Proposed Rulemaking by CFPB on Mortgage Servicing  

Posted by Gracie Nelson on July 12, 2024

During GoWest’s recent Spring Hike the Hill visit in May, we learned about potential rulemaking from CFPB members regarding Mortgage Servicing. We have remained vigilant in anticipation of this rule, providing updates on previous developments and predicting rulemaking based on CFPB data since 2021. Yesterday, the CFPB proposed rulemaking on Mortgage Servicing, specifically aimed at amending Regulation X and Regulation Z. These amendments follow the forbearance programs implemented during the Covid-19 Pandemic. To access our previous analysis of Covid-19 forbearance programs and mortgage servicing, click here.

Key Aspects of the Proposed Mortgage Servicing Rule

Streamlined Loss Mitigation Procedures and Foreclosure Procedural Safeguards: The CFPB is proposing to streamline Regulation X’s loss mitigation procedures using foreclosure procedural safeguards instead of requiring complete loss mitigation applications. This allows servicers more flexibility, not requiring a complete application to determine options and allowing sequential review. The review cycle starts with a request for assistance and continues until the loan is current or specific safeguards are met. During this cycle, foreclosure cannot proceed, and certain fees will not accrue. Required loss mitigation notices would also be removed.

Early Intervention Changes: Servicers will need to enhance early intervention notices by including additional information such as the mortgage loan owner’s name, descriptions of available loss mitigation options, and a website link for more options. They also suggest exempting servicers from some early intervention requirements during borrower forbearance periods, adding new live contact and written notice obligations as forbearances near their end, and specifying when early intervention requirements resume after forbearance ends.

Loss Mitigation Determination Notices and Appeals: Servicers will need to provide comprehensive loss mitigation determination notices and appeal rights to borrowers for all types of options, not just loan modifications. This includes both offers and denials. The notices would include key borrower-provided inputs used in decisions, a list of available options with instructions for review, and clarification that borrowers can use error procedures for determinations.

Credit Reporting: Though there are currently no regulatory changes proposed, the CFPB is seeking comments on potential approaches to ensure servicers provide accurate and consistent credit reporting information for borrowers in loss mitigation review.

Language Access: The CFPB is proposing new requirements to enhance language access for borrowers with limited English proficiency. Under the proposed rule, mortgage servicers would be required to provide Spanish-language translations of certain written communications to all borrowers. Additionally, servicers would need to offer certain written and oral communications in multiple languages upon request, accompanied by brief statements notifying borrowers of these translation and interpretation services.

Looking Forward

The proposed amendments to Mortgage Servicing regulations represent a significant step towards enhancing consumer protections and operational efficiency within the housing finance sector. By streamlining loss mitigation procedures, enhancing early intervention measures, and improving language access, the proposal aims to prevent foreclosures, mitigate financial hardships, and empower borrowers. These changes not only benefit borrowers by safeguarding their homes and financial stability but also support servicers in navigating complex regulatory landscapes more effectively.

As the rulemaking process progresses, continued feedback and refinement will be crucial to ensuring the final regulations strike a balance between protecting consumer rights and maintaining a robust mortgage servicing framework. GoWest will develop comments before the deadline on September 9th, keeping you informed through updates and seeking your feedback along the way.

If you have questions regarding the rule proposal or inquiries regarding our advocacy process, please reach out to Gracie Nelson at [email protected].

Posted in Advocacy on the Move, Regulatory Advocacy.