Understanding the Latest Consumer Financial Protection Bureau Mortgage Servicing Rules

The Consumer Financial Protection Bureau (CFPB) has introduced new mortgage servicing rules to protect consumers from unfair practices. These rules aim to improve communication, transparency, and accountability in the mortgage servicing industry.

The CFPB requires mortgage servicers to provide clear and timely information to borrowers about their loan, including the amount owed, interest rate, and payment due dates. This information must be provided in writing and made available online.

Mortgage servicers must also respond to borrower inquiries within 5 business days, and provide a point of contact for borrowers to reach out with questions or concerns. This is a significant improvement from the previous 30-day response time.

The new rules also prohibit mortgage servicers from making unauthorized changes to a borrower's loan terms, such as increasing the interest rate or fees without prior consent.

The CFPB has proposed a rule to amend the mortgage servicing rules, which would impact the foreclosure process and add consumer protections for borrowers seeking loss mitigation.

The proposed rule would add a new defined term, "loss mitigation review cycle", which would begin when a borrower requests loss mitigation assistance more than 37 days before a foreclosure sale.

This cycle would prevent servicers from moving forward with scheduling a foreclosure sale or advancing the foreclosure action during this time.

The "loss mitigation review cycle" would end when a resolution is reached or the servicer and borrower exhaust loss mitigation safeguards.

Servicers and borrowers may seek clarification on what constitutes an oral request for loss mitigation assistance.

The proposed rule would also require servicers to provide certain mortgage servicing communications in languages other than English, such as notices concerning loss mitigation programs, in both English and Spanish.

The proposed rule will go through a commenting stage until September 9, 2024, and may receive comments on various servicing issues.

The proposed rule may go into effect within 12 months of publication of the final rule in the Federal Register, likely sometime in 2026.

The VA has made significant changes to its loss mitigation program, including the launch of the Veterans Affairs Servicing Purchase Program and the implementation of a 40-year loan modification term. This change was announced in Circular 26-24-8, issued on April 17, 2024.

The VA has also addressed assumption fees, advising that the holder or servicer of a VA-guaranteed home loan with automatic authority may charge an assumption processing fee not to exceed $300. This change was made in Circulars 26-23-10, Change 1, and 26-24-5.

The VA's changes to its loss mitigation program and assumption fees aim to provide more flexibility and clarity for borrowers and lenders, making it easier to navigate the process of modifying or assuming a VA-guaranteed home loan.

The VA has made significant changes to its loss mitigation program, launching the Veterans Affairs Servicing Purchase Program and implementing a 40-year loan modification term.

The VA issued Circular 26-24-8 on April 17, 2024, which extends the available term of its loan modification option.

Borrowers may now have the option to modify their VA loans with a 40-year term, which could help lower their monthly payments.

The VA's loss mitigation program changes aim to provide more flexible options for struggling borrowers to avoid foreclosure.

The Veterans Affairs Servicing Purchase Program is a key component of the VA's loss mitigation program changes, but details about this program are not provided in the article section.

The VA has recently addressed assumption fees in a move that affects homeowners with VA-guaranteed home loans. The U.S. Department of Veterans Affairs issued Circular 26-23-10, Change 1, Circular 26-24-5 and an Exhibit to clarify the rules.

Homeowners with automatic authority may be charged an assumption processing fee, which cannot exceed $300. This fee applies to the holder or servicer of the VA-guaranteed home loan.

The VA's guidelines aim to provide clarity and consistency in the handling of assumption fees.

The FHA loan programs are designed to help low-to-moderate income borrowers purchase a home with more lenient credit requirements. FHA loans require a down payment as low as 3.5%.

FHA loan limits vary by county, with a maximum loan limit of $765,600 in high-cost areas. The FHA loan limits are adjusted annually to reflect changes in the housing market.

FHA loans have lower mortgage insurance premiums compared to conventional loans, which can save borrowers hundreds of dollars per year.

North Dakota has been actively updating its mortgage laws, with Governor Doug Burgum signing House Bill 1068 into law on April 12, creating a new statutory licensing scheme for residential mortgage loan servicing activities.

This law follows the enactment of North Dakota Senate Bill 2090, which overhauled the state's licensing requirements related to residential mortgage lending.

The state's efforts to update its mortgage laws are a positive step towards protecting consumers.

In a separate development, the Ninth Circuit Court of Appeals recently issued an Order vacating a nearly $8 million judgment won by the Consumer Financial Protection Bureau (CFPB) in its lawsuit against Nationwide Biweekly Administration, Inc.

This case highlights the importance of ensuring that mortgage servicing companies comply with the law.

The CFPB's lawsuit against Nationwide Biweekly Administration, Inc. was remanded to the district court for further analysis based on recent rulings related to the constitutionality of the CFPB.

The Supreme Court's preemption ruling in Cantero v. Bank of America, N.A. has left national banks in a state of uncertainty.

On May 30, the Supreme Court issued its opinion, effectively sending the issue back to lower courts without providing a clear preemption standard.

This lack of clarity could create a significant burden for national banks, as they struggle to navigate the complex landscape of state laws and regulations.

The Court's decision in Cantero v. Bank of America, N.A. specifically dealt with the question of whether national banks must comply with state interest-on-escrow laws.

Regulatory Compliance is a crucial aspect of the Consumer Financial Protection Bureau's (CFPB) mortgage servicing rules. The CFPB requires mortgage servicers to maintain records of all communications with borrowers, including phone calls, emails, and letters.

These records must be kept for at least 25 months, as stated in the CFPB's rules. This ensures that borrowers can access their account information and communicate with their servicer easily.

Mortgage servicers must also provide borrowers with clear and timely information about their mortgage, including payment due dates, amounts, and any changes to the loan terms.

The Hart-Scott-Rodino Act requires premerger notification filings for certain transactions, including the purchase and sale of residential mortgage loans.

Transactions involving mortgage servicing rights can raise questions about HSR Act compliance, as they frequently do.

Residential mortgage loans and mortgage servicing rights are considered reportable transactions under the HSR Act.

This means companies involved in these transactions must submit premerger notification filings to the Federal Trade Commission and the Department of Justice.

Record retention is a critical aspect of regulatory compliance. Retaining records that document actions taken with respect to a borrower's mortgage loan account does not necessarily mean actual paper copies of documents.

Accurate reproduction of records is key. The records may be retained by any method that reproduces the records accurately. This includes computer programs and contractual rights to access records possessed by another entity.

Easy access is essential. The servicer must be able to easily access the records, including through a contractual right to access records possessed by another entity.