CFPB New Regulations: What*s in it for us?

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CFPB NEW REGULATIONS:
IMPACT FOR HOUSING
COUNSELORS
CFPB – Consumer Finance Protection Bureau
 New regulations – took effect – Jan. 10, 2014
 These regulations are federal law, not just
guidelines (ex. HAMP handbook)


Creates private right of action
Real Estate Settlement Procedures Act (RESPA)
 Truth in Lending Act (TILA)
 Damages, costs & attorneys fees


Keep Good Records!
HIGHLIGHTS
Loss Mitigation
 Foreclosure Prohibitions
 Charges and Fees
 Error Resolution
 Requests for Information
 Requests for Payoff Statement

LOSS MITIGATION
What It Doesn’t Do
 A servicer has no duty to “provide any borrower
with any specific loss mitigation options”
 Loss mitigation application rules do not apply to
any applications submitted prior to Jan. 10

If more than 37 days prior to a scheduled sale,
servicer’s receipt of a new complete loss mitigation
application after Jan. 10 triggers an obligation to
review the borrower under the new rules
NEW PROTECTIONS

Any borrower who is more than 37 days from a
foreclosure sale and files a complete loss
mitigation application before 37 days before a
foreclosure sale is entitled to an evaluation of the
complete loss mitigation application for all
available loss mitigation options

What Does 37 Days Mean if No Sale Date is
Scheduled
If no foreclosure sale is set at the time the borrower
submits a complete loss mitigation application, the
loss mitigation application is treated as if it was
received by the servicer more than 90 days before any
foreclosure sale
 This treatment remains true even if a foreclosure
sale is later actually scheduled or re-scheduled

LOSS MITIGATION PROCESS

Step 1 – Live Contact


Between default & 36th day post-default, servicer
must make a good faith effort to reach the borrower,
by telephone (not just a message) or in-person
Step 2 – General Information

Must alert borrower to the availability of any loss
mitigation options
STEP 3 – CONTINUITY OF CONTACT

Between default and 45 days post-default,
servicer must assign staff to borrower and
provide written notice
Staff can be a team
 Stay assigned until 2 consecutive payments under
permanent loss mitigation agreement


Send written notice with contact info, and loss
mitigation info & application

Service Requirements:
Team must have access to all docs & info the
borrower submits for loss mitigation options
 Facilitate sharing of accurate & current info about
borrower’s loss mitigation application and the status
of foreclosure proceeding between team and other
staff, including those handling foreclosure


What Does That Mean?


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Accurate info about loss mitigation options
Info to borrower on what they need to do to apply
Deadlines for applying and processing application
How to appeal
Status of application
Provide complete record of borrower’s payment
history
Procedures for error resolution and requesting info
STEP FOUR – PERIODIC STATEMENTS

45 days after default, service must send:




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Delinquency date
Risk of foreclosure
Account history (shorter of 6 months or last current)
Amount to bring current
Whether servicer has made foreclosure notice or
filing
STEP FIVE – APPLYING FOR LOSS
MITIGATION
Application = providing any info that would be
evaluated as part of a loss mitigation application
 Transfer to new servicer: docs & info from old
servicer to new servicer may count as an
application

STEP 6 – ACKNOWLEDGING RECEIPT OF
APPLICATION

If received 45 days or more before scheduled
sale*
Servicer must review to determine if complete
 Must provide written acknowledgement of receipt
within 5 days


Must specify if application is complete
 If incomplete – servicer must:



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identify what docs & info are needed
Provide a date for submitting addtl docs
Date must be reasonable (more than 7 days)
If received less than 45 days before sale

No written requirement; servicer must “exercise
reasonable diligence” in obtaining docs & info

Facially complete application




Acknowledgement letter either denotes application as
complete or incomplete
If the servicer has everything they need to review the
application and indicate it is complete in the
acknowledgement, then it is complete
If the servicer informs the homeowner that they have
everything they need in the acknowledgement, but then later
discover they need additional documents, then the application
is facially complete
In either scenario, the homeowner receives the protections of
submitting a complete application


Including the application is complete for foreclosure protections
If incomplete, servicer must identify it as incomplete and what
docs or info. is needed*



Borrower must have reasonable time to provide info
Date – from facially complete for appeal and acceptance timeline
Date – from actually complete for 30 day evaluation timeline
STEP 7 – COMPLETE APPLICATION

If the servicer is waiting for info from a 3rd party
(ex. credit reporting agency), the application is
complete once the borrower submits everything
required from the borrower

Not dependent on 3rd parties outside of their control
STEP 8 – EVALUATION OF APPLICATION

If application is received more than 37 days before
scheduled sale, it must be reviewed for all loss
mitigation options


Must be conducted within 30 days of receipt of
COMPLETE* application
If application received 37 days or less before sale
Servicer does not have to follow this loss mitigation process
 Servicer must have policies/procedures that comply with
requirements set by investor


Transfer during evaluation
Date based from when complete application was submitted
to old servicer.
 New servicer – “continue the evaluation to the extent
practicable”

STEP 9 – APPLICATION DECISION

Within 30 days of complete application, servicer
must provide written notice

If offer is made –
Identify what loss mitigation offers are being made
 Identify amount of time the borrower has to accept


If application is denied Specific reasons for denial for any loan mod programs
 If denial is investor requirements, servicer must identify
the specific owner and the requirement that is the basis of
the denial
 Based on an investor requirement is insufficient
 If denied because of NPV, must provide inputs
 Right to appeal, requirements & timing


Appeal
Only for loan modification (not other loss mitigation
options)
 Application must be received 90 days prior to
scheduled sale*
 Must be filed within 14 days from servicer’s written
notice
 Servicer must respond to appeal within 30 days

STEP 10 – ACCEPTANCE/REJECTION

Deadlines for responding to modification offer
If submitted complete application 90 days or more
before scheduled sale, servicer must provide at least
14 days to respond
 Between 37 and 90 days


Servicer must provide at least 7 days to respond
LIMITATIONS

Servicer is only required to comply with the
requirements in the loss mitigation procedures
for a single complete loss mitigation application

Exception – if transferred to a new servicer, borrower
can apply again and receive all protections
FORECLOSURE PROHIBITIONS

Federal regulations – minimum requirements

If federal law has stronger protections, then federal
law controls


Ex. servicer can’t file foreclosure process until 120 days
delinquent (replaces MD’s 90 day protection)
 Filing = Order to Docket
If state law has stronger protections, then state law
applies

Existing state structure – mediation, filing process, etc.
stays in place, in addition to the federal protections
•
Servicer can’t file for foreclosure if borrower has filed a
complete loss mitigation application until servicer has
denied application, borrower has rejected, or borrower
fails loss mitigation agreement (ex. short term payment
forbearance)

Borrower submits complete application after
foreclosure filed

If more than 37 days before sale*
Servicer can not move for a judgment or order of sale, or
conduct sale until:
 Servicer has denied application (including appeal
process)
 Borrower rejects all options
 Borrower fails loss mitigation agreement
 Once servicer receives complete application, they must
“promptly” instruct their attorneys not to proceed with
pursing foreclosure sale


If foreclosure has been filed, and complete application
is received less than 37 days before scheduled sale,
Servicer does not have to follow requirements
 Can use investor requirements, if any exist


Exemptions

Small servicers – for most rules
Services 5,000 or fewer mortgage loans and services only
mortgage loans that they or an affiliate originated or own
(most credit unions & community banks)
 Servicer that is a housing finance agency
 However, not exempt for waiting 120 days to file for
foreclosure & can’t proceed to foreclosure if homeowner is in
compliance with trial period payment plan


Bankruptcy – notice requirements exempted
CHARGES AND FEES

Payment Processing

Full periodic mortgage payments must be credited by
the servicer the day they are received
Unless no harm to borrower (late fees, credit reporting)
 Full mortgage payment = principal, interest & escrow


Partial periodic mortgage payments

Servicer can decide what to do with payment
 Credit upon receipt
 Return to borrower
 Put in suspense account until borrower pays enough to
equal a full payment

Servicer must identify in each billing cycle periodic
statement:
 Fees
 Payments currently due and payments made
 Transaction activity. If in default:


If more than 45 days, statement must include an account
history for prior 6 months or since borrower was current
Delinquency date, potential foreclosure consequences,
whether foreclosure has been initiated, amount to cure, and
housing counselor info.
Servicer contact information
 Suspense account actions

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Total amount being held in suspense account
Total of all payments received since last statement sent to
suspense account
Total of all payments received since beginning of year held in
suspense account

No pyramiding late fees


Servicers are not allowed to impose a late fee on a
mortgage payment if the fee is only attributable to
the borrower failing to make a previous late fee
payment, when the payment otherwise is a full
periodic payment received on time
Payment change notice – ARM
Notice between 210 & 240 days prior to 1st payment
due after rate first adjusts
 Notice between 60 & 120 days when rate adjustments
causes payment change


Payments During Transfer of Servicers
Previous - prior servicer’s responsibility to get to new
servicer
 New – prior servicer can either transfer the payment
to the new servicer or return payment to the
borrower, with a notification of the new servicer


Force-Placed Insurance

Servicer can purchase force-placed insurance for
homeowner only if they have a reasonable belief that the
borrower failed to secure coverage required under the loan
contract

Reasonable belief –
 Told by homeowner or insurance company that no coverage
existed, or
 Borrower fails to respond to servicer inquiries (15 days of 2nd
notice)
If borrower is 30 days in default, servicer can not purchase
force-placed insurance, instead servicer must disburse
funds from escrow to pay current hazard insurance
premium
 Borrower proves coverage by providing a copy of insurance
policy, declaration page, etc.


Purchasing Force-Placed Insurance
Step 1 – At least 45 days before purchasing, servicer
must provide written notice requiring proof of
coverage
 Step 2 – 30 days after 1st notice & 15 days before
purchasing, service must provide 2nd notice



Must include annual cost or estimate
Step 3 – 15 days after 2nd notice, servicer can
purchase if no response

Charges must be “bona fide and reasonable”. Services
actually performed & a reasonable relationship to cost

Renewing Force-Placed Insurance

At least 45 days before renewal, servicer must notify
borrower


Must include annual cost or estimate
Cancelling force-placed insurance

Within 15 days of being notified that borrower has
obtained hazard insurance, servicer must:
Cancel the force-placed insurance
 Refund and remove any premiums and fees for the period
covered by both borrower’s insurance & force-placed
insurance

ERROR RESOLUTION PROCESS
Replaces the QWR with Notice of Error &
Request for Information
 Notice of Error – Written notice to servicer

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Assert an error
Name of borrower
Loan account information
Describes error
Is not substantially same as prior notice of error,
unless servicer hasn’t promptly responded to
previous notice, or if borrower is providing new
information likely to change the outcome
Not overbroad
Sent within 1 year after the servicer transfers
mortgage to new servicer

What is an Error?

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Failure to accept a payment according to the
servicer’s written requirements
Failure to properly apply a payment
Failure to credit payment as of the day received if
harm to borrower
Failure to pay taxes or insurance premiums timely
Failure to refund money in an escrow account within
20 days of borrower paying mortgage in full
Fee where servicer didn’t have a “reasonable basis”
for it

What is an Error? cont’d.

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Failure to provide accurate mortgage payoff amount
within 7 days from request*
Failure to provide accurate loss mitigation
information
Failure to accurately and timely transfer information
about servicing the loan when transferring to new
servicer
Violations of the foreclosure prohibitions
Any error relating to the servicing of a mortgage loan

Timing – investigation & response

Failure to provide an accurate payoff balance


Initiating improper foreclosure


Within 7 business days after notice of error is received
Before sale or within 30 business days after notice of error,
whichever earlier
 If servicer can’t investigate and respond before deadline,
servicer may cancel/postpone sale and respond prior to
rescheduled sale or within 30 business days after notice
of error
All Others

Within 30 business days of receiving notice of error
 Can extend an additional 15 days if servicer provides
borrower written notice of extension and reason

Timing – Exceptions

Servicer does not have to acknowledge notice of error
or respond if:
Servicer corrects error and notifies borrower in writing
within 5 business days of receiving notice of error
 Notice of error pertains to violations against foreclosure
prohibitions and the notice is received 7 or fewer days prior
to sale.
 Servicer still required to make good faith effort to
respond (orally or in writing), & correct error or tell
borrower why there is no error


If servicer has specific address to use, then must include
this address in any written communication to homeowner
if include other contact information.


Address must be in periodic statement or coupon booklet; and
posted on website
Borrower must use the identified address
If servicer provides multiple addresses, borrower can use
any
 If servicer doesn’t provide an address, borrower can send
notice to any office of the servicer and servicer must
respond
 Servicer must provide written notice within 5 business
days that the notice of error has been received
 If servicer believes they do not have to respond, the written
acknowledgement must state why they don’t think the
notice of error doesn’t have to be reviewed

Servicer must correct error or conduct a reasonable
investigation
 Servicer can request documentation from borrower to
support the error allegation
 Servicer cannot provide negative info. to credit
reporting agencies regarding any payment that is
disputed in notice of error
 Servicer may initiate foreclosure proceedings while
responding to notice of error, unless the notice is
alleging violations of foreclosure prohibitions


If servicer concludes error was made, they must:
Correct the error
 Provide written notice with the effective date of the
correction, and servicer contact information


If servicer concludes different error made, they
must:
Correct the error
 Provide written notice that describes error, identifies
action, gives effective date of correction, & servicer
contact info.


If servicer concludes no error, they must:
Have conducted a reasonable investigation
 Provide written notice including:

Determination of no error
 Reasons for no error
 Borrower has right to request documentation that servicer
relied on in determining no error, and how to request that
documentation
 Contact information

REQUESTS FOR INFORMATION

Written request to include:

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Borrower’s name
Mortgage loan account information
Information that is requested
Where – same rules as NOE
Servicer doesn’t have to respond if:

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Substantially similar to previous request, unless info
is type that changes over time & request covers
different time period
Proprietary info
Requests irrelevant info
Overly broad or unduly burdensome
Sent more than 1 year after servicer transfers
mortgage

Servicer response
Within 5 business days, servicer must acknowledge
receipt of request in writing, determination that it
does not have to respond to request, or provide
information
 If servicer concludes the requested info isn’t
available, they must:

Conduct a reasonable search for info.
 Provide written notice
 Info not available
 Reasons why it’s not available
 Servicer contact info


Timing – Request for Info.

Identity of, and contact info for, the owner or
assignee of mortgage


Servicer must respond within 10 business days of receipt
All other requests

Within 30 business days from receipt
 Can extend 15 business days with notice & reason
Servicer can’t require fees or delinquent payments in
order to respond to info request
 Servicer can report negative info to credit reporting
agencies during response period

REQUESTS FOR PAYOFF STATEMENTS

Written request
Servicer can designate specific email, address or fax,
or other reasonable requirements for making the
request
 Response – reasonable time, but no later than 7
business days from receiving request*
 Servicer must provide “accurate statement of the
total outstanding balance that would be required to
pay the consumer’s obligation in full as of a specified
date”

GENERAL SERVICING REQUIREMENTS

Servicers must have policies and procedures in
place to:






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Access and provide accurate & timely info.
Properly evaluate loss mitigation applications
Oversight & compliance by service providers
Transfer of information during servicing transfer
Informing borrowers of availability of NOE & RFIs
Maintain documents so that servicer can create
servicing file within 5 days (for regulators)
No private right of action, but still important to
document & file complaints

Resources:

Help for Struggling Borrowers – A Guide to Mortgage
Servicing Rules Effective on Jan. 10, 2014


Consumer Finance Protection Bureau
 http://files.consumerfinance.gov/f/201312_cfpb_mortgages
_help-for-struggling-borrowers.pdf
Filing Complaints – CFPB
http://www.consumerfinance.gov/complaint/
 855-411-2372


Legal Partners

Susan Francis, Esq.
Foreclosure Prevention Project Manager
 Maryland Volunteer Lawyers Service
 [email protected]; 443-451-4084


Sally Snowberger
Foreclosure Prevention Counselor
 [email protected]; 443-451-4067

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