Presentation on theme: "CFPB New Regulations: Impact for Housing Counselors"— Presentation transcript:
1 CFPB New Regulations: Impact for Housing Counselors
2 CFPB – Consumer Finance Protection Bureau New regulations – took effect – Jan. 10, 2014These regulations are federal law, not just guidelines (ex. HAMP handbook)Creates private right of actionReal Estate Settlement Procedures Act (RESPA)Truth in Lending Act (TILA)Damages, costs & attorneys feesKeep Good Records!Explain what private right of action isImportance – 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 ResolutionRequests for InformationRequests 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. 10If 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 rulesConsider submitting 2nd package.
5 New ProtectionsAny 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 saleThis treatment remains true even if a foreclosure sale is later actually scheduled or re-scheduledMD 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 ContactBetween default & 36th day post-default, servicer must make a good faith effort to reach the borrower, by telephone (not just a message) or in-personStep 2 – General InformationMust 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 noticeStaff can be a teamStay assigned until 2 consecutive payments under permanent loss mitigation agreementSend written notice with contact info, and loss mitigation info & applicationContinuity 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 optionsFacilitate 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 applyDeadlines for applying and processing applicationHow to appealStatus of applicationProvide complete record of borrower’s payment historyProcedures for error resolution and requesting info
11 Step Four – Periodic Statements 45 days after default, service must send:Delinquency dateRisk of foreclosureAccount history (shorter of 6 months or last current)Amount to bring currentWhether 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 applicationTransfer to new servicer: docs & info from old servicer to new servicer may count as an applicationApplies 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 completeMust provide written acknowledgement of receipt within 5 daysMust specify if application is completeIf incomplete – servicer must:identify what docs & info are neededProvide a date for submitting addtl docsDate must be reasonable (more than 7 days)If received less than 45 days before saleNo 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 incompleteIf the servicer has everything they need to review the application and indicate it is complete in the acknowledgement, then it is completeIf 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 completeIn either scenario, the homeowner receives the protections of submitting a complete applicationIncluding the application is complete for foreclosure protectionsIf incomplete, servicer must identify it as incomplete and what docs or info. is needed*Borrower must have reasonable time to provide infoDate – from facially complete for appeal and acceptance timelineDate – 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 borrowerNot 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 optionsMust be conducted within 30 days of receipt of COMPLETE* applicationIf application received 37 days or less before saleServicer does not have to follow this loss mitigation processServicer must have policies/procedures that comply with requirements set by investorTransfer during evaluationDate 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 completeTransfering - CFPB has noted particular interest/concern with transfer processes
17 Step 9 – Application Decision Within 30 days of complete application, servicer must provide written noticeIf offer is made –Identify what loss mitigation offers are being madeIdentify amount of time the borrower has to accept
18 If application is denied - Specific reasons for denial for any loan mod programsIf denial is investor requirements, servicer must identify the specific owner and the requirement that is the basis of the denialBased on an investor requirement is insufficientIf denied because of NPV, must provide inputsRight to appeal, requirements & timingMany 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 noticeServicer must respond to appeal within 30 daysOther 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 offerIf submitted complete application 90 days or more before scheduled sale, servicer must provide at least 14 days to respondBetween 37 and 90 daysServicer must provide at least 7 days to respondComplete – goes back to written acknowledgement – either complete or facially complete
21 LimitationsServicer is only required to comply with the requirements in the loss mitigation procedures for a single complete loss mitigation applicationException – if transferred to a new servicer, borrower can apply again and receive all protectionsChange 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 requirementsIf federal law has stronger protections, then federal law controlsEx. servicer can’t file foreclosure process until 120 days delinquent (replaces MD’s 90 day protection)Filing = Order to DocketIf state law has stronger protections, then state law appliesExisting 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 completeFile = 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 optionsBorrower fails loss mitigation agreementOnce servicer receives complete application, they must “promptly” instruct their attorneys not to proceed with pursing foreclosure sale= before 37 days, if no date setOther 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 requirementsCan 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 agencyHowever, not exempt for waiting 120 days to file for foreclosure & can’t proceed to foreclosure if homeowner is in compliance with trial period payment planBankruptcy – notice requirements exempted
27 Charges and Fees Payment Processing Full periodic mortgage payments must be credited by the servicer the day they are receivedUnless no harm to borrower (late fees, credit reporting)Full mortgage payment = principal, interest & escrowPartial periodic mortgage paymentsServicer can decide what to do with paymentCredit upon receiptReturn to borrowerPut in suspense account until borrower pays enough to equal a full paymentNonpayment of late fees, other fees, & non-escrow payments (ex. forced-place insurance) does not count for full mortgage payment determinationSuspense 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 madeTransaction activity. If in default:If more than 45 days, statement must include an account history for prior 6 months or since borrower was currentDelinquency date, potential foreclosure consequences, whether foreclosure has been initiated, amount to cure, and housing counselor info.Servicer contact informationSuspense account actionsTotal amount being held in suspense accountTotal of all payments received since last statement sent to suspense accountTotal of all payments received since beginning of year held in suspense accountExceptions – 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 timePayment change notice – ARMNotice between 210 & 240 days prior to 1st payment due after rate first adjustsNotice between 60 & 120 days when rate adjustments causes payment changeARM – adjustable rate mortgages
30 Payments During Transfer of Servicers Previous - prior servicer’s responsibility to get to new servicerNew – 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 contractReasonable belief –Told by homeowner or insurance company that no coverage existed, orBorrower 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 premiumBorrower proves coverage by providing a copy of insurance policy, declaration page, etc.within 15 days of servicer delivering 2nd written notice about required hazard insuranceEscrow - 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 coverageStep 2 – 30 days after 1st notice & 15 days before purchasing, service must provide 2nd noticeMust include annual cost or estimateStep 3 – 15 days after 2nd notice, servicer can purchase if no responseCharges 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 borrowerMust include annual cost or estimateCancelling force-placed insuranceWithin 15 days of being notified that borrower has obtained hazard insurance, servicer must:Cancel the force-placed insuranceRefund 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 InformationNotice of Error – Written notice to servicerAssert an errorName of borrowerLoan account informationDescribes errorIs 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 outcomeNot overbroadSent within 1 year after the servicer transfers mortgage to new servicerQualified Written RequestMust be written & sent separate from paymentBoth 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 requirementsFailure to properly apply a paymentFailure to credit payment as of the day received if harm to borrowerFailure to pay taxes or insurance premiums timelyFailure to refund money in an escrow account within 20 days of borrower paying mortgage in fullFee where servicer didn’t have a “reasonable basis” for itCrediting 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 informationFailure to accurately and timely transfer information about servicing the loan when transferring to new servicerViolations of the foreclosure prohibitionsAny error relating to the servicing of a mortgage loanServicer 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 balanceWithin 7 business days after notice of error is receivedInitiating improper foreclosureBefore sale or within 30 business days after notice of error, whichever earlierIf 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 errorAll OthersWithin 30 business days of receiving notice of errorCan extend an additional 15 days if servicer provides borrower written notice of extension and reasonForeclosure – 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 – ExceptionsServicer 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 errorNotice 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 websiteBorrower must use the identified addressIf servicer provides multiple addresses, borrower can use anyIf servicer doesn’t provide an address, borrower can send notice to any office of the servicer and servicer must respondServicer must provide written notice within 5 business days that the notice of error has been receivedIf 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 allegationServicer cannot provide negative info. to credit reporting agencies regarding any payment that is disputed in notice of errorServicer may initiate foreclosure proceedings while responding to notice of error, unless the notice is alleging violations of foreclosure prohibitionsDocumentation - But can’t require borrower to provide information as a condition of investigating the errorCan’t require any fee or paymentCredit 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 errorProvide written notice with the effective date of the correction, and servicer contact informationIf 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 investigationProvide written notice including:Determination of no errorReasons for no errorBorrower has right to request documentation that servicer relied on in determining no error, and how to request that documentationContact informationDocumentation request - Provided at no chargeCan include info in servicer’s collection system, unless proprietaryMust be provided within 15 business days
43 Requests for Information Written request to include:Borrower’s nameMortgage loan account informationInformation that is requestedWhere – same rules as NOEServicer doesn’t have to respond if:Substantially similar to previous request, unless info is type that changes over time & request covers different time periodProprietary infoRequests irrelevant infoOverly broad or unduly burdensomeSent more than 1 year after servicer transfers mortgageROI – send separate from payment
44 Servicer responseWithin 5 business days, servicer must acknowledge receipt of request in writing, determination that it does not have to respond to request, or provide informationIf servicer concludes the requested info isn’t available, they must:Conduct a reasonable search for info.Provide written noticeInfo not availableReasons why it’s not availableServicer contact infoNot 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 mortgageServicer must respond within 10 business days of receiptAll other requestsWithin 30 business days from receiptCan extend 15 business days with notice & reasonServicer can’t require fees or delinquent payments in order to respond to info requestServicer can report negative info to credit reporting agencies during response periodNo extension for identity of ownerExisting law – TILA – new investor must notify borrower within 30 days of the new investor identity.
46 Requests for Payoff Statements Written requestServicer can designate specific , address or fax, or other reasonable requirements for making the requestResponse – 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 timeAccurate = 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 applicationsOversight & compliance by service providersTransfer of information during servicing transferInforming borrowers of availability of NOE & RFIsMaintain documents so that servicer can create servicing file within 5 days (for regulators)No private right of action, but still important to document & file complaintsService providers = This includes foreclosure law firmsNOE – notice of errorRFI – request for information
48 Resources:Help for Struggling Borrowers – A Guide to Mortgage Servicing Rules Effective on Jan. 10, 2014Consumer Finance Protection BureauFiling Complaints – CFPBLegal PartnersFile 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 ManagerMaryland Volunteer Lawyers ServiceSally SnowbergerForeclosure Prevention CounselorIf you’re not sure about a requirement or how to proceed, please or call, happy to discuss regs or specific situation.
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