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NC Servicing Law: Unprecedented Requirements

North Carolina House Bill 2463, designed "to regulate mortgage servicing, to require mortgage servicer licensure under the Mortgage Lending Act, and to make technical and clarifying changes to the Mortgage Lending Act," becomes effective Jan. 1, 2009.

Passed into law on Aug. 1, the legislation is already getting mixed reviews.

According to privately held field services provider Safeguard Properties, Cleveland, the new law contains "extensive licensing requirements" for mortgage servicers and "imposes unprecedented requirements and prohibitions on foreclosure-related conduct."

The legislation broadens the definition of "mortgage servicer" when compared to the existing RESPA description, Safeguard said. (Since 1990, Safeguard operates nationally through a network of subcontractors that perform superintendence, preservation, maintenance and ancillary services.)

A servicer is defined as a person who directly or indirectly "acts as a mortgage servicer," meaning someone who engages, whether for another or on its own behalf, "in the business of receiving any scheduled periodic payments from a borrower pursuant to a mortgage loan." This includes receiving escrow amounts, and making payments of principal and interest and other payments received from the borrower pursuant to the mortgage documents or the servicing contract.

Servicer reporting requirements pertaining to the number of loans serviced, type and characteristics of the loans, also include reporting the number of loans in default broken down by 30-, 60- and 90-day delinquencies, in addition to loss mitigation activities and commenced foreclosures.

Reporting requirements to the borrower once he/she accepts servicing rights include any notice required by RESPA, schedule of ranges and categories of servicing related costs and fees, and proper notice that the servicer is licensed with the Office of the Commissioner of Banks. Complaints may be submitted to the commissioner and additional notices required by other North Carolina statutes.

The law includes mandatory loss mitigation requirements that include new restrictions for "mortgage servicers" when it comes to forced-place insurance coverage, forced-place insurance rebates, borrower reinstatement, borrower notification and escrow payments. In addition, the commissioner has the authority to suspend any foreclosure proceeding for 60 days in specific circumstances.

Another piece of legislation that provides additional notification requirements on servicers, HB 2188, was passed into law effective Oct. 1, 2008.

It aims to increase reporting transparency through measures such as requiring that any fee incurred by a servicer be clearly and conspicuously explained to the mortgagor within 30 days after the fee is assessed.

On the other hand it clarifies that the servicer is not required to send a statement to the mortgagor under certain circumstances including when a partial payment is accepted and accredited in accordance with a written statement.

It also includes additions to the list of prohibited acts under the Mortgage Lending Act. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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