Rule, proposal aim to improve communications with troubled mortgage borrowers

Mortgage servicers would receive 10 more days to tell borrowers facing foreclosure — who have requested a cease in communication under federal debt collection law — about their options in preventing the foreclosure, under an interim final rule issued by the Consumer Financial Protection Bureau (CFPB) Wednesday.

Simultaneously, the bureau issued a proposed rule providing “more certainty” for mortgage servicers about when to provide periodic statements to consumers about their bankruptcy case.

The interim rule giving servicers the longer, 10-day window to provide the modified notices takes effect Oct. 19 (the same date that related 2016 rule provisions become effective). CFPB said it is seeking comment (for 30 days) on the interim rule and will consider whether to revisit it in the future.

The bureau, in a statement, said the interim final rule should make it easier for mortgage borrowers to receive timely information from their mortgage servicers about available options for saving their home, even if they have submitted a request to cease communications. The latter proposal, CFPB Director Richard Cordray said, is aimed at clearing up confusion about when mortgage servicers can provide periodic statements with important loan information to borrowers in bankruptcy.

According to CFPB, last year it made changes to its rules requiring mortgage servicers to send written notices (known as “early intervention notices”) to certain consumers at risk of foreclosure who have requested a cease in communication under the Fair Debt Collection Practices Act. Under this law, consumers have the option to request that companies stop contacting them except for limited purposes.

Once these borrowers become delinquent, the bureau said its 2016 amendments generally require that mortgage servicers send notices to these consumers every 45 days to inform them of available foreclosure prevention options but prohibit servicers from sending the notices more than once in a 180-day period.

“The Bureau has heard concerns that once a servicer sends a notice to one of these borrowers, the rule requires servicers to provide the next notice exactly on the 180th day after the prior one, regardless of whether it is a weekend or a holiday,” CFPB stated in its release. “To alleviate these concerns, the interim final rule issued today gives servicers a longer, 10-day window to provide the modified notices. The Bureau believes that this change offers greater certainty for servicers’ ability to comply with the rule, without undermining important borrower protections. The interim final rule becomes effective on Oct. 19, 2017, the same date that the related 2016 rule provisions become effective. The Bureau is seeking comment on this rule and will consider whether to revisit it in the future.

The proposal on providing “more certainty” of the timing for servicers to provide periodic statements about a borrower’s bankruptcy case is in response to “certain technical aspects of the 2016 amendments” which “may create unintended challenges and be subject to different legal interpretations.”

The proposed effective date for the proposal is April 19, 2018, the same date that the sections of the 2016 rule that the proposal would amend become effective. The proposal will also have a 30-day comment period.

CFPB Issues Interim Final Rule to Help Mortgage Servicers Communicate With Certain Borrowers At Risk Of Foreclosure