CFPB gives more time to reach troubled borrowers in servicer rule revision

The Consumer Financial Protection Bureau said Wednesday that it would give mortgage servicers more time to send early intervention notices to distressed borrowers who have asked not to be contacted about the collection of their debts.

The CFPB issued an interim final rule to give servicers a longer, 10-day window to provide modified early intervention notices to borrowers facing foreclosure.

The CFPB said the 2016 mortgage servicing rules created "unintended challenges" for mortgage servicers because of the timing of notifying borrowers who have invoked their rights to have companies stop calling them to collect debts under the Fair Debt Collection Practices Act.

Andrew Harrer/Bloomberg

“Today’s action should make it easier for mortgage borrowers to receive timely information from their mortgage servicers about available options for saving their home, even if they have submitted a request to cease communication,” CFPB Director Richard Cordray said in a press release.

Because mortgage servicers subject to the Fair Debt Collection Practices Act are prohibited from sending notices to borrowers more than once during any 180-period, the CFPB found that servicers essentially had too little time to provide the early intervention notices to distressed borrowers. The CFPB found that servicers had to provide notices on exactly the 180^th day, after providing a prior notice, which gave them too little margin.

"The bureau did not intend this result and is concerned that the provision imposes too narrow a window for compliance and may provide insufficient guidance as to when and how servicers comply with the timing requirements under certain circumstances," the interim final rule stated.

The bureau said it is issuing the interim final rule to address a provision in Regulation X that takes effect Oct. 19.

The CFPB also is seeking public comment on a proposal related to the timing for servicers to provide periodic statements and coupon books to consumers in bankruptcy.

“We are proposing changes to clear up confusion about when to provide periodic statements with important loan information to borrowers in bankruptcy,” Cordray said in the release.

The bureau is proposing amendments to certain Regulation Z mortgage servicing rules issued in 2016. The proposed effective date for the proposed rule is April 19, 2018.