Regulatory Alert Summary

NASCUS Legislative and Regulatory Affairs
January 2017


2016 Mortgage Servicing Rule & Fair Debt Collection Practices Act Interpretive Rule

NCUA’s Regulatory Alert informs credit unions of the Consumer Financial Protection Bureau’s (CFBP’s) 2016 final rule amending Regulation X (Real Estate Settlement Procedures Act) and Regulation Z (Truth in Lending Act). The CFPB also issued an interpretive rule/advisory opinion related to the Fair Debt Collection Practices Act (FDCPA), providing FDCPA safe harbors.

Changes to the mortgage servicing rules made by the CFPB include:

  • Successors in Interest- servicers must have policies & procedures to confirm the identity & ownership interest of family member(s)/heir(s), & ensure prompt notification to them.
  • Definition of Delinquency- delinquency begins on the date a periodic payment sufficient to cover principal, interest, &, if applicable, escrow, becomes due and unpaid, and continues until no periodic payment is due and unpaid.
  • Request for Information- changes how a servicer responds to requests for ownership information for loans in trust for which Fannie or Freddie Mac is the trustee or owner.
  • Force-placed Insurance- permits a servicer to force-place insurance when the borrower has insufficient, rather than expiring/expired, hazard insurance coverage on the property.
  • Early Intervention- servicers obligated to make good faith efforts to establish live-contact with delinquent borrowers [with certain exemptions for borrowers in bankruptcy or who have invoked the right to cease communication under FDCPA].
  • Loss Mitigation- changes loss-mitigation procedures to prevent wrongful foreclosures.
  • Prompt Payment Crediting- clarifies treatment of periodic payments by consumers under either temporary loss-mitigation programs or permanent loan modifications.
  • Periodic Statements - contains several changes regarding periodic statements in loss mitigation programs, modification requirements during bankruptcy, and periodic statements for charged-off mortgage loans.
  • Small Servicer Exemption- changes the current exemption to exclude mortgage loans voluntarily serviced for non-affiliates that are not creditors or assignees, and certain seller-financed transactions, from the 5,000-loan limit.

FDCPA Interpretive Rule
The FDCPA interpretive rule provides safe harbors from liability for servicers acting in compliance with specified mortgage servicing rules. Servicers do not violate FDCPA merely by:

  • Communicating about a mortgage loan with confirmed successors in interest in compliance with mortgage servicing rules set forth in Regulations X or Z;
  • Providing the written early intervention notice required by Regulation X to a borrower who has invoked the cease communication right under FDCPA; or
  • Responding to borrower-initiated communications concerning loss mitigation after the borrower has invoked the cease communication right under FDCPA.

Effective Dates
Most provisions of the final rule on mortgage servicing and the FDCPA interpretive rule are effective October 19, 2017, except the successors in interest and bankruptcy periodic statement provisions, which become effective on April 19, 2018.

A comprehensive NASCUS summary of the CFPB final rule is available here.