AMENDMENTS TO REGULATION X AND Z SERVICING RULES

Recently the Consumer Financial Protection Bureau (CFPB) published an interim final rule that amends existing final servicing rules contained in Regulation X and Z. Comments will be accepted until November 22, 2013. The rule is effective January 10, 2014.
The changes to changes routine is wearing thin, but these changes are helpful and do not significantly increase the compliance burden. Among other changes the amendments clarify the specific disclosures that must be provided before counseling for high-cost mortgages can occur, and proper compliance regarding servicing requirements when a consumer is in bankruptcy or sends a cease communication request under the Fair Debt Collection Practices Act (FDCPA). The CFPB has also issued Bulletin 2013-12 (Bulletin) which provides additional guidance on the bankruptcy/cease communication topic
Bankruptcy law and the FDCPA both provide significant protections for consumers, and each strictly limits communications with consumers in certain circumstances.

  • The Bulletin
    • Confirms that servicers must comply with certain requirements of the Dodd-Frank Act and respond to certain borrower communications in accordance with the Bureau’s servicing rules even after a borrower has sent a cease communication request under the FDCPA.
    • Provides a safe harbor from liability under the FDCPA with regard to such communications.
  • The Bureau is providing exemptions for two other servicing communications that are not specifically mandated by statute—the requirement in § 1026.20(c) for a notice of rate change for adjustable-rate mortgages (ARMs) and the early intervention requirements in § 1024.39—when a borrower has properly invoked the FDCPA’s cease communication protections.
  • The interim final rule also exempts servicers from the early intervention requirements in § 1024.39 and from the periodic statement requirements under 12 CFR 1026.41 for borrowers while they are in bankruptcy.
  • The interim final rule also clarifies which federally required disclosure must be used in counseling under 12 CFR 1026.34(a)(5) for a closed-end HOEPA loan not subject to the Real Estate Settlement Procedures Act (RESPA). The rule replaces language that could have been read to require provision of the Good Faith Estimate (GFE) or successor disclosure under RESPA, which are not required for transactions not covered by RESPA, and instead clarifies that counseling may be based on the HOEPA disclosures that are required for such transactions pursuant to TILA section 129(a) and Regulation Z section 1026.32(c).

A copy of the Interim Final Rule is available by clicking here.

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