CFPB Proposed Rule Change: Mortgage Servicing Rules (Regulation Z)

January 2018 – The Consumer Financial Protection Bureau (CFPB) is considering rule changes on the timing of services to resolve unintended consequences related to the issuance of statements and coupon books in connection with a consumer’s bankruptcy case under existing mortgage servicing rules. Existing provisions and guidance may be subject to different interpretations.

In 2016, following the adoption of Mortgage Foreclosure Rules adopted by the federal government (known in California as the Homeowner’s Bill of Rights), CFPB adopted amendments to both the Real Estate Settlement Procedures (Regulation X) and the Truth in Lending Act (Regulation Z).

As currently cast, Regulation Z requires periodic statement and coupon book requirements when a person is a debtor in bankruptcy.

It includes a single-billing-cycle exemption from the requirement to provide a periodic statement or coupon book in certain circumstances after one of several specific triggering events occurs resulting in a servicer needing to transition to or from providing bankruptcy-specific disclosures. The single-billing-cycle exemption applies only if the payment due date for that billing cycle is no more than 14 days after the triggering event, existing rules indicate timing requirements for services to provide the next statement or coupon book.

To resolve these issues the CFPB is proposing several revisions to existing regulations to replace the single-billing-cycle exemption with a single-statement exemption. The proposal revises related commentary  to provide a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise be required to provide, regardless of when in the billing cycle the triggering event occurs.

It is believed that the proposed changes would provide a clearer and more straightforward standard than the timing requirement adopted in the 2016 Mortgage Servicing Final Rule, offering greater certainty for implementation and compliance, without unnecessarily disadvantaging consumers.