A proposed rule by the Consumer Financial Protection Bureau to amend Regulation X’s mortgage servicing provisions would accomplish some of the bureau’s objectives, but in many cases, it would have the opposite effect and would exceed the CFPB’s rulemaking authority, the American Bankers Association said Monday in a letter to the agency.
The CFPB in July issued a proposed rule to streamline existing loss mitigation requirements, add foreclosure procedural safeguards, revise certain early intervention requirements, and provide borrowers with access to certain mortgage servicing communication in languages other than English. It also would limit the fees a servicer can charge a borrower while the servicer is reviewing possible options to help the borrower. The proposal would not apply to servicers with 5,000 or fewer mortgage loans, all of which the servicer or affiliates own or originated.
In its comments, ABA said it supports removing the anti-evasion provision to allow for sequential review and exempting servicers from sending certain default-related correspondence while a borrower is on a short-term loss mitigation option. However, the association had significant concerns with the remainder of the proposed rule. There is a high likelihood the courts would rule that CFPB exceeded its authority by proposing to prohibit properly disclosed fees during the loss mitigation process and requiring communications in languages other than English, ABA said. And the bureau has not provided evidence the proposed rule would meet its stated goal of reducing avoidable foreclosures.
“While this goal is laudable, the bureau has not provided sufficient evidence to prove that the proposed rule is necessary and would effectively achieve this outcome,” ABA said. “The bureau makes no statements or assertions that servicers are engaging in avoidable foreclosures to support this rulemaking.”
ABA also said the 12-month compliance window for the rule was not enough time for servicers to implement the necessary operational and technological changes required under the proposed rule. It instead recommended setting the compliance deadline 24 months after publication of the rule in the Federal Register.
