Information related to accounts must be incorporated into a mortgage servicing file
|
ACTION: Compliance Required as of January 10, 2014 Show Dear Board of Directors and Chief Executive Officer: If your credit union services mortgage loans, you must comply with CFPB’s new Real Estate Settlement Procedures Act (REPSA) Mortgage Servicing rule for certain mortgage loans.1 The RESPA Mortgage Servicing rule addresses:
Small servicers are exempt from only certain parts of the rule, as discussed throughout this letter. Your credit union is a small servicer if you, together with any affiliates, service 5,000 or fewer mortgages, and you (or an affiliate) are the creditor or assignee for all of them.2 Specifically, small servicers are exempt from the:
However, small servicers must comply with:
Additional mortgage servicing requirements may apply under the new Truth in Lending Act (TILA) Mortgage Servicing rule issued by CFPB.3 The requirements of the TILA mortgage servicing rule are addressed in a separate NCUA Regulatory Alert 14-RA-03. Background The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) amended RESPA, which is implemented by Regulation X, to require disclosures for force-placed insurance. The Dodd-Frank Act also required servicers to take action to correct certain errors asserted by consumers and to respond to requests for certain information from consumers regarding their mortgages. CFPB adopted a rule to implement these Dodd-Frank Act provisions and issue additional mortgage servicing requirements, including designating personnel to assist delinquent consumers and contact consumers soon after delinquency to consider loss mitigation options. Concurrent with the RESPA Mortgage Servicing rule, CFPB also issued a final rule amending TILA, which is implemented by Regulation Z, and provided companion mortgage servicing rules. CFPB Bulletin 2013-12 (opens new window) clarifies the interplay between the servicing rules, bankruptcy law, and Fair Debt Collection Practices Act (FDCPA).4 If your credit union is a creditor, assignee, or servicer of mortgages, you should be familiar with the mortgage servicing rules under both Regulation X and Regulation Z to determine whether the rules apply to the loans you service, and if so, your compliance obligations under the rules. How Does a Credit Union Qualify for the Small Servicer Exemption? Your credit union is considered a small servicer under both the TILA and RESPA Mortgage Servicing rules if:
An affiliate is defined as any company that controls your credit union, is controlled by your credit union, or is under common control with your credit union.6 For example, a credit union service organization (CUSO) that is owned by a credit union is considered an affiliate. If you service any mortgages you (or an affiliate) did not originate or do not own, you do not qualify as a small servicer, even if you service 5,000 or fewer loans overall. For example, if you service 2,000 loans—1,999 of which you own or originated and one of which you neither own nor originated but for which you own the servicing rights—you do not qualify as a small servicer because you service a loan for which you (or an affiliate) are not the creditor or assignee.7 To determine if you are a small servicer, count “mortgage loans” only. A mortgage loan is a closed-end consumer credit transaction secured by a dwelling. Do not include reverse mortgages, timeshare plans, or loans you voluntarily service for a creditor or an assignee that is not an affiliate and for which you do not receive any compensation or fees. The small servicer exemption is determined each calendar year based on the loans you and your affiliates service as of January 1 for the remainder of the year. You can lose the small servicer exemption if you:
If you lose the exemption, you have six months from the date you stopped being a small servicer or until the next January 1 (whichever is later) to comply with the RESPA/TILA mortgage servicing requirements from which you were exempt as a small servicer. I. Force-Placed Insurance The REPSA Mortgage Servicing rule prohibits servicers from charging a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower failed to maintain hazard insurance, as required by the loan agreement, and has provided required notices. Which Loans are Covered by the Rule’s Force-Placed Insurance Provision?8 The force-placed insurance provision applies to most types of mortgages secured by a first or subordinate lien on residential real property, including a refinancing, upon which there is a principal dwelling for one to four families, including individual condominium or cooperative units or a manufactured home.9 Also, small servicers, as defined above, are generally exempted from the force-placed insurance escrow provisions of the RESPA Mortgage Servicing rule. A small servicer may purchase force-placed insurance for a member with an escrow account whose mortgage obligation is more than 30 days overdue, if the cost of the force-placed insurance to the member is less than the amount the small servicer would need to disburse from the member’s escrow account to pay the member’s hazard insurance premium.10 Servicers that are debt collectors under the FDCPA to whom a member has sent a written request to cease communication must still send the disclosures regarding the forced placement of hazard insurance. What are the Requirements? “Force-placed insurance” is hazard insurance the servicer obtains on behalf of the owner or assignee.11 The rule limits the use of force-placed insurance.12 You must:
Force-placed insurance charges imposed by a servicer on a member, beyond those subject to state regulation as insurance charges, must be bona fide and reasonable.13 Also, before each anniversary of your purchase of force-placed insurance, you must deliver or place in the mail to the member a written notice explaining the renewal and requesting the member provide evidence of having purchased hazard insurance on the property. The notices to members must have the content and format specified in the rule and demonstrated in the rule’s model and sample forms. Proper use of the forms will comply with both the content and format requirements of the rule. Both the rule and enclosed CFPB Mortgage Servicing Small Entity Compliance Guide describe in detail the required timing and delivery for notices and acceptable evidence you may request from members showing they maintained continuous hazard insurance coverage. Additional force-placed rules apply for members with escrow accounts.15 If a member has an escrow account for the payment of hazard insurance, you may not obtain force-placed insurance, unless you are unable to maintain the member’s existing hazard insurance coverage. You are not considered unable to maintain the member’s hazard insurance just because a member’s mortgage obligation is overdue or the escrow account has insufficient funds. Therefore, generally, you will have to advance funds through escrow to maintain coverage. You can add this cost to the escrow balance or otherwise seek reimbursement from the member for the funds you advance. You are considered unable to maintain the member’s hazard insurance, and may therefore obtain force-placed insurance in accordance with the general rules rather than advance funds through escrow, if you have a reasonable basis to believe either the hazard insurance provider has canceled the policy for reasons other than non-payment or the property is vacant. II. Error Resolution and Information Requests Servicers are required to meet procedural requirements for responding to written information requests or complaints of errors. Which Loans are Covered by the Error Resolution and Information Requests Provision?16 The error resolution and information requests provision applies to most types of mortgages secured by a first or subordinate lien on residential real property, including a refinancing, upon which there is a principal dwelling for one to four families, including individual condominium or cooperative units or a manufactured home.17 All servicers must comply with the error resolution and information requests provision. Servicers that are debt collectors under the FDCPA to whom a member has sent a written cease communication request must still comply with the error resolution and information request provision, unless the member specifically withdraws the request for the error resolution or information.18 Which Types of Errors and Information Requests are Covered? The error resolution and information request provision applies generally to any written notice from the member asserting certain specified errors and including the name of the member, information to enable you to identify the member’s mortgage loan account, and the error the member believes has occurred.19 The rule applies to over 10 types of potential errors including:20
Both the rule and enclosed Compliance Guide describe in detail the types of errors covered by the rule.21 What are the Requirements? The error resolution and information request provision establishes requirements for responding to written information requests and complaints of errors.22 You must follow these requirements for complaints asserting specific errors, as well as any errors relating to servicing, and when responding to requests for information regarding servicing a member’s mortgage. In general, when a member sends a written request to resolve an error or to send information about their account, you must:
Some information requests and error resolution types require a shorter response time, such as requests for contact information for the owner or assignee of a mortgage and allegations of errors related to a payoff statement or foreclosure proceedings. All of the timing requirements exclude legal public holidays, Saturdays, and Sundays. Both the rule and Compliance Guide describe in detail the required procedures and timelines for responding to notices of errors and information requests. You may set up an address for members to use to submit their notices of errors and requests for information, as long as you provide them with a written notice of the address. The notice shall include a statement that the member must use the established address to assert an error or request information. If you designate a specific address for receiving a notice of error, you must use the same address for receiving information requests. Before you change the designated address, you must send a written notice to the member. You must post the designated address on any websites you maintain that contain your contact address. III. General Servicing Policies, Procedures, and Requirements Servicers are required to establish policies and procedures reasonably designed to achieve objectives specified in the rule. Which Loans are Covered by the General Servicing Policies, Procedures, and Requirements Provision?24 The general servicing provision applies to mortgages secured by a first or subordinate lien on residential real property, including a refinancing, upon which there is a principal dwelling for one to four families, including individual condominium or cooperative units or a manufactured home.25 Small servicers are exempt from the general servicing policies, procedures, and requirements provision. What are the Requirements? The general servicing provision requires you to establish policies and procedures reasonably designed to achieve the following five objectives:26
The rule and Compliance Guide provide several examples of policies and procedures, that if properly implemented will help you achieve these objectives. You may determine the best policies, procedures, and methods for your credit union or affiliate so long as they are reasonably designed to achieve the objectives set forth in the general servicing policies, procedures, and requirements provisions of the RESPA and TILA Mortgage Servicing rules. You have flexibility to set policies, procedures, and methods in light of the size, nature, and scope of your operations – including, for example, the volume and aggregate unpaid principal balance of the mortgages you service, the credit quality (including the default risk) of the mortgages you service, and your history of member complaints. In addition, the rule sets specific requirements and standards for:
You must retain records that document your actions with respect to a member’s mortgage loan account until one year after the date you discharged the mortgage or transferred servicing. This does not mean you must keep actual paper copies of documents. You may retain the records using any method that accurately reproduces them (including computer programs) and ensures you can easily access the records (including a contractual right to access records possessed by another entity). As for the servicing file requirements, for each mortgage you service, you must maintain the following documents and data in a way that allows you to compile them into a servicing file within five days:
The 5-day compilation requirement does not confer upon a member an independent right to access information contained in the servicing file. When members file a written request for their servicing file, you must give them a copy of the information contained in their servicing file, subject to the procedures and limitations set forth in the information request provisions of the REPSA Mortgage Servicing rule as detailed earlier in this Regulatory Alert. IV. Early Intervention with Delinquent Members Servicers must establish or make good-faith efforts to establish live contact with borrowers by the 36th day of their delinquency and promptly inform such borrowers, where appropriate, that loss mitigation options may be available. Which Loans are Covered by the Early Intervention with Delinquent Members Provision? The early intervention with delinquent members provision applies to the same loans as described in section III of this Regulatory Alert, as well as any loan that is secured by a property that is not a member’s principal residence.29 Small servicers are exempt from the early intervention with delinquent members provision. Servicers are also exempt from the early intervention contact requirements while a member is a debtor in bankruptcy, or if the servicer is a debt collector under the FDCPA to whom the member has sent a written cease communication request.30 What are the Requirements? The early intervention provision requires that you must, at a minimum:31
The rule contains model language servicers may use for the written notice. For purposes of the rule, delinquency begins on the day a payment sufficient to cover principal, interest and, if applicable, escrow for a given billing cycle is due and unpaid. Thus, for each billing cycle for which a member is delinquent for at least 36 days, you must make a good-faith effort to establish live contact by the 36th day and, if appropriate, inform the member about the availability of loss mitigation options.32 Live contact with a member includes telephoning or conducting an in-person meeting with the member, but does not include leaving a recorded phone message. You may, but need not, rely on live contact established at the member’s initiative to satisfy the live contact requirement of this rule. The rule is designed to give you significant flexibility in tailoring your contact methods to particular circumstances. A good-faith effort to establish live contact consists of reasonable steps under the circumstances to reach a member and may include telephoning the member on more than one occasion, or sending the member a written or electronic communication encouraging the member to establish live contact with you. The early intervention provision requires you to promptly provide loss mitigation information when appropriate. You have reasonable discretion to determine whether informing a member about the availability of loss mitigation options is appropriate under particular circumstances which you may establish after making live contact with the member. The Compliance Guide contains examples demonstrating when a servicer has reasonably determined providing information about loss mitigation options is appropriate. You may provide loss mitigation information orally, in writing, or through electronic communication, as long as you share the information promptly after you establish live contact.33 You may satisfy the requirements of the loss mitigation options promptly after establishing live contact by providing the member with the written notice found in Appendix MS-4 of the rule. By the 45th day of delinquency, you must provide delinquent members a written notice about loss mitigation options.34 You must provide the written notice even if you provided information about loss mitigation and foreclosure previously during an oral communication with the member, as discussed above. The notice must be clear and conspicuous, and include:
Appendix MS-4 provides model language you can use in your loss mitigation notice. V. Continuity of Contact with Delinquent Members Servicers are required to maintain reasonable policies and procedures to provide delinquent borrowers with access to personnel to assist them with loss mitigation options where applicable. What Loans are Covered by the Continuity of Contact with Delinquent Members Provision? The continuity of contact with delinquent members provision applies to the same loans as described in section III of this Regulatory Alert.35 Small servicers are exempt from the continuity of contact with delinquent members provision. If you do not meet the standards for the small servicer exemption, note that in addition to the general scope and coverage of the rule, the continuity of contact with delinquent members provision only applies to the member’s principal residence. What are the Requirements? The rule requires that you to design policies and procedures to ensure, among other things, that:36
It is up to you to decide whether to assign a single person or a team of personnel to respond to a delinquent member. Personnel assigned to delinquent members must provide them with accurate information about:
Your policies and procedures must be designed to ensure that personnel remain available until the member has made, without incurring a late charge, two consecutive mortgage payments in accordance with the terms of a permanent loss mitigation agreement or the mortgage. If a member re-defaults after making two payments, the clock resets and personnel must be available by the time you send the written notice required by the early intervention requirements – but in any event, by the 45th day of the member’s delinquency. VI. Loss Mitigation Servicers are required to follow specified loss mitigation procedures for a mortgage secured by a borrower’s principal residence. What Loans are Covered by the Loss Mitigation Provision? The loss mitigation provision applies to the same loans as described in section III of this Regulatory Alert.37 Small servicers are exempt from the majority of the loss mitigation requirements. However, two prohibitions apply to small servicers. Small servicers must not:
Note that in addition to the general scope and coverage of the rule, the loss mitigation provision only applies to the member’s principal residence. Servicers that are debt collectors under the FDCPA to whom a member has sent a written cease communication request must still comply with the loss mitigation provision, unless the member specifically withdraws the request for loss mitigation. What are the Requirements? The loss mitigation provision generally requires you to:38
When you receive a loss mitigation application 45 days or more before a foreclosure sale is scheduled, or at any time when no foreclosure sale has been scheduled, you must:
The rule has specific requirements and timelines for acknowledging loss mitigation applications, exercising reasonable diligence to make incomplete applications complete, and correcting applications. The Compliance Guide also contains several implementation tips for these requirements. If you receive a complete loss mitigation application 37 days or more before a scheduled foreclosure sale, or at any time when no foreclosure sale has been scheduled, in general you must:
The rule allows you to offer a member a short-term payment forbearance of no more than six months based on an evaluation of an incomplete loss mitigation application.39 The rule’s requirements for evaluating loss mitigation applicants also apply to when servicing of the loan is transferred. Under the rule, how much time you must give a member to respond to loss mitigation offers depends on the proximity of a foreclosure sale:
If the member doesn’t respond within the 7-day or 14-day deadline, you can deem your loss mitigation offer as rejected, except in cases where:
You must allow members to appeal your decision regarding loan modifications40 when you receive a complete or facially complete loss mitigation application during the pre-foreclosure review period (before a servicer has made the first notice or filing to begin the foreclosure process) or 90 days or more before a scheduled foreclosure sale (or at a date when no foreclosure sale is scheduled). The appeal must include an independent evaluation – which means you cannot use the same personnel who evaluated the application to review the appeal. Supervisors can review appeals so long as they were not directly involved in the initial evaluation of the member’s completed loss mitigation application. Within 30 days of a member making an appeal, you must notify the member of your decision to offer or reject the loan modification option subject to the appeal. You must give the member at least 14 days to accept or reject an offer of a loss mitigation option resulting from your independent evaluation, after providing this notice to the member. The rule restricts dual tracking, which involves a servicer moving forward with foreclosure while simultaneously working with the member to avoid foreclosure. You cannot make the first notice or filing for any judicial or non-judicial foreclosure process until a member is more than 120 days delinquent.41 If a member has submitted a complete or facially complete loss mitigation application before you have begun the foreclosure process, you may not begin the foreclosure process until one of the following occurs: a) In the case of a complete application: 1. You send the member a notice that the member is not eligible for any loss mitigation options, and
the member has exhausted the appeal process; b) If a member submits a complete loss mitigation application after you have made the first notice or filing for the foreclosure process but more than 37 days42 before a scheduled foreclosure sale (or at a time when no sale has been scheduled), you must not move for foreclosure judgment or order of sale, or conduct a foreclosure sale, until one of the following occurs: 1. You send the member a notice that the member is not eligible for any loss mitigation, and the member has exhausted the appeal process; c) In the case of facially complete application, under the rule, you must seek to complete the application and give the member a reasonable amount of time to provide the materials necessary to complete the application. In addition, you may not make the first notice or filing for a foreclosure process or otherwise refer the member to foreclosure until the member has had a reasonable amount of time to provide the documents or information. What Other Resources are Available? In addition to the referenced enclosures on the title page of this document, other resources are available. CFPB resources to help you understand the RESPA Mortgage Servicing rule information about proposed and subsequent adjustments to the rule,43 and compliance materials can be found on the CFPB’s Mortgage Rules at a Glance Chart (opens new window). If you have questions, please contact NCUA’s Office of Consumer Protection at (703) 518-1140 or , or contact your regional office or state supervisory authority. Are mortgage servicing rights a financial asset?Servicing assets and liabilities are contracts to service financial assets. They are either assets or liabilities, depending on whether the fees paid to the servicer are expected to be more or less than adequate compensation for the servicing.
Which of the following pieces of information is considered an application?An application is defined as the submission of six pieces of information: (1) the consumer's name, (2) the consumer's income, (3) the consumer's Social Security number to obtain a credit report (or other unique identifier if the consumer has no Social Security number), (4) the property address, (5) an estimate of the ...
Which item is usually not included in the mortgage loan payment?What's not included in your monthly mortgage payment? Utilities, homeowner's association fees, and condo association fees are not included in the mortgage payment that you pay to the lender. You're responsible for setting up your utility accounts and paying those separately.
Which process of loan servicing involves the activity escrow analysis?Aggregate (or) composite analysis, hereafter called aggregate analysis, means an accounting method a servicer uses in conducting an escrow account analysis by computing the sufficiency of escrow account funds by analyzing the account as a whole.
|
