Dodd Frank Mortgage Servicing Rules

October 16, 2013

SLG Client Alert:  Dodd Frank Mortgage Servicing Rules-Get Ready!
Subject: Dodd Frank Mortgage Servicing Rules.  New CFBP Guidance on Conflicts with the Fair Debt Collection Practices Act

Note: SLG strongly advises all of its Clients and affiliates to become familiar with the new Mortgage Servicing Rules, issued under Dodd-Frank, and to be ready to comply by January 2014 (most, but not all rules effective January 10, 2014). The Rules and requirements are extensive and failure to comply will result in liability Even “smaller servicers” are affected and should understand their particular obligations. The following is one of many issues to consider.

On September 13, 2013, the CFPB finalized amendments and clarifications to the mortgage rules it finalized in January 2013 relating to 12 CFR 1002, 1024 and 1026.[1]

The final Mortgage Servicing Rules and amendments spawned controversy and comment. Even after the final amendments were issued earlier this fall, the CFPB issued further implementation guidelines and advisory opinions related to the Mortgage Servicing Final Rules to clarify the Final Rules (See e.g. CFPB Bulletin 2013-12 (“Bulletin”) issued on October 15, 2013.

The Bulletin addresses communication with the successor to a deceased borrower; communication with a borrower under the” Early Intervention Rule” (contained 12 C.F.R. 1024.39) and impact of compliance with the Mortgage Servicing Rules on Fair Debt Collection Practices (“ FDCPA”) restrictions. In particular, the CFPB concluded that if a borrower gave a servicer a “cease communication” directive it does not generally make servicers that are debt collectors liable for complying with12 CFR 1024.35(error resolution), 1024.36 (request for info);  1024.37 (force placed ins.) 1024.41 (loss mitigation), 1026.20(d) (ARM adjustments), and 1026.41 (periodic statement) communications.

The Bulletin gives guidance but does not mean that court cases will not find such actions wrongful. The Bulletin does not directly govern bankruptcy considerations, but gives guidance that the CFPB will view requirements to communicate under the mortgage servicing rules not to be violative of conflicting statutes like the FDCPA. Bankruptcy restrictions will still be a consideration, as will other statutory restrictions such as the Telephone Consumer Protection Act (47 USC Section 227 et. seq) (auto dialer restrictions) etc. However, the Bulletin gives more latitude to lenders or their agents that act as debt collectors and which are caught between “compliance with the mortgage servicing rules and a hard place”.

[1] The final Mortgage Servicing Rules spawned controversy and comment. Even after the final amendments were issued, the CFPB issued further implementation guidelines and advisory opinions related to the Mortgage Servicing Final Rules to clarify the Final Rules (See e.g. CFPB Bulletin 2013-12, clarifying communication with the successor to a deceased borrower; communication with a borrower under the” Early Intervention Rule”, and impact on FDCPA restrictions.