The CFPB proposed several changes to its servicing rule, some of which address problems in the rule raised by ABA. For example, the rule would provide a clearer definition of delinquency: “the date a payment sufficient to cover principal, interest and, if applicable, escrow becomes due and unpaid.” An ABA survey shared with the CFPB showed that the industry has several different ways of handling delinquency calculations, and ABA has long sought clarity on this point.
In another apparent win for ABA, banks that have charged off mortgage loans would not be required to send periodic statements as long as the servicer is no longer charging additional fees or interest. The proposal would also change the “small servicer” definition to allow more banks to qualify for the exemption.
The proposed rule includes a requirement to do more to prevent foreclosures by satisfying loss mitigation requirements “more than once in the life of a loan” for borrowers who become current after a delinquency and taking “affirmative steps” to delay a foreclosure sale. The rule would also clarify servicers’ obligations in handling loss mitigation applications.
The extensive round of updates to the rule would also clarify how servicers handle successors in interest, narrow the exemption from early intervention requirements for bankrupt borrowers, amend disclosures for lender-placed insurance, clarify early intervention obligations and address the treatment of periodic payments for customers in loan modifications.
ABA will review the proposal thoroughly; comments are due 90 days after publication in the Federal Register. When finalized, the provisions would take effect 280 days to one year after publication.
Read the proposed rule.