All provisions of the CFPB’s mortgage servicing final rule and interpretive rule will be published in the Federal Register on October 19th, most becoming effective 12 months after the date of publication with the exception of the “successor in interest provisions” and “bankruptcy periodic statement” that will become effective 18 months from the date of publication.
The 900-page finalized set of rules on mortgage servicing, unveiled in early August, were designed to ensure that homeowners, struggling borrowers, and property heirs are treated fairly by mortgage servicers. CFPB officials Laurie Maggiano, Manager for Servicing and Securitization Markets, Research, and Regulation, and Laura Johnson, Senior Counsel in the Office of Regulations, presented an overview of policy and programs that impact the mortgage industry based on these rules at the Five Star Conference and Expo in Dallas in September. This was one of the first times the Bureau provided an in-depth, in-person training since the promulgation of the new servicing rules.
CFPB Director Richard Cordray said, “These updates to the rule will give greater protections to mortgage borrowers, particularly surviving family members and other successors in interest, who often are especially vulnerable.”
The finalized rules dictate that servicers must provide certain borrowers with foreclosure protections more than once over the life of the loan. According to the CFPB, this change will be particularly helpful for borrowers who obtain a permanent loan modification and later suffer an unrelated hardship, such as the loss of a job or the death of a family member, that could otherwise cause them to face foreclosure. Servicers must also clarify borrower protections when the servicing of a loan is transferred and provide important loan information to borrowers in bankruptcy.
The updated rules also more clearly define various roles in the foreclosure process. For those who inherit property, the potential foreclosure process has been especially perilous. The updated rules establish a broad definition of “successor in interest” that generally includes persons who receive property upon the death of a relative or joint tenant, via divorce or legal separation, through certain trusts, or from a spouse or parent and gives them, generally, the same protections outlined under the CFPB’s mortgage servicing rules as the original borrower.
These amendments also require servicers to notify borrowers when loss mitigation applications are complete and provide greater protection for struggling borrowers during servicing transfers. The rules also clarify servicers’ obligations to avoid dual-tracking and prevent wrongful foreclosures, as well as when a borrower becomes delinquent.