United States: Mississippi Regulatory Compliance Group Quarterly Report, Vol. 27 No. 4

Last Updated: November 9 2016
Article by Butler Snow LLP

On August 4, 2016, the CFPB issued final rules amending the mortgage servicing provisions of RESPA Regulation X and TILA Regulation Z. At the same time, the Bureau issued an interpretive rule under the Fair Debt Collection Practices Act (FDCPA) relating to compliance with certain provisions by mortgage servicers who are also debt collectors under the FDCPA. Like the original mortgage servicing rules, the amendments are lengthy and complex. The CFPB issuance is 901 pages. Some changes will become effective 12 months after publication of the rule in the Federal Register, and others will take effect 18 months after publication. As of October 18, 2016, publication in the Federal Register had not yet occurred. In this article, we will summarize some of the key provisions in the amendments. But first, it might help to briefly review the basics of the current servicing rules.

The Current Mortgage Servicing Rules.

Issued in 2013 pursuant to Dodd-Frank and effective January 10, 2014, the CFPB rules generally apply to mortgage loan servicers including creditors and assignees servicing their own loans. The rules are split between Reg. Z and Reg. X. The Reg. Z mortgage servicing provisions apply to any closed-end, dwelling secured consumer credit transaction, first or subordinate lien, and whether or not the dwelling is the borrower's principal dwelling. The Reg. X servicing provisions apply to any "mortgage loan" which is defined as a "federally related mortgage loan" covered by RESPA, subject to the usual RESPA exemptions for business purpose loans, loans secured by 25 acres or more, and construction or other temporary financing, and excluding in this case, HELOCs. The Reg. X servicing amendments apply to first and subordinate lien loans except that the initial servicing disclosure and the servicing transfer disclosures apply only to first lien loans. Some of the Reg. X requirements apply only to loans secured by the borrower's principal residence.

The current Reg. Z servicing rules include:

  • Prompt payment crediting and payoff statements. Servicers must promptly credit periodic payments as of the date of receipt. Pyramiding of late fees is prohibited. Servicers are responsible for providing an accurate payoff to a consumer within a reasonable time, no later than seven business days, after receiving a written request. Prompt payment crediting and payoff statement requirements also apply to open-end consumer HELOCs.
  • ARM adjustment notices. On ARM loans, servicers must provide the first rate/payment adjustment notice at least 210 but no more than 240 days before the first payment at the adjusted level comes due. For subsequent rate adjustments, notice must be provided between 60 and 120 days before a payment at a new level becomes due. The rule sets forth detailed requirements for the contents and format of both notices.
  • Periodic billing statements. A periodic statement must be provided for each billing cycle. The rule sets forth detailed requirements for timing, form, and content of the billing statements and includes model forms. On fixed rate loans, a coupon or payment book may be used in lieu of sending billing statements, and the rule specifies the content of the payment book.

The current Reg. X servicing provisions include:

  • Servicing transfer disclosures. When loan servicing is transferred, each transferor servicer and transferee servicer must provide the borrower with a notice of transfer that meets the timing, content and format requirements specified in the rule.
  • Written servicing and information management policies and procedures. Servicers must establish and maintain comprehensive written policies and procedures for servicing loans, maintaining records, and managing information. Policies and procedures must be tailored to the size, scope, and nature of the servicer's operations and be reasonably designed to achieve the objectives and satisfy the requirements detailed in the rule.
  • Error Resolution and Information Requests. Servicers must acknowledge receipt of consumer requests for information and notices of error and, either, provide the requested information or investigate and correct any errors and provide the borrower with written notice of the corrective action taken, within the time limits specified in the rule. Delinquent loan payments cannot be required to be made before responding. Fees for responding to error notices are prohibited, and if the alleged error relates to a loan payment, no adverse information regarding the payment may be reported to the credit bureau for at least 60 days.
  • Force-placed insurance notices. No charge may be imposed for force-placed insurance unless the servicer has a reasonable basis to believe the borrower has failed to maintain required hazard insurance. The servicer must send two written notices to the borrower and not have received any verification that the borrower has insurance. Notices must meet the content, format and timing requirements in the rule, and the rule contains model forms. If a borrower provides proof of coverage, any overlapping force-placed insurance must be canceled and premiums refunded within 15 days. All charges must be bona fide and reasonable, and any costs other than regulated insurance premiums must be for services actually performed and bear a reasonable relationship to the servicer's costs of providing the service. If there is an escrow for insurance, the servicer must advance funds to the escrow account to pay insurance premiums even when the borrower is delinquent on the loan.
  • Early intervention with delinquent borrowers. For a loan secured by the borrower's principal dwelling, a servicer must make good faith efforts to establish live contact with the borrower by the time the account is 36 days delinquent and inform the borrower, where appropriate, that loss mitigation options may be available. In addition, the servicer must send written notice by the time the loan is 45 days delinquent. The rule specifies the content of the written notice and provides model forms.
  • Continuity of contact with delinquent borrowers. For a loan secured by the borrower's principal dwelling, a servicer must have and maintain reasonable written policies and procedures for providing a delinquent borrower with access to personnel who can assist them with any available loss mitigation options. The policies and procedures must be reasonably designed to achieve certain objectives specified in the rule.
  • Loss mitigation procedures. For a loan secured by the borrower's principal dwelling, a servicer is subject to limitations on initiating or continuing foreclosure and to procedural requirements when offering any loss mitigation option. Basically, a loss mitigation option is any alternative to foreclosure offered by the investor/owner of the mortgage available through the servicer. No specific loss mitigation options are required, but any that are offered must meet the procedural requirements of the rule.

The rule sets time limits for consideration of loss mitigation applications. Generally, servicers must acknowledge receipt within 5 days, inform the borrower of any additional information needed and the deadline for providing it, and evaluate the borrower for all available loss mitigation options within 30 days after receiving the completed application. A borrower must be given 7 to 14 days to accept or reject any mitigation offered, depending on how far in advance of a scheduled foreclosure the completed application was received. If the application is denied, written notice of the denial must be given to the borrower which must include a description of any appeal rights and, in some cases, a statement of the specific reasons for the denial. The borrower may appeal the denial, and any appeal must be reviewed by different personnel than those who decided the initial application. The borrower must be given notice of the determination on the appeal within 30 days, and if the appeal results in an offer of loss mitigation, the borrower must be given 14 days to accept or reject.

  • Delinquency and foreclosure. Servicers are prohibited from starting foreclosure until the loan is at least 120 days delinquent. The rule prohibits "dual tracking", or proceeding with foreclosure while at the same time dealing with a borrower on a pending loss mitigation request. Also, a servicer may not seek a judgment of foreclosure, move for an order of sale, or conduct a foreclosure sale if the borrower is performing under the terms of any permanent or temporary loss mitigation agreement.

Small servicer exceptions under the current rule. A "small servicer" is one that, together with any affiliates, services 5,000 or fewer mortgage loans in a calendar year, and only services mortgage loans originated or owned by it or its affiliate. Loans serviced on a pro bono basis for an unaffiliated entity, such as Habitat for Humanity, do not count for the threshold determination. Small servicers are exempt from Reg. Z requirements for billing statements/payment books and are also exempt from Reg. X requirements for written loan servicing and information management policies and procedures, early intervention with delinquent borrowers, continuity of contact with delinquent borrowers, and loss mitigation procedures. Small servicers are still subject to the 120 day foreclosure rule and the other Reg. Z and Reg. X requirements listed, with one small twist on force-placed insurance. Small servicers may force place insurance when the borrower is in default rather than having to advance funds to an existing escrow account, but only if the force-placed insurance costs less than the amount the servicer would disburse from escrow to maintain the borrower's existing coverage.

Key Provisions of the 2016 Mortgage Servicing Rule Amendments. The most significant changes contained in the 2016 amendments include the following:

  • Successors in interest. Under the current rule, a servicer's written servicing policies and procedures must reasonably ensure that upon receiving notice of a borrower's death, the servicer can promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property securing the loan. The 2016 amendments make three sets of changes relating to successors in interest.

First, the Bureau defines the term "successor in interest" for purposes of Reg. X and Reg. Z in a fashion consistent with the types of transfers that are protected from enforcement of a due-on-sale clause under section 341(d) of the 1982 Garn-St.Germain Act. A successor in interest is a person to whom an ownership interest in a property securing a mortgage loan is transferred from a borrower in one or more of the following ways: (i) a transfer by inheritance or through a right of survivorship on the death of a joint tenant or tenant by the entirety; (ii) a transfer to a relative resulting from the death of a borrower; (iii) a transfer where the spouse or children of the borrower become an owner; (iv) a transfer resulting from a divorce, legal separation, or property settlement agreement by which the spouse of the borrower becomes an owner; or (v) a transfer into an inter vivos, or living, trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of occupancy rights. While small servicers are generally exempt from the requirement to maintain written servicing policies and procedures, the Bureau noted that small servicers must still respond in a timely manner to requests for information which might include providing a written description of the documents the servicer reasonably requires to confirm a successor's identity and ownership interest in the property.

Second, the 2016 amendments clarify how a mortgage servicer confirms a successor in interest's identity and ownership interest. Generally, a servicer must respond to a written request from a person who may be a successor in interest by providing that person with a written description of the documents the servicer reasonably requires to confirm the person's identity and ownership interest in the property. A servicer's policies and procedures must be reasonably designed to ensure the servicer can: (i) upon receipt of notice of the borrower's death or a transfer of the property, promptly facilitate communication with any potential or confirmed successors in interest, (ii) promptly determine what documents the servicer requires to confirm the person's identity and ownership interest, (iii) promptly provide to any potential successor in interest a description of those documents and how the person may submit them; (iv) upon receipt of those documents, promptly make a determination and notify the person that his or her status is confirmed, that additional documents are needed (and what those documents are), or that the servicer has determined the person is not a successor in interest.

Third, the 2016 amendments extend the protections of the Reg. X and Z mortgage servicing rules to successors in interest once their status has been confirmed. Essentially, a successor in interest is treated as a "borrower" under Reg. X and as a "consumer" under Reg. Z for purposes of the mortgage servicing requirements, including the right to receive periodic statements and other notices, prompt crediting of payments and payoff statements, responding to notices of error and information requests, communication with delinquent borrowers, and loss mitigation. A servicer may not condition its review of a loss mitigation application upon a confirmed successor in interest agreeing to assume liability on the loan, but may condition consummating a loan modification or other loss mitigation option on assumption by the successor.

While confirmed successors in interest are entitled to receive periodic statements and notices such as escrow statements, rate/payment adjustment notices, force-placed insurance notices, etc., duplicative notices are not required. If the servicer is already sending those notices to another borrower on the loan, it is not required to also send those notices to a successor, but the servicer may still have to provide that information to the successor in response to a written request for information. A servicer may also disclose non-public personal information relating to the mortgage loan to a confirmed successor in interest, but may redact financial, contact, or location information about other borrowers to protect their privacy.

To view the full article please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Kane Russell Coleman & Logan PC
Troutman Sanders LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Kane Russell Coleman & Logan PC
Troutman Sanders LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions