Pub. 2 2014 Issue 2

spring 2014 7 borrower’s mortgage loan account to a transferee servicer. (9) Making the first notice or filing required by applicable law for any judi- cial or non-judicial foreclosure process in violation of §1024.41(f) or (j). (10) Moving for foreclosure judgment or order of sale, or conducting a foreclo- sure sale in violation of §1024.41(g) or (j). (11) Any other error relating to the ser- vicing of a borrower’s mortgage loan Upon receipt of the error notice, a ser- vicer has five days to acknowledge the receipt and generally has 30 business days to conclude an investigation and respond, but only seven business days if the error was a failure to provide an accurate pay- off balance (number (6) above). Once a request from the borrower is received, the servicer may not charge a fee or require a payment as a condition of responding to the notice of error and may not, for 60 days, furnish adverse infor- mation to a credit agency regarding any payment that is a subject to the error. Servicers do not need to conduct an inves- tigation for duplicative notices of error, an overbroad notice or a notice of error that was delivered more than a year after the servicing was transferred or the mortgage discharged. However, a notice of the determination will still need to be sent within five days of making the determi- nation. 1024.36 – Requests for Information Upon the receipt of a qualified written request for information, a servicer has five days to acknowledge the receipt. The servicer then has 10 business days from the request to respond to an information request for the identity of and contact information of the owner or assignee of the mortgage, and 30 business days to respond to any other request for informa- tion. The servicer does not need to respond, however, to any request that is du- plicative, confidential or privileged information, irrelevant, overbroad or unduly burdensome, or the request was delivered to the servicer more than one year after the transfer of service or the loan was discharged. A servicer need only send a notice of this determination within five business days after making the deter- mination. 1024.37 – Force-Placed Insurance The new force-placed insurance rules now require a 45 day notice to the borrower prior to charging them for the cost. In addition to the 45 day notice, a second “reminder” notice needs to be sent at least 30 days after the first notice but more than 15 days before assessing the borrower for the insurance. If the force placed insurance remains on the loan for a subsequent year, then a renewal notice must also be delivered at least 45 days before assessing a charge for the following year. These notices are similar, but separate from the notices required under the flood insurance regulations. However, unlike flood, a lender may send the initial 45 day notice prior to expiration of the ex- isting policy and force place immediately after the policy expires (as long as proper notice was given). A model notice can be found under Ap- pendix MS-3 of RESPA. 1024.38 – General Servicing Policies (small servicers exempt) Requires servicers to maintain policies and procedures designed to ensure that the servicer can: 1) assess and provide timely and accurate information to the borrower; 2) properly evaluate loss miti- gation applications; 3) facilitate oversight of, and compliance by, service provid- ers; 4) facilitate transfer of information during servicing transfers; 5) and inform borrowers of the written error resolution and information request procedures. This provision also provides a record reten- tion period of one year after the loan is transferred or discharged regarding all servicing records or actions taken on the loan. (NOTE: Parts 1024.39-41 only apply to a mortgage secured by the borrower’s principal residence) 1024.39 – Early Intervention Require- ments for Certain Borrowers (small servicers exempt) The new rule requires a live person to make contact with the borrower by the 36th day of delinquency and inform them of any loss mitigation options available, if any. The contact must be followed up with a letter by the 45th day of delinquen- cy. Model clauses for the letter can be found in Appendix MS-4 of RESPA. A lender is exempt from the requirement if the borrower is either in bankruptcy, or the servicer received notice from the customer asking the servicer to cease communication and the servicer is subject to the FDCPA, or state law otherwise prohibits communication with the bor- rower. 1024.40 – Continuity of Contact (small servicers exempt) Servicers must now assign specific per- sonnel to a delinquent borrower by the 45th day of delinquency and provide their contact information to the borrower. The personnel responsible must be empow- ered to provide accurate information regarding the loan, any loss mitigation options, the status of a loss mitigation application and other information surrounding the loan. This is meant to provide a single point of contact for all of the borrower’s inquiries. 1024.41 Loss Mitigation Procedures (small servicers exempt, except for the 120 day foreclosure rule) This new section imposes certain time requirements for disclosures, evaluations and appeals of loss mitigation applica- tions, but it in no way requires a lender to offer any such program. In addition to the new disclosure and timing requirements for loss mitigation, the amendment more importantly imposes a restriction on the referral to foreclosure. A servicer, small or large, may not make the first notice or filing for a foreclosure unless: 1. The borrower is 120 days delinquent on the note; 2. The foreclosure is based on the borrower’s violation of a due-on-sale clause; or 3. The servicer is joining the foreclosure action of a subordinate lienholder. A significant omission is the right to foreclose if the borrower is delinquent on taxes or is in default for any reason other than a failure to pay. So while the borrow- er may technically be in default for not paying them, the borrower has no right to initiate foreclosure unless the note is 120 days past due. n