top of page

Guide to the Proposed Mortgage Servicing Rule Changes



Introduction

Mortgage servicing is poised for significant changes with the introduction of new proposed Reg X rules aimed at enhancing transparency, accountability, and borrower protections. These changes, set forth by the CFPB, are designed to address gaps in the current system and provide more robust safeguards for borrowers facing financial hardship. In this guide, we will explore each proposed rule change in detail, outlining the requirements, the sections they pertain to, and the enhancements servicers need to implement to ensure compliance.


1. Loss Mitigation Review Cycle

Requirement: Implement a continuous period of loss mitigation review starting from the borrower's request until the loan is current or specific procedural safeguards are met.

Section: §1024.31

Current Regulation: Previously, servicers were required to collect a complete loss mitigation application before making a determination about available options.

Proposed Change: The new rule initiates a loss mitigation review cycle as soon as a borrower requests assistance. This simplification means servicers need to be prepared to begin the review process immediately, rather than waiting for a complete application.

Enhancements Needed:

  • Develop and implement additional controls to track the initiation of the loss mitigation review cycle upon any request for assistance.

  • Ensure all borrower requests are logged and trigger appropriate follow-up actions, including the review of available options and ongoing communication with the borrower.

  • Train staff to recognize and act on loss mitigation requests promptly.


2. Request for Loss Mitigation Assistance

Requirement: Treat any communication from a borrower requesting mortgage relief as a request for loss mitigation assistance, regardless of the form it takes.

Section: §1024.31

Current Regulation: The definition of a loss mitigation request was more restricted, often requiring formal applications or specific types of communication.

Proposed Change: This broadens the definition to include any oral or written communication where a borrower indicates hardship or interest in loss mitigation. This ensures no borrower is left without assistance due to the formality of their request.

Enhancements Needed:

  • Enhance communication channels to capture and act upon all requests for loss mitigation assistance.

  • Train staff to recognize and document all types of borrower requests accurately.

  • Integrate this documentation into the servicing platform for seamless follow-up.


3. Prohibition on Foreclosure Referral

Requirement: Prohibit the initiation or advancement of foreclosure proceedings until specific procedural safeguards are met.

Section: §1024.41(f)

Current Regulation: There were existing prohibitions, but these did not always prevent dual tracking, where foreclosure and loss mitigation processes run concurrently.

Proposed Change: Reinforces and extends existing prohibitions on foreclosure actions during the loss mitigation review cycle, ensuring that no foreclosure actions are initiated or advanced unless procedural safeguards are met.

Enhancements Needed:

  • Update foreclosure management systems to include checks for loss mitigation review cycles.

  • Ensure the system flags accounts under review and prevents foreclosure actions until procedural safeguards are met.

  • Regularly audit foreclosure processes to ensure compliance with the new rules.


4. Early Intervention Changes

Requirement: Provide detailed information in written early intervention notices, including the owner or assignee of the mortgage loan and available loss mitigation options.

Section: §1024.39

Current Regulation: Early intervention notices had fewer content requirements, often leaving borrowers under-informed about their options.

Proposed Change: Expands the content requirements of early intervention notices to better inform borrowers about who owns their mortgage and what loss mitigation options are available.

Enhancements Needed:

  • Revise early intervention notice templates to include all required information.

  • Ensure notices are clear, comprehensive, and provide actionable steps for borrowers.

  • Implement a tracking system to confirm that all delinquent borrowers receive these enhanced notices in a timely manner.


5. Loss Mitigation Determination Notices

Requirement: Provide detailed notices regarding loss mitigation determinations for all types of loss mitigation options, including approvals, denials, and offers, with explanations and next steps.

Section: §1024.41(c)

Current Regulation: Detailed notices were primarily required for loan modifications, leaving gaps in communication for other types of loss mitigation options.

Proposed Change: Extends the requirement for detailed notices to include all loss mitigation determinations, ensuring transparency and clarity for borrowers. Notices additionally have to have explanations to what each workout options means and a link to a website with those same explanations.

Enhancements Needed:

  • Update notice generation systems to ensure all loss mitigation determinations include detailed explanations and next steps.

  • Train staff to provide clear, accurate, and comprehensive information in these notices.

  • Regularly review and update notice templates to reflect current regulatory requirements and best practices.


6. Error Resolution and Appeals Process

Requirement: Allow borrowers to appeal any loss mitigation determination and provide an independent review of appeals.

Section: §1024.35 and §1024.41(h)

Current Regulation: While error resolution processes existed, the formalization of an appeals process for all loss mitigation determinations was lacking.

Proposed Change: Formalizes the appeal process, ensuring borrowers have the right to challenge decisions and receive an impartial review.

Enhancements Needed:

  • Develop a standardized appeal process with clear timelines and documentation requirements.

  • Train staff to manage appeals efficiently and ensure an impartial review process.

  • Implement a tracking system for appeals to monitor their status and ensure timely resolution.


7. Language Access Requirements

Requirement: Provide certain communications in languages other than English, particularly when borrowers seek payment assistance.

Section: IV.D

Current Regulation: Language access requirements were less stringent, potentially leaving non-English speaking borrowers underserved.

Proposed Change: Requires servicers to offer multilingual communication to borrowers with limited English proficiency, ensuring they can access and understand critical information.

Enhancements Needed:

  • Establish a multilingual communication plan, including the translation of key documents and availability of interpreters.

  • Train staff on how to access and utilize language services.

  • Regularly review and update multilingual resources to ensure they meet regulatory standards and borrower needs.


8. Fee Protections

Requirement: Ensure no fees beyond scheduled amounts accrue during a loss mitigation review cycle.

Section: §1024.41(f)(3)

Current Regulation: Borrowers could accrue additional fees during the loss mitigation review cycle, adding to their financial burden.

Proposed Change: Reinforces protections against additional fees while a borrower is being reviewed for loss mitigation, preventing unnecessary financial burdens.

Enhancements Needed:

  • Update billing systems to automatically suspend fee accruals during the loss mitigation review cycle.

  • Train staff on the importance of these protections and how to implement them.

  • Conduct regular audits to ensure compliance with fee protection requirements.


9. Record Retention

Requirement: Retain records documenting actions taken with respect to a borrower's mortgage loan until one year after the loan is discharged or servicing is transferred.

Section: §1024.38(c)

Current Regulation: Record retention policies varied, potentially leading to gaps in documentation and accountability.

Proposed Change: Emphasizes the importance of maintaining accurate and complete records of servicing actions, supporting compliance and dispute resolution.

Enhancements Needed:

  • Implement a comprehensive record retention policy that meets the new requirements.

  • Ensure all records are stored securely and can be easily accessed when needed.

  • Train staff on proper documentation practices and the importance of maintaining accurate records.


10. Notification of Forbearance Terms

Requirement: Provide borrowers with written notices confirming the terms and duration of forbearances.

Section: §1024.41(c)(2)(iii)

Current Regulation: Existing requirements for notifying borrowers of forbearance terms were less detailed, potentially causing confusion.

Proposed Change: Ensures continued benefit to borrowers with clear documentation, outlining the terms of forbearance agreements.

Enhancements Needed:

  • Update forbearance notice templates to ensure they include all required information.

  • Train staff to explain forbearance terms clearly and accurately to borrowers.

  • Implement a system to track and verify that all forbearance terms are communicated and understood by borrowers.



While these are still proposed changes, we recommend exploring required updates to systems, processes and staffing needs right now.

14124

People Walking

Our Services

- Core Servicing

- Default

- Compliance and Risk

- Audit and Quality Control

- Procedure Review

- Exam Support

- Reporting

Business Hours

Mon - Fri: 8am - 8pm

Sat: 8am - 12pm

Contact Us

301 W. Bay Street.

Suite 14124

Jacksonville, FL 32202

Tel: 904-207-8331
 

© 2023 BlackWolf Advisory Group

bottom of page