CFPB Issues Final Rule Amending Mortgage Servicing Rule

The Consumer Financial Protection Bureau today issued a 900-page final rule amending its mortgage servicing rules. The final rule addresses some concerns previously raised by ABA: it clarifies the definition of delinquency, adds a provision stating that banks that have charged off mortgage loans are not required to send periodic statements if certain requirements are met, and exempts certain seller-financed transactions from being counted toward the 5,000 loan limit for small servicers.

“We appreciate the bureau’s efforts to provide clarity regarding the interpretation of the servicing rules,” said ABA VP Krista Shonk. “However, we remain concerned that some of the revisions could add an undue compliance burden to financial institutions and raise legal and privacy issues for both banks and consumers.”

One such concern is the rule’s broadened definition of “successor in interest,” and the extension of the protections of the servicing rule to those individuals even though they are not obligated on the mortgage loan. In comments to the bureau last year, ABA opposed providing successors in interest detailed information regarding a mortgage loan, as doing so would violate the financial privacy of living obligors. While CFPB attempted to address the privacy concerns of living obligors, ABA is evaluating whether those protections will be sufficient.

The rule also requires servicers to provide periodic statements to borrowers in bankruptcy. ABA previously pointed out that this provision would add a significant operational and financial burden to banks, adding that it would mean implementing new processes and systems to address the limited universe of borrowers who have filed for bankruptcy.

Along with the rule, the bureau today also updated the implementation page of its website with information about the changes. The majority of rule will take effect one year after publication in the Federal Register; however, the provisions regarding periodic statements in the event of bankruptcy and successors in interest will take effect 18 months after publication. ABA is currently in the process of reviewing the rule to understand its full implications for member banks and will provide a comprehensive analysis in the coming days. For more information, contact ABA’s Krista Shonk.