitive information regarding their requirements.
 The small servicer exemption applies to some provisions of the final rule. Please review CFPB Final Rule on Mortgage Servicing and CFPB’s Small Entity Compliance Guide available on CFPB’s Title XIV Rules: Mortgage Servicing webpage (opens new window).