On July 29th, 2014,[1] the American Bankers Association, ABA, asked the Consumer Financial Protection Bureau, CFPB, to clarify and revise certain mortgage servicing rules related to delinquent and defaulted loans.[2]

THE OPENING

ABAs letter begins requesting CFPB keeps policy and regulation changes specific and narrow, because systemwide changes impose high costs and trumple previous investments in technology that help banks implement rule and regulation requirements.

CLARIFY / REVISE THESE RULES

1) ABA asks the CFPB to provide guidance on the 120 days waiting period for rolling delinquencies:

Current regulation requires a waiting period of 120 days on delinquent loans before giving first notice and/or filing for foreclosure. ABA explains many mortgage servicers are uncertain about how to apply the 120 day waiting period to rolling delinquencies (instances in which borrowers resume making monthly payments without ever becoming fully current).

Although the CFPB has suggested that servicers accelerate mortgage loans when permitted by state law and the loan contract, the ABA indicates it would be better to have the CFPB clearly state how to proceed on these cases rather than leave it to the courts to determine whether servicers have correctly determine the 120 days waiting period.

2) ABA asks the CFPB to consider revising regulation that requires servicers to provide periodic statements for charged-off accounts.

ABA explains servicers face two kinds of problems when trying to provide periodic statements to borrowers of charged off loans.[3] One problem stems from the activation date of this requirement, and the other from loans in which the servicer/creditor has lost contact with the borrower or in cases in which a court collects the payments of a partially charged off loan.

Although servicers have been required to provide periodic statements to borrowers of charged off loans for more than a year, many have not develop systems that help them implement the provision of these statements due to a delayed official interpretation of this rule by the Bureau. ABA requests the CFPB considers annulling these requirement, or at the very least, considers the adoption of the periodic statement exemption for open-end credit charged off accounts, view 12 CFR 1026.5(b)(2)(i).

Other problems with trying to provide periodic statements to charged-off loans occur when the lender loses contact with the borrower. ABA asks the CFPB to clarify servicers have no obligation to provide statements in cases in which this mail is returned as undeliverable.

Another problem with the provision of periodic statements, is when a court has granted a changed-off amount that is less than the unpaid balance; in these cases the court collects payments. ABA request CFPB clarifies servicers have no obligation to provide periodic statements to borrowers who submit remaining payments to a court.

3) ABA asks the CFPB to finalize servicing rules for borrowers who filed for bankruptcy.

Currently, an Interim Rule provides servicing rules exemptions when a borrower has filed for bankruptcy. ABA request the CFPB finalizes this rule in accordance with the Interim Rule, and makes this exceptions permanent. If the CFPB decides otherwise, ABA request CFPB follows the notice and comment process before issuing a final rule for these cases.

I THINK ABA correctly represents servicers/bankers need for clarity. As an industry peer, I appreciate the importance of servicers giving troubled borrowers a period of time in which they can overcome their financial problems, or look for alternative solutions, before the foreclosure proceedings begin; at the same time, I recognize rolling delinquent borrowers who become unresponsive to risk mitigation outreach calls boycott the efforts of servicers who are looking for ways to work through the problem. If a borrower loses touch with the creditor/lender, become unresponsive, or begin submitting payment to a court, why should servicers/creditors bear the financial costs of providing periodic statements? Have they not lost enough through the charge off? I thank the ABA for their outreach and representation.

1) http://www.cfpbmonitor.com/2014/08/04/aba-seeks-cfpb-clarification-of-mortgage-servicing-rules/

2) http://www.aba.com/Issues/Servicing/Documents/JointCommentstoCFPBsOctober23,2013InterimFinalRule112213.pdf

3) http://www.aba.com/Issues/Servicing/Documents/JointCommentstoCFPBsOctober23%2c2013InterimFinalRule112213.pdf

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