CFPB Issues Final Rule Connecting Mortgage Servicers To Bankrupt Borrowers

The Consumer Financial Protection Bureau (CFPB) introduced a final rule on Thursday (March 8) that it said will help mortgage servicers communicate with borrowers who are facing bankruptcy.

In a press release, the government watchdog agency said the final rule gives the mortgage servicers more leeway in providing periodic statements to consumers who are entering or exiting bankruptcy. The CFPB said the Truth in Lending Act requires that mortgage servicers provide borrowers with periodic statements. As a result of that rule, the CFPB has created sample forms for the services to use.

Another rule, the 2016 mortgage servicing rule, requires companies to send modified periodic statements or coupon books to consumers in bankruptcy starting on April 19 of this year. After the rule was issued, the CFPB learned that some of the technical aspects of the timing of this rule could create unintended challenges and may be subject to different legal interpretations. In October of 2017, it sought public comment and, as a result, has made the changes.

“Specifically, the final rule provides a clear single-statement exemption for servicers to make the transition, superseding the single billing cycle exemption included in the 2016 rule,” wrote the CFPB in the release. “The effective date for the rule is April 19, 2018, the same date that the other sections of the 2016 rule relating to bankruptcy-specific periodic statements and coupon books become effective.”

The CFPB, under its former director Richard Cordray, had gone after mortgage servicers for failing to help struggling borrowers with their payments. In 2016, the agency took steps to crack down on mortgage servicers that weren’t keeping their technology up to date and, as a result, may have been harming consumers. According to the CFPB, companies that failed to implement new technology were in direct violation of the bureau’s new servicing rules. According to a report, CFPB examiners found violations related to technology and process breakdowns.

“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” said Cordray at the time. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”