The Consumer Financial Protection Bureau (CFPB) recently issued an interim final rule, as well as an explanatory bulletin, to further detail and clarify the requirements of the agency’s mortgage servicing rules that were finalized in January 2013 (the Servicing Rules). The Servicing Rules implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amending the Real Estate Settlement Procedure Act of 1974 (RESPA) and the Truth in Lending Act (TILA) to provide borrowers with more detailed information regarding their loans, ensure that borrowers are not unexpectedly assessed charges or fees, and inform borrowers of alternatives to foreclosures.
After issuing the final Servicing Rules, the CFPB received a large number of inquiries from servicers regarding how they can best comply with the Rules. The interim final rule and bulletin address many of the issues raised in those inquiries, including the permissible communications with successors-in-interest when a borrower dies, the appropriate procedures to contact delinquent borrowers, and the proper treatment of borrowers who have filed for bankruptcy or invoked the protections of the Fair Debt Collection Practices Act (FDCPA).
Home Retention Efforts After a Borrower Dies
Beginning in January 2014, the Servicing Rules will require servicers to implement policies and procedures to promptly identify and contact successors-in-interest upon notification of a borrower’s death. This requirement is intended to promote home retention by ensuring that successors-in-interest are able to pursue assumption of a deceased borrower’s loan or, if applicable, loan mitigation efforts. In its bulletin, the CFPB provides examples of practices that it would consider “reasonably designed” to achieve the objectives of the Servicing Rules, such as:
- Informing any person claiming to be a successor-in-interest of all documents and other evidence that the servicer requires to establish the death of the borrower and the identity and legal interest of the successor-in-interest. The information required by the servicer should be reasonable considering the laws of the relevant jurisdiction.
- Promptly providing successors-in-interest with information regarding the loan, including whether the loan is current or delinquent, whether there is a loss-mitigation option in place, and whether there is a planned or pending foreclosure proceeding. The servicer should also provide information regarding the successor-in-interest’s eligibility to continue making payments on the loan, for loss-mitigation options, or to assume the loan.
- Providing employees with information regarding laws or other requirements that may affect the servicer’s obligations following the death of a borrower.
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