The Consumer Financial Protection Bureau (CFPB) on Tuesday released a bulletin further clarifying its new rules pertaining to mortgage servicers.
Specifically, the clarifications address how servicers communicate with family members after a borrower dies, how they contact delinquent borrowers and how they treat borrowers who have filed for bankruptcy or invoked certain protections under the Fair Debt Collection Practices Act.
As per CFPB rules, servicers are required 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 a borrower's home, if the borrower is deceased.
For example, a servicer must offer an arrangement whereby survivors of the deceased are allowed to continue making mortgage payments, thus enabling them to either keep and/or continue to occupy the home. Servicers must also offer to evaluate the heirs – or whomever the legal interest in the home passes to – for assumption of the mortgage, or alternatively, offer loss mitigation measures.
Servicers are also mandated to attempt contact with borrowers each time they miss a payment to provide important information that can help get them on track. However, this outreach does not necessarily have to be ‘single purpose’ – for example, it can happen while servicers are evaluating borrowers for loss mitigation or during collection calls. What's more, servicers have the option to make contact with borrowers through a variety of channels, including traditional mail, phone and email.
The bulletin also clarifies misconceptions regarding the interplay between the servicing rules, bankruptcy code and the Fair Debt Collection Practices Act (FDCPA).
Under the FDCPA and bankruptcy laws, delinquent borrowers can inform servicers to stop communicating with them. However, under the CFPB's rules, certain notices and communications are still required.
For example, should a borrower who has declared bankruptcy request information with regard to loss mitigation, error resolution, force-placed insurance, initial interest rate adjustment of adjustable-rate mortgages or periodic statements, the servicer must still respond to these requests, even if the borrower has requested that the servicer discontinue proactive outreach.
However, servicers will not be required to provide certain early intervention contacts or ongoing notices of interest-rate adjustments to bankrupt borrowers who have instructed the servicer to stop communicating with them.
Once borrowers who are in bankruptcy inform servicers that they are invoking their rights under FDCPA and the bankruptcy laws to not be contacted, the servicers are no longer required to provide periodic account statements and certain early intervention contacts.
The CFPB, however, says ‘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.’ Which means the CFPB could issue an additional bulletin providing further clarification.
The bulletin also clarifies the CFPB regulation that requires consumers to receive housing counseling before taking out a high-cost mortgage by specifying which federally required disclosure must be used as the basis for counseling for a small subset of closed-end loans that are not subject to the Real Estate Settlement Procedures Act.
"As servicing implementation enters its final phases, we heard from many sources that it was important to address these remaining issues to ensure a smooth transition and provide certainty to the market," says Richard Cordray, director of the CFPB, in a statement. "When mortgage servicers better understand the rules they have to follow, that is better for consumers."
To read the bulletin, click here.
To read the interim rules, click here.