22 HќќѠіђџȱ юћјђџ юѦȱ2014 DIRECTORS / SENIOR MANAGEMENT The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act)1 created the Consumer Financial Protection ȱǻ ǼȱȱȱĴȱȱ create a regulator with the ability to promulgate and consistently apply rules and regulations protecting ȱȱȱęȱȱ industry. In February 2013, the CFPB ȱȱęȱȱȱ rules (Final Rules) which, among other provisions, amend Regulation Z of the Truth in Lending Act2 and Regulation X of the Real Estate Ĵȱȱ ȱ ǯ3 ȱ ȱ ȱȱěȱ Jan. 10 and contain several new servicing requirements for residential mortgages, which may be of concern for loans in default. The Final Rules require servicers to send periodic statements to borrowers containing basic payment information including the application of past payments and fees.4 If the borrower is more than 45 days delinquent, however, the Final Rules require the servicer to include: (1) the date the borrower became DzȱǻŘǼȱȱęȱȱ risks and costs if the default is not cured; (3) a history dating back six months, or to a time when the loan was current, whichever is shorter; (4) a reinstatement amount; (5) a notice regarding any loss mitigation ȱȱ ȱȱěDzȱǻŜǼȱ if a foreclosure action has been initiated; and (7) contact information for a housing counselor.5 Servicers received some reprieve in October 2013 when the CFPB issued an Interim Final Rule to clarify that the statements are not required if the borrower is in an active bankruptcy.6 On appropriate loans related to a borrower’s primary residence, the Final Rules require the servicer to make live contact with the borrower within 36 days of the default to advise the borrower of any loss mitigation options available. This contact may be either in person or over the phone, but the servicer will not satisfy this requirement by leaving a recorded message. Interestingly, this requirement is ęȱȱȱ ȱȱȱ contact with the servicer. After the initial contact, the ȱȱȱȱ Ĵȱ ęȱȱȱȱȱ procedures to the borrower by the Śśȱ¢ȱȱ¢ǯȱ ȱ Ĵȱ notice must contain: % A request for the borrower to contact the servicer; % Telephone and mailing contact information for the servicer; % Description of the loss mitigation options which may be available to the borrower; % Instructions on how to apply for loss mitigation; % A list of housing counselors approved by the Department of Housing and Urban Development, and the HUD telephone number for access to housing counselor.7 While neither Dodd-Frank nor the Final Rules require a servicer to participate in loss mitigation activities unless the servicer is required to do so by the owner of the loan, the Final Rules prescribe procedural requirements for those servicers participating in loss mitigation on a borrower’s primary residence.8 When a servicer receives a loss mitigation application, it is required to notify the borrower ȱęȱ¢ȱ ȱȱȱ is complete.9 Final Rules Regarding Servicing Requirements for Residential Mortgages яќѢѡȱѡѕђȱ Ѣѡѕќџ Christina M. Bruno is a member of the bankruptcy and creditors’ rights group of Bose McKinney & Evans LLP, Indianapolis. She practices primarily in the areas of commercial and residential mortgage foreclosures; Chapter 7, 11 and 13 bankruptcy cases; and title insurance litigation. The author can be ȱȱřŗŝȬŜŞŚȬśŗşŘǰȱDZȱȓ ǯǯȱ Bose McKinney & Evans LLP is an associate member of the Indiana Bankers Association.
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