This issue of Law Letter focuses on two CFPB rules that will become effective for consumer residential mortgage applications received beginning January 10, 2014.
I. CFPB Requirement to provide Consumer Mortgage Applicants with Homeownership Counseling List
II. Small Servicer Exemption from CFPB Comprehensive Periodic Statement Requirement
I. CFPB Requirement that that Lenders Provide Consumer Mortgage Loan Applicants with a Written List of Homeownership Counseling Organizations
a. For all consumer residential mortgage loan applications received on or after January 10, 2014, lenders will be required to disclose to loan applicants a list of the ten (10) HUD-approved homeownership counseling agencies closest to the applicant’s zip code area within 3 business days after receipt of the loan application. Reverse mortgages and Time Share loans are excluded from coverage. This rule applies to loans secured by the consumer’s primary dwelling.
b. The CFPB has published guidelines to help lenders comply with the new rule at www.consumerfinance.gov/f/
c. The CFPB has developed a free website that will automatically generate a list of the 10 HUD-approved homeownership counseling agencies closest to the applicant’s zip code. www.consumerfinance.gov/find-
d. Using the form and list of homeownership counseling agencies created by the CFPB website, the lender should provide the disclosure to the applicant by mail, in person, or electronically within 3 business days of their receipt of the application.
e. Lenders that use a Loan Origination System (LOS) and who intend to incorporate the new CFPB requirement into their LOS will have an additional 6-months to implement the rule. During the 6 month extension period, lenders should give the applicant the following notice within 3 business days of receiving the application::
“Housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost.
If you are interested in contacting a HUD-approved housing counseling agency in your area, you can visit the Consumer Financial Protection Bureau’s (CFPB) website,www.consumerfinance.gov/find-
You can also access HUD’s housing counseling agency website via www.consumerfinance.gov/
For additional assistance with locating a housing counseling agency, call the CFPB at 1-855-411-CFPB (2372).”
f. Lenders who intend to incorporate the new CFPB rule into their Loan Origination System should contact their LOS provider immediately to discuss how this will be handled.
II. Small Servicer Exemption from Requirement of Providing a Comprehensive Periodic Statement to the Consumer
a. One of the more challenging provisions of the CFPB’s new Mortgage Servicing Regulations is the rule that requires servicers to provide consumers with a detailed statement for each billing cycle, which statement must meet certain timing, form and content requirements.
b. The CFPB has issued a Small Entity Compliance Guide for the new servicing rules. www.consumerfinance.gov/f/
c. A “Small Servicer” is exempt from the CFPB’s periodic statement requirements.
d. To qualify as a “small servicer”, a lender (together with any affiliates) may service up to 5,000 mortgage loans owned by the lender (or affiliate).
e. A lender (or affiliate) that services loans it does not own will not qualify for the small servicer exemption.
f. If the lender uses a subservicer for some of its loans (and retains servicing for other loans in its portfolio), both the lender and subservicer must separately qualify for the Small Servicer exemption.
g. According to the CFPB’s Small Entity Compliance Guide for the new Mortgage Servicing Rules, “even if the subservicer does not qualify as a small servicer, the master servicer may still be eligible for the exemption for loans it services in-house.”
This is good news. In other words, even if a credit union’s subservicer does not qualify for the Small Servicer exemption, the credit union itself may qualify for the Small Servicer exemption if it services 5,000 or fewer of its own loans.
Credit unions that use a subservicer should contact the subservicer to discuss if they are subject to the new CFPB periodic statement rule and if so, how they intend to implement the new rule.
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