NEWS: The League wrote to the CFPB yesterday to share our concerns over a proposal to update their 2013 mortgage servicing rules. We wrote about the proposal in this Comment Call, and we summarize the current rules in our ii Release No. B075.
The proposed amendments would streamline existing requirements when borrowers seek payment assistance in times of distress, add safeguards when borrowers seek help, and revise existing requirements with respect to borrower assistance. The proposed rule would also require servicers to provide certain communications in languages other than English.
None of the proposed new requirements would apply to “small servicers” – those that service 5,000 or fewer mortgages, all of which the servicer or affiliates own or originated.
We told the CFPB that Wisconsin credit unions generally support the proposal’s goals, many of which are worthwhile, such as streamlining requirements for borrowers seeking payment assistance, and increasing the likelihood of borrowers avoiding foreclosure.
However, our letter focused on two parts of the proposal that credit unions told us would be especially problematic for covered servicers: translation requirements and loss mitigation notices.
Translation requirements
The CFPB wants to require covered servicers to translate certain early intervention and loss mitigation communications into languages other than English, and to provide translator services for live discussions. These changes would unnecessarily burden mortgage servicers for several reasons, we wrote, pointing out potential problems like these:
- The CFPB should have included model wording for the written communications in other languages, but instead, the proposal puts the burden of translation on servicers themselves. This would create confusion and lead to a variety of potentially conflicting translations.
- Translating legal documents, including notices, is not as simple as feeding the text into an online translator or asking for help from a bilingual lay person. Legal terms have specific, well-defined, and technical meanings. The League has consistently recommended that credit unions employ bilingual attorneys experienced in consumer financial services to translate loan agreements, mortgage forms, disclosures, notices, and so forth. That can be prohibitively expensive for many covered servicers.
- The CFPB proposes to require covered servicers to “select five of the most frequently used languages from the languages spoken collectively by a significant majority of their borrowers with limited English proficiency that prefer languages other than English and Spanish.” But servicers are unlikely to have data on which languages a “significant majority” of their borrowers prefers.
We told the CFPB that it should scale back the proposal’s translation requirements and provide better guidance and/or model translated notices for servicers to use.
Loss mitigation notices
The proposal would expand the loss mitigation determination notice provisions in Reg. X, requiring that servicers provide notices about loss mitigation determinations and appeal rights to borrowers for all types of loss mitigation options, instead of just loan modifications, and for offers as well as denials.
“This will greatly increase the volume of loss mitigation related notices that servicers must provide,” we wrote. “That means increased costs, both for sending the notices themselves and for putting new systems in place to generate appropriate notices.”
We urged the CFPB to provide servicers with a model loss mitigation notice form.
The League will alert you when the CFPB finalizes this proposal.