The fifth in a series of posts on the new mortgage servicing rules.
CFPB has issued the Final Rule for Mortgage Servicing, which takes effect January 10, 2014. Among the numerous changes to mortgage servicing, there are several amendments to Regulation X (RESPA), including three new Rules about dealing with delinquent borrowers. These rules are presented separately in the regulation text, but build on each other.

  • Early Intervention with Delinquent Borrowers
  • Continuity of Contact with Delinquent Borrowers
  • Loss Mitigation Procedures

All three sections have the same coverage and exemptions application. The Small Servicer Exemption does apply here.  Also, these Rules do not apply to HELOCs and open-end lines of credit, reverse mortgage transactions, and loans for which the servicer is a qualified lender under the Farm Credit Act of 1971.
Following the servicer fulfilling the requirements of the Early Intervention with Delinquent Borrowers and if the borrower remains in a delinquent position, the next section of the Rule will apply. The Continuity of Contact with Delinquent Borrowers seeks to help delinquent borrowers to take action to improve the situation before default situations arise. This section has three main requirements:

  • The servicer must maintain policies to reasonably provide delinquent borrowers with access to personnel to assist them with loss mitigation options.
  • Servicers must assign contact personnel for a borrower after providing the early intervention notice.
  • Servicers must ensure that personnel can retrieve the complete record of the consumers’ payment history and all written communication.

The servicer is required to have personnel available who can explain the specific loss mitigation options available, how to complete loss mitigation applications, how to get it evaluated and if applicable explain how to appeal a denied application. The personnel must be able to inform the borrower of the status of a loss mitigation application, the loss mitigation deadlines, circumstances under which a foreclosure happens, and how to submit a written notice of error or information request.
If the consumer continues to be delinquent, the next section on Loss Mitigation Procedures becomes applicable.