Servicing Statements Run Afoul of Bankruptcy Code

Bankruptcy trustees are warning the Consumer Financial Protection Bureau that the periodic statements servicers are required to send homeowners can conflict with the Bankruptcy Code.

The statements include certain information that is helpful to borrowers whose loan is performing or in the early stages of delinquency, according to a letter by the National Association of Chapter 13 Trustees.

Once a borrower files for bankruptcy, however, the information in the CFPB periodic statement can be confusing. It “inadvertently conflicts” with the “protections of the Bankruptcy Code and will likely lead to borrower/debtor, debtor attorney or even court/trustee confusion,” the Oct. 1 letter says.

National Association of Chapter 13 Trustees officials are offering to work with the CFPB to redesign the statements that track mortgage payments and escrows.

“Until those information statements are carefully designed and tested for consumer understanding, we very strongly urge the CFPB to exclude from the periodic statement requirements loans to borrowers who are protected by bankruptcy,” the letter says.