Topic: CFPB 2014 Mortgage Rules: TILA and RESPA Mortgage Servicing Rules
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If we are considered a mortgage broker under Regulation X, can we charge a reasonable fee for ordering appraisals and title work, pulling credit reports, and submitting applications to the correspondent bank that will serve as the lender? Do we need to include anything about acting as a mortgage broker in our lending policy?
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Yes, we believe you can charge a reasonable fee for services you perform as a mortgage broker, including ordering appraisals and title work, pulling credit reports, and submitting loan applications to the correspondent bank. We are not aware of any requirement to include information related to acting as a mortgage broker in your lending policy…
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If we begin to offer FHA loans through our secondary market correspondent bank — with the correspondent bank funding the loans and closing the loans in its name — would we be considered a broker? We would order the appraisal and title work, pull credit reports, and submit the applications to the correspondent bank, which would make all decisions as to the application. If we are a broker, what compliance considerations do we need to be aware of?
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Yes, we believe you would be considered a mortgage broker in this scenario, which Regulation X defines as “a person (other than an employee of a lender) that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan.” Below is a non-exhaustive…
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What notices are required to be mailed out to mortgage borrowers when they become 45 days past due?
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Under federal law, your bank must provide the HUD housing counseling and SCRA counseling notices within 45 days after an eligible borrower becomes delinquent. Additionally, if your bank does not qualify as a “small servicer” (an institution that, together with its affiliates, services 5,000 or fewer mortgage loans as of January 1st of the current…
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We have a borrower who filed a Chapter 13 bankruptcy petition. The borrower is current on their mortgage loan, and the notice we received indicates that they will maintain the current contractual installment payments due under the loan. As a large servicer, are we still required to send the modified periodic statement for borrowers in bankruptcy, even though our debt is unaffected by the filing? There is no delinquency information to be reported, but the modified statement would contain the important bankruptcy message.
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Yes, we believe your bank must send the modified periodic statements for residential mortgage loans required under Regulation Z for borrowers in bankruptcy, unless certain exemptions apply. Generally, mortgage loan servicers (including creditors and assignees) subject to the large servicer rules are required to send modified periodic statements to debtors in bankruptcy for closed-end consumer…
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We would like to foreclose on a consumer mortgage loan. The borrower’s wife signed the mortgage, but she is not on the title to the mortgaged home and did not sign the loan agreement. The borrower has informed us that he has moved out of the home securing our loan, his wife’s boyfriend has moved in, the home’s condition is deteriorating, and he is done making loan payments. If the borrower signs an affidavit averring that the home is no longer his primary residence, are we still required to wait 120 days before filing for foreclosure?
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No, we do not believe that the 120-day grace period requirement will apply if your bank has an affidavit from the borrower averring that the mortgaged property is not his principal residence. The requirement to delay initiation of foreclosure proceedings until a mortgage loan is more than 120 days delinquent applies only to loans secured…
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Several customers who escrow their real estate taxes have prepaid them and now want a refund from their current escrow accounts. Can we impose a fee for analyzing whether a refund is required? If so, must we disclose the fee in writing? How quickly must we issue a refund after a borrower request?
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We are not aware of any prohibition against charging a fee for conducting an escrow analysis. However, your bank’s loan agreement with its borrowers must allow your bank to charge additional or unforeseen fees, such as for the analysis you have described. If the agreement does not contain language permitting such charges, then we recommend…
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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.
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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…
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When a borrower has been delinquent for at least ninety days, we used to send a letter demanding the entire amount past due, with a lockout preventing payments from processing. Under the latest mortgage servicing amendments that went into effect in October of 2017, can we still send out this letter and refuse to credit loan payments? Will we be able to file a foreclosure action after 120 days of delinquency? We are a small servicer.
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Yes, we believe that your bank may send demand letters and refuse to credit monthly loan payments on a delinquent closed-end consumer mortgage loan, provided that you already have accelerated the loan because of the delinquency. The general rule under Regulation Z for closed-end consumer mortgage loans is that servicers must credit periodic payments covering…
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We understand that the 2016 Mortgage Servicing Final Rule amended some of the force-placed insurance notice requirements under Regulation X. Do those changes affect the notice requirements in Illinois?
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Yes, because the Illinois law includes a safe harbor for servicers that substantially comply with the force-placed insurance notice requirements in Regulation X. In other words, if you comply with Regulation X (including the recent changes to the force-placed insurance notice requirements), you are deemed to comply with the Illinois law. For your reference, the…
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We recently converted to a new loan servicing platform, and we are in the process of transferring servicing rights from our bank to a separate mortgage company, without transferring the underlying loan. We will send out the required notice of servicing transfer. Are we required to complete an assignment of mortgage?
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If your bank is transferring only the servicing rights and not the loans themselves, you likely do not want to be assigning title to the mortgages to the servicer. Typically, an assignment of a mortgage transfers ownership of a loan, and that does not appear to be your bank’s intent. For resources related to our…