Real Estate Settlement Procedures Act (Regulation X) and ...

1 August 4, 2021 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small entity compliance guide 2 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES Version log The Bureau updates this guide on a periodic basis to reflect finalized amendments and clarifications to the rule that impacts guide content, as well as administrative updates. Below is a version log noting the history of this document and its updates: date Version Changes August 4, 2021 4 On June 28, 2021, the Bureau issued a final rule adding certain provisions related to the COVID-19 pandemic. This rule: Loss mitigation foreclosure protections: Added temporary procedural safeguards to the loss mitigation requirements. Loss mitigation incomplete application requirements: Revised reasonable diligence timing requirements for borrowers in a short-term forbearance program related to COVID-19.

2 It also added the ability to temporarily provide certain COVID-19-related streamlined loan modifications to borrowers based on the evaluation of an incomplete application. Early intervention live contact: Added additional information servicers must temporarily provide certain borrowers promptly after establishing living contact. On June 23, 2020, the Bureau issued an interim final rule to temporarily permit mortgage servicers to offer certain loss mitigation options ( , payment deferral and partial claim programs) to borrowers affected by the COVID-19 pandemic based on the evaluation of an incomplete loss mitigation application. 3 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES These revisions for these two rules are generally discussed in Appendix B. Separately, based on frequently asked questions, this version also clarifies certain guidance related to the servicing file and use of multiple electronic systems.

3 (See Servicing file in Section ) Miscellaneous Administrative Changes. August 6, 2019 Corrected typo on header of Early Invention with Delinquent Borrowers in Section 11. March 22, 2019 Correction of citations in the Modified Periodic Statement Requirements table. (See Content and layout requirements for modified periodic statements and coupon books in Section ) March 29, 2018 On March 8, 2018, the Bureau issued a final rule amending the 2016 Mortgage Servicing Rules. This rule replaces the single-billing-cycle exemption for periodic statements and coupon books with a single-statement exemption when servicers transition to providing modified or unmodified periodic statements and coupon books to consumers entering or exiting bankruptcy. This final rule provides a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise have to provide, regardless of when in the billing cycle the triggering event occurs.

4 (See Periodic statement and coupon book exemption for borrowers in bankruptcy ( (e)(5)) in Section ) Provisions of the mortgage servicing rules in effect prior to April 19, 2018, which are no longer in effect on or after April 19, 2018, have been removed. 4 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES Miscellaneous formatting changes. october 18, 2017 In october 2017, the Bureau issued an interim final rule amending certain mortgage servicing rules. This guide refers to the october 2017 interim final rule as the october 2017 Interim final Rule. Early intervention: The october 2017 Interim final Rule clarifies the obligations for servicers to provide the early intervention written notice if the borrower has invoked the cease communication protection under the Fair Debt Collection Practices Act (FDCPA). (See How often must I provide a written notice to a borrower who has invoked the cease communication right under the FDCPA?)

5 ( (d)(3)(iii)) in Section ) In July 2017, the Bureau published a final rule making technical corrections to the 2016 Mortgage Servicing Rule (July 2017 final Rule). The July 2017 final Rule clarifies the effective date for modifications to the sample notices provided in appendix H-30 and for commentary relating to periodic statements for certain borrowers in bankruptcy. (See Note on modifying sample periodic statements in Section and When do I have to start following these rules? in Section ) Miscellaneous Administrative Changes. November 30, 2016 In August 2016 , the Bureau published a final rule amending certain mortgage servicing rules. This guide refers to the August 2016 final rule as the 2016 Mortgage Servicing Rule. Small servicer: The small servicer exemption generally applies to servicers who service 5,000 or fewer mortgage loans for all of which the servicer 5 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES is the creditor or assignee.

6 The 2016 Mortgage Servicing Rule excludes certain seller-financed transactions and mortgage loans voluntarily serviced for a non-affiliate, even if the non-affiliate is not a creditor or assignee, from being counted toward the 5,000-loan limit. (See Small Servicer Exemption in Section 3. ) Successors in interest: The 2016 Mortgage Servicing Rule adds definitions of successor in interest to subpart C of Regulation X and to Regulation Z. In addition, it includes provisions related to how a servicer confirms a successor in interest s identity and ownership interest in a property. It also generally provides that the mortgage servicing rules apply to successors in interest once a servicer confirms the successor in interest s status. (See Successors in Interest in Section 4. ) Periodic statements: The 2016 Mortgage Servicing Rule clarifies certain periodic statement disclosure requirements relating to mortgage loans and requires servicers to provide certain borrowers in bankruptcy a modified periodic statement or coupon book.

7 In addition, in certain circumstances, servicers generally are exempt from the periodic statement requirement for charged-off mortgage loans. (See Periodic Statements in Section 5. ) Force-placed insurance: The 2016 Mortgage Servicing Rule amends the force-placed insurance disclosures and model forms to account for instances when the borrower has insufficient coverage on the property, and it gives servicers the 6 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES option to omit a borrower s mortgage loan account number on certain required notices. (See Force-Placed Insurance in Section 8. ) Early intervention: The 2016 Mortgage Servicing Rule clarifies the obligations for servicers to establish or make good faith efforts to establish live contact with delinquent borrowers. In addition, the rule revises the exemption from early intervention for borrowers who are in bankruptcy or who have invoked cease communication protection under the Fair Debt Collection Practices Act (FDCPA).

8 (See Early Intervention with Delinquent Borrowers in Section 11. ) The definition of delinquency: The 2016 Mortgage Servicing Rule adopts a general definition of delinquency that applies to all servicing provisions of Regulation X and periodic statements for mortgage loans in Regulation Z. For more information on when a borrower is delinquent, see the Bureau s factsheet on Delinquency. Loss mitigation: The 2016 Mortgage Servicing Rule amends and modifies several sections of the loss mitigation rule. (See Loss Mitigation Procedures in Section 13). The final rule: Requires servicers to meet the loss mitigation requirements more than once in the life of a loan for borrowers who become current on payments at any time between the borrower s prior complete loss mitigation application and a subsequent loss mitigation application; 7 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES Modifies an existing exception to the 120-day prohibition on foreclosure filing to allow a servicer to join the foreclosure action of a superior or subordinate lienholder; Clarifies how servicers select the reasonable date by which a borrower should return documents and information to complete an application; Makes clear that servicers cannot move for foreclosure judgment or order of sale, or conduct a foreclosure sale, in certain circumstances.

9 Requires that servicers provide a written notice to a borrower within five days (excluding Saturdays, Sundays, or legal holidays) after they receive a complete loss mitigation application and requires certain information to be included in the notice; Sets forth how servicers must attempt to obtain information not in the borrower s control and evaluate a loss mitigation application while waiting for third party information; Permits servicers to offer a short-term repayment plan based upon an evaluation of an incomplete loss mitigation application; Eases document collection requirements in connection with some loss mitigation applications; and Addresses and clarifies how loss mitigation Procedures and timelines apply when a 8 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES transferee servicer receives a mortgage loan for which there is a loss mitigation application pending at the time of a servicing transfer.

10 Other amendments and technical corrections or clarifications to the mortgage servicing rules not listed above. The mortgage servicing rules address the servicing of mortgage loans, and are implemented in both Regulation X and Regulation Z. Regulation X uses the term borrower, and Regulation Z uses the term consumer. Previous versions of the Mortgage Servicing Guide used the term consumer for ease of reading. This version replaced the term consumer throughout the guide with the term borrower. A nonprofit servicer section was added to the Small Servicer Exemption section. Miscellaneous Administrative Changes. November 3, 2014 The Bureau published a final rule amending certain mortgage rules to: Provide a small service r definition for nonprofit entities that meet ce rtain requirements. (See Small Servicer Exemption in Section 3.) January 7, 2014 Miscellaneous Administrative Changes.