Topic: CFPB 2014 Mortgage Rules: TILA and RESPA Mortgage Servicing Rules
-
We are a small servicer, but we voluntarily provide periodic statements to mortgage borrowers, as required for large servicers. When the CFPB’s amendments to the servicing rules go into effect in April of 2018, would we incur any implied liability for sending the modified periodic notices for borrowers in bankruptcies? Could we instead discontinue sending periodic notices altogether to customers who have filed for bankruptcy and have not reaffirmed the debt?
—
by
No, we do not believe that you would incur any liability for sending the modified periodic statements for consumers in bankruptcy under the CFPB’s amended mortgage servicing rules. The CFPB designed its modified periodic statements to comply with the Bankruptcy Code’s prohibition against contacting borrowers who have filed for bankruptcy and are subject to the…
-
We are researching an external firm to provide force-placed insurance and insurance tracking services. The company says it will have to charge us a separate fee for the tracking services and cannot recover tracking costs through the premiums on the force-placed policies it underwrites for us. The company referred to a “recent multi-state settlement” that stated RESPA Section 8 prohibits insurance trackers from providing tracking services “free or below cost” and “seeking to cover tracking costs through force-placed insurance premiums.” Do you know what settlement they are talking about? If not, can you provide any other guidance or clarification?
—
by
We are not sure which multi-state settlement that your proposed tracking firm is describing. However, we know that certain arrangements in which banks receive free or discounted tracking services in exchange for using a particular insurance provider have been argued to violate RESPA. RESPA’s implementing rule, Regulation X, requires that all charges to borrowers related…
-
What are the requirements to be considered a small servicer under Regulation Z? Does servicing loans for a fee affect small servicer status?
—
by
Your bank will be deemed to be a “small servicer” if the bank and all of its affiliates were servicing 5,000 or fewer residential mortgage loans as of January 1 of this year, provided that your bank (or its affiliates) originated or currently owns those loans. Your bank will not qualify as a “small servicer”…
-
We would like to establish a centralized underwriting process where our bank will receive applications and forward them to our holding company. The holding company will review the application, make the credit decision based on its own lending criteria, and send the application back to our bank to close the loan. In this process, who should report the loan under the Home Mortgage Disclosure Act (HMDA)?
—
by
We believe that your holding company is responsible for reporting the loan originations under HMDA, unless it is acting as your agent in making the credit decision (which does not appear to be the case here). Only one financial institution reports the origination of a covered loan. When multiple entities are involved in the origination…
-
Our loan software is alerting us that Illinois law requires a notice of servicing transfers, on top of the federal requirements in RESPA. They cite to 38 Ill. Adm. Code 1050.820. Can you send us this Illinois law? Does it differ from the federal law?
—
by
Yes, Illinois law requires banks to send a mortgage servicing transfer notice, and the content of the Illinois notice differs from the content of the servicing transfer notices required by federal law. The Illinois Banking Act’s requirements for the servicing transfer notice include (1) “the name and address of the transferee,” (2) “the name, address…
-
Under the TILA-RESPA Integrated Disclosure (TRID) rules, when is a mortgage considered consummated? Does the answer differ for purchase money loans versus refinancings?
—
by
Under Illinois case law, a mortgage loan is consummated on the date of the loan closing (whether a purchase money loan or a refinancing). A number of Illinois courts have held that consummation occurs on the date of the loan closing for purposes of the TILA and Regulation Z. For resources related to our guidance,…
-
If an LLC enters into a mortgage loan for the purpose of purchasing the primary residence for the LLC’s owner, do the TILA-RESPA Integrated Disclosure (TRID) rules apply?
—
by
No, the TRID rules do not apply to loans made to business entities. The TRID rules (and Regulation Z generally) apply only to consumer credit transactions, meaning loans offered to a consumer for personal, family or household purposes. A loan extended to a business entity, such as an LLC, is exempt. However, you may have…
-
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.
—
by
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…
-
Some of our customer’s mortgage loan payments are auto-debited from deposit accounts held at our bank. In those cases, does a monthly checking account statement satisfy Regulation Z’s mortgage periodic statement requirements, since it will show the debits for the mortgage payments? We service fewer than 5,000 mortgages, but we do sell some of our loans on the secondary market.
—
by
It is possible to combine the periodic statements required for closed-end mortgage loans with checking account statements, provided that you include all of the additional disclosures required for mortgage periodic statements. However, Regulation Z exempts your institution from the mortgage periodic statement requirements altogether if you qualify as a “small servicer.” As stated in a…
-
One of our residential mortgage loan customers is several months behind on his payments, and the homeowner’s insurance for the property securing the loan has lapsed. The escrow account has been exhausted. Under the CFPB’s servicing rules, can we force-place the homeowner’s insurance? Or, if we prefer, can we rely solely on our mortgage protection insurance?
—
by
To answer your first question, the CFPB rules may limit your ability to force-place hazard insurance. To answer your second question, we do not believe that those rules require you to maintain or force-place hazard insurance for the borrower (other than flood insurance, when required) — meaning that you could, theoretically, rely solely on your…