CFPB NEW REGULATIONS:IMPACT FOR HOUSING COUNSELORS

CFPB – Consumer Finance Protection Bureau New regulations – took effect – Jan. 10, 2014 These regulations are federal law, not just

guidelines (ex. HAMP handbook) Creates private right of action

Real Estate Settlement Procedures Act (RESPA) Truth in Lending Act (TILA) Damages, costs & attorneys fees

Keep Good Records!

HIGHLIGHTS

Loss Mitigation Foreclosure Prohibitions Charges and Fees Error Resolution Requests for Information Requests for Payoff Statement

LOSS MITIGATION

What It Doesn’t Do A servicer has no duty to “provide any

borrower with any specific loss mitigation options”

Loss mitigation application rules do not apply to any applications submitted prior to Jan. 10 If more than 37 days prior to a scheduled sale,

servicer’s receipt of a new complete loss mitigation application after Jan. 10 triggers an obligation to review the borrower under the new rules

NEW PROTECTIONS

Any borrower who is more than 37 days from a foreclosure sale and files a complete loss mitigation application before 37 days before a foreclosure sale is entitled to an evaluation of the complete loss mitigation application for all available loss mitigation options

What Does 37 Days Mean if No Sale Date is Scheduled If no foreclosure sale is set at the time the

borrower submits a complete loss mitigation application, the loss mitigation application is treated as if it was received by the servicer more than 90 days before any foreclosure sale

This treatment remains true even if a foreclosure sale is later actually scheduled or re-scheduled

LOSS MITIGATION PROCESS

Step 1 – Live Contact Between default & 36th day post-default, servicer

must make a good faith effort to reach the borrower, by telephone (not just a message) or in-person

Step 2 – General Information Must alert borrower to the availability of any loss

mitigation options

STEP 3 – CONTINUITY OF CONTACT

Between default and 45 days post-default, servicer must assign staff to borrower and provide written notice

Staff can be a team Stay assigned until 2 consecutive payments under

permanent loss mitigation agreement

Send written notice with contact info, and loss mitigation info & application

Service Requirements: Team must have access to all docs & info the

borrower submits for loss mitigation options Facilitate sharing of accurate & current info

about borrower’s loss mitigation application and the status of foreclosure proceeding between team and other staff, including those handling foreclosure

What Does That Mean? Accurate info about loss mitigation options Info to borrower on what they need to do to

apply Deadlines for applying and processing

application How to appeal Status of application Provide complete record of borrower’s payment

history Procedures for error resolution and requesting

info

STEP FOUR – PERIODIC STATEMENTS

45 days after default, service must send: Delinquency date Risk of foreclosure Account history (shorter of 6 months or last

current) Amount to bring current Whether servicer has made foreclosure notice or

filing

STEP FIVE – APPLYING FOR LOSS MITIGATION

Application = providing any info that would be evaluated as part of a loss mitigation application

Transfer to new servicer: docs & info from old servicer to new servicer may count as an application

STEP 6 – ACKNOWLEDGING RECEIPT OF APPLICATION

If received 45 days or more before scheduled sale* Servicer must review to determine if complete Must provide written acknowledgement of

receipt within 5 days Must specify if application is complete

If incomplete – servicer must: identify what docs & info are needed Provide a date for submitting addtl docs Date must be reasonable (more than 7 days)

If received less than 45 days before sale No written requirement; servicer must “exercise

reasonable diligence” in obtaining docs & info

Facially complete application Acknowledgement letter either denotes application as

complete or incomplete If the servicer has everything they need to review the

application and indicate it is complete in the acknowledgement, then it is complete

If the servicer informs the homeowner that they have everything they need in the acknowledgement, but then later discover they need additional documents, then the application is facially complete

In either scenario, the homeowner receives the protections of submitting a complete application

Including the application is complete for foreclosure protections If incomplete, servicer must identify it as incomplete and what

docs or info. is needed* Borrower must have reasonable time to provide info Date – from facially complete for appeal and acceptance timeline Date – from actually complete for 30 day evaluation timeline

STEP 7 – COMPLETE APPLICATION

If the servicer is waiting for info from a 3rd party (ex. credit reporting agency), the application is complete once the borrower submits everything required from the borrower Not dependent on 3rd parties outside of their

control

STEP 8 – EVALUATION OF APPLICATION

If application is received more than 37 days before scheduled sale, it must be reviewed for all loss mitigation options Must be conducted within 30 days of receipt of

COMPLETE* application If application received 37 days or less before sale

Servicer does not have to follow this loss mitigation process

Servicer must have policies/procedures that comply with requirements set by investor

Transfer during evaluation Date based from when complete application was

submitted to old servicer. New servicer – “continue the evaluation to the extent

practicable”

STEP 9 – APPLICATION DECISION

Within 30 days of complete application, servicer must provide written notice If offer is made –

Identify what loss mitigation offers are being made Identify amount of time the borrower has to accept

If application is denied - Specific reasons for denial for any loan mod programs If denial is investor requirements, servicer must

identify the specific owner and the requirement that is the basis of the denial Based on an investor requirement is insufficient

If denied because of NPV, must provide inputs Right to appeal, requirements & timing

Appeal Only for loan modification (not other loss

mitigation options) Application must be received 90 days prior to

scheduled sale* Must be filed within 14 days from servicer’s

written notice Servicer must respond to appeal within 30 days

STEP 10 – ACCEPTANCE/REJECTION

Deadlines for responding to modification offer If submitted complete application 90 days or

more before scheduled sale, servicer must provide at least 14 days to respond

Between 37 and 90 days Servicer must provide at least 7 days to respond

LIMITATIONS

Servicer is only required to comply with the requirements in the loss mitigation procedures for a single complete loss mitigation application Exception – if transferred to a new servicer,

borrower can apply again and receive all protections

FORECLOSURE PROHIBITIONS

Federal regulations – minimum requirements If federal law has stronger protections, then

federal law controls Ex. servicer can’t file foreclosure process until 120

days delinquent (replaces MD’s 90 day protection) Filing = Order to Docket

If state law has stronger protections, then state law applies Existing state structure – mediation, filing process, etc.

stays in place, in addition to the federal protections

• Servicer can’t file for foreclosure if borrower has filed a complete loss mitigation application until servicer has denied application, borrower has rejected, or borrower fails loss mitigation agreement (ex. short term payment forbearance)

Borrower submits complete application after foreclosure filed If more than 37 days before sale*

Servicer can not move for a judgment or order of sale, or conduct sale until: Servicer has denied application (including appeal

process) Borrower rejects all options Borrower fails loss mitigation agreement

Once servicer receives complete application, they must “promptly” instruct their attorneys not to proceed with pursing foreclosure sale

If foreclosure has been filed, and complete application is received less than 37 days before scheduled sale, Servicer does not have to follow requirements Can use investor requirements, if any exist

Exemptions Small servicers – for most rules

Services 5,000 or fewer mortgage loans and services only mortgage loans that they or an affiliate originated or own (most credit unions & community banks)

Servicer that is a housing finance agency However, not exempt for waiting 120 days to file for

foreclosure & can’t proceed to foreclosure if homeowner is in compliance with trial period payment plan

Bankruptcy – notice requirements exempted

CHARGES AND FEES

Payment Processing Full periodic mortgage payments must be

credited by the servicer the day they are received Unless no harm to borrower (late fees, credit reporting) Full mortgage payment = principal, interest & escrow

Partial periodic mortgage payments Servicer can decide what to do with payment

Credit upon receipt Return to borrower Put in suspense account until borrower pays enough

to equal a full payment

Servicer must identify in each billing cycle periodic statement: Fees Payments currently due and payments made Transaction activity. If in default:

If more than 45 days, statement must include an account history for prior 6 months or since borrower was current

Delinquency date, potential foreclosure consequences, whether foreclosure has been initiated, amount to cure, and housing counselor info.

Servicer contact information Suspense account actions

Total amount being held in suspense account Total of all payments received since last statement sent

to suspense account Total of all payments received since beginning of year

held in suspense account

No pyramiding late fees Servicers are not allowed to impose a late fee on

a mortgage payment if the fee is only attributable to the borrower failing to make a previous late fee payment, when the payment otherwise is a full periodic payment received on time

Payment change notice – ARM Notice between 210 & 240 days prior to 1st

payment due after rate first adjusts Notice between 60 & 120 days when rate

adjustments causes payment change

Payments During Transfer of Servicers Previous - prior servicer’s responsibility to get to

new servicer New – prior servicer can either transfer the

payment to the new servicer or return payment to the borrower, with a notification of the new servicer

Force-Placed Insurance Servicer can purchase force-placed insurance for

homeowner only if they have a reasonable belief that the borrower failed to secure coverage required under the loan contract Reasonable belief –

Told by homeowner or insurance company that no coverage existed, or

Borrower fails to respond to servicer inquiries (15 days of 2nd notice)

If borrower is 30 days in default, servicer can not purchase force-placed insurance, instead servicer must disburse funds from escrow to pay current hazard insurance premium

Borrower proves coverage by providing a copy of insurance policy, declaration page, etc.

Purchasing Force-Placed Insurance Step 1 – At least 45 days before purchasing,

servicer must provide written notice requiring proof of coverage

Step 2 – 30 days after 1st notice & 15 days before purchasing, service must provide 2nd notice Must include annual cost or estimate

Step 3 – 15 days after 2nd notice, servicer can purchase if no response Charges must be “bona fide and reasonable”. Services

actually performed & a reasonable relationship to cost

Renewing Force-Placed Insurance At least 45 days before renewal, servicer must

notify borrower Must include annual cost or estimate

Cancelling force-placed insurance Within 15 days of being notified that borrower

has obtained hazard insurance, servicer must: Cancel the force-placed insurance Refund and remove any premiums and fees for the

period covered by both borrower’s insurance & force-placed insurance

ERROR RESOLUTION PROCESS

Replaces the QWR with Notice of Error & Request for Information

Notice of Error – Written notice to servicer Assert an error Name of borrower Loan account information Describes error Is not substantially same as prior notice of error,

unless servicer hasn’t promptly responded to previous notice, or if borrower is providing new information likely to change the outcome

Not overbroad Sent within 1 year after the servicer transfers

mortgage to new servicer

What is an Error? Failure to accept a payment according to the

servicer’s written requirements Failure to properly apply a payment Failure to credit payment as of the day received

if harm to borrower Failure to pay taxes or insurance premiums

timely Failure to refund money in an escrow account

within 20 days of borrower paying mortgage in full

Fee where servicer didn’t have a “reasonable basis” for it

What is an Error? cont’d. Failure to provide accurate mortgage payoff

amount within 7 days from request* Failure to provide accurate loss mitigation

information Failure to accurately and timely transfer

information about servicing the loan when transferring to new servicer

Violations of the foreclosure prohibitions Any error relating to the servicing of a mortgage

loan

Timing – investigation & response Failure to provide an accurate payoff balance

Within 7 business days after notice of error is received Initiating improper foreclosure

Before sale or within 30 business days after notice of error, whichever earlier If servicer can’t investigate and respond before

deadline, servicer may cancel/postpone sale and respond prior to rescheduled sale or within 30 business days after notice of error

All Others Within 30 business days of receiving notice of error

Can extend an additional 15 days if servicer provides borrower written notice of extension and reason

Timing – Exceptions Servicer does not have to acknowledge notice of

error or respond if: Servicer corrects error and notifies borrower in writing

within 5 business days of receiving notice of error Notice of error pertains to violations against

foreclosure prohibitions and the notice is received 7 or fewer days prior to sale. Servicer still required to make good faith effort to

respond (orally or in writing), & correct error or tell borrower why there is no error

If servicer has specific address to use, then must include this address in any written communication to homeowner if include other contact information. Address must be in periodic statement or coupon booklet;

and posted on website Borrower must use the identified address

If servicer provides multiple addresses, borrower can use any

If servicer doesn’t provide an address, borrower can send notice to any office of the servicer and servicer must respond

Servicer must provide written notice within 5 business days that the notice of error has been received

If servicer believes they do not have to respond, the written acknowledgement must state why they don’t think the notice of error doesn’t have to be reviewed

Servicer must correct error or conduct a reasonable investigation

Servicer can request documentation from borrower to support the error allegation

Servicer cannot provide negative info. to credit reporting agencies regarding any payment that is disputed in notice of error

Servicer may initiate foreclosure proceedings while responding to notice of error, unless the notice is alleging violations of foreclosure prohibitions

If servicer concludes error was made, they must: Correct the error Provide written notice with the effective date of

the correction, and servicer contact information If servicer concludes different error made,

they must: Correct the error Provide written notice that describes error,

identifies action, gives effective date of correction, & servicer contact info.

If servicer concludes no error, they must: Have conducted a reasonable investigation Provide written notice including:

Determination of no error Reasons for no error Borrower has right to request documentation that

servicer relied on in determining no error, and how to request that documentation

Contact information

REQUESTS FOR INFORMATION

Written request to include: Borrower’s name Mortgage loan account information Information that is requested Where – same rules as NOE

Servicer doesn’t have to respond if: Substantially similar to previous request, unless

info is type that changes over time & request covers different time period

Proprietary info Requests irrelevant info Overly broad or unduly burdensome Sent more than 1 year after servicer transfers

mortgage

Servicer response Within 5 business days, servicer must

acknowledge receipt of request in writing, determination that it does not have to respond to request, or provide information

If servicer concludes the requested info isn’t available, they must: Conduct a reasonable search for info. Provide written notice

Info not available Reasons why it’s not available Servicer contact info

Timing – Request for Info. Identity of, and contact info for, the owner or

assignee of mortgage Servicer must respond within 10 business days of

receipt All other requests

Within 30 business days from receipt Can extend 15 business days with notice & reason

Servicer can’t require fees or delinquent payments in order to respond to info request

Servicer can report negative info to credit reporting agencies during response period

REQUESTS FOR PAYOFF STATEMENTS

Written request Servicer can designate specific email, address or

fax, or other reasonable requirements for making the request

Response – reasonable time, but no later than 7 business days from receiving request*

Servicer must provide “accurate statement of the total outstanding balance that would be required to pay the consumer’s obligation in full as of a specified date”

GENERAL SERVICING REQUIREMENTS

Servicers must have policies and procedures in place to: Access and provide accurate & timely info. Properly evaluate loss mitigation applications Oversight & compliance by service providers Transfer of information during servicing transfer Informing borrowers of availability of NOE & RFIs Maintain documents so that servicer can create

servicing file within 5 days (for regulators) No private right of action, but still important to

document & file complaints

Resources: Help for Struggling Borrowers – A Guide to

Mortgage Servicing Rules Effective on Jan. 10, 2014 Consumer Finance Protection Bureau

http://files.consumerfinance.gov/f/201312_cfpb_mortgages_help-for-struggling-borrowers.pdf

Filing Complaints – CFPB http://www.consumerfinance.gov/complaint/ 855-411-2372

Legal Partners

Susan Francis, Esq. Foreclosure Prevention Project Manager Maryland Volunteer Lawyers Service susan@mvlslaw.org; 443-451-4084

Sally Snowberger Foreclosure Prevention Counselor sally@mvlslaw.org; 443-451-4067