CFPB issues final rule to facilitate mortgage communication

The rule, an update to the 2016 mortgage servicer rule, is aimed at improving communication between mortgage servicers and consumers in bankruptcy. It goes into effect April 19.

The Consumer Financial Protection Bureau issued a final rule to help improve communication between mortgage servicers and some consumers in bankruptcy.

The rule, which goes into effect April 19, clarifies certain technical aspects of the timing for servicers providing periodic statements to consumers entering or exiting bankruptcy.

The Truth in Lending Act requires mortgage servicers to provide periodic statements to borrowers, and the bureau has developed sample forms for servicers to use. The 2016 mortgage servicing rule requires that servicers send modified periodic statements or coupon books to certain consumers in bankruptcy starting April 19, 2018.

The rule also addressed the timing for servicers to transition to providing or ceasing to provide modified periodic statements to consumers entering or exiting bankruptcy.

After issuing the rule, however, the bureau learned that certain technical aspects of the timing of this transition may create unintended challenges and be subject to different legal interpretations. In October 2017, the bureau sought public comment on a proposed rule that would provide greater certainty to help servicers comply.

Specifically, the final rule provides a clear single-statement exemption for servicers to make the transition, superseding the single-billing-cycle exemption included in the 2016 rule.

Under former director Richard Cordray, the bureau prioritized the regulation of mortgage servicers in the wake of the recession. Cordray and the CFPB laid a large portion of the blame for mortgage servicing failures at the foot of outdated or poorly implemented technology.

“Outdated and deficient servicing technology continues to put many consumers at risk. This problem is made worse by a lack of training to use their technology effectively,” Cordray said at the time of the 2016 rule. “Needless errors impose harm to consumers facing delinquency or engaged in loss mitigation processes. These shortcomings can become chronic when servicers do not implement proper system testing and auditing processes.”