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Consumer Financial Protection Bureau Provides Clarification for New Mortgage Servicing Rules

By: Tracy M. Evans, Esq., Associate, Saxon, Gilmore, Carraway & Gibbons, P.A.


We previously reported on the recent activity of the Consumer Financial Protection Bureau (“CFPB”) regarding changes to Regulation Z, which implements the Truth in Lending Act. The previous article can be viewed here.

Earlier this year, the CFPB also released new mortgage servicing rules under the Real Estate Settlement Procedures Act and the Truth in Lending Act, scheduled to take effect in January 2014. A recent bulletin issued by the CFPB (the “Bulletin”) provides guidance and clarification on some of the new servicing rules.

Policies and Procedures upon the Death of a Borrower

A mortgage servicer will be required to adopt and maintain policies and procedures in instances where a borrower has passed away. The purpose of this new rule is to eliminate the difficulties often experienced by successors in interest when attempting to pursue assumption of the mortgage loan or loss mitigation options. The CFPB anticipates that the new rule will reduce the number of defaults and foreclosures following the death of a borrower.

The Bulletin outlines acceptable practices that should be included in the policies and procedures implemented by a servicer upon notification that a borrower has passed away. These practices include: providing any claimed successor in interest with a complete list of all documents required to establish the death of the borrower and the identity and interest of the successor; providing successors in interest information and documentation regarding continuing payment on the loan, assumption of the loan, and loss mitigation options; prompt review of any documents and forms submitted by the successor in interest; and providing training and information to the servicer’s employees regarding compliance with procedures, laws, and investor requirements following the death of a borrower. The CFPB also suggests that servicers consider the possibility of implementing policies and procedures that would postpone or withdraw pending foreclosures where a borrower becomes deceased, in order to allow a successor in interest adequate time to pursue assumption of the loan or loss mitigation.

Live Communication Efforts under the Early Intervention Rule

The new Early Intervention Rule requires a servicer to make good faith efforts to establish live communication with a borrower by the 36th day of a loan’s delinquency. The Bulletin outlines precisely what types of communications constitute good faith efforts to establish live contact. In particular, ongoing contact with the borrower regarding the completion of loss mitigation applications and the servicer’s evaluation of the same satisfies the live communication requirement. In addition, live contact initiated by the borrower also satisfies the requirement. The CFPB suggests that good faith efforts should be evaluated in the context of the individual borrower and loan account. For instance, where a borrower has proven unresponsive or the subject of six or more consecutive delinquencies, a single telephone call or a request for the borrower to contact the servicer regarding the delinquencies in a periodic statement or e-mail may be sufficient to satisfy the good faith effort requirement.

Interaction between the New Servicing Rules and the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (“FDCPA”) establishes a set of ethical guidelines and prohibited practices aimed at preventing abusive, deceptive, and unfair debt collection practices. One particular area of the FDCPA that seems to conflict with certain communication and disclosure requirements of the new servicing rules is the FDCPA’s “cease communication” provision. Pursuant to this provision, a debt collector is prohibited from communicating with a borrower once the borrower sends a request in writing that the debt collector cease all communications with the borrower.

According to the Bulletin, when a borrower sends a request to the lender to cease communications with the borrower, the lender will not be found in violation of the FDCPA where the servicer is in the process of providing information or completing an action previously requested by the borrower. In addition, communications regarding the investigation and resolution of errors reported by the borrower are permitted. Also, communications regarding a borrower’s loss mitigation application will not be considered in violation of the FDCPA. Further, disclosures regarding the placement of force-placed hazard insurance, interest rate adjustments, and periodic loan statements are also allowed.

As the effective date of the CFPB’s new mortgage servicing rules approaches, our firm will continue to monitor any new developments with respect to the new rules to ensure our clients stay informed.

The full text of the CFBP’s recent bulletin is available at

To see all the new rules issued by the CFPB, please visit


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