1. CFPB New Regulations: Impact for Housing Counselors

2. CFPB – Consumer Finance Protection Bureau
New regulations – took effect – Jan. 10, 2014
These regulations are federal law, not just guidelines (ex. HAMP handbook)
Creates private right of action
Real Estate Settlement Procedures Act (RESPA)
Truth in Lending Act (TILA)
Damages, costs & attorneys fees
Keep Good Records!
Explain what private right of action is
Importance – housing counselors. Front line defense. Will see most of these violations. Need to share information with attorneys, as many of these violations will have occurred before they get to us. Gives us leverage in mediation, with opposing counsel, etc. when we can document a pattern of noncompliance. Ex. ALJ much more inclined to grant continuances when servicer hasn’t made good faith effort and we can demonstrate multiple failings.
Overall, positive changes, with additional strengthening by having federal law status, but some problematic new regulations too

3. Highlights Loss Mitigation Foreclosure Prohibitions Charges and Fees
Error Resolution
Requests for Information
Requests for Payoff Statement

4. Loss Mitigation What It Doesn’t Do
A servicer has no duty to “provide any borrower with any specific loss mitigation options”
Loss mitigation application rules do not apply to any applications submitted prior to Jan. 10
If more than 37 days prior to a scheduled sale, servicer’s receipt of a new complete loss mitigation application after Jan. 10 triggers an obligation to review the borrower under the new rules
Consider submitting 2nd package.

5. New Protections
Any borrower who is more than 37 days from a foreclosure sale and files a complete loss mitigation application before 37 days before a foreclosure sale is entitled to an evaluation of the complete loss mitigation application for all available loss mitigation options

6. What Does 37 Days Mean if No Sale Date is Scheduled
If no foreclosure sale is set at the time the borrower submits a complete loss mitigation application, the loss mitigation application is treated as if it was received by the servicer more than 90 days before any foreclosure sale
This treatment remains true even if a foreclosure sale is later actually scheduled or re-scheduled
MD structure, we don’t know when the sale date is going to be at 37 days or 90 days out. Interpretation – if unset, assume more than 90 days, even if it proves not to be that long.

7. Loss Mitigation Process
Step 1 – Live Contact
Between default & 36th day post-default, servicer must make a good faith effort to reach the borrower, by telephone (not just a message) or in-person
Step 2 – General Information
Must alert borrower to the availability of any loss mitigation options

8. Step 3 – Continuity of Contact
Between default and 45 days post-default, servicer must assign staff to borrower and provide written notice
Staff can be a team
Stay assigned until 2 consecutive payments under permanent loss mitigation agreement
Send written notice with contact info, and loss mitigation info & application
Continuity of contact - No private right of action, but still helpful to demonstrate non-compliance

9. Service Requirements:
Team must have access to all docs & info the borrower submits for loss mitigation options
Facilitate sharing of accurate & current info about borrower’s loss mitigation application and the status of foreclosure proceeding between team and other staff, including those handling foreclosure

10. What Does That Mean? Accurate info about loss mitigation options
Info to borrower on what they need to do to apply
Deadlines for applying and processing application
How to appeal
Status of application
Provide complete record of borrower’s payment history
Procedures for error resolution and requesting info

11. Step Four – Periodic Statements
45 days after default, service must send:
Delinquency date
Risk of foreclosure
Account history (shorter of 6 months or last current)
Amount to bring current
Whether servicer has made foreclosure notice or filing

12. Step Five – Applying for Loss Mitigation
Application = providing any info that would be evaluated as part of a loss mitigation application
Transfer to new servicer: docs & info from old servicer to new servicer may count as an application
Applies to first and second closed-end mortgages on borrower’s principal residence. Not reverse mortgages or HELOCs

13. Step 6 – Acknowledging Receipt of Application
If received 45 days or more before scheduled sale*
Servicer must review to determine if complete
Must provide written acknowledgement of receipt within 5 days
Must specify if application is complete
If incomplete – servicer must:
identify what docs & info are needed
Provide a date for submitting addtl docs
Date must be reasonable (more than 7 days)
If received less than 45 days before sale
No written requirement; servicer must “exercise reasonable diligence” in obtaining docs & info
* Remember – if no sale date set, then default is more than 90 days. So if no date set, then it is received more than 45 days before sale, and homeowner receives all protections, even if sale date is then scheduled for 2 weeks out.
Written acknowledgement - Must be sent within 5 business days after receipt of application

14. Facially complete application
Acknowledgement letter either denotes application as complete or incomplete
If the servicer has everything they need to review the application and indicate it is complete in the acknowledgement, then it is complete
If the servicer informs the homeowner that they have everything they need in the acknowledgement, but then later discover they need additional documents, then the application is facially complete
In either scenario, the homeowner receives the protections of submitting a complete application
Including the application is complete for foreclosure protections
If incomplete, servicer must identify it as incomplete and what docs or info. is needed*
Borrower must have reasonable time to provide info
Date – from facially complete for appeal and acceptance timeline
Date – from actually complete for 30 day evaluation timeline
* Reminder – the written acknowledgement detailing complete or incomplete with needed information, must send within 5 business days of receipt

15. Step 7 – Complete Application
If the servicer is waiting for info from a 3rd party (ex. credit reporting agency), the application is complete once the borrower submits everything required from the borrower
Not dependent on 3rd parties outside of their control

16. Step 8 – Evaluation of Application
If application is received more than 37 days before scheduled sale, it must be reviewed for all loss mitigation options
Must be conducted within 30 days of receipt of COMPLETE* application
If application received 37 days or less before sale
Servicer does not have to follow this loss mitigation process
Servicer must have policies/procedures that comply with requirements set by investor
Transfer during evaluation
Date based from when complete application was submitted to old servicer.
New servicer – “continue the evaluation to the extent practicable”
All loss mitigation options includes both loan modification program (HAMP & inhouse) and non-retention (short sale)
Complete or facially complete
Transfering - CFPB has noted particular interest/concern with transfer processes

17. Step 9 – Application Decision
Within 30 days of complete application, servicer must provide written notice
If offer is made –
Identify what loss mitigation offers are being made
Identify amount of time the borrower has to accept

18. If application is denied -
Specific reasons for denial for any loan mod programs
If denial is investor requirements, servicer must identify the specific owner and the requirement that is the basis of the denial
Based on an investor requirement is insufficient
If denied because of NPV, must provide inputs
Right to appeal, requirements & timing
Many of these requirements were in HAMP guidelines. Difference is this is now federal law they are violating when they aren’t complying. Housing counselors really have significant knowledge about potential denial reasons – ex. incomplete packages, inappropriate review, etc.
Application review – all programs considered at same time. Must list all program considered and reason for denial for each program

19. Appeal Only for loan modification (not other loss mitigation options)
Application must be received 90 days prior to scheduled sale*
Must be filed within 14 days from servicer’s written notice
Servicer must respond to appeal within 30 days
Other loss mitigation option s- ex. short sale
* Same protections, pre 90 days if not scheduled when application is submitted. Actual date - irrelevant

20. Step 10 – Acceptance/Rejection
Deadlines for responding to modification offer
If submitted complete application 90 days or more before scheduled sale, servicer must provide at least 14 days to respond
Between 37 and 90 days
Servicer must provide at least 7 days to respond
Complete – goes back to written acknowledgement – either complete or facially complete

21. Limitations
Servicer is only required to comply with the requirements in the loss mitigation procedures for a single complete loss mitigation application
Exception – if transferred to a new servicer, borrower can apply again and receive all protections
Change in circumstances does not trigger another full review. Servicer can do the review, but not required to, and homeowner not entitled to CFPB protections.
Exception – if first application was submitted before Jan. 10 of this year, application will get full protecions

22. Foreclosure Prohibitions
Federal regulations – minimum requirements
If federal law has stronger protections, then federal law controls
Ex. servicer can’t file foreclosure process until 120 days delinquent (replaces MD’s 90 day protection)
Filing = Order to Docket
If state law has stronger protections, then state law applies
Existing state structure – mediation, filing process, etc. stays in place, in addition to the federal protections

23. Servicer can’t file for foreclosure if borrower has filed a complete loss mitigation application until servicer has denied application, borrower has rejected, or borrower fails loss mitigation agreement (ex. short term payment forbearance)
Complete or facially complete
File = order to docket

24. Borrower submits complete application after foreclosure filed
If more than 37 days before sale*
Servicer can not move for a judgment or order of sale, or conduct sale until:
Servicer has denied application (including appeal process)
Borrower rejects all options
Borrower fails loss mitigation agreement
Once servicer receives complete application, they must “promptly” instruct their attorneys not to proceed with pursing foreclosure sale
= before 37 days, if no date set
Other judicial processes can continue (ex. mediation)

25. If foreclosure has been filed, and complete application is received less than 37 days before scheduled sale,
Servicer does not have to follow requirements
Can use investor requirements, if any exist

26. Exemptions Small servicers – for most rules
Services 5,000 or fewer mortgage loans and services only mortgage loans that they or an affiliate originated or own (most credit unions & community banks)
Servicer that is a housing finance agency
However, not exempt for waiting 120 days to file for foreclosure & can’t proceed to foreclosure if homeowner is in compliance with trial period payment plan
Bankruptcy – notice requirements exempted

27. Charges and Fees Payment Processing
Full periodic mortgage payments must be credited by the servicer the day they are received
Unless no harm to borrower (late fees, credit reporting)
Full mortgage payment = principal, interest & escrow
Partial periodic mortgage payments
Servicer can decide what to do with payment
Credit upon receipt
Return to borrower
Put in suspense account until borrower pays enough to equal a full payment
Nonpayment of late fees, other fees, & non-escrow payments (ex. forced-place insurance) does not count for full mortgage payment determination
Suspense account - Once enough money has been paid into a suspense account to cover a full payment, servicer must treat funds as payment

28. Servicer must identify in each billing cycle periodic statement: Fees
Payments currently due and payments made
Transaction activity. If in default:
If more than 45 days, statement must include an account history for prior 6 months or since borrower was current
Delinquency date, potential foreclosure consequences, whether foreclosure has been initiated, amount to cure, and housing counselor info.
Servicer contact information
Suspense account actions
Total amount being held in suspense account
Total of all payments received since last statement sent to suspense account
Total of all payments received since beginning of year held in suspense account
Exceptions – reverse mortgages, HELOCS,
Exception - coupon book (but not default notices)

29. No pyramiding late fees
Servicers are not allowed to impose a late fee on a mortgage payment if the fee is only attributable to the borrower failing to make a previous late fee payment, when the payment otherwise is a full periodic payment received on time
Payment change notice – ARM
Notice between 210 & 240 days prior to 1st payment due after rate first adjusts
Notice between 60 & 120 days when rate adjustments causes payment change
ARM – adjustable rate mortgages

30. Payments During Transfer of Servicers
Previous - prior servicer’s responsibility to get to new servicer
New – prior servicer can either transfer the payment to the new servicer or return payment to the borrower, with a notification of the new servicer

31. Force-Placed Insurance
Servicer can purchase force-placed insurance for homeowner only if they have a reasonable belief that the borrower failed to secure coverage required under the loan contract
Reasonable belief –
Told by homeowner or insurance company that no coverage existed, or
Borrower fails to respond to servicer inquiries (15 days of 2nd notice)
If borrower is 30 days in default, servicer can not purchase force-placed insurance, instead servicer must disburse funds from escrow to pay current hazard insurance premium
Borrower proves coverage by providing a copy of insurance policy, declaration page, etc.
within 15 days of servicer delivering 2nd written notice about required hazard insurance
Escrow - Even if escrow funds are insufficient (can add to arrearages, fees, etc.)
New regulation does not apply to flood insurance

32. Purchasing Force-Placed Insurance
Step 1 – At least 45 days before purchasing, servicer must provide written notice requiring proof of coverage
Step 2 – 30 days after 1st notice & 15 days before purchasing, service must provide 2nd notice
Must include annual cost or estimate
Step 3 – 15 days after 2nd notice, servicer can purchase if no response
Charges must be “bona fide and reasonable”. Services actually performed & a reasonable relationship to cost

33. Renewing Force-Placed Insurance
At least 45 days before renewal, servicer must notify borrower
Must include annual cost or estimate
Cancelling force-placed insurance
Within 15 days of being notified that borrower has obtained hazard insurance, servicer must:
Cancel the force-placed insurance
Refund and remove any premiums and fees for the period covered by both borrower’s insurance & force-placed insurance

34. Error Resolution Process
Replaces the QWR with Notice of Error & Request for Information
Notice of Error – Written notice to servicer
Assert an error
Name of borrower
Loan account information
Describes error
Is not substantially same as prior notice of error, unless servicer hasn’t promptly responded to previous notice, or if borrower is providing new information likely to change the outcome
Not overbroad
Sent within 1 year after the servicer transfers mortgage to new servicer
Qualified Written Request
Must be written & sent separate from payment
Both NOE & RFI – not specific format, but want to identify NOE or RFI, and provide the information required

35. What is an Error?
Failure to accept a payment according to the servicer’s written requirements
Failure to properly apply a payment
Failure to credit payment as of the day received if harm to borrower
Failure to pay taxes or insurance premiums timely
Failure to refund money in an escrow account within 20 days of borrower paying mortgage in full
Fee where servicer didn’t have a “reasonable basis” for it
Crediting payment - Servicer must credit within 5 days if borrower didn’t follow written requirements for payments but servicer accepted payment

36. What is an Error? cont’d.
Failure to provide accurate mortgage payoff amount within 7 days from request*
Failure to provide accurate loss mitigation information
Failure to accurately and timely transfer information about servicing the loan when transferring to new servicer
Violations of the foreclosure prohibitions
Any error relating to the servicing of a mortgage loan
Servicer has longer than 7 days if borrower is in bankruptcy, foreclosure, or has reverse mortgage. Then reasonable time.
Foreclosure prohibitions - making first filing for foreclosure prior to 120 days of delinquency and dual tracking

37. Timing – investigation & response
Failure to provide an accurate payoff balance
Within 7 business days after notice of error is received
Initiating improper foreclosure
Before sale or within 30 business days after notice of error, whichever earlier
If servicer can’t investigate and respond before deadline, servicer may cancel/postpone sale and respond prior to rescheduled sale or within 30 business days after notice of error
All Others
Within 30 business days of receiving notice of error
Can extend an additional 15 days if servicer provides borrower written notice of extension and reason
Foreclosure – clarification – servicer either must respond or cancel/postpone sale to comply with guidelines. Unless 7 days before sale.
No extensions for pay-off requests, foreclosure filing before 120 days, or dual tracking

38. Timing – Exceptions
Servicer does not have to acknowledge notice of error or respond if:
Servicer corrects error and notifies borrower in writing within 5 business days of receiving notice of error
Notice of error pertains to violations against foreclosure prohibitions and the notice is received 7 or fewer days prior to sale.
Servicer still required to make good faith effort to respond (orally or in writing), & correct error or tell borrower why there is no error

39. If servicer provides multiple addresses, borrower can use any
If servicer has specific address to use, then must include this address in any written communication to homeowner if include other contact information.
Address must be in periodic statement or coupon booklet; and posted on website
Borrower must use the identified address
If servicer provides multiple addresses, borrower can use any
If servicer doesn’t provide an address, borrower can send notice to any office of the servicer and servicer must respond
Servicer must provide written notice within 5 business days that the notice of error has been received
If servicer believes they do not have to respond, the written acknowledgement must state why they don’t think the notice of error doesn’t have to be reviewed

40. Servicer must correct error or conduct a reasonable investigation
Servicer can request documentation from borrower to support the error allegation
Servicer cannot provide negative info. to credit reporting agencies regarding any payment that is disputed in notice of error
Servicer may initiate foreclosure proceedings while responding to notice of error, unless the notice is alleging violations of foreclosure prohibitions
Documentation - But can’t require borrower to provide information as a condition of investigating the error
Can’t require any fee or payment
Credit reporting – better to submit NOE instead of Request for Info. which doesn’t have this protection

41. If servicer concludes error was made, they must:
Correct the error
Provide written notice with the effective date of the correction, and servicer contact information
If servicer concludes different error made, they must:
Provide written notice that describes error, identifies action, gives effective date of correction, & servicer contact info.

42. If servicer concludes no error, they must:
Have conducted a reasonable investigation
Provide written notice including:
Determination of no error
Reasons for no error
Borrower has right to request documentation that servicer relied on in determining no error, and how to request that documentation
Contact information
Documentation request - Provided at no charge
Can include info in servicer’s collection system, unless proprietary
Must be provided within 15 business days

43. Requests for Information
Written request to include:
Borrower’s name
Mortgage loan account information
Information that is requested
Where – same rules as NOE
Servicer doesn’t have to respond if:
Substantially similar to previous request, unless info is type that changes over time & request covers different time period
Proprietary info
Requests irrelevant info
Overly broad or unduly burdensome
Sent more than 1 year after servicer transfers mortgage
ROI – send separate from payment

44. Servicer response
Within 5 business days, servicer must acknowledge receipt of request in writing, determination that it does not have to respond to request, or provide information
If servicer concludes the requested info isn’t available, they must:
Conduct a reasonable search for info.
Provide written notice
Info not available
Reasons why it’s not available
Servicer contact info
Not available = not in the servicer’s control or info can’t be retrieved “in the ordinary course of business”

45. Timing – Request for Info.
Identity of, and contact info for, the owner or assignee of mortgage
Servicer must respond within 10 business days of receipt
All other requests
Within 30 business days from receipt
Can extend 15 business days with notice & reason
Servicer can’t require fees or delinquent payments in order to respond to info request
Servicer can report negative info to credit reporting agencies during response period
No extension for identity of owner
Existing law – TILA – new investor must notify borrower within 30 days of the new investor identity.

46. Requests for Payoff Statements
Written request
Servicer can designate specific , address or fax, or other reasonable requirements for making the request
Response – reasonable time, but no later than 7 business days from receiving request*
Servicer must provide “accurate statement of the total outstanding balance that would be required to pay the consumer’s obligation in full as of a specified date”
Exception – foreclosure or bankruptcy = reasonable time
Accurate = Accurate when issued

47. General Servicing Requirements
Servicers must have policies and procedures in place to:
Access and provide accurate & timely info.
Properly evaluate loss mitigation applications
Oversight & compliance by service providers
Transfer of information during servicing transfer
Informing borrowers of availability of NOE & RFIs
Maintain documents so that servicer can create servicing file within 5 days (for regulators)
No private right of action, but still important to document & file complaints
Service providers = This includes foreclosure law firms
NOE – notice of error
RFI – request for information

48. Resources:
Help for Struggling Borrowers – A Guide to Mortgage Servicing Rules Effective on Jan. 10, 2014
Consumer Finance Protection Bureau
Filing Complaints – CFPB
Legal Partners
File complaints with CFPB. Not overly complicated or formal. They should intervene & make inquiries. Also will encourage them to continue to crack down on non-compliers. Also document non-compliance for attorneys assisting clients.

49. Susan Francis, Esq. Sally Snowberger
Foreclosure Prevention Project Manager
Maryland Volunteer Lawyers Service
Sally Snowberger
Foreclosure Prevention Counselor
If you’re not sure about a requirement or how to proceed, please or call, happy to discuss regs or specific situation.