This document provides a policy for Alston & Bird LLP regarding closed-end servicing disclosures as required by the Consumer Financial Protection Bureau's (CFPB) mortgage servicing rules. The policy outlines requirements for providing adjustment notices when loan rates or payments change, periodic billing statements, and other notices. It establishes roles and responsibilities within the firm to ensure compliance. Appendices provide model disclosure forms and checklists for auditing compliance.
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CFPB Mortgage Servicing Rules Compliance Guide
1. Nanci L. Weissgold
Partner
Alston & Bird LLP
Morey Barnes Yost
Senior Associate
Alston & Bird LLP
Kendall Stensvad
Associate
Alston & Bird LLP
CFPB’s Mortgage Servicing
Rules Resource Guide
UPDATED AUGUST 2017
MBA COMPLIANCE ESSENTIALS℠
mba.org/compliance
THE TOOLS YOU WANT. THE TRAINING YOU NEED.
17396
2. vii
MBA COMPLIANCE ESSENTIAL RESOURCE GUIDE
TO THE CFPB’S MORTGAGE SERVICING RULES – OUTLINE
I. Introduction & Statutory Background
II. Applicability Chart
III. Policies
A. Closed-End Servicing Disclosures
B. Payment Crediting and Payoff Statement
C. Servicing Transfer
D. Force-Placed Insurance
E. Error Resolution, Information Request and QWR Policy
F. Early Intervention
G. Continuity of Contact
H. Loss Mitigation
I. Investor Reporting
J. Recordkeeping
K. Successor in Interest
IV. Internal Compliance Audit Checklists
A. Closed-End Servicing Disclosures Policy Compliance Checklist
B. Payment Crediting and Payoff Statement Policy Compliance Checklist
C. Servicing Transfer Policy Compliance Checklist
D. Force-Placed Insurance Policy Compliance Checklist
E. Written Request Policy Compliance Checklist
F. Early Intervention and Continuity of Contact Policy Compliance Checklists
G. Loss Mitigation Policy Compliance Checklist
H. Investor Reporting Policy Compliance Checklist
I. Recordkeeping Policy Compliance Checklist
J. Successor in Interest Compliance Checklist
3. i
CLOSED-END SERVICING DISCLOSURES POLICY
I. SCOPE AND PURPOSE........................................................................ A-1
1.1 Scope of Policy............................................................................ A-1
1.2 Purpose of Policy......................................................................... A-1
II. ROLES AND RESPONSIBILITIES......................................................... A-2
2.1 Board of Directors........................................................................ A-2
2.2 Compliance Department.............................................................. A-2
2.3 Internal Audit Department............................................................ A-3
2.4 Training Department.................................................................... A-3
2.5 Employees................................................................................... A-3
III. OTHER POLICIES................................................................................. A-3
IV. CLOSED-END TILA DISCLOSURES .................................................... A-3
4.1 Adjustment Notices...................................................................... A-3
4.1.1 Notice of a Rate Adjustment with a Corresponding Payment
Change ............................................................................. A-3
4.1.2 Initial Rate Adjustment Notice........................................... A-4
4.1.3 Miscellaneous................................................................... A-4
4.2 Periodic Billing Statements.......................................................... A-5
4.2.1 General............................................................................. A-5
4.2.2 Consumers in Bankruptcy................................................. A-6
4.2.2.1 Chapter 11 Bankruptcy Consumers ......A-6
4.2.2.2 Chapter 12 and 13 Bankruptcy
Consumers.......................................................A-8
4.2.3 Accelerated Loans........................................................ A-100
4.2.4 Charged-off Loans.......................................................... A-11
4.2.5 Successors in Interest .................................................... A-11
4.2.6 Loans in Temporary Loss Mitigation Programs and
Permanently Modified Loans .......................................... A-12
4.2.7 Coupon Books ................................................................ A-12
V. REVISION AND REVIEW HISTORY ................................................... A-12
4. A-1
CLOSED-END SERVICING DISCLOSURES POLICY
I. SCOPE AND PURPOSE
1.1 Scope of Policy
This Closed-End Servicing Disclosures Policy (the “Policy”) sets forth the Company’s
policies regarding the delivery of closed-end adjustment notices and periodic statements under the
federal Truth-in-Lending Act (TILA).1 This Policy reflects the requirements of the CFPB mortgage
servicing rules as amended effective October 19, 2017.2 This Policy does not address closed-end
servicing disclosures mandated by state law or the government-sponsored enterprises.
The Company delivers the adjustment notices discussed in Section 4.1 of this Policy for
any closed-end credit transaction that: (1) has a term of more than one year; (2) is secured by the
consumer’s principal dwelling; and (3) permits the annual percentage rate to increase after
consummation (a “Covered ARM”).
The following transactions are not subject to Section 4.1, however, if structured as a fixed-
rate transaction and not as an adjustable-rate mortgage based on an index or formula:
Shared-equity or shared-appreciation mortgages;
Price-level adjusted or other indexed mortgages that have a fixed rate of interest
but provide for periodic adjustments to payments and the loan balance to reflect
changes in an index measuring prices or inflation;
Graduated-payment mortgages or step-rate transactions;
Renewable balloon-payment instruments; and
Preferred-rate loans.
Except as otherwise noted, Section 4.2 of this Policy applies to any closed-end consumer
credit transaction secured by a dwelling.
1.2 Purpose of Policy
It is the purpose of this Policy to ensure that the Company:
Provides consumers with accurate and timely information; and
1
Note to Draft: As drafted, this Policy only covers disclosure requirements under the new TILA servicing
rule, but there are also separate servicing disclosure requirements in Regulation Z (e.g., the requirement to
deliver open-end billing statements). These separate requirements could be incorporated into this Policy or
addressed separately. Also note that while the creditor, any assignee, and the servicer are jointly
responsible for providing the disclosures, the Policy assumes that the servicer is the party that actually
provides the disclosures (with the exception of an initial rate adjustment notice provided by the creditor at
consummation).
2
See 81 FR 72160 (Oct. 19, 2016).
5. A-2
Otherwise complies with applicable legal requirements regarding closed-end
servicing disclosures.
II. ROLES AND RESPONSIBILITIES
2.1 Board of Directors
The Company’s Board of Directors (“Board”) is responsible for ensuring that the Company
complies with the mortgage servicing rules3 (including the topic covered in this Policy) and has
appropriate policies and procedures in place to ensure compliance with the requirements of
agencies, investors, and other relevant parties with which the Company does business.
The Board is responsible for annually reviewing this Policy and for approving any
updates.
2.2 Compliance Department
The Board delegates day-to-day oversight responsibilities for compliance with the
mortgage servicing rules and this Policy to the Compliance Department. The Compliance
Department is responsible for maintaining and updating this Policy and for ensuring its
implementation by the appropriate business unit(s) based on the direction of the Board. The
Compliance Department’s responsibilities include:
Monitoring changes in laws and in policies and procedures of investors, and
other relevant parties with which the Company does business, and assessing if
changes to this Policy should be recommended to the Board.
Ensuring management and employees are appropriately trained in and
knowledgeable of the mortgage servicing rules’ requirements and this Policy.
In accordance with the Company’s Vendor Management Program, ensuring any
Company vendors and third-party service providers with responsibilities requiring
compliance with the mortgage servicing rules’ requirements have appropriate
policies and procedures and training programs to provide for compliance with the
mortgage servicing rules and this Policy.
Assessing compliance with the mortgage servicing rules and this Policy, and
ensuring this Policy, training, and other internal controls are appropriately
updated as a result of quality control or audit findings and other applicable
concerns.
Conferring with inside and outside legal counsel as appropriate regarding the
mortgage servicing rules’ requirements.
Assisting with regulatory inquiries or audits addressing the mortgage servicing
rules.
3
The mortgage servicing rules can be found, in significant part, in Subpart C of Regulation X and Subparts
C and E of Regulation Z, and in the Federal Register at: 78 FR 10696 (Feb. 14, 2013), 78 FR 10902 (Feb.
14, 2013), 78 FR 44685 (July 24, 2013), 78 FR 60382 (Oct. 1, 2013), 78 FR 62993 (Oct. 23, 2013), 78 FR
80225 (Dec. 31, 2013), 80 FR 8767 (Feb. 19, 2015), 80 FR 43911 (July 24, 2015), 81 FR 72160 (Oct. 19,
2016).
6. A-3
Monitoring compliance with the mortgage servicing rules and this Policy through
independent audits performed by the Company or by a third party.
Periodically reporting to the Board regarding compliance with the mortgage
servicing rules and this Policy, including the results of audit findings as
applicable.
2.3 Internal Audit Department
The Internal Audit Department is responsible for periodically verifying the Company’s
compliance with this Policy (but no less frequently than annually).
2.4 Training Department
The Training Department will provide employees with information and training regarding
the Company’s obligations relating to closed-end servicing disclosures. At a minimum, this will
include applicable training regarding this Policy and the CFPB mortgage servicing rules.
2.5 Employees
All employees responsible for generating and delivering billing statements and other
periodic disclosures must adhere to the requirements of this Policy. Such employees are
responsible for understanding and complying with the requirements established in this Policy and
must participate in the applicable training as designed by the Training Department regarding the
topic covered in this Policy.
III. OTHER POLICIES
Please refer to the following Company policies and procedures for additional relevant
information:
[Open-End Servicing Disclosures Policy and Procedures]
[Electronic Transactions Policy and Procedures]
[Recordkeeping Policy and Procedures]
[Internal Audit Policy and Procedures]
[Successors in Interest Policy]
[Other]
IV. CLOSED-END TILA DISCLOSURES
4.1 Adjustment Notices
4.1.1 Notice of a Rate Adjustment with a Corresponding Payment Change
When an interest rate adjustment on a Covered ARM results in a corresponding change in
the consumer’s minimum payment obligation (including in connection with a payment change that
results from the conversion of a Covered ARM to a fixed-rate transaction), the Company will provide
the consumer with an adjustment notice that contains the information required under 12 C.F.R. §
1026.20(c). The content and format of the notice will be substantially similar4 to Model Forms H-
4(D)(1) and (2) in Appendix H to Regulation Z.
4
The Company may modify the model forms to accommodate particular consumer circumstances or
transactions not addressed by the forms. For example, when the Company provides the required notice to a
7. A-4
The Company will provide such notices to consumers at least 25, but no more than 120,
days before the first payment at the adjusted level is due for: (1) Covered ARMs with uniformly
scheduled interest rate adjustments occurring every 60 days or more frequently; and (2) Covered
ARMs originated before January 10, 2015, in which the loan contract requires the adjusted interest
rate and payment to be calculated based on the index figure available as of a date that is less than
45 days before the adjustment date.
The Company will provide such notices to consumers as soon as practicable, but not less
than 25 days before the first payment at the adjusted level is due, when: (1) the first adjustment to
a Covered ARM occurs within 60 days of consummation; and (2) the new interest rate disclosed at
consummation pursuant to Section 4.1.2 of this Policy was an estimate. However, the Company
will not provide such a notice in connection with the first rate adjustment on a Covered ARM when:
(1) the first payment at the adjusted level is due within 210 days after consummation; and (2) the
new interest rate disclosed at consummation pursuant to Section 4.1.2 of this Policy was not an
estimate.
The Company otherwise will provide such notices to consumers at least 60, but no more
than 120, days before the first payment at the adjusted level is due. The Company is exempt from
the requirements of this section if the Company is considered a debt collector under Fair Debt
Collection Practices Act (FDCPA) with respect to a consumer and that consumer has exercised a
“cease communication” right under the FDCPA.
4.1.2 Initial Rate Adjustment Notice
The Company will provide an initial rate adjustment notice in connection with the initial
contractual5 interest rate adjustment on a Covered ARM. The initial rate adjustment notice will
contain the information required under 12 C.F.R. § 1026.20(d) and appear in a format that is
substantially similar to Model Forms H-4(D)(3) and (4) in Appendix H to Regulation Z. If the new
interest rate (or the new payment calculated from the new interest rate) is not known by the date of
the disclosure, the Company will disclose an estimate and label it as such. This estimate will be
based on the appropriate index value in effect within 15 business days before the date of the
disclosure.
The Company will provide the initial rate adjustment notice to consumers at least 210, but
no more than 240, days before the first payment at the adjusted level is due, except that if the first
payment at the adjusted level is due within the first 210 days after consummation, the creditor will
be responsible for providing the notice at consummation. The Company must provide this notice
even if the Company is considered a debt collector under the FDCPA with respect to a consumer,
and that consumer has exercised a “cease communication” right under the FDCPA.
4.1.3 Miscellaneous
The notices required under Section 4.1.1 and 4.1.2 of this Policy must reflect the credit
terms to which the parties are legally bound when the disclosures are provided. They also must
be made clearly and conspicuously, in writing, and in a form that the consumer may keep.
consumer whose Covered ARM is converting to a fixed-rate mortgage, it may modify the model language to
explain that the interest rate will no longer adjust.
5
Note to Draft: The Commentary to the 2016 mortgage servicing rules amendment clarifies that the notice
requirement is not triggered by an interest rate adjustment that is made for loss mitigation purposes
(although subsequent adjustments made pursuant to the revised terms of the contract could trigger notice
obligations).
8. A-5
Such notices may be provided electronically, subject to compliance with the consumer
consent and other applicable provisions of the federal Electronic Signatures in Global and National
Commerce Act. The disclosures required to appear in the notices must be grouped together,
segregated from everything else, and may not contain any additional information, other than an
acknowledgement of receipt, the date of the transaction, and the consumer’s name, address, and
account number. Further, the initial rate adjustment notice must be provided as a separate
document from all other written materials.6
4.2 Periodic Billing Statements
4.2.1 General
The Company will provide consumers7 with a periodic statement for each billing cycle of
any closed-end consumer credit transaction secured by a dwelling (other than a reverse mortgage
or a transaction secured by a consumer’s interest in a timeshare plan). The Company must
continue to provide periodic statements even if the Company is considered a debt collector under
the FDCPA with respect to a consumer and that consumer has exercised a “cease communication”
right under the FDCPA.
If a mortgage loan has a billing cycle shorter than a 31-day period (e.g., a biweekly billing
cycle), the periodic statement may cover an entire month. The Company will deliver the periodic
statement or place it in the mail within a reasonably prompt time after the payment due date or the
end of any courtesy period provided for in the previous billing cycle. Delivering, emailing, or placing
the periodic statement or coupon book in the mail within four days after the payment due date or
the end of the courtesy period generally would be considered reasonably prompt.
The periodic statements will clearly and conspicuously disclose the information required
under 12 C.F.R. § 1026.41(d). If the Company has established an address pursuant to 12 C.F.R.
§§ 1024.35(c) or § 1024.36(b) that a consumer must use to assert an error or request information,
that address must be provided in the periodic statements. The statements must be formatted to
comply with 12 C.F.R. § 1026.41(c) and in a manner that is substantially similar8 to the model
statements in Appendix H-30 to Regulation Z.9
6
When the notice is mailed, however, it may be in the same envelope as other materials. Similarly, when it
is delivered by electronic mail, it may be one of several attachments, as long as it remains a separate
attachment.
7
When two consumers are joint obligors with primary liability in the transaction, the periodic statement may
be sent to either consumer. For example, if spouses jointly own a home, the Company may send a single
statement to either spouse and need not send separate statements to both.
8
The Company may modify the model forms to accommodate particular consumer circumstances or
transactions not addressed by the forms. For example, when the Company provides the required notice to a
consumer whose Covered ARM is converting to a fixed-rate mortgage, it may modify the model language to
explain that the interest rate will no longer adjust.
9
Note to Draft: Regulation Z expressly provides that the adjustment notices discussed in Section 4.1 may
not include any extraneous information and that the initial rate adjustment notice must appear as a separate
document. However, these limitations do not apply to the periodic statement requirement. The
Commentary to Regulation Z expressly acknowledges that a servicer may include additional information on
the periodic statement and/or combine it with disclosures required by other laws, unless otherwise expressly
prohibited by applicable law. Further, where § 1026.41(d) requires disclosures to be in “close proximity to
one another,” the items should be grouped together and set off from other groupings of items. This may be
accomplished in a variety of ways, for example, by presenting the information in boxes or by arranging the
items on the document and including spacing between the groupings. However, items in “close proximity”
may not have any unrelated text between them. Text is “unrelated” if it does not explain or expand upon the
required disclosures.
9. A-6
Periodic statements must be in writing and in a form that the consumer may keep. If the
consumer agrees, the Company may, however, provide periodic statements electronically.10
4.2.2 Consumers in Bankruptcy11
(i) 4.2.2.1 Chapter 11 Bankruptcy Consumers
The periodic statement may be modified according to 12 C.F.R. § 1026.41(f) while any
consumer on a mortgage loan is a debtor in bankruptcy under Title 11 of the United States Code
or if such consumer has discharged personal liability for the mortgage loan under 11 U.S.C. §§
727, 1141, 1228, or 1328. When one of these events occurs, the Company must provide the next
modified periodic statement by delivering it or placing it in the mail within a reasonably prompt time
after the first payment due date or the end of any courtesy period for the payment’s corresponding
billing cycle. The Company is provided a courtesy period for a single billing cycle during which the
Company is exempt from providing a modified periodic statement if the payment due date for that
billing cycle is no more than 14 days after the date either the consumer becomes a debtor in
bankruptcy under Title 11 or the consumer discharges personal liability for the mortgage loan. If
this occurs for a mortgage loan with more than one primary obligor (under Chapter 11, 12, or 13),
the Company may provide the modified statement to any or all of the primary obligors, even if the
primary obligor the Company provides the modified statement to is not a debtor in bankruptcy. The
Company need not provide an unmodified statement to any of the primary obligors.
The modifications the Company may make to the periodic statement or coupon book
pursuant to § 1026.41(f) for debtors in bankruptcy under Title 11 are:
Omission of the Late Payment Fee: The Company may omit the amount of any late
payment fee, and the date on which that fee will be imposed, if payment has not been
received;
Omission of the Length of Delinquency: The Company may omit the length of the
consumer’s delinquency. Specifically, the length of a consumer’s delinquency is
measured as of the date of the periodic statement or the date of the written notice
provided under § 1026.41(e)(3)(iv) when a consumer is in bankruptcy. A consumer’s
delinquency begins on the date an amount sufficient to cover a periodic payment of
principal, interest, and escrow, if applicable, becomes due and unpaid, even if the
consumer is afforded a period after the due date to pay before the Company
assesses a late fee. Further, if the Company applies payments to the oldest
outstanding periodic payment, a payment by a delinquent consumer advances the
date the consumer’s delinquency began;
Omission of Risk Notifications: The Company may omit any notification of possible
risks, such as foreclosure, and expenses that may be incurred if the delinquency is not
cured; and
10
Note to Draft: A servicer technically is not required to obtain a formal E-SIGN consent to deliver periodic
statements in an electronic format. However, a consumer not only must consent to receive electronic
statements, but also must demonstrate the ability to access electronic disclosures in the format in which they
are to be provided. Thus, as a practical matter, a servicer may want to comply with the formal E-SIGN
consent and disclosure requirements before providing electronic statements. Note, however, that any
consumer who is currently receiving disclosures for any account (for example, a mortgage or checking
account) electronically from their servicer shall be deemed to have consented to receiving e-statements in
place of paper statements.
11
This section of the Policy reflects the requirements of the CFPB mortgage servicing rules as of April 19,
2018. See 81 FR 72160 (Oct. 19, 2016).