We know that if a residential mortgage loan customer cycles in and out of delinquency (missing a payment, later making payments to bring the account current, and then missing another payment), we would send a written early intervention notice every 180 days under 12 CFR 1024.39(b). But if the customer stays delinquent, without making additional payments, should we send only one written early intervention notice or should we send repeat notices every 180 days? We are large servicer.

We recommend that you continue providing written early intervention notices for borrowers who remain delinquent for more than 180 days after you send the first early intervention notice (which must be sent within 45 days from the date of the first delinquency).

Regulation X requires you to provide a written early intervention notice to a “delinquent borrower,” but not “more than once during any 180-day period.” The official staff commentary defines “delinquency” to begin when a borrower fails to make a full payment (covering principal, interest and escrow) for a given billing cycle. If a borrower remains delinquent, the borrower also would be missing payments in subsequent billing cycles, which again would trigger the written early intervention notice requirement.

The CFPB’s proposed revisions to Regulation X illustrate that it currently interprets Regulation X to require repeated notices to borrowers who remain delinquent. In its own words, the CFPB is seeking to “clarify the frequency with which a servicer must provide the written early intervention notice . . . . If the borrower remains delinquent or becomes 45 days delinquent again after the 180-day period expires, the proposed revision requires the servicer to provide the written notice again.” Because the CFPB frames its revisions as a clarification of Regulation X’s current requirements, we believe that the CFPB’s interpretation of Regulation X in its current form is that it requires repeated written early intervention notices to borrowers who remain delinquent. (The CFPB plans to finalize this proposed rule in “late spring of 2016.”)

For resources related to our guidance, please see:

Regulation X, 12 CFR 1024.39(b)(1) (“Except as otherwise provided in this section, a servicer shall provide to a delinquent borrower a written notice with the information set forth in paragraph (b)(2) of this section not later than the 45th day of the borrower’s delinquency. A servicer is not required to provide the written notice more than once during any 18-day period.”)
Official Interpretations, Regulation X, 12 CFR 1024, Paragraph 39(a)(1), Comment 1 (“Delinquency begins on the day a payment sufficient to cover principal, interest, and, if applicable, escrow for a given billing cycle is due and unpaid . . . .”)

Proposed Rule, Amendments to the 2013 Mortgage Servicing Rules, 79 Fed. Reg. 74175, 74200 (December 15, 2014) (“The Bureau is proposing certain revisions to § 1024.39(b)(1) and its commentary to clarify the frequency with which a servicer must provide the written early intervention notice . . . . the Bureau is proposing to clarify through a revision to comment 39(b)(2)(1)-2 that a servicer is again required to send written notice to a borrower who remains delinquent more than 180 days after the servicer sent the first notice.”)

Proposed Rule, Amendments to the 2013 Mortgage Servicing Rules, 79 Fed. Reg. 74175, 74292 (December 15, 2014) (“Frequency of the written notice. A servicer need not provide the written notice under section 1024.39(b) more than once during a 180-day period beginning on the date on which the written notice is provided. For example, a borrower has a payment due on March 1. The amount due is not fully paid during the 45 days after March 1 and the servicer provides the written notice within 45 days after March 1 — i.e., by April 15. Assume the servicer provides the notice on April 15. If the borrower subsequently fails to make a payment due April 1 and the amount due is not fully paid during the 45 days after April 1, the servicer need not provide the written notice again during the 180-day period beginning on April 15 — i.e., no sooner than on October 12. If the borrower is delinquent on October 12, however, the servicer must again provide the written notice 45 days from the date the most recently missed payment was due. For example, if the amount due on October 1 is not fully paid during the 45 days after October 1, the servicer will need to provide the written notice again 45 days after October 1 — i.e., by November 15.”)