We are not aware of any Illinois law or regulation requiring certain language to appear on a periodic statement when a mortgage loan is in forbearance, and, as a small servicer, you are not required to comply with Regulation Z’s requirements for periodic statements. However, Regulation Z’s periodic statement requirements for large servicers may be instructive.

Under Regulation Z, large servicers must include the amount due in a periodic statement. If the consumer has agreed to a temporary loss mitigation program (such as a forbearance), the amount due shown on the periodic statement may be shown as either the payment due under the temporary loss mitigation program or the payment due under the loan contract. If you choose to show the payment due under the temporary loss mitigation program (rather than the payment due under the loan contract), the explanation of the amount due “must include both the amount due according to the loan contract and the payment due under the temporary loss mitigation program,” with “an explanation that the amount due is being disclosed as a different amount because of the temporary loss mitigation program,” as well as “any amount past due.” Consequently, we believe the periodic statement for a loan in forbearance may reference missed payments according to the terms of the loan contract.

Additionally, we believe it is accurate to include a delinquency notice on the periodic statements for customers who have agreed to your Forbearance Plan Offer, unless or until they enter into a permanent loss mitigation agreement with your bank.

Regulation Z provides that if a consumer is more than forty-five days delinquent, their periodic statement should include a “notification of possible risks, such as foreclosure, and expenses, that may be incurred if the delinquency is not cured.” Although Regulation Z does not define “delinquency,” Regulation X provides that “a borrower and a borrower’s mortgage loan obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid.”

When the CFPB adopted this definition of “delinquency,” it further explained in the supplementary information for the rule how the definition operates with respect to loss mitigation plans. The CFPB explained that a borrower making payments under a temporary loss mitigation program still “may be delinquent” according to the loan contract, but a borrower making payments under a permanent loss mitigation agreement is “performing under the modified contract” and does not meet Regulation X’s definition of delinquent.

Accordingly, we believe that a consumer who is complying with the terms of a temporary forbearance agreement that does not modify the original loan contract could be considered “delinquent,” in which case it would be appropriate to include a delinquency notice on your periodic statements. Additionally, while your forbearance agreement states that you will not pursue foreclosure during the term of the forbearance plan, foreclosure remains a risk once the forbearance plan terminates. Consequently, we would not view it as misleading (i.e., from a UDAAP perspective) to include a warning in the delinquency notice that the borrower’s failure to bring the loan current may result in fees and foreclosure.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.41(e)(4)(i) (“A creditor, assignee, or servicer is exempt from the requirements of this section for mortgage loans serviced by a small servicer.”)

• Regulation Z, 12 CFR 1026.41(e)(4)(ii)(A) (“A small servicer is a servicer that: (A) 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 Z, 12 CFR 1026.41(d)(1) (“The periodic statement required by this section shall include: (1) Amount due. Grouped together in close proximity to each other and located at the top of the first page of the statement: (i) The payment due date; (ii) The amount of any late payment fee, and the date on which that fee will be imposed if payment has not been received; and (iii) The amount due, shown more prominently than other disclosures on the page and, if the transaction has multiple payment options, the amount due under each of the payment options.”)

• Regulation Z, Official Interpretations, Paragraph 41(d)(1), Comment 2 (“Temporary loss mitigation programs. If the consumer has agreed to a temporary loss mitigation program, the amount due under § 1026.41(d)(1) may identify either the payment due under the temporary loss mitigation program or the amount due according to the loan contract.”)

• Regulation Z, 12 CFR 1026.41(d)(2)  (“Explanation of amount due. The following items, grouped together in close proximity to each other and located on the first page of the statement: (i) The monthly payment amount . . . ; (ii) The total sum of any fees or charges imposed since the last statement; and (iii) Any payment amount past due.”)

• Regulation Z, Official Interpretations, Paragraph 41(d)(2), Comment 2 (“Temporary loss mitigation programs. If the consumer has agreed to a temporary loss mitigation program and the amount due identifies the payment due under the temporary loss mitigation program, the explanation of amount due under § 1026.41(d)(2) must include both the amount due according to the loan contract and the payment due under the temporary loss mitigation program. The statement must also include an explanation that the amount due is being disclosed as a different amount because of the temporary loss mitigation program. The explanation should be on the front page of the statement or, alternatively, may be included on a separate page enclosed with the periodic statement or in a separate letter.”)

• Regulation Z, 12 CFR 1026.41(d)(8)(ii) (“Delinquency information. If the consumer is more than 45 days delinquent, the following items, grouped together in close proximity to each other and located on the first page of the statement or, alternatively, on a separate page enclosed with the periodic statement or in a separate letter: . . . (ii) A notification of possible risks, such as foreclosure, and expenses, that may be incurred if the delinquency is not cured . . .”)

• Regulation X, 12 CFR 1024.31 (“Delinquency means a period of time during which a borrower and a borrower’s mortgage loan obligation are delinquent. A borrower and a borrower’s mortgage loan obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid, until such time as no periodic payment is due and unpaid.”)

• CFPB, Amendments to the 2013 Mortgage Rules, 81 Fed. Reg. 72160, 72271 (October 19, 2016) (“A temporary loss mitigation program does not modify the existing loan contract. A borrower may continue to accumulate a delinquency according to the loan contract for the duration of the temporary loss mitigation program. Accordingly, a borrower performing under a temporary loss mitigation program may be delinquent for purposes of § 1024.41(i). This is distinct from a borrower performing under a permanent loss mitigation agreement, which does modify the existing loan contract. When a borrower is making payments required by the terms of a permanent loss mitigation agreement and therefore performing under the modified contract, the borrower would not meet the definition of delinquency in § 1024.31 and thus would not be delinquent for purposes of § 1024.41(i). . . .”)