Compliance

CFPB Adds to Stack of Mortgage Rules

Here’s a six-point overview of the CFPB’s new mortgage lending regulations.

February 28, 2013
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3. New mandates exist on how to service consumer mortgages, but some requirements exempt “small servicers.” Consistent with the CFPB’s acknowledgment that smaller institutions didn’t cause the financial crisis, the bureau includes in its new mortgage servicing regulations a “small servicer” exemption.

A credit union that services 5,000 or fewer mortgages where it’s the creditor or assignee will be exempt from certain (not all) of the requirements (as noted in the following).

But if a credit union servicing 5,000 or fewer loans uses a subservicer that services more than 5,000 mortgages, the subservicer must comply with all the requirements and the credit union is liable if the subservicer doesn’t comply.

The mortgage servicing rule generally applies to closed-end consumer loans secured by a dwelling. The rules address the following mortgage servicing requirements under both Regulations Z and X: Reg Z:

The new regulation amends the format and content of rate adjustment disclosures and requires earlier disclosures, such as seven to eight months before the first payment is due aft er the initial rate adjustment. Lenders, assignees, and servicers also must provide a notice between two to four months before payment at a new level is due when a rate adjustment causes the payment to change.

All servicers are subject to this requirement.

Also, servicers must send an accurate payoff balance to a borrower within seven business days aft er receipt of a written request from the borrower.

Reg X—Real Estate Settlement Procedures Act (RESPA):

Small servicers receive a restricted exemption, depending on the cost of the forcedplaced insurance.

And they must provide a written notice with loss mitigation information by the 45th day of the borrower’s delinquency. Small servicers are exempt.

The personnel should be accessible by phone to assist the borrower with loss mitigation options and applications. The servicer can determine how to assign staff to comply with this requirement. Small servicers are exempt.

The rule restricts a servicer from simultaneously evaluating a borrower for a loan modification while pursuing foreclosure on the property. Small servicers are exempt from many of the procedural requirements, but can’t initiate the foreclosure process unless a borrower is more than 120 days delinquent or proceed to a foreclosure judgment or sale if the borrower is following the terms of a loan mitigation agreement.

NEXT: Home Ownership and Equity Protection Act

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