On August 4, the CFPB issued Final Rules providing foreclosure protections.  The Rules, consisting of 901 pages, address foreclosure protections, successors in interest, borrowers in bankruptcy, loss mitigation, servicing transfers, and loss mitigation applications.  The Rules consist of a number of amendments to Regulation X and Regulation Z, their respective Official Interpretations, and model forms and clauses.  Along with the Final Rules, the CFPB also issued an Interpretive Rule providing safe harbors from liability under the Fair Debt Collection Practices Act that coincide with the Final Rule.

In conjunction with the Rules, the CFPB prepared a Press Release summarizing the changes that credit unions will need to follow.  Compliance with the majority of the changes will 12 months after the publication in the Federal Register.  Provisions regarding successors in interest and periodic statements for borrowers in bankruptcy will be effective 18 months after publication.

Since the Final Rule encompasses a number of consumer protections, NWCG is breaking them down into multiple blog posts, so you burn out slowly, rather than all at once.   Take a look at the CFPB’s Press Release, and then keep checking back here for our detailed evaluation of the new requirements.  This post will address providing more information to borrowers in bankruptcy –

Providing more information to borrowers in bankruptcy: Under the CFPB’s existing mortgage rules, servicers do not have to provide periodic statements or early intervention loss mitigation information to borrowers in bankruptcy. Today’s final rule generally requires, subject to certain exemptions, that servicers provide those borrowers periodic statements with specific information tailored for bankruptcy, as well as a modified written early intervention notice to let those borrowers know about loss mitigation options. Servicers also currently do not have to provide early intervention loss mitigation information to borrowers who have told the servicer to stop contacting them under the Fair Debt Collection Practices Act. Today’s final rule generally requires servicers to provide modified written early intervention notices to let those borrowers also know about loss mitigation options.

In short – 

• Servicers are not required to make live contact attempts if any borrower on the loan is in bankruptcy.
• Servicers who are covered by the FDCPA are not required to make live contact attempts if any borrower on the loan has invoked the FDCPA’s cease communication provisions.
• “Good faith efforts” to establish live contact depend on length of delinquency. The Bureau reiterated its position that a servicer is expected to make good faith efforts to establish live contact with a delinquent borrower no later than 36 days after each missed payment due date/period of delinquency. However, the length of delinquency and the borrower’s responsiveness to past attempts are taken into account in determining whether a servicer’s efforts to establish live contact with a delinquent borrower are in good faith. The Bureau states that, for example, whereas “good faith efforts” to establish live contact with a borrower with two consecutive missed payments might require a telephone call, “good faith efforts” to establish live contact with an unresponsive borrower with six or more consecutive missed payments might require no more than including a sentence requesting that the borrower contact the servicer concerning the delinquencies in the periodic statement or in an electronic communication. In addition, if the borrower is in the process of loss mitigation, the servicer need not make attempts to achieve live contact, but the servicer must resume attempts at live contact if the borrower becomes delinquent after curing a prior delinquency.
• Servicers generally must send modified early intervention notices for borrowers who have filed for bankruptcy and/or have invoked FDCPA’s cease communications rights.
  • Bankruptcy. Servicers are not required to send the early intervention notice if any borrower on the loan has filed for bankruptcy protection, and either (i) no loss mitigation option is available or (ii) the servicer is subject to the FDCPA and a borrower on the loan has invoked the FDCPA’s cease communication right. In all other cases when a borrower is in bankruptcy, the servicer must send the early intervention notice if the borrower is more than 45 days delinquent, but must modify the notice so that it does not include a request for payment. The servicer is not required to send more than one notice during the bankruptcy.
  • FDCPA rights. If any borrower has invoked cease communication rights and the servicer is subject to the FDCPA, the servicer is not required to send the early intervention notice if either (i) a borrower on the loan has also filed for bankruptcy protection or (ii) no loss mitigation option is available. In all other cases, the servicer must send the early intervention notice, without a request for payment, but with a statement that the servicer may or will pursue foreclosure.
  • Servicers must send early intervention notices during prolonged delinquencies. Under the final rule, a servicer generally must provide the early intervention notice at least once every 180 days to a borrower who is 45 days or more delinquent.
• With some exceptions, servicers must send periodic statements or coupon books to borrowers in bankruptcy or who have discharged the loan, with content that varies depending on whether the consumer is in bankruptcy under Chapters 12 or 13.
  • Modifications for all borrowers in bankruptcy or who have discharged personal liability for the loan:
    • The periodic statement or a coupon book must include a statement identifying the consumer’s status as a debtor in bankruptcy or the discharged status of the loan and noting that the periodic statement is provided for informational purposes only.
    • The periodic statement or a coupon book may omit the information about late payment fees, certain delinquency information, and the notice of whether the servicer has issued the first notice or filing for foreclosure. In addition, the amount due need not be shown more prominently than any other disclosures on the statement or book.
  • Additional modifications for borrowers in bankruptcy under Chapters 12 or 13:
    • Delinquency information. The periodic statement or coupon book may omit all of the information regarding delinquency.
    • Amount due. The periodic statement or coupon book may be further modified by: (i) limiting the amount due information to the date and amount of the post-petition payment due and any post-petition fees and charges; (ii) limiting the amount due explanation to the monthly post-petition amount (including a breakdown between principal, interest, and escrow), the post-petition charges imposed since the last statement, and any post-petition past due amount.
    • Transaction activity. The periodic statement or coupon book must show all the payments received since the last statement, both pre- and post-petition, as well as all charges the servicer has imposed since the last statement.
    • Pre-petition arrearage. For the periodic statement, the servicer must disclose any pre-petition arrearage in close proximity to the total of all pre-petition payments received since the last statement, and the total of all pre-petition payments received since the beginning of the bankruptcy case.
    • Additional disclosures required. The periodic statement must disclose a statement that, as applicable: (i) the amount due includes only post-petition payments and not other payments due under the bankruptcy plan; (ii) the consumer should send post-petition payments to the trustee if the consumer’s plan so requires; (iii) the statement may be inconsistent with the trustee’s records and may not reflect payments made to the trustee; (iv) encourages the consumer to contact her attorney or trustee with questions; and (v) if the consumer is more than 45 days delinquent on post-petition payments, the servicer has not received all payments that became due since the bankruptcy filing.
  • Exceptions to requirement to send periodic statements or coupon books for borrowers in bankruptcy. A servicer is not required to send periodic statements or coupon books if the consumer has filed for bankruptcy protection under any chapter, and one or more of the following occurs: (i) the consumer requests the servicer to cease sending statements; (ii) the bankruptcy plan provides that the consumer will surrender the home securing the loan, will avoid the lien, or otherwise does not provide for payment of pre-bankruptcy arrearage or maintenance of payments due under the loan; (iii) the bankruptcy court orders the lien avoided, lifts the automatic stay, or requires the servicer to stop providing statements; or (iv) the consumer files a statement of intent to surrender the home securing the loan and has not made any payment on the loan after filing for bankruptcy.
  • Servicers are not required to send periodic statements or coupon books if the loan is charged off, provided the servicer meets certain conditions. A servicer need not send periodic statements or coupon books for a loan that is charged off, provided that the servicer will not impose additional fees or interest and sends a final statement to the consumer. The rule mandates certain content for the final periodic statement or book, including statements that the loan has been charged off, the servicer will not impose any new fees or interest on the loan, the lien remains in place and that the borrower is liable for the loan and related obligations such as taxes.

1024.39 Early intervention requirements for certain borrowers.

(a)  Live contact. Except as otherwise provided in this section, a servicer shall establish or make good faith efforts to establish live contact with a delinquent borrower no later than the 36^th day of a borrower’s delinquency and again no later than 36 days after each payment due date so long as the borrower remains delinquent. Promptly after establishing live contact with a borrower, the servicer shall inform the borrower about the availability of loss mitigation options, if appropriate.

(b)  Written notice—

(1)  Notice required. Except as otherwise provided in this section, a servicer shall provide to a delinquent borrower a written notice with the information set forth in paragraph (b)(2) of this section no later than the 45th day of the borrower’s delinquency and again no later than 45 days after each payment due date so long as the borrower remains delinquent. A servicer is not required to provide the written notice, however, more than once during any 180-day period. If a borrower is 45 days or more delinquent at the end of any 180-day period after the servicer has provided the written notice, a servicer must provide the written notice again no later than 180 days after the provision of the prior written notice. If a borrower is less than 45 days delinquent at the end of any 180-day period after the servicer has provided the written notice, a servicer must provide the written notice again no later than 45 days after the payment due date for which the borrower remains delinquent.

(c)  Borrowers in bankruptcy—

(1)  Partial exemption. While any borrower on a mortgage loan is a debtor in bankruptcy under title 11 of the United States Code, a servicer, with regard to that mortgage loan:

(i)  Is exempt from the requirements of paragraph (a) of this section;

(ii)  Is exempt from the requirements of paragraph (b) of this section if no loss mitigation option is available, or if any borrower on the mortgage loan has provided a notification pursuant to the Fair Debt Collection Practices Act (FDCPA) section 805(c) (15 U.S.C. 1692c(c)) with respect to that mortgage loan as referenced in paragraph (d) of this section; and

(iii)  If the conditions of paragraph (c)(1)(ii) of this section are not met, must comply with the requirements of paragraph (b) of this section, as modified by this paragraph (c)(1)(iii):

(A)  If a borrower is delinquent when the borrower becomes a debtor in bankruptcy, a servicer must provide the written notice required by paragraph (b) of this section not later than the 45th day after the borrower files a bankruptcy petition under title 11 of the United States Code. If the borrower is not delinquent when the borrower files a bankruptcy petition, but subsequently becomes delinquent while a debtor in bankruptcy, the servicer must provide the written notice not later than the 45th day of the borrower’s delinquency. A servicer must comply with these timing requirements regardless of whether the servicer provided the written notice in the preceding 180-day period.

(B)  The written notice required by paragraph (b) of this section may not contain a request for payment.

(C)  A servicer is not required to provide the written notice required by paragraph (b) of this section more than once during a single bankruptcy case.

(2)  Resuming compliance.

(i)  Except as provided in paragraph (c)(2)(ii) of this section, a servicer that was exempt from paragraphs (a) and (b) of this section pursuant to paragraph (c)(1) of this section must resume compliance with paragraphs (a) and (b) of this section after the next payment due date that follows the earliest of the following events:

(A)  The bankruptcy case is dismissed;

(B)  The bankruptcy case is closed; and

(C)  The borrower reaffirms personal liability for the mortgage loan.

(ii)  With respect to a mortgage loan for which the borrower has discharged personal liability pursuant to 11 U.S.C. 727, 1141, 1228, or 1328, a servicer:

(A)  Is not required to resume compliance with paragraph (a) of this section; and

(B)  Must resume compliance with paragraph (b) of this section if the borrower has made any partial or periodic payment on the mortgage loan after the commencement of the borrower’s bankruptcy case.

(d)  Fair Debt Collection Practices Act—Partial exemption. With regard to a mortgage loan for which any borrower has provided a notification pursuant to the Fair Debt Collection Practices Act (FDCPA) section 805(c) (15 U.S.C. 1692c(c)), a servicer subject to the FDCPA with respect to that borrower’s loan:

(1)  Is exempt from the requirements of paragraph (a) of this section;

(2)  Is exempt from the requirements of paragraph (b) of this section if no loss mitigation option is available, or while any borrower on that mortgage loan is a debtor in bankruptcy under title 11 of the United States Code as referenced in paragraph (c) of this section; and

(3)  If the conditions of paragraph (d)(2) of this section are not met, must comply with the requirements of paragraph (b) of this section, as modified by this paragraph (d)(3):

(i)  In addition to the information required pursuant to paragraph (b)(2) of this section, the written notice must include a statement that the servicer may or intends to invoke its specified remedy of foreclosure. Model clause MS–4(D) in appendix MS–4 to this part may be used to comply with this requirement.

(ii)  The written notice may not contain a request for payment.

(iii)  A servicer is prohibited from providing the written notice more than once during any 180-day period.

1026.41  Periodic statements for residential mortgage loans.

(e)  Exemptions;

(5)  Certain Consumers in Bankruptcy

(i)  Exemption.  Except as provided in paragraph (e)(5)(ii) of this section, a servicer is exempt from the requirements of this section with regard to a mortgage loan if:

(A) Any consumer on the mortgage loan is a debtor in bankruptcy under title 11 of the United States Code or has discharged personal liability for the mortgage loan pursuant to 11
U.S.C. 727, 1141, 1228, or 1328; and

(B) With regard to any consumer on the mortgage loan:

(1) The consumer requests in writing that the servicer cease providing a periodic statement or coupon book;

(2) The consumer’s bankruptcy plan provides that the consumer will surrender the dwelling securing the mortgage loan, provides for the avoidance of the lien securing the mortgage loan, or otherwise does not provide for, as applicable, the payment of pre-bankruptcy arrearage or the maintenance of payments due under the mortgage loan;

(3) A court enters an order in the bankruptcy case providing for the avoidance of the lien securing the mortgage loan, lifting the automatic stay pursuant to 11 U.S.C. 362 with regard to
the dwelling securing the mortgage loan, or requiring the servicer to cease providing a periodic statement or coupon book; or

(4) The consumer files with the court overseeing the bankruptcy case a statement of intention pursuant to 11 U.S.C. 521(a) identifying an intent to surrender the dwelling securing the mortgage loan and a consumer has not made any partial or periodic payment on the mortgage loan after the commencement of the consumer’s bankruptcy case.

(ii) Reaffirmation or consumer request to receive statement or coupon book. A servicer ceases to qualify for an exemption pursuant to paragraph (e)(5)(i) of this section with respect to a mortgage loan if the consumer reaffirms personal liability for the loan or any consumer on the loan requests in writing that the servicer provide a periodic statement or coupon book, unless a court enters an order in the bankruptcy case requiring the servicer to cease providing a periodic statement or coupon book.

(iii) Exclusive address. A servicer may establish an address that a consumer must use to submit a written request under paragraph (e)(5)(i)(B)(1) or (ii) of this section, provided that the
servicer notifies the consumer of the address in a manner that is reasonably designed to inform the consumer of the address. If a servicer designates a specific address for requests under
paragraph (e)(5)(i)(B)(1) or (ii) of this section, the servicer shall designate the same address for purposes of both paragraphs (e)(5)(i)(B)(1) and (ii) of this section.

(iv) Timing of compliance following transition—

(A) Triggering events for transitioning to modified and unmodified periodic statements. A servicer transitions to providing a periodic statement or coupon book with the modifications set forth in paragraph (f) of this section or to providing a periodic statement or coupon book without such modifications when one of the following three events occurs:

(1) A mortgage loan becomes subject to the requirements of paragraph (f) of this section;

(2) A mortgage loan ceases to be subject to the requirements of paragraph (f) of this section; or

(3) A servicer ceases to qualify for an exemption pursuant to paragraph (e)(5)(i) of this section with respect to a mortgage loan.

(B) Transitional single-billing-cycle exemption. A servicer is exempt from the requirements of this section with respect to a single billing cycle when the payment due date for that billing cycle is no more than 14 days after the date on which one of the events listed in paragraph (e)(5)(iv)(A) of this section occurs.

(C) Timing of first modified or unmodified statement after transition. When one of the events listed in paragraph (e)(5)(iv)(A) of this section occurs, a servicer must provide the next
modified or unmodified periodic statement or coupon book that complies with the requirements of this section by delivering or placing it in the mail within a reasonably prompt time after the first payment due date, or the end of any courtesy period for the payment’s corresponding billing cycle, that is more than 14 days after the date on which the applicable event listed in paragraph (e)(5)(iv)(A) of this section occurs.

(6) Charged-off loans.

(i) A servicer is exempt from the requirements of this section for a mortgage loan if the servicer:

(A) Has charged off the loan in accordance with loan-loss provisions and will not charge any additional fees or interest on the account; and

(B) Provides, within 30 days of charge-off or the most recent periodic statement, a periodic statement, clearly and conspicuously labeled “Suspension of Statements & Notice of
Charge Off—Retain This Copy for Your Records.” The periodic statement must clearly and conspicuously explain that, as applicable, the mortgage loan has been charged off and the
servicer will not charge any additional fees or interest on the account; the servicer will no longer provide the consumer a periodic statement for each billing cycle; the lien on the property remains in place and the consumer remains liable for the mortgage loan obligation and any obligations arising from or related to the property, which may include property taxes; the consumer may be required to pay the balance on the account in the future, for example, upon sale of the property; the balance on the account is not being canceled or forgiven; and the loan may be purchased, assigned, or transferred.

(ii) Resuming compliance—

(A) If a servicer fails at any time to treat a mortgage loan that is exempt under paragraph (e)(6)(i) of this section as charged off or charges any additional fees
or interest on the account, the obligation to provide a periodic statement pursuant to this section resumes.

(B) Prohibition on retroactive fees. A servicer may not retroactively assess fees or interest on the account for the period of time during which the exemption in paragraph (e)(6)(i)
of this section applied.

(f) Modified periodic statements and coupon books for certain consumers in bankruptcy. While any consumer on a mortgage loan is a debtor in bankruptcy under title 11 of the United
States Code, or if such consumer has discharged personal liability for the mortgage loan pursuant to 11 U.S.C. 727, 1141, 1228, or 1328, the requirements of this section are subject to the following modifications with regard to that mortgage loan:

(1) Requirements not applicable. The periodic statement may omit the information set forth in paragraphs (d)(1)(ii) and (d)(8)(i), (ii), and (v) of this section. The requirement in
paragraph (d)(1)(iii) of this section that the amount due must be shown more prominently than other disclosures on the page shall not apply.

(2) Bankruptcy notices. The periodic statement must include the following:

(i) A statement identifying the consumer’s status as a debtor in bankruptcy or the discharged status of the mortgage loan; and

(ii) A statement that the periodic statement is for informational purposes only.

(3) Chapter 12 and chapter 13 consumers. In addition to any other provisions of this paragraph (f) that may apply, with regard to a mortgage loan for which any consumer with
primary liability is a debtor in a chapter 12 or chapter 13 bankruptcy case, the requirements of this section are subject to the following modifications:

(i) Requirements not applicable. In addition to omitting the information set forth in paragraph (f)(1) of this section, the periodic statement may also omit the information set forth in
paragraphs (d)(8)(iii), (iv), (vi), and (vii) of this section.

(ii) Amount due. The amount due information set forth in paragraph (d)(1) of this section may be limited to the date and amount of the post-petition payments due and any post-petition
fees and charges imposed by the servicer.

(iii) Explanation of amount due. The explanation of amount due information set forth in paragraph (d)(2) of this section may be limited to:

(A) The monthly post-petition payment amount, including a breakdown showing how much, if any, will be applied to principal, interest, and escrow;

(B) The total sum of any post-petition fees or charges imposed since the last statement; and

(C) Any post-petition payment amount past due.

(iv) Transaction activity. The transaction activity information set forth in paragraph (d)(4) of this section must include all payments the servicer has received since the last statement,
including all post-petition and pre-petition payments and payments of post-petition fees and charges, and all post-petition fees and charges the servicer has imposed since the last statement. The brief description of the activity need not identify the source of any payments.

(v) Pre-petition arrearage. If applicable, a servicer must disclose, grouped in close proximity to each other and located on the first page of the statement or, alternatively, on a
separate page enclosed with the periodic statement or in a separate letter:

(A) The total of all pre-petition payments received since the last statement;

(B) The total of all pre-petition payments received since the beginning of the consumer’s bankruptcy case; and

(C) The current balance of the consumer’s pre-petition arrearage.

(vi) Additional disclosures. The periodic statement must include, as applicable:

(A) A statement that the amount due includes only post-petition payments and does not include other payments that may be due under the terms of the consumer’s bankruptcy plan;

(B) If the consumer’s bankruptcy plan requires the consumer to make the post-petition mortgage payments directly to a bankruptcy trustee, a statement that the consumer should send
the payment to the trustee and not to the servicer;

(C) A statement that the information disclosed on the periodic statement may not include payments the consumer has made to the trustee and may not be consistent with the trustee’s
records;

(D) A statement that encourages the consumer to contact the consumer’s attorney or the trustee with questions regarding the application of payments; and

(E) If the consumer is more than 45 days delinquent on post-petition payments, a statement that the servicer has not received all the payments that became due since the consumer
filed for bankruptcy.

(4) Multiple obligors. If this paragraph (f) applies in connection with a mortgage loan with more than one primary obligor, the servicer may provide the modified statement to any or all of the primary obligors, even if a primary obligor to whom the servicer provides the modified statement is not a debtor in bankruptcy.

(5) Coupon books. A servicer that provides a coupon book instead of a periodic statement under paragraph (e)(3) of this section must include in the coupon book the disclosures set forth in paragraph (f)(2) and (f)(3)(vi) of this section, as applicable. The servicer may include these disclosures anywhere in the coupon book provided to the consumer or on a separate page enclosed with the coupon book. The servicer must make available upon request to the consumer by telephone, in writing, in person, or electronically, if the consumer consents, the information
listed in paragraph (f)(3)(v) of this section, as applicable. The modifications set forth in paragraph (f)(1) and (f)(3)(i) through (iv) and (vi) of this section apply to a coupon book and
other information a servicer provides to the consumer under paragraph (e)(3) of this section.

(g) Successor in interest. If, upon confirmation, a servicer provides a confirmed successor in interest who is not liable on the mortgage loan obligation with a written notice and acknowledgment form in accordance with Regulation X, § 1024.32(c)(1), the servicer is not required to provide to the confirmed successor in interest any written disclosure required by this section unless and until the confirmed successor in interest either assumes the mortgage loan obligation under State law or has provided the servicer an executed acknowledgment in
accordance with Regulation X, § 1024.32(c)(1)(iv), that the confirmed successor in interest has not revoked.

The Final Rule also includes updates to model forms and clauses along with updates to Official Bureau Interpretations, which are not included in these posts.  (If they were, you would have quit reading long ago.)  Refer to the Final Rule for these changes.