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 servicing transfers –

Protecting struggling borrowers during servicing transfers: When mortgages are transferred from one servicer to another, borrowers who had applied to the prior servicer for loss mitigation may not know where they stand with the new servicer. Today’s final rule clarifies that generally the new servicer must comply with the loss mitigation requirements within the same timeframes that applied to the transferor servicer, but provides limited extensions to these timeframes under certain circumstances. If a borrower submits an application shortly before transfer, the new servicer must send an acknowledgment notice within 10 business days of the transfer date. If the borrower’s application was complete prior to transfer, the new servicer must evaluate it within 30 days of the transfer date. If the new servicer needs more information to evaluate the application, the borrower would retain some foreclosure protections in the meantime. If the borrower submits an appeal, the new servicer has 30 days to make a determination on the appeal.

In short – 

• Transferee servicers must meet all of the deadlines and requirements for loss mitigation under § 1024.41 of Regulation X based on the date the application was received by the transferor servicer.
• A transferee servicer who receives a loan with a complete loss mitigation application pending as of the transfer date must comply with the requirement to evaluate the borrower for all loss mitigation options within 30 days of the transferor servicer’s receipt of the application, and use reasonable diligence to obtain any information that is not in the borrower’s control and that is needed to evaluate the borrower for loss mitigation options. The transfer date is defined as the date the transferee servicer will accept payments relating to a mortgage loan.
• A transferee servicer must allow a borrower to accept a loss mitigation option that was pending as of the transfer date, during the unexpired balance of the time the transferor servicer had given the borrower to accept the offer.
• A transferee must make a determination on an appeal if it is able to, within the later of 30 days of the transfer date or 30 days of the appeal date. If the servicer is not able to make a decision, it must treat the appeal as a pending complete loss mitigation application.
• If the acknowledgement period has not expired as of the transfer date and the transferor servicer has not provided the notice, the transferee servicer must send the acknowledgement notice within 10 days of the transfer date.
• A transferee servicer may not make the first notice or filing for foreclosure until after the date disclosed to the borrower for submitting the documents the transferee servicer requires for a complete loss mitigation application.

1024.41 Loss Mitigation procedures

(k)   Servicing Transfers.

(1)   In general—

(i)  Timing of compliance. Except as provided in paragraphs (k)(2) through (4) of this section, if a transferee servicer acquires the servicing of a mortgage loan for which a loss mitigation application is pending as of the transfer date, the transferee servicer must comply with the requirements of this section for that loss mitigation application within the timeframes that were applicable to the transferor servicer based on the date the transferor servicer received the loss mitigation application. All rights and protections under paragraphs (c) through (h) of this section to which a borrower was entitled before a transfer continue to apply notwithstanding the transfer.

(ii)  Transfer date defined. For purposes of this paragraph (k), the transfer date is the date on which the transferee servicer will begin accepting payments relating to the mortgage loan, as disclosed on the notice of transfer of loan servicing pursuant to § 1024.33(b)(4)(iv).

(2)   Acknowledgment notices—

(i)  Transferee servicer timeframes. If a transferee servicer acquires the servicing of a mortgage loan for which the period to provide the notice required by paragraph (b)(2)(i)(B) of this section has not expired as of the transfer date and the transferor servicer has not provided such notice, the transferee servicer must provide the notice within 10 days (excluding legal public holidays, Saturdays, and Sundays) of the transfer date.

(ii)  Prohibitions. A transferee servicer that must provide the notice required by paragraph (b)(2)(i)(B) of this section under this paragraph (k)(2):

(A)  Shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process until a date that is after the reasonable date disclosed to the borrower pursuant to paragraph (b)(2)(ii) of this section, notwithstanding paragraph (f)(1) of this section. For purposes of paragraph (f)(2) of this section, a borrower who submits a complete loss mitigation application on or before the reasonable date disclosed to the borrower pursuant to paragraph (b)(2)(ii) of this section shall be treated as having done so during the pre-foreclosure review period set forth in paragraph (f)(1) of this section.

(B)  Shall comply with paragraphs (c), (d), and (g) of this section if the borrower submits a complete loss mitigation application to the transferee or transferor servicer 37 or fewer days before the foreclosure sale but on or before the reasonable date disclosed to the borrower pursuant to paragraph (b)(2)(ii) of this section.

(3)  Complete loss mitigation applications pending at transfer. If a transferee servicer acquires the servicing of a mortgage loan for which a complete loss mitigation application is pending as of the transfer date, the transferee servicer must comply with the applicable requirements of paragraphs (c)(1) and (4) of this section within 30 days of the transfer date.

(4)  Applications subject to appeal process. If a transferee servicer acquires the servicing of a mortgage loan for which an appeal of a transferor servicer’s determination pursuant to paragraph (h) of this section has not been resolved by the transferor servicer as of the transfer date or is timely filed after the transfer date, the transferee servicer must make a determination on the appeal if it is able to do so or, if it is unable to do so, must treat the appeal as a pending complete loss mitigation application.

(i)  Determining appeal. If a transferee servicer is required under this paragraph (k)(4) to make a determination on an appeal, the transferee servicer must complete the determination and provide the notice required by paragraph (h)(4) of this section within 30 days of the transfer date or 30 days of the date the borrower made the appeal, whichever is later.

(ii)  Servicer unable to determine appeal. A transferee servicer that is required to treat a borrower’s appeal as a pending complete loss mitigation application under this paragraph (k)(4) must comply with the requirements of this section for such application, including evaluating the borrower for all loss mitigation options available to the borrower from the transferee servicer.

For purposes of paragraph (c) or (k)(3) of this section, as applicable, such a pending complete loss mitigation application shall be considered complete as of the date the appeal was received by the transferor servicer or the transferee servicer, whichever occurs first. For purposes of paragraphs (e) through (h) of this section, the transferee servicer must treat such a pending complete loss mitigation application as facially complete under paragraph (c)(2)(iv) as of the date it was first facially complete or complete, as applicable, with respect to the transferor servicer.

(5)  Pending loss mitigation offers. A transfer does not affect a borrower’s ability to accept or reject a loss mitigation option offered under paragraph (c) or (h) of this section. If a transferee servicer acquires the servicing of a mortgage loan for which the borrower’s time period under paragraph (e) or (h) of this section for accepting or rejecting a loss mitigation option offered by the transferor servicer has not expired as of the transfer date, the transferee servicer must allow the borrower to accept or reject the offer during the unexpired balance of the applicable time period.

The Final Rule also includes updates to model forms and clauses along with updates to Offical 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.