CFPB Official Previews Final Mortgage Servicing Rule

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DALLAS — The Consumer Financial Protection Bureau is expected to finalize its second round of mortgage servicing rules in July, a top agency official said Thursday.

Laurie Maggiano, a program manager for servicing and secondary markets at the CFPB, discussed the rule and also offered additional insights at a conference here into the agency's long-anticipated debt collection rulemaking.

The final mortgage servicing rule is expected to provide more specifics about how servicers should treat borrowers when defaulted loans are transferred, an area that has caused some harm to consumers, Maggiano said.

The servicing rule is also expected to require servicers to send periodic statements and early intervention notices to some borrowers in bankruptcy. Additionally, there will be requirements for successors in interest, or any person who inherits a mortgage or property from the original owner, she said.

The rule is also expected to tweak loss mitigation regulations. The CFPB is looking at what the future of loss mitigation might be when the Making Home Affordable program expires at the end of this year.

Currently, loss mitigation rules only apply once during the life of the loan, which Maggiano referred to as "one and done." The final rule is expected to extend loss mitigation to borrowers who become current and then run into trouble again, perhaps years down the road.

"It's not like every time they raise their hand, you have to evaluate them all over again; they actually have to reperform to be eligible," Maggiano said. "It is not a churning in the same default cycle."

The CFPB issued its servicing proposal with a focus on servicing transfers in 2014.

The CFPB's first round of mortgage servicing rules went into effect in January 2014, but it almost immediately received feedback from the industry on ways for improvement. Those first rules required servicers to help struggling borrowers and maintain accurate records of mortgages and payments.

Servicers will have plenty of time to put the rules in place since they are also dealing with requirements of the Home Mortgage Disclosure Act and Know Before You Owe consumer disclosure rules, Maggiano said.

"For some of the more difficult parts of the rule, there will probably be quite a long runway," Maggiano said. "Our rules always set the floor, not the ceiling, for what you can do."

Maggiano also provided some topics under review for its debt collection rulemaking. The agency put out an advance notice of proposed rulemaking on the Fair Debt Collection Practices Act in 2013 and received more than 23,000 comments.

Some of the topics under review include the validation process to confirm a debt, the transfer of time-barred debts, and the potential for registration requirements for debt collectors, Maggiano said. The agency is looking at the challenges that technology has created since the rule's enactment in 1977.

"Our goal is really to make sure that anyone who collects a debt really substantiates the debt, and that they provide the consumer the appropriate information in a respectful and lawful way," Maggiano said.

The bureau is also considering rules for first-party debt collectors; the debt collection law deals primarily with third-party collectors.

"We're trying to decide if it might be appropriate and in what cases it would be appropriate to treat consumers the same way whether the collector was a third party or a first party," she said.

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Compliance Mortgage defaults Foreclosures Loss mitigation Servicing