The Consumer Financial Protection Bureau (CFPB) just released a detailed report, a bulletin and interim final rule amending the mortgage servicing rules and offering guidance under the existing rules. These mortgage loan rules go into effect January 10, 2014 and are suppose to bring more clarity to the mortgage industry.
In that report, the CFPB addresses “contact with delinquent borrowers, communications with family members after a borrower dies and the treatment of consumers who have filed for bankruptcy or invoked certain protections under the Fair Debt Collection Practices Act (FDCPA).
The CFPB is an independent federal agency whose primary responsibility is to regulate consumer protection laws, products and services in the United States. Their jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies. The CFPB’s more recent concerns have been mortgages, credit cards and student loans. They are located inside, and funded by the U.S. Federal Reserve. They examine, monitor, and report on markets, collect and track consumer complaints.
The CFPB clarifications on three mortgage servicing issues released are:
• Home retention efforts after a borrower dies. In cases in which a borrower dies, the rules the CFPB issued in January require servicers to have policies and procedures in place to ensure that they promptly identify and communicate with family members, heirs, or other parties who have a legal interest in the home. The CFPB provides examples of such servicer policies and procedures, including allowing for continued payment on the mortgage as well as evaluating the heir (or whomever the legal interest in the home passes to) for assumption of the mortgage and, if appropriate, for loss mitigation measures.
• Early intervention requirement to contact delinquent borrowers. The CFPB’s new rules require servicers to attempt contact with borrowers each time they miss a payment to provide important information that can help get them on track. The CFPB clarifies that this requirement may be met through other contact that servicers have with such borrowers, for example, when evaluating them for loss mitigation or during collection calls. Also, the method of attempted contact may vary depending on how long a borrower is delinquent or on whether the borrower has responded to earlier servicer attempts to communicate.
• Interplay between the servicing rules, bankruptcy code, and the Fair Debt Collection Practices Act (FDCPA). Both the FDCPA and bankruptcy law provide significant protections for consumers who decide to invoke them and restrict certain types of communications regarding their debts. The Bureau has received a large number of questions about how these other protections intersect with the servicing rules and how to communicate effectively with borrowers who have invoked their other rights. Among the clarifications the CFPB is responding to today, the CFPB is:
– Clarifying that even if delinquent borrowers have instructed servicers to stop communicating with them pursuant to the FDCPA, certain notices and communications mandated by the CFPB servicing rules and the Dodd-Frank Wall Street Reform and Consumer Protection Act are still required. Specifically, servicers must communicate with the borrower with regard to requests for loss mitigation, information requests, error resolution, force-placed insurance, initial interest rate adjustment of adjustable-rate mortgages, and periodic statements. However, servicers will not be required to provide certain early intervention contacts or ongoing notices of interest rate adjustments to delinquent borrowers who have instructed the servicer to stop communicating with them.
– Exempting servicers from being required to provide periodic account statements and certain early intervention contacts with borrowers who are in bankruptcy. The Bureau believes further assessment is warranted regarding how bankruptcy protections intersect with these servicing requirements and how to ensure that the servicing communications do not confuse consumers regarding the status of their loans.
CFPB Director Richard Cordray said he doesn’t anticipate an outburst of litigation after his agency’s qualified mortgage rule takes effect in January 2014. He released a statement October 21: “Let me also assure you that our oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focuses on making good-faith efforts to come into substantial compliance on time – a point that we have also been discussing with our fellow regulators.”
Keith Gantenbein has broad experience helping clients in both residential and commercial mortgage industries with arduous skill in litigation.
Keith is a Colorado consumer advocate attorney, foreclosure defense and real estate attorney located in Denver and servicing all of Colorado. His foreclosure defense practice includes: foreclosure prevention, foreclosure assistance, loan modifications, short sales, and all other foreclosure defense legal assistance. He also handles bankruptcies, wrongful credit reporting, mortgage negotiations, lender liability, real estate, civil litigation, debt defense, debt harassment, contracts and landlord/tenant. If you think you will be facing debt collection, foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.