Under the new Mortgage Servicing Rules that took effect October 19, 2017, we are required to make “good faith efforts” to establish live contact with a delinquent borrower no later than the 36th day of delinquency and again no later than 36 days after each payment due date. Does this mean that we must continue to make phone calls until a foreclosure sale is confirmed? Our bank does not qualify as a small servicer.

No, in general we do not believe that a loan servicer’s responsibility to make good faith efforts to establish live contact always requires phone calls to be made up to the date of the final foreclosure sale. A servicer’s obligation to make live contact varies from case to case. (While not applicable here, we also note that the live contact requirements would not apply to a small servicer — an institution that, together with its affiliates, services 5,000 or fewer mortgage loans as of January 1st of the current year, provided that the institution or an affiliate owns or originated all of the mortgage loans it services.)

Under the CFPB’s live contact requirements, servicers must “establish or make good faith efforts to establish live contact with a delinquent borrower no later than the 36th day of a borrower’s delinquency.” The CFPB’s 2016 Mortgage Servicing Final Rule added a requirement to make or attempt live contact “again no later than 36 days after each payment due date so long as the borrower remains delinquent.”

However, according to the CFPB’s Official Interpretations, what constitutes a “good faith effort” to establish live contact depends on the circumstances, including the “length of a borrower’s delinquency, as well as a borrower’s failure to respond to a servicer's repeated attempts at communication.” As an example, the CFPB states that for a borrower with two consecutive missed payments, “good faith efforts” to establish live contact might require a telephone call. But for an unresponsive borrower with six or more consecutive missed payments, “good faith efforts” might require “no more than including a sentence requesting that the borrower contact the servicer with regard to the delinquencies in the periodic statement or in an electronic communication.” Consequently, depending on the circumstances, a covered servicer may suspend its phone calls before the foreclosure sale is confirmed.

For resources related to our guidance, please see:

Regulation Z, 12 CFR 1026.41(e)(4) (“A small servicer is a servicer that: Services, together with any affiliates, 5,000 or fewer mortgage loans, for all of which the servicer (or an affiliate) is the creditor or assignee. . . .”)
Regulation X, 12 CFR 1024.39(a) (“Except as otherwise provided in this section, a servicer shall establish or make good faith efforts to establish live contact with a delinquent borrower no later than the 36th day of a borrower’s delinquency and again no later than 36 days after each payment due date so long as the borrower remains delinquent. Promptly after establishing live contact with a borrower, the servicer shall inform the borrower about the availability of loss mitigation options, if appropriate.”)
2016 Mortgage Servicing Final Rule, 81 Fed. Reg. 72160, 72215 (effective October 19, 2017) (“Some commenters expressed specific concern over the burden associated with the live contact requirements in situations where a loan has been referred to foreclosure, noting that the foreclosure process may take several years. As discussed in more detail below, comment 39(a)-3 accounts for the burden associated with § 1024.39(a) where there is a prolonged delinquency. It clarifies that the length of a borrower's delinquency may be a factor to consider in the determination of what constitutes good faith efforts to establish live contact.”)
2016 Mortgage Servicing Final Rule, 81 Fed. Reg. 72160, 72216 (effective October 19, 2017) (“The Bureau is declining to adopt a specific definition of what constitutes good faith efforts in comment 39(a)-3, as requested by one commenter. What constitutes good faith efforts is based on circumstances specific to the borrower and the borrower's mortgage loan obligation. The comment provides examples demonstrating the fact-specific nature of this determination.”)
Official Interpretations, Regulation X, 12 CFR 1024, Paragraph 39(a), Comment 3 (“Good faith efforts. Good faith efforts to establish live contact consist of reasonable steps, under the circumstances, to reach a borrower and may include telephoning the borrower on more than one occasion or sending written or electronic communication encouraging the borrower to establish live contact with the servicer. The length of a borrower’s delinquency, as well as a borrower’s failure to respond to a servicer's repeated attempts at communication pursuant to § 1024.39(a), are relevant circumstances to consider. For example, whereas ‘good faith efforts’ to establish live contact with regard to a borrower with two consecutive missed payments might require a telephone call, ‘good faith efforts’ to establish live contact with regard to an unresponsive borrower with six or more consecutive missed payments might require no more than including a sentence requesting that the borrower contact the servicer with regard to the delinquencies in the periodic statement or in an electronic communication. Comment 39(a)-6 discusses the relationship between live contact and the loss mitigation procedures set forth in § 1024.41.”)