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  • Fannie Mae and Freddie Mac Update Servicing Guides

    Lending

    On October 11, Fannie Mae and Freddie Mac announced updates to their respective Servicing Guides.

    Fannie Mae. Servicing Guide Announcement SVC-2017-09 highlights recent updates to the Servicing Guide, including topics related to the management of electronic transactions such as: (i) confirmation that sellers and servicers may originate, service, and modify loans using electronic records (electronic promissory notes require special approval); (ii) streamlined language clarifying requirements for the accuracy of information in electronic records; (iii) specification that paper records are not required for recorded mortgages and deeds of trust; (iv) clarification that all electronic signatures must comply with ESIGN, UETA, and other applicable laws; and (v) the removal of requirements for document custodians from the Servicing Guide that were duplicative of requirements set forth in Fannie Mae’s Requirements for Document Custodians. Additional updates address changes made to the reimbursement of foreclosure sale publication costs for costs incurred on or after January 1, 2018, and specific guidance for servicers pertaining to mortgage liens (to be implemented by December 1, 2017).

    Freddie Mac. Freddie Mac issued Bulletin 2017-22 announcing servicing updates concerning (i) modifications to imminent default evaluation and process requirements (jointly developed with Fannie Mae) that will take effect July 1, 2018; and (ii) provisions under the Servicemembers Civil Relief Act (SCRA) related to compliance time frames for servicers when responding to, or submitting requests for, interest rate reductions, along with updates that take effect February 1, 2018, concerning Guide Exhibit 71 used by servicers to report eligible SCRA interest rate subsidized loans. The updates also eliminate the manual property condition certificate process and modify time frame requirements for cancelling property insurance policies on real estate owned properties.

    Lending Agency Rule-Making & Guidance Fannie Mae Freddie Mac Mortgage Servicing Electronic Signatures ESIGN UETA SCRA

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  • CFPB Issues Interim Final Rule Regarding Foreclosure Communications; Seeks Comment on Proposed Rule About Periodic Statements During Bankruptcy

    Agency Rule-Making & Guidance

    On October 4, the CFPB announced one change and one proposed change to the amendments to its mortgage servicing rules under Regulations X and Z. These amendments, which were previously covered by a Buckley Sandler Special Alert, are scheduled to take effect in two phases on October 19, 2017 and April 19, 2018.

    First, the CFPB amended the amendments to Regulation X’s provision regarding early intervention notices in order to address timing issues that result when a borrower has invoked his or her cease in communication rights under the FDCPA. Had the most recent amendment not been made, a mortgage servicer subject to a cease in communication request would have been required to provide a modified early intervention notice to the borrower every 180 days but not more than once during any 180-day period, leaving no margin for error and creating operational challenges if the 180th day fell on a weekend or holiday. Based on concerns from the mortgage industry the CFPB issued an interim final rule without advance public comment to give servicers a 10-day window to provide the modified notices at the end of the 180-day period. The interim final rule becomes effective on October 19, 2017, at the same time the broader amendments to the early intervention requirements take effect.

    Second, the CFPB proposed to update technical aspects of the upcoming periodic statement requirements for borrowers in bankruptcy. Specifically, the CFPB is seeking public comment on changes to the transition rules for borrowers who enter or leave bankruptcy, including replacing the single-billing-cycle exemption with a single-statement exemption for the next periodic statement the servicer would have to provide regardless of when in the billing cycle a triggering event occurs. The Bureau proposed that these amendments take effect on April 19, 2018, at the same time as the new periodic statement requirements for borrowers in bankruptcy. 

    The comment period on both the interview final rule and the proposed rule will close 30 days after publication in the Federal Register.

    Agency Rule-Making & Guidance CFPB Mortgages FDCPA Regulation Z Regulation X Mortgage Servicing Federal Register

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  • HUD IG Blames Ginnie Mae for Inadequate Supervision; HUD IG Concludes HUD Did Not Follow Requirements When Forgiving Debts

    Federal Issues

    On September 21, the HUD Inspector General (IG) released an audit report of Ginnie Mae’s oversight of nonbanks in the mortgage servicing industry. The report found that Ginnie Mae did not adequately respond to the growth in its nonbank issuer base; a base, the report notes, that tends to have more complex financial and operating structures than banking institutions. The IG found, among other things, that Ginnie Mae may not be prepared to identify problems with nonbank issuers prior to default, requiring additional funds from the U.S. Treasury to pay back investors in the event of a large default.

    On the same day, the IG also announced a report which found that HUD did not always follow applicable requirements when forgiving debts and terminating debt collections. The report determined that HUD’s review process for evaluating debt forgiveness or collection termination was not thorough enough to ensure that statutory, regulatory, and policy requirements associated with this process were met—such as ensuring DOJ approval was obtained when required.

    Federal Issues HUD OIG DOJ Ginnie Mae Mortgage Servicing Mortgages Debt Cancellation Nonbank Supervision Department of Treasury

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  • CFPB’s Summer Edition of Supervisory Highlights Discloses Findings Across Many Financial Services Areas

    Consumer Finance

    On September 12, the CFPB released its summer 2017 Supervisory Highlights, which outlines its supervisory and oversight actions in areas such as auto loan servicing, credit card account management, debt collection, deposit account supervision, mortgage origination and servicing, remittances, service provider programs, short-term small-dollar lending, and fair lending. According to the Supervisory Highlights, recent supervisory resolutions have “resulted in total restitution payments of approximately $14 million to more than 104,000 consumers during the review period” between January 2017 and June 2017.

    As examples, in the area of auto loan servicing, examiners discovered vehicles were being repossessed even though the repossession should have been cancelled. Coding errors, document mishandling, and failure to timely cancel the repossession order were cited causes. Regarding fair lending examination findings, the CFPB discovered, in general, “deficiencies in oversight by board and senior management, monitoring and corrective action processes, compliance audits, and oversight of third-party service providers.” Examiners also conducted ECOA Baseline Reviews on mortgage servicers and discovered weaknesses in servicers’ fair lending compliance management systems. Findings in other areas include the following:

    • consumers were provided inaccurate information about when bank checking account service fees would be waived, and banks misrepresented overdraft protection;
    • debt collectors engaged in improper debt collection practices related to short-term, small-dollar loans, including attempts to collect debts owed by a different person or contacting third parties about consumers’ debts;
    • companies overcharged mortgage closing fees or wrongly charged application fees that are prohibited by the Bureau’s Know Before You Owe mortgage disclosure rules; and
    • borrowers were denied the opportunity to take full advantage of the mortgage loss mitigation options, and mortgage servicers failed to “exercise reasonable diligence in collecting information needed to complete the borrower’s application.”

    The Bureau also set forth new examination procedures for HMDA data collection and reporting requirements as well as student loan servicers, in addition to providing guidance for covered persons and service providers regarding pay-by-phone fee assessments.

    Consumer Finance CFPB Enforcement Auto Finance Credit Cards Debt Collection Fair Lending ECOA Compliance Mortgage Origination Mortgage Servicing HMDA Student Lending

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  • HUD Releases Mortgagee Letter Providing Home Equity Conversion Mortgage Servicing Implementation Guidance

    Agency Rule-Making & Guidance

    On August 24, HUD published Mortgagee Letter 2017-11, which provides directions for FHA-approved mortgagees to implement certain servicing policy changes outlined in the Federal Housing Administration: Strengthening the Home Equity Conversion Mortgage Program Final Rule (HECM Final Rule), published in the Federal Register in January 2017. The HECM Final Rule’s servicing requirements (including the additional guidance set forth in Mortgagee Letter 2017-11), will take effect for all FHA case numbers assigned on or after September 19, 2017. The Mortgagee Letter furnishes additional details on the following areas of servicing policy included in the HECM Final Rule: (i) “Default for Unpaid Property Charges”; (ii) “Sale of Property Securing a Due and Payable HECM”; and (iii) “Cash for Keys Incentive and Relocation Incentive.”

    Agency Rule-Making & Guidance HUD FHA Mortgage Servicing Federal Register Home Equity Loans HECM

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  • Oregon Enacts Law Regulating Residential Mortgage Loan Servicers

    State Issues

    On August 2, Oregon Governor Kate Brown signed into law the Mortgage Loan Servicer Practices Act (SB 98), which places certain residential mortgage loan servicers under the supervision of the state’s Department of Consumer and Business Services (DCBS) and requires them to comply with a range of requirements. Among other things, the law gives licensing, examination, investigation, and enforcement authority to the DCBS, and requires applicable residential mortgage loan servicers to: (i) obtain and renew a license through the DCBS if they “directly or indirectly service a residential mortgage loan” in Oregon; (ii) maintain “sufficient liquidity, operating reserves and tangible net worth”; (iii) notify the DCBS in writing before certain operational changes occur; and (iv) comply with a range of consumer protection, antifraud, and recordkeeping requirements, including those related to borrower communications, payment processing, and fee assessments. The law becomes operative on January 1, 2018, and applies “to service transactions for residential mortgage loans that occur on or after” that date.

    State Issues State Legislation Reverse Mortgages Lending Mortgage Servicing

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  • CFPB Monthly Complaint Snapshot Focuses on State-Level Consumer Complaints

    Consumer Finance

    On June 27, the CFPB released its monthly complaint report, highlighting complaints from around the country. According to the Bureau, it has handled over 1.2 million complaints from 2011 through June 1 of this year. The report shows nationwide complaint statistics and statistics for service members and older consumers. In addition, the report breaks down statistics on the state level covering financial products and services, company responses to complaints, as well as number of complaints. The vast majority of consumers report high company response rates to complaints averaging in the high 90 percent range, although the volume of complaints is trending upward. The top five products receiving complaints across the country in descending order are: (i) debt collection; (ii) mortgages; (iii) credit reporting; (iv) credit cards; and (v) bank accounts or services.

    Consumer Finance Lending Consumer Complaints Internet Lending CFPB Debt Collection Credit Cards Mortgage Servicing

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  • Maine Amends Consumer Credit Code to Regulate Mortgage Loan Servicers

    State Issues

    On May 30, Maine Governor Paul LePage signed into law S.P. 444, which amends the state’s Consumer Credit Code to improve the mortgage foreclosure process by regulating mortgage loan servicers. Under the Consumer Credit Code, “creditors” must be licensed and must comply with the provisions of the Consumer Credit Code. The amendment revises the definition of “creditor” to now include a “mortgage loan servicer,” which means a person or organization that undertakes direct collection of payments from or enforcement of rights against debtors arising from a supervised loan secured by a dwelling. The law, according to state rules, takes effect 90 days after adjournment of the legislature.

    State Issues Mortgage Servicing State Legislation Foreclosure

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  • Fed Assesses $1.8 Million Civil Money Penalty Against Florida-Based Holding Company, Terminates Enforcement Action

    Lending

    On June 8, the Board of Governors of the Federal Reserve (Board) announced the termination of an enforcement action brought against a Florida-based holding company in April 2011 relating to deficiencies in its residential mortgage loan servicing, loss mitigation, and foreclosure processing activities found in an Office of Thrift Supervision (OTS) review of the company. Additionally, the OTS review found inadequate procedures to assess potential risks associated with such activities. Under the terms of the 2011 enforcement action, the holding company was required to enhance its oversight of its thrift subsidiary and improve its internal risk management, audit, and compliance programs to address deficiencies in these areas. The decision to terminate the action was based on a review conducted by the Board’s supervisory team, which determined the holding company made “sustainable improvement” in its mortgage servicing oversight practices. Furthermore, the mortgage servicer has agreed to pay a $1.8 million civil money penalty.

    Lending Federal Reserve Mortgages Enforcement Mortgage Servicing

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  • CFPB Fines Mortgage Servicer for RESPA Violations

    Consumer Finance

    On June 7, the CFPB ordered a mortgage servicer to pay up to $1.15 million in restitution for failing to provide borrowers with required foreclosure protections when handling loss-mitigation applications. The consent order alleges the servicer violated RESPA by failing to send critical information to consumers who were applying for foreclosure relief, and, in some circumstances, beginning foreclosure proceedings on borrowers who had submitted completed applications. Pursuant to the consent order, in addition to restitution, the servicer is required to provide borrowers the opportunity to pursue foreclosure relief, must cease its illegal practices, and develop policies and procedures to ensure compliance with mortgage servicing rules.

    Consumer Finance CFPB Enforcement Mortgages Foreclosure RESPA Mortgage Servicing

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