We are a small community bank with well under $5,000 mortgage loans. We do, however, take payments for a scholarship loan program funded by a local attorney–some of which are secured by the borrower’s primary residence. We do not fund the loans, take action on the loans, report to the IRS or act as the creditor in any way aside from taking their payments. Does this knock us out of the Small Servicer Exemption? Thoughts?
Commentary 12 CFR 1026.41(e)(4)(ii) Small servicer defined.
Small servicers that do not qualify for the exemption. A servicer that services any mortgage loans for which a servicer or an affiliate is not the creditor or assignee is not a small servicer. For example, a servicer that owns mortgage servicing rights for mortgage loans that are not owned by the servicer or an affiliate, or for which the servicer or an affiliate was not the entity to whom the obligation was initially payable, is not a small servicer.
Reg Z 1026.41 defines a mortgage loan as any closed end consumer credit transaction secured by a dwelling. From my understanding of your situation, I would say you do not meet the small servicer exemption requirements since you are servicing another creditors mortgage loans. However, if you don’t own the servicing rights you may qualify under the subservicer provision. If you and the master servicer both meet the small servicer requirements that may be an option. See commentary 12 CFR 1025.41(e)(4)(ii)(2).