COMMENT CALL: The Consumer Financial Protection Bureau (CFPB) has proposed changes that would rewrite its 2013 mortgage servicing rules. The amendments would simplify the “loss mitigation” process and give borrowers additional protections to help them avoid foreclosure.
In releasing the proposal, the CFPB wrote: “In general, the proposed rule would streamline existing loss mitigation requirements to provide borrowers with quicker loss mitigation solutions, add foreclosure procedural safeguards that begin as soon as a borrower requests loss mitigation assistance, revise certain early intervention requirements, and provide borrowers with access to certain mortgage servicing communication in languages other than English. The proposed rule also requests comment on various servicing issues, including comment on servicer furnishing practices for consumer reporting.”
Since “small servicers” are already exempt from all of the early intervention requirements, these changes would not apply to “small servicers” – those that service 5,000 or fewer mortgages, all of which the servicer or affiliates own or originated.
The proposal addresses these key areas:
- Streamlined loss mitigation procedures and foreclosure procedural safeguards. The CFPB is proposing to streamline and simplify Reg. X’s loss mitigation procedures by removing most of the requirements on incomplete and complete loss mitigation applications and replacing them with a new framework based on foreclosure procedural safeguards.
Under the proposal, once a borrower asks for loss mitigation assistance, a “loss mitigation review cycle” begins. It continues until either the borrower’s loan is brought current or one of the following foreclosure procedural safeguards is met: 1) the servicer reviews the borrower for all available loss mitigation options and no available options remain, or 2) the borrower remains unresponsive for a specified time despite the servicer regularly taking steps to reach the borrower.
Significantly, during the “loss mitigation review cycle,” the servicer may not begin or advance the foreclosure process and borrowers would also be protected against the accrual of certain fees.
The CFPB is also proposing to remove loss mitigation notices that would no longer be necessary under the new proposed framework, such as those notifying a borrower about whether a loss mitigation application is complete or incomplete.
- Early intervention changes. The CFPB is proposing to require servicers to provide certain additional information in written early intervention notices, including, the name of the owner or assignee of the borrower’s mortgage loan, a brief description of each type of loss mitigation option that is generally available from that owner or assignee, as well as a website to access a list of all loss mitigation options that may be available from that owner or assignee.
- Loss mitigation determination notices and appeals. The CFPB is proposing to require that servicers provide loss mitigation determination notices and appeal rights to borrowers about all types of loss mitigation options, instead of just loan modifications, and for offers as well as denials. The CFPB also is proposing to require servicers to include certain additional information in determination notices.
- Credit reporting. The CFPB said that it “is aware of a select number of specific instances where mortgage servicers may be furnishing information about borrowers undergoing loss mitigation review that raise questions about accuracy and consistency. While the CFPB is not proposing any regulatory changes at this time, the CFPB is requesting comment about possible approaches it could take to ensure servicers are furnishing accurate and consistent credit reporting information for borrowers undergoing loss mitigation review.”
- Language access. The CFPB is proposing several requirements to provide borrowers with limited English proficiency greater access to certain early intervention and loss mitigation communications in languages other than English so that they can access the information they need, when they need it. In general, the proposed rule would require mortgage servicers to provide Spanish-language translations of certain written communications to all borrowers. The proposed rule also would require servicers to make certain written and oral communications available in multiple languages and to provide those translated or interpreted communications upon borrower request.
This CFPB “Fast Facts” document gives a high-level overview of the proposal.
The League’s ii Release No. B075 has information on the current CFPB mortgage servicing rules.
Make your voice heard
The League plans to comment on these changes, and we would appreciate help from the credit unions that will be subject to the rule when it is finalized. Please take the time to have your mortgage servicing staff look over the proposal, and share your concerns with Paul Guttormsson by Sept. 2, 2024, so that our comment letter (which we must submit to the CFPB by Sept. 9, 2024) can reflect your feedback.