August 4, 2021
Real Estate Settlement
Procedures Act
(Regulation X) and Truth
in Lending Act
(Regulation Z) Mortgage
Servicing Rules
Small entity compliance guide
2 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Version log
The Bureau updates this guide on a periodic basis to reflect finalized amendments and
clarifications to the rule that impacts guide content, as well as administrative updates. Below is
a version log noting the history of this document and its updates:
Date
Version
Changes
August 4,
2021
4
On June 28, 2021, the Bureau issued a final rule adding
certain provisions related to the COVID-19 pandemic.
This rule:
Loss mitigation foreclosure protections: Added
temporary procedural safeguards to the loss
mitigation requirements.
Loss mitigation incomplete application
requirements: Revised reasonable diligence
timing requirements for borrowers in a short-
term forbearance program related to COVID-19.
It also added the ability to temporarily provide
certain COVID-19-related streamlined loan
modifications to borrowers based on the
evaluation of an incomplete application.
Early intervention live contact: Added additional
information servicers must temporarily provide
certain borrowers promptly after establishing
living contact.
On June 23, 2020, the Bureau issued an interim final rule
to temporarily permit mortgage servicers to offer certain
loss mitigation options (e.g., payment deferral and partial
claim programs) to borrowers affected by the COVID-19
pandemic based on the evaluation of an incomplete loss
mitigation application.
3 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
These revisions for these two rules are generally
discussed in Appendix B.
Separately, based on frequently asked questions, this
version also clarifies certain guidance related to the
servicing file and use of multiple electronic systems. (See
“Servicing file” in Section 10.5.2.)
Miscellaneous Administrative Changes.
August 6,
2019
3.2.1
Corrected typo on header of Early Invention with
Delinquent Borrowers in Section 11.
March 22,
2019
3.2
Correction of citations in the Modified Periodic
Statement Requirements table. (See “Content and layout
requirements for modified periodic statements and
coupon books” in
Section 5.10.2)
March 29,
2018
3.1
On March 8, 2018, the Bureau issued a final rule
amending the 2016 Mortgage Servicing Rules. This rule
replaces the single-billing-cycle exemption for periodic
statements and coupon books with a single-statement
exemption when servicers transition to providing
modified or unmodified periodic statements and coupon
books to consumers entering or exiting bankruptcy. This
final rule provides a single-statement exemption for the
next periodic statement or coupon book that a servicer
would otherwise have to provide, regardless of when in
the billing cycle the triggering event occurs. (See
“
Periodic statement and coupon book exemption for
borrowers in bankruptcy (§ 1026.41(e)(5)) in Section
5.10.6)
Provisions of the mortgage servicing rules in effect prior
to April 19, 2018, which are no longer in effect on or after
April 19, 2018, have been removed.
4 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Miscellaneous formatting changes.
October 18,
2017
3.0
In October 2017, the Bureau issued an interim final rule
amending certain mortgage servicing rules. This guide
refers to the October 2017 interim final rule as the
October 2017 Interim Final Rule.
Early intervention: The October 2017 Interim
Final Rule clarifies the obligations for servicers to
provide the early intervention written notice if the
borrower has invoked the cease communication
protection under the Fair Debt Collection
Practices Act (FDCPA). (See “How often must I
provide a written notice to a borrower who has
invoked the cease communication right under the
FDCPA? (§ 1024.39(d)(3)(iii)) in Section 11.8.8)
In July 2017, the Bureau published a final rule making
technical corrections to the 2016 Mortgage Servicing Rule
(July 2017 Final Rule). The July 2017 Final Rule clarifies
the effective date for modifications to the sample notices
provided in appendix H-30 and for commentary relating
to periodic statements for certain borrowers in
bankruptcy. (See “5.6.3 Note on modifying sample
periodic statements” in Section 5.6.3 and “When do I
have to start following these rules?” in Section 2.2)
Miscellaneous Administrative Changes.
November
30, 2016
3.0
In August 2016, the Bureau published a final rule
amending certain mortgage servicing rules. This guide
refers to the August 2016 final rule as the 2016 Mortgage
Servicing Rule.
Small servicer: The small servicer exemption
generally applies to servicers who service 5,000 or
fewer mortgage loans for all of which the servicer
5 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
is the creditor or assignee. The 2016 Mortgage
Servicing Rule excludes certain seller-financed
transactions and mortgage loans voluntarily
serviced for a non-affiliate, even if the non-
affiliate is not a creditor or assignee, from being
counted toward the 5,000-loan limit. (See “
Small
Servicer Exemption” in Section 3. )
Successors in interest: The 2016 Mortgage
Servicing Rule adds definitions of “successor in
interest” to subpart C of Regulation X and to
Regulation Z. In addition, it includes provisions
related to how a servicer confirms a successor in
interest’s identity and ownership interest in a
property. It also generally provides that the
mortgage servicing rules apply to successors in
interest once a servicer confirms the successor in
interest’s status. (See “Successors in Interest” in
Section 4. )
Periodic statements: The 2016 Mortgage
Servicing Rule clarifies certain periodic statement
disclosure requirements relating to mortgage
loans and requires servicers to provide certain
borrowers in bankruptcy a modified periodic
statement or coupon book. In addition, in certain
circumstances, servicers generally are exempt
from the periodic statement requirement for
charged-off mortgage loans. (See “Periodic
Statements” in Section 5. )
Force-placed insurance: The 2016 Mortgage
Servicing Rule amends the force-placed insurance
disclosures and model forms to account for
instances when the borrower has insufficient
coverage on the property, and it gives servicers the
6 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
option to omit a borrower’s mortgage loan
account number on certain required notices. (See
“
Force-Placed Insurance” in Section 8. )
Early intervention: The 2016 Mortgage Servicing
Rule clarifies the obligations for servicers to
establish or make good faith efforts to establish
live contact with delinquent borrowers. In
addition, the rule revises the exemption from
early intervention for borrowers who are in
bankruptcy or who have invoked cease
communication protection under the Fair Debt
Collection Practices Act (FDCPA). (See “Early
Intervention with Delinquent Borrowers” in
Section 11. )
The definition of delinquency: The 2016 Mortgage
Servicing Rule adopts a general definition of
delinquency that applies to all servicing provisions
of Regulation X and periodic statements for
mortgage loans in Regulation Z. For more
information on when a borrower is delinquent,
see the Bureau’s factsheet on Delinquency
.
Loss mitigation: The 2016 Mortgage Servicing
Rule amends and modifies several sections of the
loss mitigation rule. (See “Loss Mitigation
Procedures” in Section 13). The final rule:
Requires servicers to meet the loss mitigation
requirements more than once in the life of a
loan for borrowers who become current on
payments at any time between the borrower’s
prior complete loss mitigation application and
a subsequent loss mitigation application;
7 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Modifies an existing exception to the 120-day
prohibition on foreclosure filing to allow a
servicer to join the foreclosure action of a
superior or subordinate lienholder;
Clarifies how servicers select the reasonable
date by which a borrower should return
documents and information to complete an
application;
Makes clear that servicers cannot move for
foreclosure judgment or order of sale, or
conduct a foreclosure sale, in certain
circumstances;
Requires that servicers provide a written
notice to a borrower within five days
(excluding Saturdays, Sundays, or legal
holidays) after they receive a complete loss
mitigation application and requires certain
information to be included in the notice;
Sets forth how servicers must attempt to
obtain information not in the borrower’s
control and evaluate a loss mitigation
application while waiting for third party
information;
Permits servicers to offer a short-term
repayment plan based upon an evaluation of
an incomplete loss mitigation application;
Eases document collection requirements in
connection with some loss mitigation
applications; and
Addresses and clarifies how loss mitigation
procedures and timelines apply when a
8 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
transferee servicer receives a mortgage loan
for which there is a loss mitigation application
pending at the time of a servicing transfer.
Other amendments and technical corrections or
clarifications to the mortgage servicing rules not
listed above.
The mortgage servicing rules address the servicing of
mortgage loans, and are implemented in both Regulation
X and Regulation Z. Regulation X uses the term
“borrower,” and Regulation Z uses the term “consumer.”
Previous versions of the Mortgage Servicing Guide used
the term “consumer” for ease of reading. This version
replaced the term “consumer” throughout the guide with
the term “borrower.”
A nonprofit servicer section was added to the Small
Servicer Exemption section.
Miscellaneous Administrative Changes.
November 3,
2014
2.2
The Bureau published a final rule amending certain
mortgage rules to:
Provide a small servicer definition for nonprofit
entities that meet certain requirements. (See
“
Small Servicer Exemption” in Section 3.)
January 7,
2014
2.1
Miscellaneous Administrative Changes.
November
27, 2013
2.0
Servicer activities prohibited during the first 120
days of delinquency: The Bureau’s servicing rule
prohibits servicers from making the “first notice
or filing” under state law during the first 120 days
of the borrower’s delinquency. The October 2013
Final Rule clarifies how the rule works across
9 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
different states with different foreclosure laws,
and adopts a narrower definition of “first notice of
filing” that closely tracks FHA’s “first legal”
standard, which is familiar to industry. Also
under the final rule, servicers will be allowed to
send early notices that may provide beneficial
information to borrowers about legal aid,
counseling, or other resources.
Procedures for obtaining follow-up information
on loss-mitigation applications: According to the
Bureau’s servicing rule, within five days of receipt
of a loss mitigation application, a servicer must
acknowledge receipt of the application and inform
the borrower whether it deems the application
complete or incomplete. If incomplete, the
servicer must identify for the borrower what is
needed to complete it. The October 2013 Final
rule makes two changes to these provisions:
First, it outlines procedures for servicers to
follow if, after conducting an initial review and
sending the notice to the borrower, they
discover that they do not have the information
needed to complete an assessment or failed to
identify needed documents or information in
the initial notice. The changes clarify that
servicers are required to seek the additional
information from the borrower if they cannot
complete the assessment without it.
Second, it provides borrowers who submit
“facially complete” applications—i.e., they
respond to the initial notice by providing all of
the documents or information identified by
the servicer at that time—with rights and
protections under the rule. This includes
10 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
prohibiting servicers form proceeding with a
foreclosure until the borrower has been
notified that additional documents or
information is needed and been given a
reasonable time to those documents or
information.
Short-term forbearance: The October 2013 Final
Rule provides servicers more flexibility in
providing short-term forbearance plans for
delinquent borrowers who need only temporary
relief without going through a full loss mitigation
evaluation process.
Interplay between the servicing rules,
bankruptcy law, and Fair Debt Collection
Practices Act (FDCPA): The October 2013 Interim
Final Rule and CFPB Bulletin 2013-12 provide
clarifications that certain notices and
communications mandated by the servicing rules
and the Dodd-Frank Wall Street Reform and
Consumer Protection Act are still required even
when delinquent borrowers have instructed
servicers who are debt collectors under the
FDCPA to cease communications. However, such
will not be required to provide early intervention
contacts or certain notices of interest rate
adjustments. The October 2013 Interim Final
Rule also exempts servicers from being required
to provide periodic statements and early
intervention contacts with borrowers in
bankruptcy.
June 7, 2013
1.0
Original Document
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Table of contents
Version log ................................................................................................................... 2
Table of contents....................................................................................................... 11
1. Introduction ......................................................................................................... 18
1.1 What are the RESPA & TILA Mortgage Servicing Rules? .................................. 18
1.2 What is the purpose of this guide? ..................................................................... 21
1.3 Who should read this guide? ............................................................................. 22
1.4 Where can I find additional resources that will help me understand the
Mortgage Servicing Rules? ................................................................................ 22
2. Overview of the Mortgage Servicing Rules ...................................................... 24
2.1 What are the Mortgage Servicing Rules about? ................................................ 24
2.2 When do I have to start following these rules? ................................................. 25
2.3 What loans do the Mortgage Servicing Rules cover? ........................................ 26
3. Small Servicer Exemption .................................................................................. 27
3.1 Who is considered a small servicer? (§ 1026.41(e)(4)) .................................... 27
3.2 What loans should be considered? (§ 1026.41(a) and (e)) ............................... 29
3.3 From what provisions are small servicers exempt? ........................................... 31
4. Successors in Interest ....................................................................................... 33
4.1 What do the successor in interest rules require? .............................................. 33
4.2 What is the scope of the successor in interest rules? ........................................ 34
4.3 Is there a small servicer exemption from the successor in interest
requirements? .................................................................................................... 34
4.4 When do I have to start complying with the successor in interest rules? ........ 35
4.5 Who are successors in interest? (§§ 1024.31 and 1026.2(a)(27)) .................... 35
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4.6 What are my responsibilities to a potential successor in interest?
(§§ 1024.36(i) and 38(b)(1)(vi)) .........................................................................37
4.7 What are my responsibilities to a confirmed successor in interest? ................ 43
4.8 Is there a private right of action for potential successors in interest under
RESPA or a privately enforceable notice of error requirement related to
successorship determinations?........................................................................... 51
5. Periodic Statements ........................................................................................... 52
5.1 What does the rule on periodic statements require? (§ 1026.41) .................... 52
5.2 What is the scope of the periodic statements rule? (§ 1026.41(a)(1)) .............. 52
5.3 Is there a small servicer exemption to the periodic statement rule? ................ 54
5.4 Who is responsible for sending a periodic statement? (§ 1026.41(a)(2) and
comment 41(a)-3) .............................................................................................. 54
5.5 How often must I send a periodic statement? (§ 1026.41(a)(2)) ..................... 54
5.6 What information must be on the periodic statement, and how must I arrange
it? ........................................................................................................................ 56
5.7 How can I use coupon books instead of periodic statements? (§ 1026.41(e)(3)
and comments 41(e)(3)-1 to -4) .......................................................................... 61
5.8 How must I deliver the information in periodic statements? ........................... 64
5.9 Must I continue to provide periodic statements or coupon books after a
mortgage loan is charged off? (§ 1026.41(e)(6)) .............................................. 66
5.10 Must I provide a borrower in bankruptcy a periodic statement or coupon
book? .................................................................................................................. 68
6. Interest Rate Adjustment Notices (§ 1026.20(c) and (d)) ................................. 79
6.1 What does the rule on interest rate adjustment notices require? (§ 1026.20(c)
and (d)) .............................................................................................................. 79
6.2 What is the scope of the interest rate adjustment notice rule?......................... 79
6.3 Is there a small servicer exemption to the interest rate adjustment notices
rule?.................................................................................................................... 80
6.4 Who is responsible for sending the ARM notices? (§ 1026.20(c) and (d))...... 80
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6.5 When must I send these notices? (§ 1026.20(c)(2) and (d)(2)) ....................... 81
6.6 What information must be included in the initial and ongoing interest rate
adjustment notices? ........................................................................................... 82
7. Prompt Payment Crediting and Payoff Statements (§ 1026.36(c)) ................. 86
7.1 What do the prompt crediting and payoff statements rules require? .............. 86
7.2 What is the scope of the prompt crediting and payoff statement rules?
(§ 1026.36(c)(1) and (c)(3)) ............................................................................... 86
7.3 Is there a small servicer exemption to the prompt crediting and payoff
statement rules? ................................................................................................. 87
7.4 What is a periodic payment, and how must I handle it? (§ 1026.36(c)(1)(i)) . 87
7.5 What is a partial payment, and how must I handle it? (§ 1026.36(c)(1)(ii) and
comment 36(c)(1)(ii)-1) ..................................................................................... 88
7.6 What is a non-conforming payment, and how must I handle it?
(§ 1026.36(c)(1)(iii)) .......................................................................................... 89
7.7 How must I respond to written requests for payoff statements?
(§ 1026.36(c)(3)) ................................................................................................ 90
8. Force-Placed Insurance ..................................................................................... 91
8.1 What does the force-placed insurance rule require? (§ 1024.37) ..................... 91
8.2 What is the scope of the force-placed insurance rule? ....................................... 91
8.3 Is there a small servicer exemption to the force-placed insurance rule? ......... 92
8.4 What is force-placed insurance? ....................................................................... 92
8.5 What must I do before I charge a borrower for force-placed insurance? ......... 93
8.6 May I charge a borrower for insurance placed before the notices have been
sent? ................................................................................................................... 93
8.7 What must be in the force-placed insurance notices? ...................................... 94
8.8 What evidence may I request from borrowers showing they have had
continuous hazard insurance coverage? (Comment 37(c)(1)(iii)-2) .............. 100
8.9 What do I do when the borrower responds? .................................................... 101
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8.10 What are the limitations on charges? (§ 1024.37(h)(1) and (h)(2)) ............... 101
8.11 What additional rules apply for borrowers with escrow accounts for payment
of hazard insurance? (§ 1024.17(k)(5))........................................................... 102
8.12 What is the small servicer exemption from the escrow provisions?
(§ 1024.17(k)(5)(iii)) ........................................................................................ 102
9. Error Resolution and Information Requests .................................................. 103
9.1 What do the error resolution and information request rules require? ........... 103
9.2 What is the scope of the error resolution and information request rules? ..... 104
9.3 Is there a small servicer exemption to the error resolution and information
request rules? ................................................................................................... 104
9.4 How is this different from the requirements for Qualified Written
Requests? ......................................................................................................... 104
9.5 What is a notice of error? (§ 1024.35(a))........................................................ 104
9.6 What is an information request? (§ 1024.36(a)) ............................................. 107
9.7 Are there situations that do not trigger the error resolution or information
request response procedures? (§§ 1024.35(g) and 36(f)) .............................. 108
9.8 Can I designate addresses for notices of error or requests for
information? ..................................................................................................... 110
9.9 What must I do if I receive a notice of error? ................................................... 112
9.10 What is the timeline for responding to borrowers who send notices of
errors? ............................................................................................................... 115
9.11 What must I do when I receive an information request?................................. 116
9.12 What is the timeline for responding to borrowers who request
information? ..................................................................................................... 119
9.13 May I charge borrowers a fee for responding to notices of errors or requests for
information? .................................................................................................... 120
9.14 How do error notices and information requests affect collections and credit
reporting? (§ 1024.35(i)(1) to (2)) .................................................................. 120
10. General Servicing Policies, Procedures, and Requirements ........................ 121
15 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
10.1 What does the general servicing policies, procedures, and requirements rule
require? ............................................................................................................. 121
10.2 What is the scope of the general servicing policies, procedures, and
requirements rule? ............................................................................................ 122
10.3 Is there a small servicer exemption to the general servicing policies,
procedures, and requirements rule? ................................................................ 122
10.4 What objectives must I design my policies and procedures to achieve? ......... 123
10.5 What are the standard requirements I must meet? ......................................... 127
11. Early Intervention with Delinquent Borrowers ............................................... 129
11.1 What does the early intervention rule require? (§ 1024.39) ........................... 129
11.2 What is the scope of the early intervention rule? ............................................. 129
11.3 Is there a small servicer exemption to the early intervention rule? ............... 130
11.4 When must I establish live contact with a delinquent borrower? (§ 1024.39(a)
and comment 31(Delinquency)-1) ................................................................... 130
11.5 What Information must I share with delinquent borrowers about loss
mitigation options? (Comment 39(a)-4.i) ....................................................... 134
11.6 When must I provide a written notice about loss mitigation to delinquent
borrowers? (§ 1024.39(b) and comments 39(a)-1 and (b)(1)-2 and -5) ......... 135
11.7 What information must be in the written notice about loss mitigation options?
(§ 1024.39(b)(2) to (3)) .................................................................................... 137
11.8 Do the rules provide any exemptions to the early intervention requirements if a
borrower is in bankruptcy or invoked the cease communication protection
under the FDCPA? ............................................................................................ 138
12. Continuity of Contact with Delinquent Borrowers ......................................... 145
12.1 What does the continuity of contact rule require? ........................................... 145
12.2 What is the scope of the continuity of contact rule? ........................................ 145
12.3 Is there a small servicer exemption to the continuity of contact rule? ............ 146
12.4 What is continuity of contact? (§ 1024.40(a)) ................................................. 146
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12.5 When must continuity of contact personnel be available to borrowers?
(§ 1024.40(a)(1) to (2)) ..................................................................................... 147
12.6 What must personnel be able to do? (§ 1024.40(b)(1)-(2)) ............................148
13. Loss Mitigation Procedures ............................................................................. 150
13.1 What does the loss mitigation rule require? (§ 1024.41) ................................ 150
13.2 What is the scope of the loss mitigation rule? .................................................. 151
13.3 Is there a small servicer exemption to the loss mitigation
rule? (§ 1024.41(j)) ........................................................................................... 151
13.4 What must I do when I receive a loss mitigation application? ........................ 153
13.5 What must I do when I deny a loan modification application? (§ 1024.41(d)
and comments 41(d)(1)-1 to -4) ........................................................................168
13.6 How long must I give borrowers to respond to loss mitigation offers?
(§ 1024.41(e)(1)) ................................................................................................ 169
13.7 What appeals must I allow when I offer loan
modifications? (§ 1024.41(h)) .......................................................................... 170
13.8 When am I prohibited from starting foreclosure or completing a foreclosure for
which I have already made the first notice or filing? (§§ 1024.41(f)(1)-(2) and
(g) and comments 41(f)-1 and 41(g)-1 to -5) .................................................... 171
13.9 What requirements apply to loss mitigation applications submitted 37 days or
less before a foreclosure sale?........................................................................... 174
13.10 What loss mitigation rules apply to servicing transfers? (§ 1024.41(k)) ........ 175
13.11 When must I evaluate a subsequent complete loss mitigation application?
(§ 1024.41(i)) ..................................................................................................... 183
13.12 Is there a private right of action for a borrower to enforce the loss mitigation
procedures? .......................................................................................................184
14. Practical Implementation and Compliance Considerations .......................... 185
15. Other Resources ............................................................................................... 187
15.1 Where can I find a copy of the Mortgage Servicing Rules and get more
information about them? .................................................................................. 187
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Appendix A: ............................................................................................................. 188
Appendix B: ............................................................................................................. 189
Additional Provisions: 2020 and 2021 Mortgage Servicing COVID-19 Rules .........189
18 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
1. Introduction
1.1 What are the RESPA & TILA Mortgage
Servicing Rules?
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank
Act) amended the Real Estate Settlement Procedures Act (RESPA) of 1974, which is
implemented by Regulation X, and the Truth in Lending Act (TILA), which is implemented by
Regulation Z, with regard to the servicing of certain residential mortgage loans. The Consumer
Financial Protection Bureau (Bureau) issued rules in January 2013 to implement these Dodd-
Frank Act amendments to RESPA and TILA. The Bureau also issued several amendments to
these rules in 2013 and 2014. This guide refers to all of these rules collectively as the 2013
Mortgage Servicing Rules. Most of the 2013 Mortgage Servicing Rules became effective on
January 10, 2014.
In August 2016, the Bureau issued a final rule that clarified, revised, and amended several
provisions in the 2013 Mortgage Servicing Rules.
1
These provisions include requirements
regarding force-placed insurance notices, policies and procedures, early intervention, and loss
mitigation under Regulation X’s servicing provisions; and prompt crediting and periodic
statements under Regulation Z’s servicing provisions. The final rule also addressed certain
servicing requirements when a person is a potential or confirmed successor in interest, is a
debtor in bankruptcy, or has sent a cease communication request under the Fair Debt Collection
Practices Act (FDCPA). This guide refers to the August 2016 final rule as the 2016 Mortgage
Servicing Rule. Most provisions of the 2016 Mortgage Servicing Rule became effective on
October 19, 2017. The provisions relating to successors in interest and bankruptcy periodic
statements became effective on April 19, 2018.
To assist borrowers affected by the COVID-19 emergency, the Bureau issued two rules amending
Regulation X. In June 2020, the Bureau issued an interim final rule (2020 Mortgage Servicing
COVID-19 Interim Final Rule) to temporarily permit mortgage servicers to offer certain loss
1
The Bureau issued the final rule on August 4, 2016. The rule was published in the Federal Register on October 19,
2016. 81 Fed. Reg. 72160 (October 19, 2016).
19 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
mitigation options, such as certain payment deferral and partial claim programs, to borrowers
affected by the COVID-19 pandemic based on the evaluation of an incomplete loss mitigation
application. These amendments were effective on July 1, 2020. Additionally, in June 2021, the
Bureau issued a final rule that amended several provisions to assist borrowers during the
COVID-19 pandemic (2021 Mortgage Servicing COVID-19 Rule). The final rule included
provisions to establish temporary procedural safeguards that servicers must ensure are met
before you can make the first notice or filing required for foreclosure on certain mortgages. In
addition, the provisions temporarily permit mortgage servicers to offer certain COVID-19-
related streamlined loan modifications based on the evaluation of an incomplete application and
added temporary early intervention and loss mitigation reasonable diligence obligations. These
provisions are effective on August 31, 2021.
The 2013 and 2016 Mortgage Servicing Rules, the 2020 Mortgage Servicing COVID-19 Interim
Final Rule, and the 2021 Mortgage Servicing COVID-19 Rule are collectively referred to in this
guide as the “Mortgage Servicing Rules.” This guide provides a summary of those rules. The
guide highlights issues that small creditors, and those that work with them, might find helpful to
consider when implementing the rules. Appendix B
of this Guide specifies deviations from the
2013 and 2016 Mortgage Servicing Rules that are applicable in the limited and temporary
circumstances of the 2020 Mortgage Servicing COVID-19 Interim Final Rule and the 2021
Mortgage Servicing COVID-19 Rule. References to
Appendix B are placed in the applicable
sections of this Guide where relevant to compliance with the 2013 and 2016 Mortgage Servicing
Rules. The content of this guide does not include any rules, bulletins, guidance, or other
interpretations of the Mortgage Servicing Rules, Regulation X, or Regulation Z issued or
released after the date on the guide’s cover page.
The Mortgage Servicing Rules can be found in the Federal Register:
Regulation X at 78 FR 10695 (February 14, 2013), as amended by 78 FR 44685 (July 24,
2013), 78 FR 60381 (October 1, 2013), 78 FR 62993 (October 23, 2013) (Interim Final
Rule), 81 FR 72160 (October 19, 2016), 85 FR 39055 (June 30, 2020) (Interim Final
Rule), and 86 FR 34848 (June 30, 2021).
Regulation Z at 78 FR 10901 (February 14, 2013), as amended by 78 FR 44685 (July 24,
2013), 78 FR 60381 (October 1, 2013), 78 FR 62993 (October 23, 2013) (Interim Final
Rule), 79 FR 65299 (November 3, 2014), and 81 FR 72160 (October 19, 2016).
The Bureau has also issued several other rules and documents related to the Mortgage Servicing
Rules. These documents include:
20 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
A supervisory bulletin CFPB Bulletin 2013-12;
Two interpretive rules relating to the Mortgage Servicing Rules: 79 FR 41631 (July 17,
2014) and 81 FR 71977 (October 19, 2016);
Policy guidance on supervisory and enforcement priorities for early compliance with the
2016 Mortgage Servicing Rules, 82 FR 29713 (June 30, 2017) (June 2017 Policy
Guidance);
A final rule making technical corrections to the 2016 Mortgage Servicing Final Rule, 82
FR 30947 (July 5, 2017) (July 2017 Final Rule);
An interim final rule, 82 FR 47953 (October 16, 2017) (October 2017 Interim Final Rule);
and
A final rule which revised the timing requirements adopted in the 2016 Mortgage
Servicing Final Rule for servicers transitioning between modified or unmodified periodic
statements and coupon books when consumers enter or exit bankruptcy, 83 FR 1053
(March 12, 2018).
The Dodd-Frank Act required disclosures for certain adjustable-rate mortgages (ARMs) and
force-placed insurance as well as periodic statements for consumers’ mortgage loans. It also
required prompt crediting of mortgage payments and providing payoff statements to
consumers. The Dodd-Frank Act further required servicers to take action to correct certain
errors asserted by consumers regarding their mortgages and to respond to requests for certain
information from consumers regarding their mortgages. The Dodd-Frank Act, TILA, and
RESPA authorized the Bureau to implement these requirements and to issue additional
consumer protection regulations. The Mortgage Servicing Rules issued by the Bureau under this
(and other) authority require servicers to establish certain policies, procedures, and
requirements—including regarding the designation of personnel to assist consumers who fall
behind in their mortgage payments—and to contact consumers soon after delinquency and work
with them to be considered for applicable loss mitigation options.
The Mortgage Servicing Rules set forth minimum requirements for compliance. The
Mortgage Servicing Rules do not foreclose other entities, such as owners and assignees of
mortgage loans, from setting higher servicing standards that are not in conflict with the
requirements set forth in the Mortgage Servicing Rules. An applicable servicing requirement is
not in conflict with the Mortgage Servicing Rules solely because it imposes additional
requirements. For example, if owner or assignee guidelines prescribe exactly how frequently
21 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
servicers must call borrowers until right party contact is made, those requirements may exceed
the general requirement of good faith efforts under the Mortgage Servicing Rules so long as the
guidelines are not in conflict with the requirements of the Mortgage Servicing Rules.
Note that, subsequent to the publication of this guide, the Bureau may update or amend
provisions of the Mortgage Servicing Rules and intends to provide guidance updates to reflect
any such future changes. Changes to this Small Entity Compliance Guide are noted in the
guide’s Version Log.
1.2 What is the purpose of this guide?
This guide provides a summary of the Mortgage Servicing Rules. This guide also highlights
issues that small creditors, and those that work with them, might find helpful to consider when
implementing the Mortgage Servicing Rules.
This guide also meets the requirements of Section 212 of the Small Business Regulatory
Enforcement Fairness Act of 1996, which requires the Bureau to issue a small entity compliance
guide to help small businesses comply with the regulations, and is a Compliance Aid issued by
the Consumer Financial Protection Bureau. The Bureau published a Policy Statement on
Compliance Aids, available at
www.consumerfinance.gov/policy-
compliance/rulemaking/finalrules/policy-statement-compliance-aids/, that explains the
Bureau’s approach to Compliance Aids.
Users of this guide should review the Mortgage Servicing Rules as well. The Mortgage Servicing
Rules are available at
www.consumerfinance.gov/rules-policy/final-rules/mortgage-servicing-
rules-under-real-estate-settlement-procedures-act-and-truth-lending-act/.
Servicers may want to review their policies, processes, software, contracts, or other aspects of
their business operations in order to identify any changes needed to comply with the Mortgage
Servicing Rules. Changes related to the Mortgage Servicing Rules may take careful planning,
time, or resources to implement. This guide will help you identify and plan for any necessary
changes.
Except when specifically needed to explain the Rule, this guide does not discuss other laws,
regulations, or regulatory guidance that may apply. The content of this guide does not include
22 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
any rules, bulletins, guidance, or other interpretations issued or released after the date on the
guide’s cover page.
At the end of this guide, there is more information about where to find some additional
resources.
1.3 Who should read this guide?
Creditors, assignees, and servicers of mortgage loans may find this guide useful. This guide may
also be helpful to companies that serve as business partners to creditors, assignees, and
servicers.
This guide may be useful in helping you determine whether these rules regulate the loans you
service, and, if so, what your compliance obligations are under the rules.
1.4 Where can I find additional resources that
will help me understand the Mortgage
Servicing Rules?
Resources to help you understand and comply with the Dodd-Frank Act mortgage reforms and
the Bureau’s regulations, including downloadable compliance guides, are available through the
Bureau’s website at
www.consumerfinance.gov/compliance/compliance-resources/mortgage-
resources/mortserv/. On this website, we also offer the ability to sign up for an email
distribution list through which we announce additional resources and tools as they become
available. The Bureau’s website also provides a link to our interactive regulations tool, which is
available at
www.consumerfinance.gov/rules-policy/regulations/. The interactive regulations
tool includes an unofficial version of Regulation X (12 CFR Part 1024) and Regulation Z (12 CFR
part 1026), in which the Mortgage Servicing Rules are codified. The tool provides versions of
the regulatory text and commentary that are currently in effect in a single location.
If after reviewing these materials, as well as the regulation and official commentary, you have a
specific regulatory interpretation question about the Mortgage Servicing Rules, you can submit
it to us on our website at https://reginquiries.consumerfinance.gov/
. Please understand that
23 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
the responses we provide are not official interpretations of the Bureau and are not a substitute
for formal legal counsel or other compliance advice.
Email comments about this guide to CFPB_RegulatoryImplementat[email protected]
. Your
feedback is crucial to making this guide as helpful as possible. The Bureau welcomes your
suggestions for improvements and your thoughts on its usefulness and readability.
The Bureau is particularly interested in feedback relating to:
How useful you found this guide for understanding the rules
How useful you found this guide for implementing the rules at your business
Suggestions you have for improving the guide, such as additional implementation tips
24 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
2. Overview of the Mortgage
Servicing Rules
2.1 What are the Mortgage Servicing Rules
about?
The Mortgage Servicing Rules address the servicing of mortgage loans and are set forth in both
Regulation X and Regulation Z. Regulation X uses the term “borrower,” and Regulation Z uses
the term “consumer.” Unless otherwise noted, this guide uses the term “borrower” throughout.
The Regulation X rule addresses:
Successors in interest (§ 1024.17 and Subpart C of Regulation X)
Error resolution and information requests (§§ 1024.35 and 1024.36)
Force-placed insurance (§§ 1024.17 and 1024.37)
General servicing policies, procedures, and requirements (§ 1024.38)
Early intervention with delinquent borrowers (§ 1024.39)
Continuity of contact with delinquent borrowers (§ 1024.40)
Loss mitigation (§ 1024.41)
The Regulation Z rule addresses:
Successors in interest (§§ 1026.2(a)(11) and (a)(27), 1026.20(c) through (e), 1026.36(c),
1026.39(f), and 1026.41(g))
Interest rate adjustment notices for ARMs (§ 1026.20)
Prompt crediting of mortgage payments and responses to requests for payoff amounts
(§ 1026.36(c))
Periodic statements for mortgage loans (§ 1026.41)
25 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Small servicers (§ 1026.41(e)(4))
2.2 When do I have to start following these
rules?
The 2013 Mortgage Servicing Rules generally took effect on January 10, 2014. The 2016
Mortgage Servicing Rule took effect on October 19, 2017 for all provisions, except as noted
below.
2
Bankruptcy periodic statement exemption and bankruptcy modified periodic statements
took effect on April 19, 2018. The relevant provisions are §§ 1026.41(e)(5) and (f) and
related commentary.
Successor in interest provisions took effect on April 19, 2018. The relevant provisions
are in both Regulation X and Regulation Z.
Under Regulation X, these provisions are § 1024.30(d) and related comments 30(d)-
1 through -3; the definitions of successor in interest and confirmed successor in
interest under § 1024.31 and related comments 31 (Successor in interest)-1 and -2;
§ 1024.32(c) and related comments 32(c)(1)-1, 32(c)(2)-1 and -2, and 32(c)(4)-1;
§ 1024.35(e)(5); § 1024.36(d)(3) and (i) and related comments 36(i)-1 through -3;
§ 1024.38(b)(1)(vi) and related comments 38(b)(1)(vi)-1 through -5; comment 41(b)-
1; and comment appendix MS to part 1024-2.
Under Regulation Z, these provisions are § 1026.2(a)(11) and (a)(27) and related
comments 2(a)(11)-4 and 2(a)(27)(i)-1 and -2; comment 20(e)(4)-3; § 1026.20(f);
comment 36(c)(1)(iii)-2; § 1026.39(f); comment 41(c)-5; and § 1026.41(g).
The 2020 Mortgage Servicing COVID-19 Interim Final Rule took effective on July 1, 2020. The
2021 Mortgage Servicing COVID-19 Rule took effect on August 31, 2021.
2
In June 2017, the Bureau issued policy guidance on its supervisory and enforcement priorities regarding early
compliance with the 2016 Mortgage Servicing Rule.
81 FR 7260, 72350 (Oct. 19, 2016); 82 FR 29713 (June 30,
2017). The Bureau indicated in the guidance that it does not intend to take supervisory or enforcement action for
violations of Regulation X or Regulation Z resulting from a servicer’s compliance with the 2016 Mortgage Servicing
Rule occurring up to three days before the applicable effective dates. 82 FR 29713.
26 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
The Bureau may—from time to time—issue rule updates that have different effective dates.
2.3 What loans do the Mortgage Servicing
Rules cover?
These rules generally apply to consumer mortgage loans and entities that service these loans.
Servicers should note that certain aspects of the rules exempt particular types of consumer
mortgage loans. For example, reverse mortgages transactions and timeshare plans are exempt
from the periodic statement requirements. In addition, not all servicers are required to comply
with all rules. For example, small servicers are exempt from the majority of the loss mitigation
requirements. To help readers, this guide includes a scope and small servicer exemption
discussion for each section of the rules.
27 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
3. Small Servicer Exemption
3.1 Who is considered a small servicer?
(§ 1026.41(e)(4))
Servicers that qualify as small servicers are exempt from certain parts of the Mortgage Servicing
Rules. You are a small servicer if you meet one of these criteria:
You, together with any affiliates, service 5,000 or fewer mortgage loans, and you (or an
affiliate) are the creditor or assignee for all of them. See “What loans should be
considered?” in Section 3.2 for more information about what loans count toward the
5,000 mortgage loan threshold.
You are a nonprofit small servicer, meaning you are designated as a nonprofit
organization under section 501(c)(3) of the Internal Revenue Code of 1986, you service
5,000 or fewer mortgage loans (including any mortgage loans serviced on behalf of
associated nonprofit entities), and you (or an associated nonprofit entity) are the creditor
for all of those loans. See § 1026.41(e)(4)(ii)(C)(2) for a definition of “associated
nonprofit entities” and “What loans should be considered?” in Section 3.2 for more
information.
You are a Housing Finance Agency, as defined in 24 CFR § 266.5.
(§ 1026.41(e)(4)(ii))
3.1.1 Servicers that service 5,000 or fewer mortgage loans
(§ 1026.41(e)(4)(ii)(A))
To qualify for the small servicer exemption under § 1026.41(e)(4)(ii)(A), you must meet a two-
part test. First, you must (together with any affiliates) service 5,000 or less mortgage loans per
year. Second, you must service only mortgage loans for which you (or your affiliate) are the
creditor or assignee. (Comment 41(e)(4)(ii)-2)
For example, if you service 3,000 loans—2,900 of which you own or originated and 100 of which
neither you nor any affiliate own or originated—you do not qualify as a small servicer because
28 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
you service loans for which you (or an affiliate) are not the creditor or assignee, notwithstanding
that you service fewer than 5,000 loans. (Comment 41(e)(4)(ii)-2.ii)
3.1.2 Nonprofit servicer (§ 1026.41(e)(4)(ii)(C))
To qualify for the nonprofit small servicer exemption pursuant to § 1026.41(e)(4)(ii)(B), you
must be designated a “nonprofit entity.” A “nonprofit entity” is defined as an entity having a tax
exemption ruling or determination letter from the Internal Revenue Service under section
501(c)(3) of the Internal Revenue Code. (§ 1026.41(e)(4)(ii)(C))
In addition to meeting the definition of a nonprofit entity, you must meet a two-part test. First,
you must service 5,000 or fewer mortgages loans, including those serviced on behalf of
associated nonprofit entities. The term “associated nonprofit entities” is defined as nonprofit
entities that by agreement operate using a common name, trademark, or servicemark to further
and support a common charitable mission or purpose. Second, you must service only mortgage
loans that you or an associated nonprofit entity originated. (Comment 41(e)(4)(ii)-4)
For example, if you service 4,400 loans—3,400 of which you originated and 1000 of which your
associated nonprofit originated, and 500 loans neither you nor your associated nonprofit entity
originated, you do not qualify as a small servicer because you service loans that you or your
associated nonprofit entity did not originate. (Comment 41(e)(4)(ii)-4.ii)
3.1.3 Note on loans acquired through merger or acquisition
Any mortgage loan you or your affiliates obtain as part of a merger or acquisition, or as part of
the acquisition of all of the assets or liabilities of a branch office of a creditor counts as a loan for
which you (or an affiliate) are the creditor or assignee.
A branch office means either an office of a depository institution that is approved as a branch by
a federal or state supervisory agency or an office of a for-profit mortgage lending institution
(other than a depository institution) that takes applications from the public for mortgage loans.
(Comment 41(e)(4)(iii)-1)
3.1.4 Note on master/subservicer
Where a loan is subserviced, the master servicer does not lose its small servicer status if it
retains a subservicer (see § 1024.31 for the definition of those terms). The subservicer can gain
29 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
the benefit of the small servicer exemption only if both the master servicer and the subservicer
are small servicers. The subservicer generally will not be a small servicer because it does not
own and did not originate the loans it subservices—unless it is an affiliate of a master servicer
that qualifies as a small servicer. (Comment 41(e)(4)(ii)-3)
3.2 What loans should be considered?
(§ 1026.41(a) and (e))
Only consider mortgage loans that you service. “Mortgage loan” is defined in § 1026.41(a)(1) to
mean a closed-end consumer credit transaction secured by a dwelling. Use this definition to
identify the pool of loans from which to determine your small servicer status. Do not include
mortgage loans that are:
Voluntarily serviced by you for a non-affiliate and for which the you do not receive any
compensation or fees;
Reverse mortgages;
Timeshare plans in the pool of loans; or
Transactions serviced by you for a “seller financer” that meet all of the criteria identified
in § 1026.36(a)(5). See “Who is considered a ‘seller financer’?” in Section 3.2.1 for more
information.
This same pool of loans determines your status as a small servicer whether you are looking at
the small servicer exemption with regard to provisions in Regulation X or Z.
3.2.1 Who is considered a “seller financer”?
(§ 1026.36(a)(5))
To be considered a “seller financer,” you must meet three criteria. First, a “seller financer” must
be a natural person, estate, or trust that provides seller financing for the sale of only one
property in any 12-month period to purchasers of such property, which is owned by the natural
person, estate, or trust and serves as security for the financing. (§ 1026.36(a)(5)(i))
30 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Second, the “seller financer” cannot have constructed, or acted as a contractor for the
construction of, a residence on the property in its ordinary course of business.
(§ 1026.36(a)(5)(ii))
Third, the financing must have a repayment schedule that does not result in negative
amortization and must have a fixed rate or an adjustable rate subject to certain limitations. If
the financing has an adjustable rate, it must not adjust until after five or more years (i.e., 5/1 or
7/7 ARMs); the rate must be determined by the addition of a margin to an index rate, based on a
widely available index such as indices for U.S. Treasury securities or the London Interbank
Offered Rate; and the rate must be subject to reasonable annual and lifetime rate adjustment
limitations. (§ 1026.36(a)(5)(iii))
3.2.2 What happens if I no longer qualify for the small
servicer exemption? (§ 1026.41(e)(4)(iii))
The small servicer exemption is determined each calendar year based on the loans you and your
affiliates service as of January 1 of that calendar year.
If you cease to qualify for the exemption, you have 6 months or until the next January 1
(whichever is later) to comply with any requirements that you were previously exempt from
because you qualified as a small servicer.
The following examples demonstrate when a servicer either is considered, or is no longer
considered, a small servicer:
A servicer that begins servicing more than 5,000 mortgage loans on October 1, and
services more than 5,000 mortgage loans as of January 1 of the following year, would no
longer be considered a small servicer on April 1 (six months after the previous October)
of that following year.
A servicer that begins servicing more than 5,000 mortgage loans on February 1, and
services more than 5,000 mortgage loans as of the following January 1 of the following
year, would no longer be considered a small servicer as of that January 1.
A servicer that begins servicing more than 5,000 mortgage loans on February 1, but
services less than 5,000 mortgage loans as of the following January 1, is considered a
small servicer for that following year. (Comment 41(e)(4)(iii)-2)
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3.3 From what provisions are small servicers
exempt?
Small servicers are exempt from the following provisions of the Mortgage Servicing Rules:
The periodic statement provisions. (§ 1026.41) (See Section 5 for more on periodic
statements.)
The prohibition on purchasing force-placed insurance where a servicer could continue
the borrower’s existing hazard insurance coverage by advancing funds to escrow under
certain circumstances (when the cost of force-placed insurance is less than the cost of
advancing for hazard insurance). (§ 1024.17(k)(5)) (See Section 8 for more on force-
placed insurance.)
The general servicing policies, procedures, and requirements provisions. (§ 1024.38)
(See Section 10
for general servicing policies, procedures, and requirements.)
The early intervention provisions. (§ 1024.39) (See Section 11 for more on early
intervention.)
The continuity of contact provisions. (§ 1024.40) (See Section 12 for more on continuity
of contact.)
Some of the loss mitigation provisions. (§ 1024.41) (See Section 13 for more on loss
mitigation.)
Small servicers must comply with certain provisions of the Mortgage Servicing Rules regardless
of servicers’ status as small servicers, including for example:
The provision relating to written requests from a person that indicate that the person
may be a successor in interest. (§ 1024.36(i)) (See Section 4.6
for more information.)
The ARM disclosure provisions. (§ 1026.20(c) and (d)) (See Section 6 for more on
interest rate adjustment notices.)
The prompt crediting and payoff statement provisions. (§ 1026.36(c)) (See Section 7 for
more on prompt crediting and payoff statements.)
The force-placed insurance provisions. (§ 1024.37) (See Section 8 for more on force-
placed insurance.)
32 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
The error resolution and information request provisions. (§§ 1024.35 and 1024.36) (See
Section 9
for more on error resolution and information requests.)
Some of the loss mitigation provisions. (§ 1024.41(j)) (See Section 13 for more on loss
mitigation.)
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4. Successors in Interest
4.1 What do the successor in interest rules
require?
Successors in interest under the Mortgage Servicing Rules are certain persons who receive an
ownership interest in a property from a borrower by means of one of five types of transfers. See
“Who are successors in interest? (§§ 1024.31 and 1026.2(a)(27))” in Section 4.5.
Unless an exemption applies, the rule requires you to maintain policies and procedures
reasonably designed to ensure that you can:
1. Promptly facilitate communication with any potential or confirmed successors in interest
regarding a property securing a mortgage loan upon receiving notice of the death of a
borrower or of any transfer of the property;
2. Promptly determine what documents you reasonably require to confirm the person’s identity
and ownership interest in the property, and promptly provide the person with a description
of those documents and how to submit a written request for information regarding the
documents required for confirmation; and
3. Promptly notify the person, upon the receipt of such documents, that you have
a. confirmed the person’s status as a successor in interest, or
b. determined that additional documents are required (and what those documents
are), or
c. determined that the person is not a successor in interest. (See “Do I need to adopt
policies and procedures for communicating with potential successors in interest?
(§ 1024.38(b)(1)(vi)) in Section 4.6.1.)
The rule also requires you to respond to certain written requests indicating a person may be a
successor in interest by providing that person with a written description of the documents that
are required to confirm the person’s identity and ownership interest in the property. This
requirement includes responding to a written request from an agent of a successor in interest.
34 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
See “What are my responsibilities to a potential successor in interest? (§§ 1024.36(i) and
38(b)(1)(vi))” in Section 4.6 for more information.
You are required to treat a confirmed successor in interest as a borrower for the purposes of
Regulation X’s Mortgage Servicing Rules and a consumer for the purposes of Regulation Z’s
Mortgage Servicing Rules. These provisions generally apply to confirmed successors in interest
in the same way that they would apply to another borrower or consumer. If a servicer, such as a
small servicer, is otherwise exempt from a requirement, such as the early intervention
requirement, it does not need to comply with that requirement with regard to a confirmed
successor in interest.
4.2 What is the scope of the successor in
interest rules?
The successor in interest rules in Regulation X generally apply to federally related mortgage
loans (as defined in § 1024.2 subject to the exemptions in § 1024.5(b), but not including open-
end lines of credit). The successor in interest rules in Regulation Z generally apply to closed-end
consumer credit transactions secured by a dwelling (as defined in § 1026.2(a)(19)).
4.3 Is there a small servicer exemption from
the successor in interest requirements?
There is no general exemption from the successor in interest requirements for small servicers,
but small servicers have the same exemptions with respect to confirmed successors in interest
that they have with respect to other borrowers and consumers. For example, small servicers are
exempt from § 1024.38, which generally requires servicers to adopt servicing policies,
procedures, and requirements. (§ 1024.30(b)). However, small servicers are required to
respond to certain written requests from potential successors in interest pursuant to
§ 1024.36(i), as there is no small servicer exemption for information requests.
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4.4 When do I have to start complying with
the successor in interest rules?
The successor in interest provisions of the 2016 Mortgage Servicing Rule became effective April
19, 2018. For example, as of the April 19, 2018, effective date servicers must:
Maintain policies and procedures with respect to potential successors in interest as
defined in the 2016 Mortgage Servicing Rules;
Provide a written response in accordance with § 1024.36(i) to certain written requests
received on or after the effective date from a person indicating that a person may be a
successor in interest as defined in the 2016 Mortgage Servicing Rules; and
Generally treat confirmed successors in interest as defined in the 2016 Mortgage
Servicing Rules as borrowers for the purposes of Regulation X’s mortgage servicing rules
and consumers for the purposes of Regulation Z’s mortgage servicing rules.
For more information on the requirements of the successor in interest provisions of the 2016
Mortgage Servicing Rules, see What are my responsibilities to a potential successor in interest?
in Section 4.6 and What are my responsibilities to a confirmed successor in interest? in Section
4.7.
For more information on effective dates, see “When do I have to start following these rules?” in
Section 2.2.
4.5 Who are successors in interest?
(§§ 1024.31 and 1026.2(a)(27))
Successors in interest are certain persons who inherit or otherwise receive an ownership interest
in property, from a spouse, parent, or other relative, or upon the death of a joint tenant, when
there is an outstanding mortgage loan on the property. Successors in interest can include
persons who acquire their interest in the property upon death of a borrower or in a divorce, as
well as transfers from a spouse or from a parent to a child.
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Regulations X and Z contain similar definitions of “successor in interest.” The two definitions
vary slightly to account for the different terms and scope restrictions of the two regulations. For
example, Regulation X uses the term “borrower,” and Regulation Z uses the term “consumer.”
Under Regulation X, a person is a successor in interest if a borrower transfers an ownership
interest in a property securing a mortgage loan to the person by means of one of the five
categories of transfers listed below:
1. A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant
by the entirety;
2. A transfer to a relative resulting from the death of a borrower;
3. A transfer where the spouse or children of the borrower become an owner of the
property;
4. A transfer resulting from a decree of a dissolution of marriage, legal separation
agreement, or from an incidental property settlement agreement, by which the spouse of
the borrower becomes an owner of the property; or
5. A transfer into an inter vivos trust in which the borrower is and remains a beneficiary
and which does not relate to a transfer of rights of occupancy in the property.
For example, assume that Person A, the borrower on a mortgage loan, dies and that a relative
Person B becomes the sole owner as a result of Person A’s death. Person B is a successor in
interest on Person A’s mortgage loan under the Regulation X definition. Once you confirm
Person B’s identity and ownership interest in the property, using documents appropriate under
state law for the specific type of transfer, Person B would be considered a “confirmed successor
in interest.” (§ 1024.31)
A “confirmed successor in interest” must be treated as a borrower for purposes of the Mortgage
Servicing Rules in Regulation X and a consumer for purposes of the Mortgage Servicing Rules in
Regulation Z. (§§ 1024.30(d); 1026.2(a)(11)). For example, if you receive a loss mitigation
application from a confirmed successor in interest, you must review and evaluate the application
and notify the confirmed successor in interest in accordance with the procedures set forth in
§ 1024.41 if the property is the confirmed successor in interest’s principal residence and the
procedures set forth in § 1024.41 are otherwise applicable. (Comment 30(d)-1 of Regulation X)
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4.6 What are my responsibilities to a
potential successor in interest?
(§§ 1024.36(i) and 38(b)(1)(vi))
Unless you are exempt from the requirements of § 1024.38, you must develop policies and
procedures relating to potential successors in interest. See “Do I need to adopt policies and
procedures for communicating with potential successors in interest?” in Section 4.6.1. You
must respond to requests from a person indicating that a person may be a successor in interest.
See “If I receive an oral request indicating a person may be a successor in interest, how must I
respond?” in Section 4.6.3 and “If I receive a written request indicating a person may be a
successor in interest, how do I respond?” in Section 4.6.4. This includes situations where the
potential successor in interest contacts you without using the term “successor in interest,” as the
potential successor in interest does not need to use a particular phrase to alert you of their
status. (See Comments 36(i)-1 and 38(b)(1)(vi)-1)
For example, you may be notified of the existence of a potential successor in interest when:
You receive notice that a transfer of ownership or of an ownership interest in the
property has taken place;
A person notifies you that a borrower has been divorced, legally separated, or died; or
A person other than a borrower submits a loss mitigation application.
4.6.1 Do I need to adopt policies and procedures for
communicating with potential successors in interest?
(§ 1024.38(b)(1)(vi))
Servicers that are not exempt from the requirements of § 1024.38 must develop policies and
procedures relating to potential successors in interest. Specifically, these servicers must
maintain policies and procedures reasonably designed to ensure that the servicer can:
Promptly facilitate communication with any potential successors in interest regarding
the property upon receiving notice of the death of a borrower or of any transfer of the
property securing a mortgage loan;
38 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Promptly determine what documents the servicer reasonably requires to confirm the
person’s identity and ownership interest in the property, and promptly provide a
description of those documents to the person and how the person may submit a written
request for a description of the documents required for confirmation (including the
appropriate address); and
Upon the receipt of such documents, promptly make a confirmation determination and
notify the person that the servicer has:
Confirmed the person’s status;
Determined that additional documents are required (and what those documents are);
or
Determined that the person is not a successor in interest.
The Mortgage Servicing Rules do not specifically define the term “prompt” for purposes of
§ 1024.38(b)(1)(vi). Generally, whether an action is prompt will depend on the facts and
circumstances of the potential successor in interest’s request. Notification that a potential
successor in interest has been confirmed is not prompt if it unreasonably interferes with a
successor in interest’s ability to apply for loss mitigation options according to the procedures
provided in § 1024.41. (Comment 38(b)(1)(vi)-5)
In many circumstances, providing information promptly may require a servicer to respond more
quickly than the time limits established in § 1024.36(d)(2) for responding to a request for
information under § 1024.36(i). For example, if a non-borrowing spouse indicates that the
borrowing spouse has died and that the borrowing spouse and non-borrowing spouse owned the
property jointly as tenants by the entirety, the Bureau expects that a prompt response to the
non-borrowing spouse would occur within a significantly shorter period than 30 days.
4.6.2 What documents may I require to confirm a potential
successor in interest’s identity and ownership interest?
(Comments 38(b)(1)(vi)-2 and -3)
The documents you require to confirm a potential successor in interest’s identity and ownership
interest must be reasonable in light of the laws of the relevant jurisdiction, the specific situation
of the potential successor in interest, and the documents already in your possession. For
example, assume that a potential successor in interest indicates that an ownership interest in the
39 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
property transferred to the potential successor in interest from a spouse who is a borrower as a
result of a property agreement incident to a divorce proceeding. Assume further that the
applicable law of the relevant jurisdiction does not require a deed conveying the interest in the
property, but accepts a final divorce decree and accompanying separation agreement executed
by both spouses to evidence transfer of title. Under these circumstances, it would be reasonable
for you to require the potential successor in interest to provide documentation of the final
divorce decree and an executed separation agreement. Because the applicable law of the
relevant jurisdiction does not require a deed, it generally would not be reasonable for you to
require a deed. (Comment 38(b)(1)(vi)-3.iii)
Where appropriate, the documents you require from a potential successor in interest may
include, for example, a death certificate, an executed will, or a court order. You may also require
any documents that you reasonably believe are necessary to prevent fraud (for example, if you
have reason to believe a document presented is forged). (Comment 38(b)(1)(vi)-2)
4.6.3 If I receive an oral request indicating a person may be a
successor in interest, how must I respond?
(§ 1024.38(b)(1)(vi))
Servicers subject to § 1024.38(b)(1)(vi) must maintain policies and procedures reasonably
designed to ensure that the servicer can promptly facilitate communication with any potential
successors in interest regarding the property upon receiving notice of the death of a borrower or
any transfer of the property. They must also promptly determine the documents they
reasonably require to confirm that person’s identity and ownership interest in the property and
promptly provide to the potential successor in interest a description of those documents and
how the person may submit a written request under § 1024.36(i) (including the appropriate
address). This includes situations when a servicer receives actual notice of the existence of a
successor in interest through oral notification. (§ 1024.38(b)(1)(vi) and comment 38(b)(1)(iv)-1)
4.6.4 If I receive a written request indicating a person may be
a successor in interest, how do I respond?
(§§ 1024.36(i) and 38)
Servicers subject to § 1024.38(b)(1)(vi) must maintain policies and procedures reasonably
designed to ensure that the servicer can promptly facilitate communication with any potential
successors in interest regarding the property upon receiving notice of the death of a borrower or
40 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
any transfer of the property. They must also promptly determine the documents they
reasonably require to confirm that person’s identity and ownership interest in the property and
promptly provide to the potential successor in interest a description of those documents and
how the person may submit a written request under § 1024.36(i) (including the appropriate
address).
In addition, all servicers must provide a written response in accordance with § 1024.36(i) to
certain written requests from a person indicating that a person may be a successor in interest.
Specifically, when you receive a written request from a person that (1) indicates they may be a
successor in interest, (2) includes the name of the borrower from whom the person received an
ownership interest, and (3) provides information that enables you to identify the mortgage loan
account, you must generally do the following:
Within five days (excluding legal public holidays, Saturdays, and Sundays) of receiving
the request, provide a written acknowledgment that you have received the request.
(§ 1024.36(c))
Within thirty-days (excluding legal public holidays, Saturdays, and Sundays) of receiving
the written request, provide a written description of the documents you reasonably
require to confirm the person’s identity and ownership interest in the property and
contact information, which must include a telephone number, that the person may use
for further assistance.
If you are subject to § 1024.38(b)(1)(vi), your policies and procedures require you to
provide information promptly, which depending on the facts and circumstances may
require a faster response to a potential successor in interest than the time limits
established in § 1024.36(d)(2). (§ 1024.38(b)(1)(vi))
You may combine these two notices so long as you provide the combined notice within five days
(excluding legal public holidays, Saturdays, and Sundays) of receiving the written request.
(§ 1024.36(e))
41 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
If the written request does not provide sufficient
information for you to identify the documents
reasonably required to confirm the person’s
identity and ownership interest, you may send
the potential successor in interest a modified
version of the second notice required in
§ 1024.36(i)(1), described above. In lieu of
providing a written description of the
documents you require to confirm the person’s
identity and ownership interest in the property,
you may provide a response that:
You may also choose to contact the potential
successor in interest informally to clarify the
request and obtain additional relevant
information that is needed to respond to the
request. Through such contacts, you may be
able to obtain any missing information that
you need to respond fully within the time
limits.
In
cludes examples of documents typically accepted to establish identity and ownership
interest in a property;
Indicates that the person may obtain a more individualized description of required
documents by providing additional information;
Specifies what additional information is required to enable the servicer to identify the
required documents; and
Provides contact information, including a telephone number, for further assistance.
(§ 1024.36(i)(2))
When the potential successor in interest provides orally or in writing the additional required
information that you specified, you must treat the newly acquired information, together with the
original request, as a new non-duplicative request under § 1024.36(i)(1). Therefore, you must
comply with § 1024.36(i)(1) and respond to the potential successor in interest by providing a
written description of the documents the servicer reasonably requires to confirm the person’s
identity and ownership interest in the property and contact information, including a telephone
number, for further assistance. For timing purposes, you will consider the request received as of
the date the required information was acquired.
42 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
4.6.5 Must I respond to a written request from a person that
claims to be an agent of a potential successor in
interest? (Comment 36(i)-3)
An information request pursuant to § 1024.36(i) is considered to be submitted by a potential
successor in interest if the information request is submitted by an agent of the potential
successor in interest. If you receive a written notice from a person that claims to be an agent of
a potential successor in interest, you may undertake reasonable procedures to determine if that
person has authority from the potential successor in interest to act on the potential successor in
interest’s behalf. You may establish procedures to determine if a person that claims to be an
agent of a potential successor in interest has authority from the potential successor in interest to
act on the potential successor in interest’s behalf, for example, by requiring that the person
provide documentation from the potential successor in interest stating that the purported agent
is acting on the potential successor in interest’s behalf. Upon receipt of such documentation,
you must treat the request for information as having been submitted by the potential successor
in interest. (Comment 36(i)-3)
4.6.6 Can I require that potential successors in interest use a
specific address to submit information requests?
(§ 1024.36(i)(4))
If you have established an address that a borrower must use to request information pursuant to
§ 1024.36(b) and the potential successor in interest does not use that address, you are not
required to treat that request as a request for information under § 1024.36(i)(4). See “Can I
designate addresses for notices of error or requests for information?” in Section 9.8 for more
information.
Unless you are a small servicer, however, you may be required to respond to a written request
sent to an address that is not the address you have established for requests. Servicers subject to
§ 1024.38(b)(1)(vi) must have policies and procedures that are reasonably designed to ensure
they are able to respond promptly with information upon receiving notice of the existence of a
potential successor in interest. This applies to requests received at an address that is not the
address a servicer has established for requests under § 1024.36(b).
43 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
4.6.7 Can I require that a person assume a mortgage loan
before confirming that the person is a successor in
interest? (Comments 30(d)-1 and -2 of Regulation X;
Comment 2(a)(11)-4.i of Regulation Z)
No. You may not require a person to assume a mortgage loan to be considered a successor in
interest. If, however, a person assumes the mortgage loan obligation under state law or is
otherwise liable on it, the protections that the successor in interest enjoys under Regulations X
and Z are not limited to the protections that apply to a confirmed successor in interest under
§ 1024.30(d) and § 1026.2(a)(11).
4.6.8 Am I required to search for potential successors in
interest?
The Mortgage Servicing Rules do not require you to conduct a search for potential successors in
interest if you have not received actual notice of their existence. (Comment 38(b)(1)(vi)-1)
4.6.9 If I receive a loss mitigation application from a potential
successor in interest, do I review and evaluate the
application in accordance with loss mitigation
procedures?
See “Potential successors in interest (Comments 41(b)-1.i and 41(b)-1.ii)” in the Loss Mitigation
Procedures section in Section 13.4.12.
4.7 What are my responsibilities to a
confirmed successor in interest?
Generally, you are required to treat a confirmed successor in interest as a borrower for the
purposes of Regulation X’s mortgage servicing rules and a consumer for the purposes of
Regulation Z’s mortgage servicing rules. Confirmed successors in interest are treated as
borrowers or consumers for purposes of the following provisions:
Escrow Accounts (§ 1024.17);
44 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Subpart C of Regulation X;
Disclosure Requirements Regarding Post-Consummation Events (§ 1026.20);
Prompt Payment Crediting and Payoff Statements (§ 1026.36(c));
Mortgage Transfer Disclosures (§ 1026.39); and
Periodic Statement Requirements (§ 1026.41).
Note that the early intervention, continuity of contact, and loss mitigation requirements
(§§ 1024.39 through 1024.41), only apply to a confirmed successor in interest when the property
is the confirmed successor in interest’s principal residence. (§ 1024.30(c)(2)). Determining a
borrower’s principal residence will depend on the specific facts and circumstances regarding the
property and applicable state law. For example, a vacant property may still be a borrower’s
principal residence. (Comment 30(c)(2)-1)
4.7.1 Do I need to adopt policies and procedures for
communicating with confirmed successors in interest?
(§ 1024.38(b)(1)(vi))
Servicers that are not otherwise exempt from the requirements of § 1024.38 must develop
policies and procedures reasonably designed to ensure that they promptly facilitate
communication with confirmed successors in interest when they receive notice of the death of a
borrower or any transfer of the property securing a mortgage loan. (§ 1024.38(b)(1)(vi))
4.7.2 What information must I share with a confirmed
successor in interest?
You must send confirmed successors in interest disclosures and provide other information
under various mortgage servicing rules that relate to:
Escrow accounts, payments, and account balances (§§ 1024.17 and 1024.34);
Mortgage servicing transfers and mortgage transfers (§§ 1024.33 and 1026.39);
Error resolution (§ 1024.35);
Information requests (§ 1024.36);
45 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Force-placed insurance (§ 1024.37);
Early intervention (§ 1024.39);
Loss mitigation (§ 1024.41);
Post-consummation events (§ 1026.20);
Payoff statements (§ 1026.36(c)); and
Periodic statements (§ 1026.41).
Note that the information request and error resolution provisions allow you to limit the
information that confirmed successors in interest may obtain about other borrowers and that all
borrowers may obtain about potential and confirmed successors in interest in response to
information requests and notices of error requests for documentation. See “May I omit
borrower information from documents that are shared with a confirmed successor in interest
in responding to an information request or a notice of error request for documentation?” in
Section 4.7.9 for more information
You are generally not required to send a Mortgage Servicing Rule notice to a confirmed
successor in interest when you are sending that same specific notice to another borrower or
consumer on the account. See “Do I need to send a confirmed successor in interest a notice if I
send another confirmed successor in interest that notice?” in Section 4.7.8 for more
information.
Similarly, if you send an optional written notice and acknowledgment form that complies with
the requirements in § 1024.32(c) to a confirmed successor in interest who has not assumed the
mortgage loan obligation under state law, and the confirmed successor in interest does not
execute the acknowledgment form indicating a desire to receive the notices, you are not required
to provide the confirmed successor in interest any written disclosures required by §§ 1024.17,
1024.33, 1024.34, 1024.37, 1024.39, 1026.20(c) through (e), 1026.39(b), 1026.41 or to comply
with the live contact requirements in § 1024.39(a), as to that confirmed successor in interest.
However, the confirmed successor in interest may request copies of notices sent to other
borrowers or consumers through a request for information.
4.7.3 What can I do to ensure that sending required notices
to confirmed successors in interest who have not
46 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
assumed the mortgage loan obligation under state law
won’t confuse or mislead them about their liability?
The servicing notices provide important information that can assist confirmed successors in
interest in preserving their ownership interests in their properties. Some language appearing in
the model and sample form notices in Regulations X and Z, however, could suggest that the
recipient of the notice is liable on the mortgage loan obligation. It is possible that this language,
without modification, could confuse confirmed successors in interest who have not assumed the
mortgage loan obligation under state law and are not otherwise liable on the mortgage loan
obligation. For example, some of these forms state: “your loan” or “[y]ou are late on your
mortgage payments.”
The Mortgage Servicing Rules do not require servicers to use any particular method to ensure
that notices required by the Mortgage Servicing Rules do not confuse or mislead confirmed
successors in interest who are not liable for the loan and have not assumed the mortgage loan
obligation under state law. However, Regulations X and Z provide several different options that
you can use as you deem appropriate to ensure clarity in your communications with confirmed
successors in interest.
One option is to adjust the language in the notices to replace terminology that might suggest
liability. For example, you can modify certain model and sample forms for ARM disclosures to
remove language regarding personal liability to accommodate particular consumer
circumstances or transactions not addressed by the forms. (Comments 20(c)(3)(i)-1,
20(d)(3)(i)-1)
A second option is to add an affirmative disclosure that clarifies a confirmed successor in
interest has no personal liability and has not assumed the mortgage loan obligation under state
law. For some of the required servicing notices, this type of disclosure could be added into the
notice, while for other types of notices it could be provided in an explanatory cover letter in the
same transmittal.
A third possibility is to send an optional notice and acknowledgment form, as described under
§ 1024.32(c), to confirmed successors in interest who have not assumed the mortgage loan
obligation and are not otherwise liable on the mortgage loan under state law. The notice
explains that the confirmed successor in interest is not liable until that person assumes the
mortgage loan obligation under state law. The notice also indicates that the confirmed
47 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
successor in interest must return the acknowledgment form to receive servicing notices under
the Mortgage Servicing Rules.
See also “Note on modifying sample periodic statements” in Section 5.6.3 for more information
on modifying sample periodic statements.
4.7.4 Why might I choose to send a confirmed successor in
interest the optional notice and acknowledgment form
described in § 1024.32(c)?
If upon confirmation you send a confirmed successor in interest the optional notice and
acknowledgment form, as described under § 1024.32(c), the Mortgage Servicing Rules relieve
you of the obligations to provide Mortgage Servicing Rule notices and to engage in live contacts
with the confirmed successor in interest until the confirmed successor in interest either provides
you an executed acknowledgment indicating a desire to receive the notices or assumes the
mortgage loan obligation under state law.
Note that if a confirmed successor in interest assumes a mortgage loan obligation under state
law, the information in the optional notice and acknowledgment form is no longer applicable,
and you become obligated to provide any notices required by the Mortgage Servicing Rules.
4.7.5 What are the content requirements for the optional
notice and acknowledgment form? (§ 1024.32(c)(1))
An optional written notice and acknowledgment form will not relieve you of the obligation to
send other servicing notices unless it conforms to the requirements listed in § 1024.32(c) and
the other conditions are met. The requirements listed can be broken down into two sections: (1)
the notice itself, and (2) the acknowledgment form that is sent with the notice.
The optional notice you provide must clearly and conspicuously explain the following five
points:
You have confirmed the successor in interest’s identity and ownership interest in the
property.
Unless the confirmed successor in interest assumes the mortgage loan under state law,
the successor in interest is not liable for the mortgage debt and cannot be required to use
the successor in interest’s own assets to pay the mortgage debt, except that the lender
48 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
retains a security interest in the property and a right to foreclose on the property, when
permitted by law and authorized under the mortgage loan contract.
The confirmed successor in interest may be entitled to receive certain notices and
communications about the mortgage loan if you are not providing them to another
confirmed successor in interest or borrower on the account. You may identify examples
of the types of notices and communications (e.g., periodic statements or mortgage
transfer notices) the confirmed successor in interest may receive if the acknowledgment
form is executed.
To receive such notices and communications, the confirmed successor in interest must
provide you with an executed acknowledgment form. As discussed below, specific
information must be incorporated into the acknowledgment form.
Whether or not the confirmed successor in interest executes the acknowledgment form,
the confirmed successor interest is entitled to submit notices of error, requests for
information, and requests for a payoff statement. You must include a brief description
and explanation of these rights and how to exercise them, including appropriate address
information.
Included in the optional notice is a separate acknowledgment form that the confirmed successor
in interest can execute and return. You must provide an acknowledgment form that clearly and
conspicuously explains that the confirmed successor in interest:
Requests notices and communications about the mortgage loan, if you are not providing
them to another confirmed successor in interest or borrower on the account.
Indicates that the successor in interest understands that such notices do not make the
successor in interest liable for the mortgage debt and that the successor in interest is
only liable for the mortgage debt if the successor in interest assumes the mortgage loan
obligation under state law.
Informs the successor in interest that there is no time limit to return an executed
acknowledgment, but you will not begin sending notices and communications until the
executed acknowledgment is returned.
49 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
4.7.6 Must a successor in interest execute an
acknowledgment form within a certain time period?
(§ 1024.32(c)(3) and comment 32(c)(2)-1)
There is no time limit to return an executed acknowledgment. A confirmed successor in interest
may provide an executed acknowledgment to you at any time after confirmation. In addition,
you must provide additional copies of the written notice and acknowledgment to the confirmed
successor in interest upon written or oral request. (§ 1024.32(c)(3) and comment 32(c)(2)-1)
4.7.7 What happens if the successor in interest fails to
provide an executed acknowledgment form or revokes
an executed acknowledgment? (§ 1024.32(c)(2) and
comment 32(c)(2)-2)
If, upon confirmation, you provide a confirmed successor in interest who is not liable on the
mortgage loan obligation with a written notice and acknowledgment form in accordance with
§ 1024.32(c)(1), you will be relieved of the obligation to provide any written disclosures required
by §§ 1024.17, 1024.33, 1024.34, 1024.37, 1024.39, 1026.20(c) through (e), 1026.39(b), or
1026.41; or to comply with the live contact requirements in § 1024.39(a).
Similarly, when a confirmed successor in interest who is not liable on the mortgage loan
executes and later revokes an executed acknowledgment, pursuant to § 1024.32(c)(1)(iv), you
are not required to provide that confirmed successor in interest with written notices stated
above, as of the date the revocation is received.
In either scenario, you will not be required to provide notices until the confirmed successor in
interest either assumes the mortgage loan obligation under state law or executes and provides
you an acknowledgment form.
4.7.8 Do I need to send a confirmed successor in interest a
notice if I send another confirmed successor in interest
that notice? (Comment 2(a)(11)-4.iv to Regulation Z
and comment 32(c)(4)-1 to Regulation X)
Generally, you are not required to send a confirmed successor in interest a required notice under
the Mortgage Servicing Rules if you are already providing that same notice to another borrower
or consumer on the account.
50 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
For example, if you are providing a periodic statement to a consumer who is obligated on the
mortgage loan, you are not required to send the same periodic statement to a confirmed
successor in interest. (Comments 2(a)(11)-4.iv and 41(a)-1 in Regulation Z). Similarly, you are
not required to provide a force-placed insurance notice required under § 1024.37 to a confirmed
successor in interest if you are providing the same force-placed insurance notice to another
confirmed successor in interest or other borrower on the account. (Comment 32(c)(4)-1 to
Regulation X)
However, confirmed successors in interest who are not receiving servicing communications
because they are being provided to another borrower or consumer can request copies of
servicing notices and other information through the information request process. (See “Error
Resolution and Information Requests” in Section 9. for more information)
4.7.9 May I omit borrower information from documents that
are shared with a confirmed successor in interest in
responding to an information request or a notice of
error request for documentation? (§§ 1024.35(e)(5)
and 36(d)(3))
In responding to a request for information, under§ 1024.36(d), or documentation relating to a
notice of error, under (§ 1024.35(e), from a confirmed successor in interest, you may omit from
your response location, contact, and personal financial information (e.g., a borrower’s Social
Security number) that pertains to a borrower who is not the requester. Similarly, if a borrower
requests information or documentation, and a responsive document includes location, contact,
or personal financial information of a potential or confirmed successor in interest that is not the
requester, you may also omit that information. In either scenario, however, you may never omit
information about the terms, status, and payment history of the mortgage loan.
(§§ 1024.35(e)(5) and 36(d)(3))
For example, assume a confirmed successor in interest requests information about the mortgage
loan. In collecting the information for the confirmed successor in interest, you notice that the
information contains contact information for the borrower that transferred the property to the
confirmed successor in interest. You may omit the contact information for the transferor
borrower before sending your response to the confirmed successor in interest.
51 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
4.8 Is there a private right of action for
potential successors in interest under
RESPA or a privately enforceable notice
of error requirement related to
successorship determinations?
The Mortgage Servicing Rules do not provide a potential successor in interest a private right of
action or a notice of error procedure for claims that a servicer made an inaccurate determination
about successorship status or failed to comply with §§ 1024.36(i) or 1024.38(b)(1)(vi). The
Mortgage Servicing Rules also do not provide a safe harbor from other claims relating to
confirmation determinations, such as claims of unfair, deceptive, or abusive acts or practices.
Confirmed successors in interest are considered borrowers for purposes of Subpart C of
Regulation X and escrow account requirements (§ 1024.17) and consumers for purposes of the
periodic statement requirements (§ 1026.41), disclosure requirements regarding post-
consummation events (§ 1026.20), and mortgage transfer disclosure requirements (§ 1026.39).
Therefore, confirmed successors in interest have the same private rights of action to enforce the
Mortgage Servicing Rules as other borrowers and consumers.
52 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
5. Periodic Statements
5.1 What does the rule on periodic
statements require? (§ 1026.41)
For loans subject to the periodic statement rule (See “What is the scope of the periodic
statements rule? (§ 1026.41(a)(1))” in Section 5.2), you must provide borrowers with a
statement each billing cycle. The statement must show (among other things) information on the
payment due and the application of past payments.
The periodic billing statement must meet certain timing, form, and content requirements. (See
“How often must I send a periodic statement? (§ 1026.41(a)(2))” in Section 5.5, “What
information must be on the periodic statement, and how must I arrange it?” in Section 5.6, and
“Coupon books for borrowers in bankruptcy” in Section 5.10.3.)
In addition, under certain circumstances, you must provide periodic statements or coupon
books when a borrower is in bankruptcy. See “Must I provide a borrower in bankruptcy a
periodic statement or coupon book?” in Section 5.10 for more information. This section
discusses how the periodic statement rule applies to borrowers who are not in bankruptcy unless
otherwise specified.
5.2 What is the scope of the periodic
statements rule? (§ 1026.41(a)(1))
The periodic statement requirement applies to any closed-end consumer credit transaction
secured by a dwelling, unless an exemption listed in § 1026.41(e) applies.
As Table 1 below illustrates, periodic statements are not required for open-end transactions,
reverse mortgages, timeshare loans, and in other circumstances.
53 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
TABLE 1: LOANS NOT COVERED BY THE PERIODIC STATEMENT PROVISION IN § 1026.41
Periodic statements not
required for:
Notes Citation
Open-end lines of credit and
Home-Equity Lines of Credit
(HELOCs)
The periodic statement provisions in
§ 1026.41 apply only to closed-end
transactions. Note that open-end
transactions have separate periodic
statement requirements found in § 1026.7.
§ 1026.41(a)(1)
Reverse mortgages
Reverse mortgages are exempt from the
periodic statement requirement. Reverse
mortgages are defined in § 1026.33(a).
§ 1026.41(e)(1)
Timeshare loans
Timeshare loans are exempt from
the periodic statement requirement.
Timeshare loans are defined in
11 U.S.C. 101(53D).
§ 1026.41(e)(2)
Fixed-rate loans that have
coupon books and certain
information made available
See “How can I use coupon books instead
of periodic statements?” in Section 5.7.
§ 1026.41(e)(3)
Loans serviced by small
servicers
See “Who is considered a small servicer?”
in Section 3.1.
§ 1026.41(e)(4)
Loans while the borrower is a
debtor in bankruptcy in
certain circumstances
Servicers may be exempt from the periodic
statement requirement while the borrower
is a debtor in bankruptcy. See “Periodic
statement and coupon book exemption for
borrowers in bankruptcy” in Section 5.10.6.
§ 1026.41(e)(5)
Loans that have been
charged off
Servicers may be exempt from the periodic
statement requirement when a loan has
been charged-off. See “Must I continue to
provide periodic statements or coupon
books after a mortgage loan is charged
off?” in Section 5.9.
§ 1026.41(e)(6)
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5.3 Is there a small servicer exemption to the
periodic statement rule?
Yes. Small servicers are exempt from all requirements of the periodic statement rule.
(§ 1026.41(e)(4)) (See page 27 for details of the small servicer exemption.)
5.4 Who is responsible for sending a periodic
statement? (§ 1026.41(a)(2) and
comment 41(a)-3)
Creditors, assignees, and servicers. Note they do not each need to send a separate statement; a
borrower needs to receive only one statement each billing cycle.
Creditors or assignees that do not currently own the mortgage loan or the mortgage servicing
rights do not have to provide a periodic statement. (§ 1026.41(a)(2))
5.5 How often must I send a periodic
statement? (§ 1026.41(a)(2))
You must send a periodic statement each billing cycle. A billing cycle corresponds to the
frequency of payments. Thus, if a loan requires the borrower to make monthly payments, that
borrower will have a monthly billing cycle. Likewise, if a borrower makes quarterly payments (4
payments a year), that borrower will have a quarterly billing cycle.
You need not send a periodic statement more frequently than once a month. If a mortgage loan
has a billing cycle shorter than 31 days (for example, a biweekly billing cycle), you may send a
periodic statement covering an entire month. (§ 1026.41(a)(2)). You may combine information
from more than one cycle in a single billing statement to create your explanation of the amount
due or the past payment breakdown. (Comment 41(a)-2). For example, if you have a biweekly
mortgage that was paid on March 6 and 20, you may send a single statement showing both
biweekly payments.
55 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
5.5.1 Statement timing (§ 1026.41(b))
You must deliver or mail the periodic statement within a “reasonably prompt” time after the
payment due date or the end of any courtesy period provided for the previous billing cycle.
“Reasonably prompt” generally means delivering, emailing, or placing the periodic statement in
the mail within 4 days of the close of the courtesy period of the previous billing cycle.
(Comment 41(b)-1)
The “courtesy period” is the period in which you do not impose a late fee. The meaning of
“courtesy period” is explained in Comment 7(b)(11)-1.
If there is no courtesy period, you must send the periodic statement no later than 4 days after
the payment due date.
5.5.2 Stopping periodic statements
You do not have to send periodic statements when:
You transfer the loan to another servicer.
The loan is fully paid or paid off through a refinance or sale of the house.
The loan is discharged in a foreclosure sale. The loan is charged-off, you decline to
charge additional fees and interest, and you provide the borrower with a copy of the
“Suspension of Statements & Notice of Charge Off—Retain This Copy for Your Records”
periodic statement. See “Must I continue to provide periodic statements or coupon
books after a mortgage loan is charged off? (§ 1026.41(e)(6))” in Section 5.9 for more
information.
In certain circumstances, a borrower on the mortgage loan becomes a debtor in
bankruptcy. See “Must I provide a borrower in bankruptcy a periodic statement or
coupon book?” in Section 5.10 for more information.
You will have to send periodic statements if the bankruptcy case is dismissed or closed or if the
borrower receives a discharge. However, you do not have to send the periodic statement if the
borrower discharges personal liability for the mortgage debt, unless the borrower reaffirms
personal liability. If the bankruptcy case is revived, the periodic statement exception may still
apply. (Comment 41(e)(5)-4)
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You must continue to send periodic statements even when borrowers are delinquent or if you
are a debt collector under the FDCPA to whom a borrower has sent a written cease
communication request. (See CFPB Bulletin 2013-12
for additional details.)
5.6 What information must be on the periodic
statement, and how must I arrange it?
The periodic statement rule requires certain groupings of information, and has different
requirements for where on the statement you must place these grouping. This information is
summarized in Table 2 below. In addition, you can also see how this information would look in
the sample forms provided in appendix H-30 of Regulation Z (see “Note on modifying sample
periodic statements” in Section 5.6.3 for more information).
The information provided in Table 2 may also apply to periodic statements sent to borrowers in
bankruptcy, with certain modifications as provided under § 1026.41(f). For information on the
content and layout requirements for modified periodic statements, see “Must I provide a
borrower in bankruptcy a periodic statement or coupon book?” in Section 5.10.
TABLE 2: PERIODIC STATEMENT GROUPING AND PRESENTATION REQUIREMENTS
Grouping Information required
Presentation
requirements
Citation
Amount due
(i) Payment due date
(ii) Amount of late fee
if payment is late
(iii) Amount due
Grouped together
in close proximity
and located at the
top of the first page
§ 1026.41(d)(1)
Explanation
of amount due
(i) Monthly payment amount and
breakdown of how that will be
applied to principal, interest, and
escrow
(ii) Total of fees imposed
(iii) Past amount due
Grouped together
in close proximity
and located on the
first page
§ 1026.41(d)(2)
57 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Grouping Information required
Presentation
requirements
Citation
Past payment
breakdown
(i) Total of all payments since the
last statement and application to
principal, interest, escrow, fees, and
suspense account
(ii) Total of all payments since the
beginning of the calendar year and
application to principal, interest,
escrow, and fees as well as total
amount in the suspense account
Grouped together
in close proximity
and located on the
first page
§ 1026.41(d)(3)
Transaction
activity
List of all the transaction activity
since the last statement
All activity must be
listed together, but
the list can be
located anywhere
on the statement
§ 1026.41(d)(4)
Partial payment
information
Only if funds are held in a
suspense account, information on
what must be done for the funds to
be applied
Can be on the first
page, a separate
page, or in a
separate letter
§ 1026.41(d)(5)
Contact
information
A toll-free number and email
address
(if applicable) where borrowers may
obtain information about their
account
Must be on the first
page
§ 1026.41(d)(6)
Account
information
(i) Outstanding principal balance
(ii) Current interest rate
(iii) Date when that interest rate may
change
(iv) Existence of any prepayment
penalty
(v) Housing counselor information
Can be anywhere
on the statement;
these items do not
need to be grouped
together
§ 1026.41(d)(7)
Delinquency
information
Only if the borrower is 45 days or
more delinquent, see below for a
list of information required
Can be on the first
page, a separate
page, or in a
separate letter
§ 1026.41(d)(8)
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5.6.1 Housing counselor information
Housing counselor information, including links to HUD-approved housing counselors and state
housing finance agencies can be found here: www.consumerfinance.gov/mortgagehelp/
.
5.6.2 Delinquency information
This information is only required if the borrower is 45 days or more delinquent. This
information could be on the first page of the statement, on a separate page in the statement, or
sent in a separate letter:
The length of the borrower’s delinquency (as of the date of the periodic statement).
Delinquency is a period of time during which a borrower and the borrower’s mortgage
loan obligation are delinquent. A borrower and a borrower’s mortgage loan obligation
are delinquent beginning on the date a periodic payment sufficient to cover principal,
interest, and (if applicable) escrow becomes due and unpaid, until such time as no
periodic payment is due and unpaid. For example, assume a borrower’s mortgage loan
requires a borrower to make periodic payments of principal, interest, and escrow by the
first of each month. Borrower does not make the payment that is due on January 1. On
January 2, Borrower is one day delinquent. (Comment 41(d)(8)-1)
A notification of possible risks and expenses (for example, foreclosure or legal fees) that
the borrowers could face if the delinquency is not cured.
An account history showing, for the previous six months or the period since the last time
the account was current, whichever is shorter, the amount remaining past due from each
billing cycle or, if any such payment was fully paid, the date on which it was credited as
fully paid.
A notice showing any loss mitigation program the borrower has agreed to, if applicable.
A notice that you have made the first notice or filing required to start a foreclosure, if
applicable.
The total payment the borrower would have to make to bring the account current.
A reference to the homeownership counselor information you include elsewhere in your
periodic statement. (§ 1026.41(d)(7)(v))
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5.6.3 Note on modifying sample periodic statements
3
Appendix H-30 of Regulation Z contains sample periodic statements. Some elements of the
sample periodic statements are not required by the Mortgage Servicing Rules. For example, the
tear-off coupon or use of legal-size paper is not required when sending a periodic statement.
These elements were included in the sample periodic statements to provide context. While they
show one way you could comply with the Mortgage Servicing Rules, these elements are not
required.
In addition, you do not have to use the exact terms or layout used in the sample periodic
statements found in appendix H-30. You may use terms borrowers in your area commonly
understand. For example, servicers in different parts of the country use the terms “escrow
account” and “impound account” to describe the account in which servicers collect funds to pay
borrowers’ tax and insurance bills.
You may also modify the samples to remove language that could suggest liability under the
mortgage loan agreement if such language is not applicable. For example, in the case of a
confirmed successor in interest who has not assumed the mortgage loan obligation under state
law and is not otherwise liable on the mortgage loan, you may modify the forms to:
Use “this mortgage” or “the mortgage” instead of “your mortgage.”
Use “The payments on this mortgage are late” instead of “You are late on your mortgage
payments.”
Use “This is the amount needed to bring the loan current” instead of “You must pay this
amount to bring your loan current.”
See also “What can I do to ensure that sending required notices to confirmed successors in
interest who have not assumed the mortgage loan obligation under state law won’t confuse or
mislead them about their liability?” in Section 4.7.3 for more information on sending notices to
successors in interest.
3
The allowed modifications to the sample periodic statements provided in Appendix H-30 are effective April 19,
2018. The effective dates were discussed in the 2016 Mortgage Servicing Rule, as well as the technical corrections in
the July 2017 Final Rule. The July 2017 Final Rule is available at www.consumerfinance.gov/policy-
compliance/rulemaking/final-rules/amendments-2013-mortgage-rules-under-real-estate-settlement-procedures-
act-regulation-x-and-truth-lending-act-regulation-z-correction/.
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For information about modifying periodic statements in context of bankruptcy, see “Model
modified periodic statements for borrowers in bankruptcy” in Section 5.10.4.
5.6.4 Amount Due
Under the Mortgage Servicing Rules, you are required to disclose and explain a modified
“amount due” when (1) the mortgage loan has been accelerated and you accept a lower amount
to reinstate the loan, (2) the mortgage loan is subject to a temporary loss mitigation program, or
(3) the mortgage loan contract has been permanently modified. (Comments 41(d)(1)-1 and -2
and 41(d)(2)-1 and -2)
When the balance of a mortgage loan has been accelerated but you accept a lesser amount to
reinstate the loan, you must disclose the lesser amount that will be accepted to reinstate the loan
as the “amount due.” If you are only accepting the lesser amount for a specified period of time,
you must indicate that the amount is accurate for the designated period of time. For example,
you may state that the reinstatement amount will be accepted to reinstate the loan through the
“as of [date]” or “good through [date].” The explanation of the “amount due” for an accelerated
mortgage, however, must list both the reinstatement amount that is disclosed and the
accelerated amount, which is the amount that the borrower technically owes under the loan
contract. (Comments 41(d)(1)-1 and 41(d)(2)-1)
When the borrower has agreed to a temporary loss mitigation program, you may disclose either
the payment due under the temporary loss mitigation program or the amount due according to
the loan contract as the “amount due.” The explanation of “amount due,” however, must include
both the amount due according to the loan contract and the payment due under the temporary
loss mitigation program if the servicer provided the temporary loss mitigation payment as the
amount due. (Comments 41(d)(1)-2 and 41(d)(2)-2)
When the loan contract has been permanently modified, you must disclose amount due under
the modified loan contract as the “amount due.” Under a permanently modified loan contract,
you are required to explain the “amount due” as normally explained under § 1026.41(d)(2).
(Comment 41(d)(1)-3)
If any information necessary for an accurate disclosure is unknown, you must make the “amount
due” disclosure based on the best information reasonably available at the time the disclosure is
provided and must state clearly that the disclosure is an estimate.
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5.7 How can I use coupon books instead of
periodic statements? (§ 1026.41(e)(3)
and comments 41(e)(3)-1 to -4)
A coupon book is a book with a page for each billing cycle during a set period (often covering
one year). The borrower tears off the page or a portion of the page and returns it to you with a
payment for each billing cycle.
You may send a coupon book instead of a periodic statement as long as:
The borrower has a fixed-rate loan. You must send periodic statements to all borrowers
who have ARMs, even if you give them a coupon book. (See § 1026.18(s)(7)(iii) and its
commentary for guidance on the meaning of “fixed rate.”)
Your coupon book includes certain information. (See “Information required in a coupon
book” in Section 5.7.1.)
You make certain information available to the borrower upon request. (See “Making
additional information available” in Section 5.7.2.)
You provide certain information to borrowers who are 45 days or more delinquent. (See
“Coupon books for delinquent borrowers” in Section 5.7.3.)
If a borrower is a debtor in bankruptcy or has discharged or discharged personal liability for the
mortgage loan through bankruptcy pursuant to chapters 7, 11, 12, or 13 of the Bankruptcy Code,
you may be exempt from providing coupon books. See “Periodic statement and coupon book
exemption for borrowers in bankruptcy” in Section 5.10.6. If this exemption does not apply, as
explained in Section 5.10.2, certain modifications may apply to the coupon book.
5.7.1 Information required in a coupon book
(§ 1026.41(e)(3)(i) and (ii) and comments 41(e)(3)-2
and -4)
Your coupon book must include 2 types of information:
1. Information that must appear on every coupon
2. Information that can appear anywhere in the coupon book
62 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Each coupon in your book must have this information:
The payment due date
The amount of any late payment fee and the date on which you will charge a late fee if
you don’t receive the payment
The amount due
You must include other information in your coupon book, but it does not have to be included on
each coupon:
The outstanding principal balance at the
beginning of the time period covered by
the coupon book
The current interest rate
The existence of any prepayment penalty (as defined in § 1026.32(b)(6)(i))
HUD’s toll-free telephone number ((800) 569-4287) to access contact information for
homeownership counselors or counseling organizations and the website address for
either the Bureau’s information section on homeownership counselors
(
You may include other information about the
loan on any of the coupon book’s pages.
(Comment 41(e)(3)-2)
http://www.consumerfinance.gov/mortgagehelp/
) or HUD’s list of homeownership
counselors and counseling organizations
(
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm)
Contact information on where borrowers can get more information about their loans. (See
“Making additional information available” in Section 5.7.2.)
You can put the above information on the inside of the front or back cover of the coupon book or
on filler pages. (Comment 41(e)(3)-3)
5.7.2 Making additional information available
(§ 1026.41(e)(3)(iii))
If you opt to use a coupon book, you must make additional information available to borrowers.
This information could be made available via telephone, in writing, in person, or electronically
(if the borrower consents). Upon request, you must provide any of these items as requested by
the borrower:
63 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
1. An explanation of the amount due including:
The periodic payment amount (including a breakdown showing how you will apply the
payment to principal, interest, and escrow)
The total fees or charges you imposed since the last statement
Any payment amount past due
2. A breakdown of past payments, including:
The total of all payments you received since the previous statement, including a
breakdown showing the amount, if any, you applied to principal, interest, escrow, fees
and charges, and the amount, if any, you sent to a suspense or unapplied funds account
The total of all payments you received since the beginning of the calendar year, including
a breakdown showing the amount, if any, you applied to principal, interest, escrow, fees
and charges, and the amount, if any, you are currently holding in a suspense or
unapplied funds account
3. A list of the transaction activity that occurred since the last statement. “Transaction activity”
means any activity that causes a credit or debit to the amount currently due.
Include the date, a brief description, and the amount for each transaction on the list.
4. If you are currently holding any funds in a suspense or unapplied funds account, include
information explaining what the borrower must do for the funds to be applied.
5.7.3 Coupon books for delinquent borrowers
When a borrower becomes 45 days or more delinquent, you must provide this additional
information in writing for each billing cycle during the delinquency:
The length of the borrower’s delinquency (measured as of the date of the written notice).
A notification of possible risks and expenses (for example, foreclosure or legal fees) that
the borrowers could face if the delinquency is not cured.
An account history showing the previous 6 months or the period since the last time the
account was current, whichever is shorter, the amount remaining past due from each
64 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
billing cycle, or if the borrower made a full payment, the date you credited the account
for the full payment.
A notice showing any loss mitigation program the borrower has agreed to, if applicable.
A notice that you have made the first notice or filing required to start a foreclosure, if
applicable.
The total payment the borrower would have to make to bring the account current.
A reference to the homeownership counselor information you include in your coupon
book. (§ 1026.41(d)(7)(v))
(§ 1026.41(e)(3)(iv))
5.7.4 Coupon books for borrowers who are debtors in
bankruptcy
See “Content and layout requirements for modified periodic statements and coupon books” in
Section 5.10.2 and “Coupon books for borrowers in bankruptcy” in Section 5.10.3.
5.8 How must I deliver the information in
periodic statements?
5.8.1 Borrower opt-out
Generally, borrowers may not opt-out of receiving periodic statements (except in the bankruptcy
context, as discussed below). However, if a borrower chooses to receive statements
electronically, that borrower may opt-out of electronic notification that statements are ready to
access online, if they demonstrate the ability to access statements online.
Such ability may be demonstrated, for example, by the borrower receiving notification that the
statements are available, going to the website where the information is available, viewing the
information about their account, and selecting a link or option there to indicate they no longer
would like to receive notifications when new statements are available. (Comment 41(a)-4)
65 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
5.8.2 Clear and conspicuous
Make the information clear and conspicuous. The “clear and conspicuous” standard generally
requires that disclosures be presented in a reasonably understandable form. (Comment 41(c)-1)
5.8.3 Additional information
You may add information to the disclosures and combine disclosures, as long as:
The added information does not overwhelm or obscure the required disclosures.
(Comment 41(c)-1)
The combination is not prohibited by these Mortgage Servicing Rules or other applicable
law. (Comment 41(c)-2)
For example, the Mortgage Servicing Rules do not require you to include certain information
about the borrower’s escrow account (such as the account balance). You could put escrow
information in the periodic statement or coupon book if you wanted to as long as the placement
of that information didn’t break up a group of disclosures you are required to put together.
Similarly, you could combine the periodic statement with statements from a checking account or
other account so long as you meet all the requirements of the periodic statement disclosure, and
combining the statements is not prohibited by regulations governing the other account.
5.8.4 Close proximity
The periodic statement rule requires you to put
several disclosures in close proximity to one
another. To meet this requirement, group the
items together and set them off from other
groupings.
You could, for example, present the information
in boxes, or arrange items in groups and then
put spaces between the groups. 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.
(Comment 41(d)-1)
If a disclosure is not applicable, you don’t
have to include it. For example, if you don’t
charge a prepayment penalty, you do not
need to include the prepayment penalty
disclosures in your periodic statements.
(Comment 41(d)-2)
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5.8.5 Acceptable forms (§ 1026.41(c))
You can send paper statements by mail or provide them in person.
If the borrower gives you affirmative consent, you may send periodic statements electronically.
If you send electronic statements, they must be in a form the borrower can print or download.
If you are sending the statement electronically,
instead of sending the statement itself, you may
send borrowers a link to an online site where
they can securely access their statements.
(Comment 41(c)-3)
If you are currently sending a borrower
electronic disclosure for any account (for
example, a mortgage or checking account), you
do not have to seek affirmative consent again.
(Comment 41(c)-4)
You do not need to follow the full E-Sign Act verification procedures before providing a
statement electronically. If you wish to follow the E-Sign Act procedures to obtain borrower
consent, you may, but you can also obtain affirmative consent through a simpler process.
(Comment 41(c)-4)
Be sure you distinguish between borrowers
who have agreed to receive disclosures and
statements electronically and those who opt
to pay electronically, for example, via
automatic debit. Choosing automatic
electronic payment does not equal
affirmative consent to receive electronic
statements.
5.9 Must I continue to provide periodic
statements or coupon books after a
mortgage loan is charged off?
(§ 1026.41(e)(6))
You are exempt from the periodic statement or coupon book requirements for charged-off
mortgage loans if two conditions apply. First, you have charged off the loan in accordance with
your institution’s loan-loss provisions and will not charge any additional fees or interest on the
account.
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Second, within 30 days of the charge-off or the most recent periodic statement, you must
provide a periodic statement clearly and conspicuously labeled “Suspension of Statements &
Notice of Charge Off—Retain This Copy for Your Records.” This periodic statement must clearly
and conspicuously explain, as applicable:
• The mortgage loan has been charged off and you will not charge any additional fees or
interest on the account;
• You will no longer provide the borrower a periodic statement for each billing cycle;
• The lien on the property remains in place and the borrower remains liable for the
mortgage loan obligation and any obligations arising from or related to the property,
which may include property taxes;
• The borrower may be required to pay the balance on the account in the future, for
example, upon sale of the property;
• The balance on the account is not being canceled or forgiven; and
• The loan may be purchased, assigned, or transferred.
You do not need to include any of the above-listed disclosures when the disclosures do not apply
to a particular borrower. For example, if a borrower has discharged personal liability for the
mortgage loan through bankruptcy, you do not need to include an explanation that the borrower
remains liable for the mortgage loan obligation.
The clear and conspicuous standard generally requires that disclosures be in a reasonably
understandable form and readily noticeable to the borrower. The standard, however, does not
impose a minimum type size or other technical requirements. (§ 1026.41(e)(6)(ii) and
comment 41(e)(6)(i)(B)-1)
If you fail at any time to treat the mortgage loan as charged off, or if you charge any additional
fees or interest on a charged-off loan, your obligation to provide the borrower with periodic
statement or coupon book resumes. (§ 1026.41(e)(6)(ii))
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5.10 Must I provide a borrower in bankruptcy
a periodic statement or coupon book?
Unless you are exempt from sending a periodic statement or coupon book due to a borrower’s
bankruptcy, you must provide periodic statements or coupon books when a borrower is in
bankruptcy. The periodic statements or coupon books must be modified for bankruptcy.
Certain modifications apply for chapter 7 or chapter 11 bankruptcy, and additional modifications
apply for chapters 12 or 13. See “Content and layout requirements for modified periodic
statements and coupon books” in Section 5.10.2.
If a borrower is a debtor in bankruptcy or has discharged personal liability for the mortgage loan
through bankruptcy pursuant to chapters 7, 11, 12, or 13 of the Bankruptcy Code, you may be
exempt from providing periodic statements or coupon books. See “Periodic statement and
coupon book exemption for borrowers in bankruptcy (§ 1026.41(e)(5))” in Section 5.10.6.
5.10.1 Effective date for bankruptcy periodic statement and
coupon book provisions
The bankruptcy periodic statement and coupon book provisions of the 2016 Mortgage Servicing
Rule became effective on April 19, 2018. For more information on effective dates, see “When do
I have to start following these rules?” in Section 2.2.
5.10.2 Content and layout requirements for modified periodic
statements and coupon books
With some exceptions, periodic statements or coupon books for borrowers in bankruptcy must
contain the same categories of disclosures as are provided to borrowers who are not in
bankruptcy. See “What information must be on the periodic statement, and how must I
arrange it?” in Section 5.6 for information on the disclosures required for borrowers who are
not in bankruptcy. When a borrower is in bankruptcy (or has discharged personal liability for
the loan through bankruptcy), however, certain modifications apply to the periodic statement or
coupon book, as explained below. Table 3 below highlights how various requirements differ
between periodic statements and coupon books that are (1) unmodified; (2) modified for chapter
7, 11, 12 and 13 bankruptcy or discharge of personal liability through bankruptcy; and (3) further
modified for only chapter 12 and 13 bankruptcy.
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TABLE 3: MODIFIED PERIODIC STATEMENT REQUIREMENTS
Disclosures
Periodic
Statement for
Borrowers Not
in Bankruptcy
Modifications for
Chapter 7 or 11
Bankruptcy (or
Discharge of
Personal Liability)
Modifications for
Chapter 12 or 13
Bankruptcy
Amount Due, as required
under § 1026.41(d)(1)(iii)
Required
Modifications
permitted. See below
for more information.
§ 1026.41(f)(1)
Modifications
permitted. See below
for more information.
§ 1026.41(f)(3)(ii)
Explanation of Amount
Due, as required under
§ 1026.41(d)(2)(iii)
Required
Required
Modifications
permitted. See below
for more information.
§ 1026.41(f)(3)(ii)
Late Payment Fee, as
required under
§ 1026.41(d)(1)(ii)
Required
May be omitted
§ 1026.41(f)(1)
May be omitted
§ 1026.41(f)(1)
Transaction activity, as
required under
§ 1026.41(d)(4).
Required
Required
Modifications
permitted. See below
for more information.
§ 1026.41(f)(3)(iv)
Length of Delinquency, as
required under
§ 1026.41(d)(8)(i).
Required
May be omitted
§ 1026.41(f)(1)
May be omitted
§ 1026.41(f)(1)
Notification of Possible
Risks if Delinquency is Not
Cured, as required under
§ 1026.41(d)(8)(ii)
Required
May be omitted
§ 1026.41(f)(1)
May be omitted
§ 1026.41(f)(1)
Account History, as
required under
§ 1026.41(d)(8)(iii)
Required
Required
May be omitted
§ 1026.41(f)(3)(i)
Loss Mitigation Program
Information, if applicable,
as required under
§ 1026.41(d)(8)(iv)
Required
Required
May be omitted
§ 1026.41(f)(3)(i)
First Notice or Filing for
Any Foreclosure Process
Information, if applicable,
as required under
§ 1026.41(d)(8)(v)
Required
May be omitted
§ 1026.41(f)(1)
May be omitted
§ 1026.41(f)(1)
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Disclosures
Periodic
Statement for
Borrowers Not
in Bankruptcy
Modifications for
Chapter 7 or 11
Bankruptcy (or
Discharge of
Personal Liability)
Modifications for
Chapter 12 or 13
Bankruptcy
Total Payment Amount
Needed to Bring the
Account Current, as
required under
§ 1026.41(d)(8)(vi)
Required
Required
May be omitted
§ 1026.41(f)(3)(i)
Homeownership
Counselor Information, as
required under
§ 1026.41(d)(8)(vii)
Required
Required
May be omitted
§ 1026.41(f)(3)(i)
Bankruptcy Notice
Statements for Chapters
7, 11, 12, and 13
Borrowers, as required
under § 1026.41(f)(2)
Not Included
Required
§ 1026.41(f)(2)
Required
§ 1026.41(f)(2)
Pre-petition Arrearage
Disclosures, as required
under § 1026.41(f)(3)(v)
Not Included
Not Included
Required, if applicable.
See below for more
information.
§ 1026.41(f)(3)(v)
Additional Disclosures for
Chapters 12 and 13
Borrowers, as required
under § 1026.41(f)(3)(vi)
Not Included
Not Included
Required, if applicable.
§ 1026.41(f)(3)(vi)
Modified amount due for borrowers in bankruptcy
Generally, when providing a periodic statement or coupon book that has not been modified due
to a bankruptcy, you are required to ensure that the “amount due” is shown more prominently
than other disclosures on the page. (§ 1026.41(d)(1)(iii)). When sending the modified periodic
statement or coupon book, however, the requirement to show the “amount due” more
prominently than other disclosures on the page does not apply. (§ 1026.41(f)(1))
When sending a periodic statement or coupon book to a borrower in chapter 12 or 13
bankruptcy, the amount due information may be limited to the date and amount of the post-
71 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
petition payments due and any post-petition fees and charges imposed by the servicer.
(§ 1026.41(f)(3)(ii))
In addition, when a periodic statement or coupon book is provided to borrowers in chapter 12 or
13 bankruptcy, the explanation of the amount due disclosed under § 1026.41(d)(2) may be
limited to:
The monthly post-petition payment
amount, including a breakdown showing
how much, if any, will be applied to
principal, interest, and escrow;
The total sum of any post-petition fees or
charges imposed since the last
statement; and
Any post-petition payment amount past
due.
(§ 1026.41(f)(3)(iii))
Definitions
(Comments 41(f)(3)-1 and -2)
Post-petition fees and charges are defined as
fees and charges imposed after the
bankruptcy case is filed.
Pre-petition payments are defined as
payments made to cure the borrower’s pre-
bankruptcy defaults.
Post-petition payments are defined as
payments made to satisfy the mortgage loan’s
periodic payments as they come due after the
bankruptcy case is filed.
Modified transaction activity for borrowers in chapter 12 or
chapter 13 bankruptcy (§ 1026.41(f)(3)(iv))
The transaction activity information set forth in § 1026.41(d)(4) must include all payments you
received since the last statement, including all post-petition and pre-petition payments and
payments of post-petition fees and charges, and all post-petition fees and charges the servicer
has imposed since the last statement. The brief description of the activity need not identify the
source of any payments. (§ 1026.41(f)(3)(iv))
Pre- petition arrearage modifications for borrowers in chapter
12 or chapter 13 bankruptcy (§ 1026.41(f)(3)(v) )
If applicable, you must disclose the following information on a periodic statement or coupon
book for borrowers in chapter 12 or chapter 13 bankruptcy:
The total of all pre-petition payments received since the last statement;
72 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
The total of all pre-petition payments received since the beginning of the consumer’s
bankruptcy case; and
The current balance of the consumer’s pre-petition arrearage.
These pre-petition arrearage disclosures, disclosed as applicable, must be grouped in close
proximity to each other and located on the first page of the statement or, alternatively, on a
separate page enclosed with the periodic statement or in a separate letter. (§ 1026.41(f)(3)(v))
If a borrower’s pre-petition arrearage is subject to dispute, or you have not yet determined it,
you can include on the periodic statement a statement acknowledging the unresolved amount.
You may omit this information from the periodic statement or coupon book until you have had a
reasonable opportunity to determine the amount of the pre-petition arrearage. You may not,
however, omit that information from the periodic statement or coupon book after the date that
the bankruptcy court has fixed for filing proofs of claim in the consumer’s bankruptcy case.
(Comment 41(f)(3)(v)-1)
To the extent that the court overseeing the borrower’s bankruptcy case requires post-petition
fees and charges to be included as an amendment to your proof of claim, you may include such
fees and charges in the balance of the pre-petition arrearage under § 1026.41(f)(3)(v)(C) rather
than treating them as post-petition fees and charges for purposes of § 1026.41(f)(3).
(Comment 41(f)(3)-2)
5.10.3 Coupon books for borrowers in bankruptcy
A coupon book, while any borrower on the loan is in bankruptcy, must include the same
bankruptcy disclosures as a periodic statement for a borrower in bankruptcy. These disclosures
include the bankruptcy notices required under § 1026.41(f)(2) in the context of chapters 7, 11,
12, and 13 bankruptcy or a discharge of personal liability, as well as the additional disclosures
that apply only when a borrower is in chapters 12 and 13 bankruptcy, as required under
§ 1026.41(f)(3)(vi). You may include these disclosures anywhere in the coupon book provided to
the consumer or on a separate page enclosed with the coupon book. See “Coupon books for
borrowers in bankruptcy” in Section 5.10.3 for more information.
Furthermore, bankruptcy-specific modifications to the delinquency information and other
account information (for example, account history, amount due, explanation of amount due, and
transaction activity) apply to coupon books.” (§§ 1026.41(f)(1); 1026.41(f)(3)(i) through (iv),
1026.41(f)(3)(vi), 1026.41(f)(5))
73 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
In addition to the requirements listed in Section 5.10.3, you must make available, upon a
borrower’s request, the pre-petition arrearage information set forth in § 1026.41(f)(3)(v) to the
borrower by telephone, in writing, in person, or electronically. (§ 1026.41(f)(5))
For more information on using a coupon book in lieu of a periodic statement, see “How can I
use coupon books instead of periodic statements?” in Section 5.7.
5.10.4 Model modified periodic statements for borrowers in
bankruptcy
Appendix H-30 contains sample forms of modified periodic statements for borrowers in
bankruptcy (e.g., sample forms H-30(E) and H-30(F)). You may use terminology other than
that found on the sample periodic statements in appendix H-30, so long as the new terminology
is commonly understood. (Comment 41(f)-2)
You may modify a periodic statement or coupon book as necessary to facilitate compliance with
title 11 of the United States Code, the Federal Rules of Bankruptcy Procedure, court orders, and
local rules, guidelines, and standing orders. (Comment 41(f)-4)
For information about modifying periodic statements outside of the context of bankruptcy, see
“Note on modifying sample periodic statements” in Section 5.6.3.
5.10.5 Multiple borrowers primarily obligated on the mortgage
loan (§ 1026.41(f)(4) and comments 41(f)(4)-1 and -2)
When more than one borrower is primarily obligated on a mortgage loan and you are required
to provide a modified periodic statement or coupon book under § 1026.41(f) because one of the
borrowers is a debtor in bankruptcy or has discharged personal liability pursuant to chapter 7,
11, 12, or 13, you may provide the modified periodic statement or coupon book to any or all of
the borrowers primarily obligated on a mortgage loan, even if a borrower to whom you provide
the modified statement is not a debtor in bankruptcy. (§ 1026.41(f)(4))
You may, but need not, include the required modifications under § 1026.41(f)(3) (modifications
that relate exclusively to chapter 12 or chapter 13 bankruptcy) when two or more borrowers who
are primarily obligated on a mortgage loan are debtors under different chapters of bankruptcy
and only one is subject to chapter 12 or 13. For example, assume one borrower is a debtor in a
case under chapter 7 and another borrower is a debtor in a case under chapter 13, and you are
74 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
not exempt from the periodic statement or coupon book requirement. Further assume that both
borrowers are joint obligors on a mortgage loan. The periodic statement and coupon book you
provide is subject to the modifications set forth in § 1026.41(f)(1) and (f)(2), but you may
determine whether it is appropriate to include the modifications set forth in § 1026.41(f)(3).
(Comment 41(f)(4)-2)
5.10.6 Periodic statement and coupon book exemption for
borrowers in bankruptcy (§ 1026.41(e)(5))
You are exempt from providing periodic statements or coupon books to a borrower in
bankruptcy when two requirements are satisfied.
First, any borrower on the mortgage loan must be a debtor in bankruptcy or discharged personal
liability for the mortgage loan through bankruptcy pursuant to chapters 7, 11, 12, or 13 of the
Bankruptcy Code. (§ 1026.41(e)(5)(i)(A)). When two or more borrowers are joint obligors on a
mortgage loan, the first requirement applies if any one of the borrowers meets the criteria listed
above. (Comment 41(e)(5)(i))
Second, one of the following conditions must
apply to a borrower on the mortgage loan:
A borrower “opts-out” by sending you a
written request that the servicer cease
providing a periodic statement or coupon book.
A borrower’s most recently filed bankruptcy plan provides that the borrower will
surrender the dwelling securing the mortgage loan, provides for the avoidance of the lien
securing the mortgage loan, or otherwise does not provide for, as applicable, the
payment of pre-bankruptcy arrearage or the maintenance of payments due under the
mortgage loan. For purposes of this condition, the borrower’s most recently filed
bankruptcy plan applies, regardless of whether the court overseeing the borrower’s
bankruptcy case has confirmed or approved the plan.
A court enters an order in the bankruptcy case providing for the avoidance of the lien
securing the mortgage loan, lifting the automatic stay pursuant to 11 U.S.C. 362 with
regard to the dwelling securing the mortgage loan, or requiring you to cease providing a
periodic statement.
When borrower’s bankruptcy counsel
submits a request that you cease or continue
providing a periodic statement, you must
treat this request as if it were submitted by
the borrower. (Comment 41(e)(5)-1)
75 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
A borrower files with the court a statement of intention pursuant to 11 U.S.C. 521(a),
which identifies the borrower’s intent to surrender the dwelling securing the mortgage
loan, and a borrower has not made any partial or periodic payment on the mortgage loan
after the commencement of the borrower’s bankruptcy case.
(§ 1026.41(e)(5)(i)(B))
For example, assume that two spouses jointly own a home and are primary obligors on the
mortgage loan. One spouse files for chapter 13 bankruptcy and has a bankruptcy plan that
provides for surrendering the dwelling that secures the mortgage loan. In this scenario, you are
exempt from providing a periodic statement with regard to that mortgage loan, unless one of the
spouses requests in writing that the servicer provide a periodic statement or coupon book. (The
written request for the servicer to provide a periodic statement or coupon book is one of the
reasons you would be required to resume compliance, as explained in “Modified transaction
activity for borrowers in chapter 12 or chapter 13 bankruptcy” in Section 5.10.2.) (Comment
41(e)(5)(i)-1)
The exemption no longer applies if the borrower reaffirms personal liability for the loan.
Similarly, you no longer qualify for the exemption when any borrower on the mortgage loan
“opts-in” by submitting a written request that you provide a periodic statement or coupon book,
unless a court enters an order in the bankruptcy case requiring the servicer to cease providing a
periodic statement or coupon book. (Comment 41(e)(5)(ii)-2)
Establishing an exclusive address for “opt-ins” and “opt-outs.”
(§ 1026.41(e)(5)(iii))
Regarding the bankruptcy exemption provisions, you are allowed to establish an exclusive
address that a borrower must use to submit a written request to opt into or out of receiving
periodic statements. If you designate an exclusive address for either opt-ins or opt-outs, you
must designate the same address for both, and you must notify borrowers of the address in a
manner that is reasonably designed to inform the borrower of the address. For example, you
may be able to satisfy this notification requirement by including the address on your website or
on a borrower’s periodic statement (assuming they are receiving a periodic statement). If a
borrower calls requesting a periodic statement, you may inform the borrower of the address in
that phone call.
76 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Transitioning between a modified or an unmodified periodic statement or
coupon book for borrowers in bankruptcy (§ 1026.41(e)(5)(iv) and
associated comments)
When one of three events listed below occurs, you must transition to providing a modified or an
unmodified periodic statement or coupon book, as applicable:
1. A mortgage loan becomes subject to the requirement to provide a modified periodic
statement. For example, any borrower who is on the mortgage loan becomes a debtor in
bankruptcy or discharges personal liability for the mortgage loan. (Comment
41(e)(5)(iv)(A)-1)
2. A mortgage loan ceases to be subject to the requirement to provide a modified periodic
statement. For example, the borrower in bankruptcy reaffirms personal liability for a
mortgage loan or the borrower’s bankruptcy case is closed or dismissed without the
borrower having discharged personal liability. (Comment 41(e)(5)(iv)(A)-1)
3. You cease to qualify for an exemption pursuant to a § 1026.41(e)(5)(i) with respect to a
mortgage loan. For example:
o The borrower’s bankruptcy case is dismissed or closed without the borrower
having discharged personal liability for the mortgage loan;
o The borrower files an amended bankruptcy plan or statement of intention that
provides, as applicable, for the maintenance of payments due under the mortgage
loan and the payment of pre-petition arrearage or that the borrower will retain
the dwelling securing the mortgage loan;
o A borrower makes a partial or periodic payment on the mortgage loan despite the
borrower in bankruptcy having filed a statement of intention identifying an intent
to surrender the dwelling securing the mortgage loan (thereby making
§ 1026.41(e)(5)(i)(B)(4) inapplicable);
o The borrower in bankruptcy reaffirms personal liability for the mortgage loan; or
o The borrower submits a written request pursuant to §1026.41(e)(ii) that you
resume providing a periodic statement or coupon book.
(§ 1026.41(e)(5)(iv)(A) and associated comments)
77 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Single-statement exemption (§ 1026.41(e)(5)(iv)(B) and associated
comments)
When one of three events listed above occurs, you are exempt from providing modified or
unmodified periodic statements or coupon books for the next periodic statement or coupon
book that would otherwise be required. After the single-statement exemption, you must begin
providing the modified or unmodified periodic statements or coupon books.
(§ 1026.41(e)(5)(iv)(B))
For example, assume that a mortgage loan has a monthly billing cycle, each payment due date is
on the first day of the month following its respective billing cycle, and each payment due date
has a 15-day courtesy period.
In this scenario:
1. If
one of the three events listed above occurs on October 6 (before the end of the 15-day
courtesy period) and the servicer has not yet provided a periodic statement or coupon book
for the billing cycle with a November 1 payment due date, the servicer is exempt from
providing a periodic statement or coupon book for that billing cycle. The servicer is required
to resume providing modified or unmodified periodic statements or coupon books that
comply with the requirements of § 1026.41 for the billing cycle with a December 1 payment
due date within a reasonably prompt time after November 1 or the end of the 15-day courtesy
period provided for the November 1 payment due date. (See § 1026.41(b) and comment
41(e)(5)(iv)(B)-1.i.).
78 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
2. If one of the three events listed above occurs on October 20 (after the end of the 15-day
courtesy period) and the servicer timely provided a periodic statement or coupon book for
the billing cycle with the November 1 payment due date, the servicer is not required to
correct the periodic statement or coupon book already provided and is exempt from
providing the next periodic statement or coupon book, which is the one that would otherwise
be required for the billing cycle with a December 1 payment due date. The servicer is
required thereafter to resume providing periodic statements or coupon books that comply
with the requirements of § 1026.41 by providing a modified or unmodified periodic
statement or coupon book for the billing cycle with a January 1 payment due date within a
reasonably prompt time after December 1 or the end of the 15-day courtesy period provided
for the December 1 payment due date. (See § 1026.41(b) and comment 41(e)(5)(iv)(B)-1.ii.).
This single-statement exemption might apply more than once over the life of a loan. For
example, assume the exemption applies beginning on April 14 because the consumer files for
bankruptcy on that date and the bankruptcy plan provides that the consumer will surrender the
dwelling, such that the mortgage loan becomes subject to the requirements of § 1026.41(f). (See
§ 1026.41(e)(5)(iv)(A)(1)). If the consumer later exits bankruptcy on November 2 and has not
discharged personal liability for the mortgage loan pursuant to 11 U.S.C. 727, 1141, 1228, or
1328, such that the mortgage loan ceases to be subject to the requirements of § 1026.41(f), the
single-statement exemption would apply again beginning on November 2. (See
§ 1026.41(e)(5)(iv)(A)(2) and comment 41(e)(5)(iv)(B)-3).
If you provide a coupon book instead of a periodic statement, you are only required to provide a
new coupon book after one of the three triggering events to the extent that you have not
previously provided the consumer with a coupon book that covers the upcoming billing cycle.
For example, if you provided a 12-month coupon book to a borrower in January and the
borrower filed for bankruptcy in March, the servicer would not need to issue a new, modified
coupon book accompanied by § 1026.41(f)(1) and (f)(3)(vi) disclosures until the following
January. (See Comment 41(e)(5)(iv)(B)-2).
79 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
6. Interest Rate Adjustment
Notices (§ 1026.20(c) and
(d))
6.1 What does the rule on interest rate
adjustment notices require?
(§ 1026.20(c) and (d))
You must make disclosures in connection with the initial reset of an adjustable-rate mortgage
(ARM) and each time an interest rate adjustment results in a payment change.
The rule contains model forms as guides to developing your own notices and sample forms to
provide examples of what actual ARM notices might look like.
There are 2 types of notices, which are summarized in Table 4 on page 82.
The § 1026.20(d) initial interest rate adjustment notice is required only for the first time
the interest rate adjusts. It must be provided to a borrower between 210 days and 240
days before the first payment at the new rate is due.
The § 1026.20(c) ongoing interest rate adjustment notice must be provided to a borrower
between 60 and 120 days before the first payment at the new rate is due each time an
interest rate adjustment results in a payment change.
6.2 What is the scope of the interest rate
adjustment notice rule?
You must provide these notices for ARMs secured by the borrower’s principal dwelling. For the
purposes of this rule, an ARM is a closed-end borrower credit transaction in which the annual
percentage rate may increase after consummation. (§ 1026.20(c)(1)(i) and (d)(1)(i))
80 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
ARMs with a term of 1 year or less are exempt from both initial and ongoing disclosures
(§ 1026.20(c)(1)(ii)(A) and (d)(1)(ii)). In some circumstances, certain ARMs may be subject to
different timing rules. (§ 1026.20(c)(2) and (d))
In addition, a § 1026.20(c) ongoing interest rate adjustment disclosure is not required the first
time the ARM adjusts if the first payment at the adjusted level is due within 210 days after
consummation and the new interest rate you disclosed in the § 1026.20(d) notice at
consummation was not an estimate. (§ 1026.20(c)(1)(ii)(B))
The § 1026.20(c) ongoing interest rate adjustment notice also is not required if the creditor,
assignee or servicer is a debt collector under the FDCPA to whom the borrower has sent a
written cease communication request. However, such servicers must still provide the
§ 1026.20(d) initial interest rate adjustment notice. (See CFPB Bulletin 2013-12
for additional
details.)
6.3 Is there a small servicer exemption to
the interest rate adjustment notices rule?
No, there is no small servicer exemption to the interest rate adjustment notice requirements.
6.4 Who is responsible for sending the ARM
notices? (§ 1026.20(c) and (d))
The creditor, assignee, or servicer is responsible. Note they do not each need to send a separate
notice; the borrower needs to receive only one notice each time it is required. A creditor or
assignee that no longer owns the loan is not required to send ARM notices.
81 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
6.5 When must I send these notices?
(§ 1026.20(c)(2) and (d)(2))
In general, you must send the § 1026.20(d) initial interest rate adjustment disclosure
(§ 1026.20(d)) at least 210 days, but no more than 240 days, before the first payment at the
adjusted level is due.
If the first payment at the adjusted level is due within the first 210 days after
consummation, provide the disclosures at consummation.
In general, you must send the § 1026.20(c) ongoing interest rate adjustment notice disclosing an
interest rate adjustment causing a payment change at least 60 days, but no more than 120 days,
before the first payment at the adjusted level is due.
The rules also provide special timing requirements to address frequently-adjusting ARMs,
ARMs with short look-back periods, and ARMs adjusting soon after consummation:
If an ARM has regularly scheduled interest rate adjustments occurring every 60 days or
more frequently, provide the disclosures at least 25 days, but no more than 120 days,
before the first payment at the adjusted level is due.
If an ARM was originated prior to January 10, 2015, and the adjusted interest rate and
payment are calculated based on an index figure available less than 45 days prior to the
adjustment date, provide the § 1026.20(c) disclosures at least 25 days, but no more than
120 days, before the first payment at the adjusted level is due.
If the first adjustment to an ARM is to occur within 60 days of consummation and the
§ 1026.20(d) notice you provided at consummation contained an estimated adjusted
interest rate, provide the § 1026.20(c) disclosure as soon as practicable, but not less than
25 days before the first payment at the adjusted level is due.
82 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
6.6 What information must be included in the
initial and ongoing interest rate
adjustment notices?
The notices must have the content and format specified in the rule and demonstrated in the
model and sample forms.
Proper use of the forms will comply with both the content and format requirements of this rule.
(See Table 4 below for the content requirement and Table 5 on page 85 for an overview of ARM
disclosure presentation). The model forms may be filled out and used, while the sample forms
demonstrate an example of the proper way to fill out the forms.
TABLE 4: CONTENT OF THE ARM DISCLOSURES
Item Details
Required in
§ 1026.20(d)
Required in
§ 1026.20(c)
Date The date of the disclosure § 1026.20(d)(2)(i) n/a
A statement
including:
(i) An explanation that under
the terms of the loan, the
interest rate may change
(ii) The effective date of the
adjustment and future
adjustments (iii) Any other
changes to loan terms,
features, or options on the
same date
§ 1026.20(d)(2)(ii) § 1026.20(c)(2)(i)
A table containing:
(i) The current and new rates
(ii) The current and new
payments and the date the first
payment is due (iii) For
interest-only or negatively-
amortizing payments,
allocation and other
information
§ 1026.20(d)(2)(iii) § 1026.20(c)(2)(ii)
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Item Details
Required in
§ 1026.20(d)
Required in
§ 1026.20(c)
An explanation
of how the rate
is determined,
including:
(i) The specific index or
formula
used in making the adjustment,
and a source of information
about that index or formula
(ii) The type and amount of any
adjustment to the index,
including any margin and
information
on the margin
§ 1026.20(d)(2)(iv) § 1026.20(c)(2)(iii)
Any limits
on the interest rate
or payment
increases
Including the extent to which
such limits result in foregone
increase to the interest rate,
and the earliest date such
increases may apply in the
future
§ 1026.20(d)(2)(v) § 1026.20(c)(2)(iv)
An explanation
of how the
new payment
is determined,
including:
(i) The index or formula used
(ii) Any adjustment to the index
or formula, such as a margin
(iii) The loan balance expected
on the date of the adjustment
(iv) The length of the remaining
loan term and
(v) If the new rate or payment
is an estimate (see
below for
more information), a statement
that actual information will be
coming 2 to 4 months before
the adjustment
§ 1026.20(d)(2)(vi) § 1026.20(c)(2)(v)
If applicable,
a statement that
the new payment
will be interest
only, or will result
in negative
amortization
See the regulation text for
details of the statement.
§ 1026.20(d)(2)(vii) § 1026.20(c)(2)(vi)
The
circumstances
under which
a prepayment
penalty may be
imposed
A prepayment penalty is
defined in § 1026.32(b)(6)(i).
§ 1026.20(d)(2)(viii) § 1026.20(c)(2)(vii)
84 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Item Details
Required in
§ 1026.20(d)
Required in
§ 1026.20(c)
The telephone
number
of the servicer
The number for borrowers to
call
if they anticipate not being able
to make payments
§ 1026.20(d)(2)(ix) n/a
Alternatives to
paying at the new
rate
Include a brief explanation of
(i) Refinancing the loan
(ii) Selling the property
(iii) Modifying the terms of the
loan
(iv) Arranging payment
forbearance
§ 1026.20(d)(2)(x) n/a
Housing
counseling
information
See below for details on the
housing counseling
information.
§ 1026.20(d)(2)(xi) n/a
6.6.1 Estimates
For the initial interest rate notice, if the new interest rate (or the new payment calculated from
the new interest rate) is not known as of the date of the disclosure, you must use an estimate and
label it as such. This estimate must be based on the index as reported within 15 business days
prior to the date of the disclosure. (§ 1026.20(d)(2))
6.6.2 Housing counseling information
The following housing counselor information must be provided in the § 1026.20(d) initial
interest rate adjustment notice:
The website to access either the Bureau list or the HUD list of homeownership
counselors and counseling organizations
(http://www.consumerfinance.gov/mortgagehelp/
)
The HUD toll-free number to access the HUD list of homeownership counselors and
counseling organizations ((800) 569-4287)
The Bureau website to access contact information for state housing finance authorities
(http://www.consumerfinance.gov/mortgagehelp/
)
(§ 1026.20(d)(2)(xi))
85 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
TABLE 5: AT A GLANCE: ARM DISCLOSURE PRESENTATION
Item
Required by
§ 1026.20(d)
Required by
§ 1026.20(c)
Required when
The first time the interest rate
adjusts
Every time an interest rate
adjustment results in a
corresponding change in the
payment amount. An annual notice
(if there is no payment change
during the year) is no longer
required.
Timing
210 to 240 days before the first
payment at the new rate is due
60 to 120 days before the first
payment at the new rate is due
Estimate
You may use estimated
information.
Use the exact information
Formatting § 1026.20(d)(3) § 1026.20(c)(3)
Sample form Appendix H-4(D)(4) Appendix H-4(D)(2)
Model form Appendix H-4(D)(3) Appendix H-4(D)(1)
Delivery
Must be a separate document from
all other written materials (but may
be provided in same envelope with
other notices)
Must be segregated from other
information (but may be provided in
same envelope
with other notices)
6.6.3 How must I arrange the information in the notices?
You must provide the information in the form of a table, substantially similar to the forms in
appendix H.
6.6.4 How must the notices be sent?
The § 1026.20(d) initial interest rate adjustment disclosure must be a separate document.
(§§ 1026.17(a) and20(d)) The § 1026.20(c) ongoing interest rate adjustment disclosure must be
segregated from other information but may be on the same document as other information.
Both ARM disclosures may be sent in the same envelope with other disclosures, such as the
periodic statement.
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7. Prompt Payment Crediting
and Payoff Statements
(§ 1026.36(c))
7.1 What do the prompt crediting and payoff
statements rules require?
Periodic payments must be promptly credited as of the day of receipt. A periodic payment
consists of the amount necessary to cover principal, interest, and escrow (if applicable).
If you receive a payment that is less than the amount due for a periodic payment, you may place
the payment in a suspense account. When the amount in the suspense account covers a periodic
payment, you must treat the accumulated amount as a periodic payment and promptly credit it
to the borrower’s account.
In addition, creditors, assignees, and servicers must provide an accurate payoff balance to a
borrower no later than 7 business days after receipt of a written request from the borrower for
that information.
7.2 What is the scope of the prompt crediting
and payoff statement rules?
(§ 1026.36(c)(1) and (c)(3))
The prompt crediting and payoff statement
provisions apply to certain types of mortgage
loans. Additionally, different parties are
responsible for the different provisions. This
information is set out in Table 6 below.
A creditor or assignee that does not currently
own the mortgage loan or servicing rights is
not subject to the requirement to provide a
payoff statement.
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TABLE 6: PROMPT CREDITING AND PAYOFF STATEMENTS: APPLICATION AND RESPONSIBLE PARTIES
Provision Responsible party
Open / closed-end
loans?
Principal / all
dwellings?
Prompt crediting Servicer Closed-end loans Principal only
Payoff statements
Creditor, assignee, or
servicer
Both All dwellings
7.3 Is there a small servicer exemption to the
prompt crediting and payoff statement
rules?
No, there is no small servicer exemption to the prompt crediting and payoff statement
provisions.
7.4 What is a periodic payment, and how
must I handle it? (§ 1026.36(c)(1)(i))
A periodic payment is an amount sufficient to cover principal, interest, and escrow (if
applicable) for a given billing cycle. A payment qualifies as a periodic payment even if it does
not include amounts required to cover late fees, other fees, or non-escrow payments you
advanced on a borrower’s behalf. You must credit a periodic payment to the borrower’s account
as of the day of receipt, except when a delay in crediting does not result in any charge to the
borrower, or in the reporting of negative information to a consumer reporting agency.
In cases where you specified in advance and in writing requirements for the borrower to follow
when making payments and then accept a payment that does not conform to your requirements,
you may wait up to 5 days after receipt to credit the payment. Any requirements you set must be
reasonable. (See “What is a non-conforming payment, and how must I handle it?” in Section
7.6).
Note that the legal obligation between the creditor and the borrower, subject to the applicable
law, is what determines the method for crediting payments. (Comment 36(c)(1)(i)-2)
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7.4.1 Partial payments under temporary loss mitigation
programs (Comments 36(c)(1)(i)-4 and 36(c)(1)(i)-5)
When the loan contract has not been permanently modified and a borrower makes payments
under a temporary loss mitigation program, such as a repayment or trial modification plan, you
should generally treat the borrower’s payment as a partial payment if the payment is less than
the amount sufficient to cover principal, interest, and escrow (if applicable) for a given billing
cycle under the loan contract (regardless of the payment due under the temporary program).
Whether a payment is full or partial depends on the contractual obligation between the
borrower and lender. (Comment 36(c)(1)(i)-4)
On the other hand, if the loss mitigation program has permanently modified the loan contract,
and the borrower submits a payment sufficient to cover principal, interest, and escrow (if
applicable) for a given billing cycle under the modified loan contract, you would treat that
payment as a periodic payment and not as a partial payment. (Comment 36(c)(1)(i)-5)
7.5 What is a partial payment, and how must
I handle it? (§ 1026.36(c)(1)(ii) and
comment 36(c)(1)(ii)-1)
A partial payment is any payment that is less than a periodic payment. (See “What is a periodic
payment, and how must I handle it?” in Section 7.4).
If you receive a partial payment, to the extent that you are not prohibited by applicable law or
the legal obligation between the parties, you may:
Credit the partial payment upon receipt
Return the partial payment to the borrower
Hold the payment in a suspense or unapplied funds account
If you opt to retain a partial payment in a suspense or unapplied funds account, you must:
Disclose on the borrower’s periodic statement the total amount of funds you are holding
in the suspense or unapplied funds account—if you are required to send the borrower a
89 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
periodic statement. (See “What information must be on the periodic statement, and
how must I arrange it?” in Section 5.6).
Once you have accumulated sufficient funds to cover a periodic payment, you must credit
them as you would a periodic payment
7.6 What is a non-conforming payment, and
how must I handle it?
(§ 1026.36(c)(1)(iii))
A non-conforming payment is a payment that does not meet any reasonable requirements that
you set in advance in writing for making payments, such as:
Requiring that payments be accompanied by the account number or payment coupon
Setting a cutoff hour for payment to be received, or setting different hours for payment
by mail and payments made in person
Specifying that only checks or money orders should be sent by mail
Accepting only U.S. dollars as payment
Having one particular address for receiving payments, such as a post office box
Your payment requirements must be reasonable and cannot make it difficult for most borrowers
to make conforming payments. For example, it would be reasonable to require a cutoff time of 5
p.m. for receipt of a mailed check at the address you specify for receiving payments.
(Comment 36(c)(1)(iii)-2)
You may not require payment solely by preauthorized electronic funds transfer. (See Section
913 of the Electronic Fund Transfer Act, 15 U.S.C. 1693k for more information on this issue.)
In cases where you specify in writing requirements for making payments and then you accept a
payment that does not conform to your requirements, you have up to 5 days after receipt to
credit the payment.
If you do not set specific payment requirements, then you must allow payments by cash, money
order, draft, or other similar instrument in properly negotiable form during regular business
90 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
hours at any location where you conduct business, or by electronic fund transfer, if you have
agreed to accept electronic payments. (Comment 36(c)(1)(iii)-3). Under the general rule, such
payments must be credited as of the day of receipt.
The partial payments you hold in a suspense or unapplied funds account, discussed above,
would not be considered to have been “accepted,” so they are not required to be applied within 5
days.
7.7 How must I respond to written requests
for payoff statements? (§ 1026.36(c)(3))
If a borrower or any person acting on behalf of a borrower makes a written request for a payoff
statement, a creditor, assignee, or servicer must provide the statement within 7 business days.
When a creditor, assignee, or servicer, as applicable, is not able to provide the statement within
7 business days because the loan is in bankruptcy or foreclosure, the loan is a reverse mortgage
or shared appreciation mortgage, or because of natural disasters or other similar circumstances,
the payoff statement must be provided within a reasonable time.
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8. Force-Placed Insurance
8.1 What does the force-placed insurance
rule require? (§ 1024.37)
This rule puts limits on charging the borrower for force-placed insurance. These limits include:
You must have a reasonable basis to believe that a borrower has failed to maintain
required hazard insurance before charging for force-placed insurance.
You must send 2 notices to the borrower and not have received in response to these
notices evidence that the borrower has had in place, continuously, required hazard
insurance before you charge for force-placed insurance.
You must notify the borrower and not have received in response to this notice evidence
that the borrower has purchased required hazard insurance before you charge the
borrower for renewing force-placed insurance.
You must cancel force-placed insurance within 15 days of receiving evidence that the
borrower has required hazard insurance in place and refund to the borrower any fees or
charges for periods of overlapping coverage.
Force-placed insurance charges imposed by a servicer on a borrower, beyond those
subject to state regulation as insurance charges, must be bona fide and reasonable.
Additional rules apply for borrowers with escrow accounts, as described in § 1024.17. (See
“What additional rules apply for borrowers with escrow accounts for payment of hazard
insurance?” in Section 8.11.)
8.2 What is the scope of the force-placed
insurance rule?
The rule applies to federally related mortgage loans (as defined in § 1024.2(b)) except for the
exemptions in §§ 1024.5(b) and 17(k)(5)(iii), and open-end lines of credit.
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For more information on § 1024.17(k)(5)(iii), see “What is the small servicer exemption from
the escrow provisions?” in Section 8.12.
Servicers that are debt collectors under the FDCPA to whom a borrower has sent a written cease
communication request must still send the § 1024.37 disclosures regarding the forced placement
of hazard insurance. (See CFPB Bulletin 2013-12
for additional details.)
8.3 Is there a small servicer exemption to the
force-placed insurance rule?
In general, there is no small servicer exemption to the force-placed insurance provisions. There
is a limited small servicer exemption to the prohibition on the purchase of force-placed
insurance for borrowers with escrow accounts in certain circumstances. (See “What is the small
servicer exemption from the escrow provisions?” in Section 8.12.)
8.4 What is force-placed insurance?
“Force-placed insurance” is hazard insurance the servicer obtains on behalf of the owner or
assignee. (§ 1024.37(a)(1))
The following insurance does not constitute “force-placed insurance” under this section:
Flood insurance required because the borrower’s property is in a special hazard flood
zone. In these cases, the Flood Disaster Protection Act of 1973 (FDPA) rules covering
force-placed flood insurance govern.
Hazard insurance the borrower obtains and that you renew using escrow funds
(including funds you advance to escrow) per the escrow account provisions in
§ 1024.17(k)(5) or by advancing your own funds at your discretion if the borrower agrees.
(§ 1024.37(a)(2))
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8.5 What must I do before I charge a
borrower for force-placed insurance?
8.5.1 First notice and reminder notice
You must have a reasonable basis to believe that a borrower has failed to maintain required
hazard insurance to charge for force-placed insurance. As part of having a reasonable basis, you
must send 2 notices. You must deliver these notices to the borrower or place them in the mail.
In response to these notices, you must not have received evidence that the borrower had in
place, continuously, required hazard insurance.
The first notice must be sent at least 45 days before you charge the borrower for force-placed
insurance.
If you do not receive evidence that the borrower has had hazard insurance that complies with
the loan contract’s requirements continuously in place, you must deliver or place in the mail to
the borrower a written reminder notice at least 30 days after you sent the first notice. If you do
not receive evidence that the borrower has had in place required hazard insurance continuously
after the second notice, you may assess a force-placed insurance fee 15 days or more after
sending the second notice.
8.6 May I charge a borrower for insurance
placed before the notices have been
sent?
You may charge a borrower for insurance coverage that was in place before the notices were sent
if you do not receive evidence that the borrower had in place, continuously, required hazard
insurance during these periods, but you may not impose that charge until after the notices have
been sent and the notice periods specified in the rule have elapsed.
8.6.1 Renewal notice
Before each anniversary of your purchase of force-placed insurance, you must deliver or place in
the mail to the borrower a written notice explaining the renewal and requesting the borrower to
94 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
provide evidence of having purchased hazard insurance on the property. You only have to
provide this written renewal notice once a year. (§ 1024.37(e)(5)). In response to this notice,
you must not have received evidence that the borrower purchased required hazard insurance.
The written renewal notice generally must be delivered or mailed at least 45 days before
assessing on a borrower a charge or fee related to the renewal. (§ 1024.37(e)(1)(i))
If you renewed or replaced an existing force-placed insurance policy and you receive evidence
that the borrower lacked insurance coverage after the existing force-placed insurance expired
(including during the 45-day notice period), you may immediately after receiving such evidence
assess a premium charge or fee related to renewing or replacing the existing force-placed
insurance for that period without coverage—as long as not prohibited by state or other
applicable laws. (§ 1024.37(e)(1)(iii))
8.6.2 What class of postage must I use if I mail the notices?
(§ 1024.37(f))
When you mail notices, you must use at least first-class mail.
8.7 What must be in the force-placed
insurance notices?
The notices must have the content and format specified in the rule and demonstrated in the
model and sample forms.
Proper use of the forms will comply with both the content and format requirements of this rule.
(See Table 7 below for the content requirement and Table 8 on page 98 for the format
requirement.) The model forms may be filled out and used, while the sample forms
demonstrate the proper way to fill out the forms.
You may make certain changes to the format or content of the forms and clauses without losing
protection from liability so long as those changes do not affect the substance, clarity, or
meaningful sequence of the forms and clauses. (Comment appendix MS to part 1024-2)
For example, except as otherwise specifically required, acceptable changes include:
Use of “borrower” and “servicer” instead of pronouns.
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Substitution of the words “lender” and “servicer” for each other.
Addition of graphics or icons, such as the servicer’s corporate logo.
Modifications to remove language that could suggest liability under the mortgage loan
agreement if such language is not applicable. For example, in the case of a confirmed
successor in interest who has not assumed mortgage loan obligation under state law and
is not otherwise liable on the mortgage loan obligation, changes may include:
Use of “the mortgage loan” or “this mortgage loan” instead of “your mortgage loan”
and “the monthly payments” instead of “your monthly payments.”
Use of “Payments due on or after [Date] may be sent to” instead of “Send all
payments due on or after [Date] to” in notices of transfer.
Use of “We will charge the loan account” instead of “You must pay us” in notices
relating to force-placed insurance.
TABLE 7: CONTENT OF THE FORCE-PLACED INSURANCE DISCLOSURES
Content
First notice
(§ 1024.37(c)(2))
Reminder notice
(§ 1024.37(d)(2))
Renewal notice
(§ 1024.37(e)(2))
The date of the notice § 1024.37(c)(2)(i)
§ 1024.37(d)(2)(i)(A)
§ 1024.37(d)(2)(ii)(A)
§ 1024.37(e)(2)(i)
A statement that this is
the second and final
notice
§ 1024.37(d)(2)(i)(B)
§ 1024.37(d)(2)(ii)(B)
The servicer’s name and
mailing address
§ 1024.37(c)(2)(ii)
§ 1024.37(d)(2)(i)(C)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(ii)
The borrower’s name and
mailing address
§ 1024.37(c)(2)(iii)
§ 1024.37(d)(2)(i)(C)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(iii)
A request for the
borrower to provide
hazard insurance
information for the
property (and states the
property’s address)
§ 1024.37(c)(2)(iv)
§ 1024.37(d)(2)(i)(C)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(iv)
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Content
First notice
(§ 1024.37(c)(2))
Reminder notice
(§ 1024.37(d)(2))
Renewal notice
(§ 1024.37(e)(2))
A statement that the
servicer previously
purchased insurance,
charged to the borrower,
because the servicer did
not have evidence that
the borrower had required
hazard insurance on the
property
§ 1024.37(e)(2)(v)
A statement that, the
insurance the servicer
purchased previously has
expired or is expiring, and
because hazard
insurance is required the
servicer intends to
maintain insurance by
renewing or replacing the
insurance it previously
purchased
§ 1024.37(e)(2)(vi)
A statement that the
hazard insurance is
expiring, has expired, or
provides insufficient
coverage; a statement
that the servicer does not
have evidence of hazard
insurance that provides
sufficient coverage, as
applicable; and, a
statement that identifies
the type of hazard
insurance for which the
servicer lacks evidence of
coverage
§ 1024.37(c)(2)(v) § 1024.37(d)(2)(i)(C)
A statement that hazard
insurance is required and
the servicer has
purchased (will purchase)
such insurance at the
borrower’s expense
§ 1024.37(c)(2)(vi) § 1024.37(d)(2)(i)(C)
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Content
First notice
(§ 1024.37(c)(2))
Reminder notice
(§ 1024.37(d)(2))
Renewal notice
(§ 1024.37(e)(2))
A statement requesting
the borrower
to promptly provide the
servicer
with insurance
information
§ 1024.37(c)(2)(vii) § 1024.37(d)(2)(i)(C) § 1024.37(e)(2)(viii)
A description of the
requested insurance
information, and how the
borrower may provide
such information
§ 1024.37(c)(2)(viii) § 1024.37(d)(2)(i)(C) § 1024.37(e)(2)(ix)
A statement that the
insurance the servicer will
(has) purchase(d):
(i) may cost significantly
more and
(ii) may not provide as
much coverage as hazard
insurance purchased by
the borrower
§ 1024.37(c)(2)(ix)
§ 1024.37(d)(2)(i)(C)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(vii)(A)
to (B)
The servicer’s telephone
number for borrower
inquiries
§ 1024.37(c)(2)(x)
§ 1024.37(d)(2)(i)(C)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(ii)(x)
If applicable, a statement
advising the borrower to
review additional
information provided in
the same transmittal
§ 1024.37(c)(2)(xi)
§ 1024.37(d)(2)(i)(C)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(xi)
The cost of the force-
placed insurance, stated
as an annual premium (or
if the servicer does not
know the cost, a
reasonable estimate)
§ 1024.37(d)(2)(i)(D)
§ 1024.37(d)(2)(ii)(B)
§ 1024.37(e)(2)(vii)(C)
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Content
First notice
(§ 1024.37(c)(2))
Reminder notice
(§ 1024.37(d)(2))
Renewal notice
(§ 1024.37(e)(2))
If applicable, a statement
that the information the
borrower sent to the
servicer is incomplete
and the borrower must
send the missing
information to avoid
charge for any period for
which the servicer is
unable to verify hazard
insurance coverage
§ 1024.37(d)(2)(ii)(C)
to (E)
TABLE 8: AT A GLANCE: FORCE-PLACED INSURANCE DISCLOSURES PRESENTATION
Item
First notice
(§ 1024.37(c)(1))
Reminder notice
(§ 1024.37(d)(1))
Renewal notice
(§ 1024.37(e)(1))
Timing
At least 45 days
before you assess a
force-placed
insurance fee
At least 30 days after the
first notice, at least 15 days
before assessing a force-
placed insurance fee
Before each anniversary
of your purchase of
force-placed insurance,
and generally at least 45
days before assessing
on a borrower fee
related to the renewal,
but not more than once
annually
Content § 1024.37(c)(2) § 1024.37(d)(2) § 1024.37(e)(2)
Format § 1024.37(c)(3) § 1024.37(d)(3) § 1024.37(e)(3)
Forms Appendix MS-3(A) Appendix MS-3(B) to (C) Appendix MS-3(D)
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Item
First notice
(§ 1024.37(c)(1))
Reminder notice
(§ 1024.37(d)(1))
Renewal notice
(§ 1024.37(e)(1))
Additional
information
Except for the
mortgage loan
account number, you
may not include any
information other
than the required
information in the
notice. If you want to
include additional
information, put it on
a separate piece of
paper in the same
transmittal.
(§ 1024.37(c)(4))
Except for the mortgage
loan account number, you
may not include any
information other than the
required information in the
notice. If you want to
include additional
information, put it on a
separate piece of paper in
the same transmittal.
(§ 1024.37(d)(4))
Except for the mortgage
loan account number,
you may not include any
information other than
the required information
in the notice. If you
want to include
additional information,
put it on a separate
piece of paper in the
same transmittal.
(§ 1024.37(e)(4))
Note
If you receive new
information about the
borrower’s hazard
insurance after you put the
reminder notice into
production, you are not
required to update the
notice based on the new
information provided the
notice was put into
production a reasonable
time prior to mailing it to the
borrower. A reasonable
time is five days or less
(excluding legal holidays,
Saturdays, and Sundays).
(§ 1024.37(d)(5) and
comment 37(d)(5)-1)
You are not required to
provide this notice more
than once a year.
In assessing whether the borrower has had
hazard insurance that complies with the loan’s
contract requirements continuously in place,
check to make sure that applicable law, such as
state law or the terms and conditions of the
The content of your reminder notice will vary
based on the insurance information you
receive from the borrower. See
comment 37(d)(1)-1 for more information.
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borrower’s insurance policy, do not give the borrower a grace period or extension of time to pay
the premium after the due date.
If there is a grace period and the borrower pays the premium during the extension and the
insurance company accepts the payment with no lapse in insurance coverage, then that satisfies
the requirement to have continuous hazard insurance coverage. (Comment 37(c)(1)(iii)-1)
8.7.1 Can I combine the notices required by these rules with
the notices for flood insurance? (§ 1024.37(i))
You may include your notices for force-placed insurance in the same transmittal as your notices
concerning flood insurance, as long as you use separate pieces of paper. (See also Section 102(e)
of the Flood Disaster Protection Act of 1973.)
8.8 What evidence may I request from
borrowers showing they have had
continuous hazard insurance coverage?
(Comment 37(c)(1)(iii)-2)
You may ask the borrower to supply a copy of:
The borrower’s hazard insurance policy declaration page
The borrower’s insurance certificate
The borrower’s insurance policy or similar forms of written confirmation of insurance
You may reject evidence of hazard insurance coverage submitted by the borrower if:
Neither the borrower’s insurance provider nor insurance agent provides confirmation of
the information the borrower submitted.
The terms and conditions of the borrower’s hazard insurance policy do not comply with
the requirements of the borrower’s loan contract.
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8.9 What do I do when the borrower
responds?
8.9.1 If the borrower sends evidence that he or she has
hazard insurance coverage
If the borrower sends evidence of having hazard insurance coverage in place that
complies with the loan contract’s requirements, within 15 days you must:
Cancel any force-placed insurance you purchased for the borrower (§ 1024.37(g)(1))
Refund to the borrower all force-placed insurance premium charges and related fees for
any period of overlapping insurance coverage (§ 1024.37(g)(2))
Remove from the borrower’s account all force-placed insurance charges and related fees
for the overlapping period (§ 1024.37(g)(2))
If the borrower does not respond or does not provide evidence of having hazard
insurance, and you do not otherwise have such evidence, you may charge the borrower for
force-placed insurance 15 days after sending the second notice.
8.10 What are the limitations on charges?
(§ 1024.37(h)(1) and (h)(2))
Except for charges subject to state regulation as the business of insurance and charges
authorized by the Flood Disaster Protection Act of 1973, all charges related to force-placed
insurance assessed by or through the servicer must be “bona fide and reasonable.”
A “bona fide and reasonable” charge is a charge for a service you actually perform that bears a
reasonable relationship to your cost to provide the service, and is not otherwise prohibited by
applicable law. (§ 1024.37(h)(2))
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8.11 What additional rules apply for
borrowers with escrow accounts for
payment of hazard insurance?
(§ 1024.17(k)(5))
If a borrower has an escrow account for payment of hazard insurance, you may not obtain force-
placed insurance unless you are unable to maintain the borrower’s existing hazard insurance
coverage.
You are not considered unable to maintain the borrower’s hazard insurance just because a
borrower’s mortgage loan obligation is overdue or the escrow account has insufficient funds.
Therefore, generally, you will have to advance funds through escrow to maintain coverage. You
can add this cost to the escrow balance or otherwise seek reimbursement from the borrower for
the funds you advance.
You are considered unable to maintain the
borrower’s hazard insurance, and may therefore
obtain force-placed insurance in accordance
with the general rules rather than advance funds
through escrow, if you have a reasonable basis to
believe either that the hazard insurance provider
has canceled the policy for reasons other than
non-payment or that the property is vacant.
When a delinquent borrower’s escrow
account has insufficient funds to cover
payment of the borrower’s hazard insurance
premium, generally, you will have to advance
the funds through escrow to continue
coverage.
8.12 What is the small servicer exemption
from the escrow provisions?
(§ 1024.17(k)(5)(iii))
A small servicer may purchase force-placed insurance for a borrower with an escrow account
whose mortgage loan obligation is more than 30 days overdue, if the cost of the force-placed
insurance to the borrower is less than the amount the small servicer would need to disburse
from the borrower’s escrow account to pay the borrower’s hazard insurance premium.
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9. Error Resolution and
Information Requests
9.1 What do the error resolution and
information request rules require?
The error resolution and information request provisions of the Mortgage Servicing Rules
establish requirements for responding to written information requests and complaints of errors.
You must follow these requirements for complaints asserting specific errors, as well as any
errors relating to servicing the borrower’s mortgage loan and when responding to requests for
information regarding a borrower’s mortgage loan.
In general, when borrowers send a written request asking you to resolve an error or to send
information about their account, you must:
Within 5 days, acknowledge the request for information or notice of error.
Within 30 to 45 days, correct the error and provide the borrower written notification of
the correction, or conduct an investigation and provide the borrower written notification
that no error occurred.
Within 30 to 45 days, provide the information or conduct a reasonable search for the
requested information and provide the borrower with a written notification explaining
why the information is not available.
Note: Some information requests and error resolution types require a shorter response time.
(See “What is the timeline for responding to borrowers who send notices of errors?” in Section
9.10 and “What is the timeline for responding to borrowers who request information?” in
Section 9.12.)
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9.2 What is the scope of the error resolution
and information request rules?
The rule applies to federally related mortgage loans (as defined in § 1024.2(b)) except for the
exemptions in § 1024.5(b) and open-end lines of credit.
Thus, these rules do not apply to HELOCs and open-end lines of credit.
Servicers that are debt collectors under the FDCPA to whom a borrower has sent a written cease
communication request must still comply with the error resolution and information request
rules, unless the borrower specifically withdraws the request for the error resolution or
information. (See CFPB Bulletin 2013-12
for additional details.)
9.3 Is there a small servicer exemption to the
error resolution and information request
rules?
No, there is no small servicer exemption to the rules on error resolution or information requests.
9.4 How is this different from the
requirements for Qualified Written
Requests?
The error resolution and information request requirements expand on (and encompass) the
qualified written request requirements.
9.5 What is a notice of error? (§ 1024.35(a))
The rules apply generally to any written notice from the borrower that asserts certain specified
errors and includes:
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The name of the borrower
Information that enables you to identify the borrower’s mortgage loan account
The error the borrower believes has occurred
A notice on a payment coupon or other payment form is not considered a notice of error.
A qualified written request that asserts an error relating to the servicing of a mortgage loan is a
notice of error. (§ 1024.35(a))
The error resolution rules apply to the following categories of errors:
Failure to accept a payment that conforms to any written requirements that the borrower
must follow in making payments. (See “What is a non-conforming payment, and how
must I handle it?” in Section 7.6.)
Failure to apply an accepted payment to principal, interest, escrow, or other charges
under the terms of the mortgage loan and applicable law.
Failure to credit a payment to a borrower’s mortgage loan account as of the date of
receipt, in violation of the prompt crediting provisions in § 1026.36(c)(1).
Failure to pay taxes, insurance premiums, or other charges, including charges that the
borrower has voluntarily agreed that you should collect and pay, in a timely manner as
required by the escrow provisions (§ 1024.34(a)), or to refund an escrow account balance
as required (§ 1024.34(b)).
Imposition of a fee or charge that you lack a reasonable basis to impose upon the
borrower, which includes, for example, a late fee for a payment that was not late, a
charge you imposed for a service that was not provided, a default property-management
fee for borrowers who are not in a delinquency status that would justify the charge, or a
charge for force-placed insurance in a circumstance not permitted by the force-placed
insurance provisions. (§ 1024.37). (See Section 8 for more on force-placed insurance.)
Failure to provide an accurate payoff balance amount upon a borrower’s request within 7
days in violation of § 1026.36(c)(3). (See Section 7 for more on prompt payment
crediting and payoff statements.)
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Failure to provide accurate information to a borrower regarding loss mitigation options
and foreclosure, as required by the early intervention provisions of this rule.
(§ 1024.39). (See Section 11 for more on early intervention.)
Failure to transfer accurately and timely information relating to the servicing of a
borrower’s mortgage loan account to a transferee servicer.
Making the first notice or filing required by applicable law for any judicial or non-judicial
foreclosure process in violation of the loss mitigation procedures of this rule.
(§ 1024.41(f) or (j)). (See Section 13 for more on loss mitigation.)
Moving for foreclosure judgment or order of sale, or conducting a foreclosure sale in
violation of the loss mitigation procedures of this rule. (§ 1024.41(g) or (j)). (See Section
13 for more on loss mitigation.)
Any other error relating to the servicing of a borrower’s mortgage loan. Note that
“servicing” is defined in § 1024.2(b).
(§ 1024.35(b))
You do not have to acknowledge or follow the response provisions of this rule for errors that are
outside the scope of the above list, although you may want to do so as a matter of customer
service. For example, the rule would not cover an error related to:
The origination of a mortgage loan
The underwriting of a mortgage loan
A subsequent sale or securitization of a mortgage loan
A determination to sell, assign, or transfer the servicing of a mortgage loan
(Comment 35(b)-1)
Note that an error relating to the failure to transfer accurate and timely information relating to
the servicing of a borrower’s mortgage loan account to a transferee servicer is a covered error.
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9.6 What is an information request?
(§ 1024.36(a))
This rule applies generally to any written request for information from a borrower relating to the
servicing of a mortgage loan that includes:
The name of the borrower.
Information that enables the servicer to identify the borrower’s mortgage loan account.
A statement of the information the borrower is requesting with respect to a mortgage
loan.
A notice on a payment coupon or other payment form is not considered a request for
information.
A request for a payoff balance is not considered a request for information.
A qualified written request that requests information relating to the servicing of the mortgage
loan is a request for information subject to the provisions of this rule. “Servicing” is defined in
§ 1024.2(b).
9.6.1 Must I distinguish between an information request and
an error notice?
Some borrowers will describe their communication as a request for information when they are
asking you to correct a purported error or vice versa. You should not rely solely on their
description of a submission to determine whether the submission constitutes a notice of error,
an information request, or both.
For example, a borrower may submit a letter that claims to be a “notice of error” when the
borrower is asking to receive the information set forth in an annual escrow account statement
and also asserts that you made an error by failing to provide an annual escrow statement. This
letter may constitute an information request that triggers an obligation for you to provide an
annual escrow statement. You should not rely on the borrower’s characterization of the letter as
a “notice of error.” Instead, you must evaluate whether the letter fulfills the substantive
requirements of a notice of error, information request, or both. (Comment 35(a)-2)
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9.7 Are there situations that do not trigger the
error resolution or information request
response procedures? (§§ 1024.35(g)
and 36(f))
Yes, there are several situations that do not trigger the error resolution or information request
procedures.
If you determine that for any of the reasons listed below, you are not required to comply with the
error resolution or information request requirements, you must notify the borrower in writing of
your determination no later than 5 days (excluding legal public holidays, Saturdays, and
Sundays) after making your determination. The notice must explain the basis upon which you
made the determination. (§§ 1024.35(g)(2) and 36(f)(2))
The following situations do not trigger the error resolution/information request procedures:
9.7.1 Duplicative notice of error or information requests
(§§ 1024.35(g)(1)(i) and 36(f)(1)(i))
If the asserted error or information request is substantially the same as one the borrower
previously asserted, and you have already complied with the requirements to respond to the
earlier notice of error or request, the new notice of error or request does not trigger the error
resolution or information request procedures.
However, if a resubmitted notice of error
contains new and material information to
support the asserted error, the exception for
duplicative notices of error does not apply.
“New and material information” is information
you did not review in your prior investigation of the same error and is reasonably likely to
change your prior determination about the error. (§§ 1024.35(g)(1)(i) and 36(f)(1)(i))
A borrower’s statement that the borrower disagrees with your determination does not constitute
new or material information, nor do you have to re-open the dispute simply because the
borrower disagrees. (Comment 35(g)(1)(i)-1)
The exemption for duplicative notices of
error does not apply when a different
borrower previously requested the
information.
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9.7.2 Overbroad or unduly burdensome request for
information (§ 1024.36(f)(1)(iv))
An information request is overbroad or unduly burdensome if:
The borrower asks you to provide an unreasonable volume of documents or information.
A diligent servicer could not respond to the request without exceeding the time limit to respond
to information requests (See “What is the timeline for responding to borrowers who request
information?” in Section 9.12) or incurring costs that would be unreasonable in light of the
circumstances.
If you can identify a valid information request in a submission that is otherwise overbroad or
unduly burdensome, you must respond in accordance with the rule with respect to that
requested information.
9.7.3 Overbroad notice of error (§ 1024.35(g)(ii))
A notice of error is overbroad if you cannot reasonably determine the specific error that the
borrower asserts has occurred.
To the extent you can reasonably identify a valid assertion of an error in a notice of error that is
otherwise overbroad, you must follow the error resolution requirements with respect to that
asserted error.
Examples of error assertions that are overbroad include:
An assertion that you have made errors in all aspects of the loan including origination,
servicing, and foreclosure, including errors relating to substantially every borrower
payment and escrow account transaction
Assertions in the form of a judicial action complaint, subpoena, or discovery request that
purports to require you to respond to each numbered paragraph
Incomprehensible requests that are not reasonably understandable
Assertions that include voluminous tangential discussion or requests for so much
information that you cannot reasonably identify from the notice any error that the notice
of error provisions requires you to correct
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(Comment 35(g)(1)(ii)-1)
9.7.4 Untimely notices of error or information requests
(§§ 1024.35(g)(1)(iii) and 36(f)(1)(v))
A notice of error or information request is untimely if it is delivered to you more than one year
after:
You transfer the loan in question.
The mortgage loan is “discharged,” which means the debt and all corresponding liens
have been extinguished or released.
9.7.5 Confidential, proprietary, or privileged information
(§ 1024.36(f)(1)(ii))
You are not required to provide documents relied upon that constitute confidential, proprietary,
or privileged information.
9.7.6 Irrelevant requests for information (§ 1024.36(f)(1)(iii))
You are not required to provide irrelevant
information requested by a borrower.
Information is irrelevant if it is not directly
related to the borrower’s mortgage loan account.
You must treat the error notice or
information request submitted by an agent of
the borrower as though it came directly from
the borrower. You may find it useful to set
up a procedure to verify that a borrower has
authorized a person claiming to be an agent
of the borrower to act on his or her behalf.
(Comments 35(a)-1 and 36(a)-1)
9.8 Can I designate addresses for notices of
error or requests for information?
You may set up an address for borrowers to use to submit notices of errors and requests for
information, as long as you provide borrowers with written notice of the address. The notice
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shall include a statement that the borrower must use the established address to assert an error
or request information.
If you designate a specific address for receiving notices of error, you must use the same address
for receiving information requests. Before you change the designated address, you must send a
written notice to the borrower. You must post the designated address on any websites you
maintain that contain your contact address. (§§ 1024.35(c),1024.36(b), and 1024.36(i)(4))
9.8.1 Exclusive, designated address not required
You are not required to designate a specific address that borrowers must use to assert an error
or request information. If you do not designate a specific address, you must respond to a notice
of error or an information request received by any of your offices. (Comments 35(c)-1 and
36(b)-1)
9.8.2 Notice of exclusive, designated address
You may send the notice establishing the designated address with a different disclosure, such as
on a notice of transfer, periodic statement, or coupon book. The notice must be clear and
conspicuous, in writing, and in a form the borrowers can keep. (§ 1024.32(a)(1)). You must
include the designated address in the following contexts:
The written notice you send designating the specific address
Periodic statements or coupon books you send to borrowers
Any website you maintain in connection with servicing the loan
Any notice you are required to send under §§ 1024.39 or 1024.41 that includes contact
information for assistance
(Comments 35(c)-2 and 36(b)-2)
9.8.3 Multiple offices
You may designate multiple office addresses for receiving notices of errors or requests for
information. If you choose to do that, you must respond to all notices of error and requests for
information that come to any of your multiple offices.
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For example, suppose you designate a California address to receive notices of error or
information requests for California borrowers and another address to receive notices of errors or
information requests for Texas borrowers. If a Texas borrower sends an error notice or
information request to your California address, you are considered to have received the notice of
error or information request and must comply with the error resolution or information request
provisions of the Mortgage Servicing Rules with respect to the notice or request, as applicable.
(Comments 35(c)-3 and 36(b)-3)
9.8.4 Internet intake
If you wish, you may set up a process to receive notices of error or information requests through
email, a website form, or other online intake methods. Even if you have an online intake
process, you still have to offer borrowers the option of submitting notices of error and
information requests by mail.
Whatever online process you establish will be considered your exclusive online process. You are
not required to send a notice regarding the online process in order to establish it as your
exclusive online process. (Comments 35(c)-4 and 36(b)-4)
9.9 What must I do if I receive a notice of
error?
Generally, when you receive a written notice of error, you must provide the borrower a written
response acknowledging receipt within 5 days (excluding legal public holidays, Saturdays, and
Sundays). Then, not later than 30 days (excluding legal public holidays, Saturdays, and
Sundays) after receipt of the notice of error, either correct the errors and provide the borrower
with written notice of the correction, or conduct a reasonable investigation and provide the
borrower with written notice that no error occurred. (§ 1024.35(d) and (e))
9.9.1 Responding to borrowers
Generally, a servicer must share its response to a notice of error with the borrower within the
time frame discussed in “What is the timeline for responding to borrowers who send notices of
errors?” in Section 9.10.
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If you correct an error, send the borrower a written notification explaining:
The correction you made
The effective date of the correction
Your contact information, including a telephone number, for further assistance
If you determine after a reasonable investigation that no error occurred, send the borrower a
written notification explaining:
That no error occurred
The reason or reasons for your determination
A statement of the borrower’s right to request the documents you relied upon to reach
your determination and information regarding how the borrower can request such
documents
Your contact information, including a telephone number, for further assistance
9.9.2 What type of documents do I have to provide when I
deny that an error occurred?
If a borrower requests the documents you relied upon to determine that no error occurred, you
are required to respond to this request within 15 days. (§ 1024.35(e)(4)). You must provide only
the documents you actually relied upon to determine that no error occurred, including
documents reflecting information entered in your collection system. (Comment 35(e)(4)-1)
For example, if a borrower asserts you made a payment allocation error, you may provide a
printed screen-capture showing amounts your servicing system credited to the borrower’s
account for principal, interest, escrow, or other charges.
In two specific scenarios, you may omit location, contact, and personal financial information
(e.g., a borrower’s Social Security number) from the documents you actually relied upon to
determine that no error occurred: (1) if the information pertains to a potential or confirmed
successor in interest who is not the requester, or (2) if the requester is a confirmed successor in
interest and the information pertains to any borrower who is not the requester.
(§ 1024.35(e)(5)). In either scenario, however, you may never omit information about the
terms, status, and payment history of the mortgage loan. (§ 1024.35(e)(5))
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See “May I omit borrower information from documents that are shared with a confirmed
successor in interest in responding to an information request or a notice of error request for
documentation?” in Section 4.7.9 for additional information.
9.9.3 What must I do when borrowers assert multiple errors
or send multiple notices of errors or I discover more
errors during my investigation?
When a borrower sends a notice that alleges multiple errors, you may send a single response or
separate responses that address each asserted error. (Comment 35(e)(1)(i)-1)
If you discover different or additional errors, you must correct such errors and provide written
notification of the correction to the borrower. You may provide this written notice either in the
same notice you send in response to the initial notice of error or in a separate response.
(Comment 35(e)(1)(ii)-1)
When notifying borrowers that you found a different or additional error during your
investigation, include a description of:
The errors you identified;
The action you took to correct the errors;
The effective date of the correction; and
Your contact information, including a telephone number, for further assistance.
(§ 1024.35(e)(1)(ii))
You may request supporting documentation from a borrower in connection with the
investigation of an asserted error, but you may not:
Require the borrower to provide the information as a condition of investigating an
asserted error; or
Determine that no error occurred simply because the borrower failed to provide the
information you requested. You must still conduct a reasonable investigation even when
you do not get the requested information.
(§ 1024.35(e)(2))
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9.10 What is the timeline for responding to
borrowers who send notices of errors?
You must either correct the error asserted by the borrower and inform the borrower of the
correction or conduct a reasonable investigation and inform the borrower that no error
occurred:
Not later than 7 days (excluding legal public holidays, Saturdays, and Sundays) after you
receive a notice of error asserting a failure to provide an accurate payoff balance amount
in violation of § 1026.36(c)(3); (§ 1024.35(e)(3)(i)(A))
Prior to the date of a foreclosure sale or within 30 days (excluding legal public holidays,
Saturdays, and Sundays), whichever is earlier, after you receive a notice of error
asserting that you improperly made the first foreclosure notice or filing, or moved for
foreclosure judgment or order of sale, or conducted a foreclosure sale in violation of the
Bureau’s rules on loss mitigation procedures (§ 1024.35(e)(3)(i)(B)). Note: If you cannot
investigate, correct, or respond to a borrower who asserts this error by the earlier of a
foreclosure sale or 30 days after receipt of the error notice, you may cancel or postpone a
foreclosure sale to meet the deadline; (Comment 35(e)(3)(i)(B)-1)
For all other errors, not later than 30 days (excluding legal public holidays, Saturdays,
and Sundays) after you receive the notice of error. (§ 1024.35(e)(3)(i)(C))
9.10.1 May I extend the time limit to respond to notices of
errors?
For errors other than those related to payoff statements or the foreclosure process, you may
extend the time period for responding by an additional 15 days (excluding legal public holidays,
Saturdays, and Sundays) if, before the end of the 30-day period after receipt of the notice of
error, you notify the borrower in writing of the extension and the reasons for the extension.
(§ 1024.35(e)(3)(ii))
If the original notice of error alleges multiple errors, you may treat each asserted error as a
separate notice of error and extend the time period for responding to each separate asserted
error for which an extension is permissible (i.e., those that do not relate to payoff statements or
the foreclosure process as described above). (Comment 35(e)(3)(ii)-1)
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9.10.2 If I correct an error within 5 days, can I send a notice
of correction instead of the acknowledgment?
If you correct an error and notify the borrower in writing of the correction within 5 days
(excluding legal public holidays, Saturdays, and Sundays), you do not also have to send the
acknowledgment. (§ 1024.35(f)(1))
9.10.3 What must I do when a borrower asserts an error
shortly before a scheduled foreclosure sale?
You are not required to acknowledge and respond to notices of error related to foreclosure if you
receive the error notice 7 or fewer days before a foreclosure sale. However, you must make a
good faith attempt to respond to the borrower, orally or in writing, and either correct the error
or state the reason you have determined that no error has occurred. (§ 1024.35(f)(2))
9.11 What must I do when I receive an
information request?
Generally, when you receive an information request, you must provide the borrower a written
response acknowledging receipt within 5 days (excluding legal public holidays, Saturdays, and
Sundays). Then, not later than 30 days (excluding legal public holidays, Saturdays, and
Sundays) after receipt of the notice, either provide the information requested or conduct a
reasonable search for the information and provide the borrower with a written notice that the
information is not available. (§ 1024.36(d) and (e))
If you can provide the information, share it in writing within the time frames discussed in “What
is the timeline for responding to borrowers who request information?” in Section 9.12. Include
your contact information and a telephone number for further assistance. (§ 1024.36(d)(1)(i))
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9.11.1 What contact information must I provide when
complying with an information request for the owner or
assignee of a mortgage loan?
When you receive a request for information and the loan is held in a trust for which an
appointed trustee receives payments on behalf of the trust, you comply with § 1024.36(d) by
responding to the borrower’s request with the following information, as applicable:
For any request for information where the Federal National Mortgage Association
(Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) is not
the owner of the loan or the trustee of the securitization trust in which the loan
is held, you must provide the name of the trust, and the name, address, and
appropriate contact information for the trustee.
If the request for information did expressly request the name or number of the trust or
pool, and Fannie Mae or Freddie Mac is the owner of the loan or the trustee of
the securitization trust in which the loan is held, you must provide the name of the
trust, and the name, address, and appropriate contact information for the trustee.
If the request for information did not expressly request the name or number of the
trust or pool, and Fannie Mae or Freddie Mac is the owner of the loan or the
trustee of the securitization trust in which the loan is held, you must provide the
name and contact information for Fannie Mae or Freddie Mac, as applicable, without
also providing the name of the trust.
(Comment 36(a)-2.ii)
If, however, a loan is not held in a trust for which an appointed trustee receives payments on
behalf of the trust, you comply with § 1024.36(d) by responding to a request for information
regarding the owner or assignee of a mortgage loan by identifying the person on whose behalf
the servicer receives payments from the borrower. (Comment 36(a)-2.i)
You, the servicer, are not the owner or assignee for purposes of § 1024.36(d) if you hold the title
to the loan, or title is assigned to you, solely for the administrative convenience in servicing the
mortgage loan obligation. (Comment 36(a)-2.i)
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The Government National Mortgage Association is not the owner or assignee for purposes of a
request for information under § 1024.36(d) solely as a result of its role as the guarantor of the
security in which the loan serves as the collateral. (Comment 36(a)-2.i)
9.11.2 What if I do not maintain the type of information
requested?
You are not required to provide information that is not available to you. Information is not
available if it is not in your control or possession, or you cannot retrieve it in the ordinary course
of business through reasonable efforts. (Comment 36(d)(1)(ii)-1)
Here are some examples:
A borrower requests a copy of a telephonic communication with your staff. Your
personnel have access in the ordinary course of business to audio recording files with
organized recordings or transcripts of borrower telephone calls and can identify the
communication referred to by the borrower through reasonable business efforts. The
information requested by the borrower is available to you, so you must share it.
A borrower requests information stored on electronic backup media that is not accessible
to your personnel in the ordinary course of business without undertaking extraordinary
efforts to identify and restore the information from the electronic backup media. The
information the borrower is requesting is not available to you, so you need not share it.
A borrower requests information stored at an off-site document storage facility. You
have the right to access documents at the off-site document storage facility, and your
personnel can access those documents through reasonable efforts in the ordinary course
of business. The information requested by the borrower is available to you, assuming
that the information can be found within the off-site documents with reasonable efforts.
(Comment 36(d)(1)(ii)-2)
If you determine that the information is not available to you after conducting a reasonable
search, send the borrower written notification stating that you have determined the requested
information is not available. Provide the basis for your determination and your contact
information, including a telephone number, for further assistance. (§ 1024.36(d)(1)(ii))
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9.11.3 What if one confirmed successor in interest requests
information about another borrower, or a borrower
requests information about a potential or confirmed
successor in interest who is not the requester?
(§ 1024.36(d)(3))
See “May I omit borrower information from documents that are shared with a confirmed
successor in interest in responding to an information request or a notice of error request for
documentation?” in Section 4.7.9.
9.12 What is the timeline for responding to
borrowers who request information?
How long you have to respond depends upon the information requested. In general, you must
respond not later than 30 days (excluding legal public holidays, Saturdays, and Sundays) after
you receive the information request. (§ 1024.36(d)(2)(i)(B))
However, when you receive an information request for the identity of, and address or other
relevant contact information for, the owner or assignee of a mortgage loan, you must respond to
the borrower not later than 10 days (excluding legal public holidays, Saturdays, and Sundays)
after you receive the request. (§ 1024.36(d)(2)(i)(A))
9.12.1 May I extend the time limit for responding to
information requests?
For requests for information other than those requesting contact information for the owner or
assignee, you may extend the time period for responding by an additional 15 days (excluding
legal public holidays, Saturdays, and Sundays) if, before the end of the 30-day period, you notify
the borrower in writing of the extension and the reasons for the extension. (§ 1024.36(d)(2)(ii))
9.12.2 If I provide the information requested within 5 days, do
I need to send an acknowledgment?
If you provide the information requested and contact information, including a telephone
number for further assistance, in writing, within 5 days (excluding legal public holidays,
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Saturdays, and Sundays) of receiving an information request, you do not also need to send the
acknowledgment. (§ 1024.36(e))
9.13 May I charge borrowers a fee for
responding to notices of errors or
requests for information?
You generally may not charge fees for responding to notices of errors or information requests,
and you may not require a borrower to make any payment owed to you as a condition for
providing a response. You may charge a fee for certain limited types of information, such as
payoff statements (because a request for a payoff balance is not an information request) or state
law beneficiary notices. (§§ 1024.35(h), 1024.36(a), and 1024.36(g))
Note that this does not alter or otherwise affect the borrower’s obligation to make the payments
owed. For example, if the borrower makes a monthly payment in February, but asserts an error
relating to your acceptance of the February payment, the borrower must still make the March
payment. However, you may not require the borrower to make the March monthly payment as a
condition of responding to the notice of error. (Comment 35(h)-1)
9.14 How do error notices and information
requests affect collections and credit
reporting? (§ 1024.35(i)(1) to (2))
Generally, nothing in the error resolution and information request provisions of the rule limits
or restricts you from pursuing any remedy you have under applicable law, including initiating
foreclosure or proceeding with a foreclosure sale.
However, as discussed above, certain timely notices of error regarding the foreclosure process
must be resolved before a foreclosure sale may proceed. (§§ 1024.35(i) and 36(h))
Also, for 60 days after receipt of a notice of error, you may not furnish adverse information to
any borrower reporting agency regarding any payment that is the subject of the notice of error.
(§ 1024.35(i)). This prohibition does not apply to requests for information.
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10. General Servicing Policies,
Procedures, and
Requirements
10.1 What does the general servicing
policies, procedures, and requirements
rule require?
The rule requires you to establish policies and procedures reasonably designed to achieve the
following objectives, which are described in more detail in “What objectives must I design my
policies and procedures to achieve?” in Section 10.4:
Accessing and providing timely and accurate information;
Properly evaluating loss mitigation applications;
Facilitating oversight of, and compliance by, service providers;
Promptly facilitating the transfer of information during servicing transfers;
Informing borrowers of the written error resolution and information request procedures;
and
Promptly facilitating communication with potential and confirmed successors in interest
and confirming a successor in interest’s identity and ownership interest.
Additionally, the rule sets standards for:
Record retention; and
Servicing file creation.
You may determine the best policies, procedures, and methods for your organization so long as
they are reasonably designed to achieve the objectives set forth in the general servicing policies,
procedures, and requirements provisions of the Mortgage Servicing Rules.
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The rule provides that you have flexibility to set policies, procedures, and methods in light of the
size, nature, and scope of your operations, including, for example, the volume and aggregate
unpaid principal balance of the mortgage loans you service, the credit quality (including the
default risk) of the mortgage loans you service, and your history of borrower complaints.
10.2 What is the scope of the general
servicing policies, procedures, and
requirements rule?
The rules apply to federally related mortgage loans (as defined in § 1024.2(b)) except for the
exemptions in § 1024.5(b), the exemptions in § 1024.30(b), and open-end lines of credit.
Thus, these rules do not apply to:
HELOCs and open-end lines of credit;
Small servicers;
Reverse mortgage transactions; and
Loans for which the servicer is a qualified lender under the Farm Credit Act of 1971.
10.3 Is there a small servicer exemption to
the general servicing policies,
procedures, and requirements rule?
Yes, there is a small servicer exemption. Small servicers are exempt from all requirements of the
provisions on general servicing policies, procedures, and requirements.
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10.4 What objectives must I design my
policies and procedures to achieve?
Your policies and procedures must be reasonably designed to achieve the following goals:
10.4.1 Accessing and providing timely and accurate
information (§ 1024.38(b)(1))
To meet the objective of accessing and providing timely and accurate information, your policies
and procedures must be reasonably designed to ensure that you can:
Provide accurate disclosures to borrowers within the correct timeframes.
Investigate, respond to, and when needed, make corrections in response to borrower
complaints. (See Section 9 for more on error resolutions.)
Respond to borrowers’ requests for information regarding their mortgage loans with
accurate and timely information. (See Section 9 for more on information requests.)
Provide owners or assignees with accurate and current information and documents
about mortgage loans you service for them, including detailed information about loss
mitigation actions.
Submit documents or filings required for a foreclosure process, including those required
by a court of competent jurisdiction, that reflect accurate and current information and
comply with applicable law.
Upon receiving notice of a borrower’s death or of any transfer of the property securing a
mortgage loan, promptly facilitate communication with any potential or confirmed
successors in interest regarding the property.
Upon receiving notice of the existence of a potential successor in interest, promptly
determine the documents you reasonably require to confirm the person’s identity and
ownership interest in the property, provide a description of those documents, and notify
the person how to submit a written request for information about the documents
required for confirmation (including the appropriate address).
Upon the receipt of such documents, promptly make a confirmation determination and
notify the person, as applicable, that you have confirmed the person’s status, have
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determined that additional documents are required (and what those documents are), or
have determined that the person is not a successor in interest.
10.4.2 Properly evaluating loss mitigation applications
(§ 1024.38(b)(2))
To meet the objective of properly evaluating loss mitigation applications, your policies and
procedures must be reasonably designed to ensure that you can:
Provide accurate information to the borrower regarding loss mitigation options that the
owner or assignee makes available.
Identify with specificity all loss mitigation options for which borrowers may be eligible.
Provide personnel assigned to manage delinquent borrowers with prompt access to all
loss mitigation documents and information borrowers submit. (See Section 12 for
continuity of contact.)
Identify documents and information that
a borrower must submit to apply for loss
mitigation and facilitate compliance with
the requirement to notify borrowers
whether a loss mitigation application is
complete or incomplete, and how to
complete an incomplete application.
(§ 1024.41(b)(2)(i)(B)) (See Section 13
for more on loss mitigation.)
Properly evaluate borrowers’ loss mitigation applications based on all the options
available to them and in accordance with the loss mitigation rules.
Promptly identify and obtain documents or information not in the borrower’s control
that the servicer requires to determine which loss mitigation options, if any, to offer the
borrower in accordance with the requirements of § 1024.41(c)(4).
In your policies and procedures to identify all
the loss mitigation options available for the
mortgage loans you service, address how you
will identify all of the borrowers’ options, the
criteria you will apply when evaluating those
options, and how you will apply specific
eligibility thresholds.
S
o, for example, if an assignee requires that you only make a particular loss mitigation option
available to a certain percentage of the loans you service, then your procedures must be
reasonably designed to determine in advance how you will apply that threshold to those
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mortgage loans. You will also need to ensure that this information is accessible to the personnel
assigned to manage delinquent borrowers. (Comment 38(b)(2)(ii)-1)
10.4.3 Facilitating oversight of, and compliance by, service
providers (§ 1024.38(b)(3))
To meet the objective of facilitating oversight of, and compliance by, service providers, your
policies and procedures must be reasonably designed to ensure that you can:
Provide servicing personnel (your own and those working for your service providers)
with access to accurate and current
documents and information reflecting
your service providers’ actions.
Facilitate periodic reviews of your service
providers, including by providing your
personnel with documents and
information they need to audit your
service providers’ compliance with their
contractual obligations and applicable
law.
Share accurate and current information
about borrowers’ loss mitigation
applications and the status of any
foreclosure proceeding among appropriate servicer personnel and service provider
personnel, including personnel assigned to manage delinquent borrowers and those
handling foreclosure proceedings.
Your policies and procedures must be
reasonably designed to ensure that you can
promptly inform service provider personnel
handling the foreclosure proceedings that
you have received a complete loss mitigation
application. In addition, your policies and
procedures must promptly instruct
foreclosure counsel to take any step required
by § 1024.41(g) to sufficiently and timely to
avoid violating the prohibition against
moving for judgment or order of sale, or
conducting a foreclosure sale.
(Comment 38(b)(3)-1)
10.4.4 Facilitating transfer of information during servicing
transfers (§ 1024.38(b)(4))
To meet the objective of facilitating the sharing of borrower information during servicing
transfers, your policies and procedures must be reasonably designed to ensure that all
information and documents move from the transferor servicer to the transferee servicer.
When you are the transferor servicer, your policies and procedures must be reasonably designed
to ensure that you timely transfer all the information and documents you possess or control
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related to transferred mortgage loans. You must do this in a form or manner that ensures
accuracy and enables the transferee servicer to comply with its obligations to owners or
assignees and applicable law.
Your policies and procedures may provide for the electronic transfer of documents provided
these requirements are satisfied.
When you transfer the servicing for a loan in loss mitigation, you must ensure that the transfer
includes:
Information reflecting the status of your discussions with the borrower;
Agreements you have with the borrower; and
Your analysis of any potential recovery from the mortgage, as appropriate.
(Comment 38(b)(4)(i)-2)
When you are the transferee servicer, you must have policies and procedures reasonably
designed to identify and obtain necessary documents or information that the transferor servicer
should have, but did not, transfer.
You must ensure that you get copies of any loss mitigation applications and agreements, find out
about the status of any prior discussions with borrowers, and that you are able to retrieve
missing loss mitigation documents and information from the transferor servicer before asking
the borrower for the information. (Comment 38(b)(4)(ii)-1)
10.4.5 Informing borrowers of the written error resolution and
information request procedures (§ 1024.38(b)(5))
Your policies and procedures must be reasonably designed to inform borrowers of the
procedures for submitting written notices of errors and written information requests.
(§§ 1024.35 and 1024.36). You may satisfy this requirement by sending a brief statement
informing borrowers of their rights (mailed or delivered electronically) or posting the
information on a website. For example, you could choose to include the information in a
borrower’s monthly periodic statement. (Comment 38(b)(5)-1)
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Note that if you designate an exclusive address for submitting notices of error and
requests for information you must follow the notice requirements specific to exclusive
addresses. (§§ 1024.35(c), 1024.36(b), and comments 35(c)-2 and 36(b)-2)
Your policies and procedures must be reasonably designed to provide information about the
procedures for submitting written notices of error and requests for information to borrowers
who are not satisfied with the resolution of an oral complaint or request for information
submitted orally. (Comment 38(b)(5)-2)
Your policies and procedures must also be reasonably designed to ensure that you will either
inform any borrower that incorrectly submits an assertion of error to an address given in
connection with a loss mitigation application or by the continuity of contact of the correct
address, or redirect such notices to the correct address. (Comment 38(b)(5)-3)
10.5 What are the standard requirements I
must meet?
Two of the rule requirements are written to provide specific requirements and standards, rather
than requiring policies and procedures reasonably designed to achieve general objectives.
10.5.1 Document retention
You must retain records that document your actions with respect to a borrower’s mortgage loan
account until one year after the date you discharged the mortgage or transferred the servicing.
(§ 1024.38(c)(1))
This does not mean you must keep actual paper copies of documents. You may retain the
records using any method that accurately reproduces them (including computer programs) and
that ensures you can easily access the records (including a contractual right to access records
possessed by another entity). (Comment 38(c)(1)-1)
10.5.2 Servicing file
For each mortgage loan you service, you must maintain the following documents and data in a
way that allows you to compile them into a servicing file within 5 days:
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A schedule of all transactions credited or debited to the mortgage loan account, including
escrow and suspense accounts
A copy of the security instrument that establishes the lien securing the mortgage loan
Any notes your personnel create that reflect communications with the borrower about
the mortgage loan account
To the extent applicable, a report of the data fields your electronic system creates related
to the borrower’s mortgage loan account, such as the terms of the borrower’s mortgage
loan, the occurrence of automated or manual collection calls, loss mitigation evaluation
information, owner or assignee information, or any credit reporting history
Copies of documents and information borrowers submit as part of loss mitigation or
error resolution requests
(§ 1024.38(c)(2))
The required information must be kept in a manner that facilitates compiling such documents
and data into a servicing file within five days. The Rule does not require that records be retained
in a single location or electronic system. For example, multiple electronic systems may be used
so long as the servicer can compile the required records within five days.
While you are required to comply with this provision as of January 10, 2014, you are not
required to comply with the 5-day rule for information created before that date. For example, if
you originate a loan on January 1, 2013, you would not have to maintain information about
transactions credited or debited prior to January 10, 2014 in any particular manner. But you
would have to maintain information about payments made on or after January 10, 2014, in a
manner that facilitates compiling the information into a servicing file within 5 days
(Comment 38(c)(2)-1)
The 5-day compilation requirement (§ 1024.38(c)(2)) does not confer upon any borrower an
independent right to access information contained in the servicing file. When borrowers file a
written request for their servicing file, you must give them a copy of the information contained
in their servicing file, subject to the procedures and limitations set forth in the information
request provisions of the Mortgage Servicing Rules. (§ 1024.36 and comment 38(c)(2)-2)
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11. Early Intervention with
Delinquent Borrowers
11.1 What does the early intervention rule
require? (§ 1024.39)
You must, at a minimum, establish or make good faith efforts to establish live contact with
borrowers by the 36th day of delinquency and, except in certain COVID-19-related situations as
described in Appendix B
to this Guide, if appropriate to their situation, promptly inform them of
loss mitigation options that may be available, as described below. For information on when a
borrower is delinquent for purposes of the Mortgage Servicing Rules, see the
Bureau’s factsheet
on Delinquency.
In addition, you must, at a minimum, provide borrowers with written information about any
available loss mitigation options by the 45th day of delinquency, as described below.
The Rules contain model language servicers may use for the written notice. The Bureau has also
published Spanish translations
of this written notice language that servicers may use to the
extent allowed by other applicable law. These translations are not part of the model language in
the regulation, and therefore do not qualify for the same safe harbor protection under RESPA.
11.2 What is the scope of the early
intervention rule?
The early intervention rule applies to federally related mortgage loans (as defined in
§ 1024.2(b)) except for the exemptions in § 1024.5(b), the exemptions in § 1024.30(b) and (c),
and open-end lines of credit.
Thus, these rules do not apply to:
HELOCs and open-end lines of credit
130 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
Small servicers
Reverse mortgage transactions
Loans for which the servicer is a qualified lender under the Farm Credit Act of 1971
Any loan that is secured by a property
that is not the borrower’s principal
residence
Determining a borrower’s principal residence
will depend on the specific facts and
circumstances regarding the property and
applicable state law. For example, a vacant
property may still be a borrower’s principal
residence. (Comment 30(c)(2)-1)
In addition, the early intervention rule may
apply under certain circumstances even when a
borrower is in bankruptcy or has invoked the
cease communication protection under FDCPA section 805(c). See “Do the rules provide any
exemptions to the early intervention requirements if a borrower is in bankruptcy or invoked
the cease communication protection under the FDCPA?” in Section 11.8 for more information.
This section discusses how the early intervention rule applies to borrowers who are not in
bankruptcy and who have not invoked the FDCPA cease communication protection unless
otherwise specified.
11.3 Is there a small servicer exemption to
the early intervention rule?
Yes, there is a small servicer exemption. Small servicers are exempt from all of the early
intervention requirements.
11.4 When must I establish live contact with a
delinquent borrower? (§ 1024.39(a) and
comment 31(Delinquency)-1)
You must establish or make good faith efforts to establish live contact with a delinquent
borrower no later than the 36th day of delinquency.
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For purposes of the early intervention rule, delinquency is a period of time during which a
borrower and the borrower’s mortgage loan obligation are delinquent. A borrower and a
borrower’s mortgage loan obligation are delinquent beginning on the date a periodic payment
sufficient to cover principal, interest, and (if applicable) escrow becomes due and unpaid, until
such time as no periodic payment is due and unpaid. Thus, for each billing cycle for which a
borrower is delinquent for at least 36 days, you must establish or make good faith efforts to
establish live contact by the 36th day and, if appropriate, inform the borrower about the
availability of loss mitigation options. (Comment 31(Delinquency)-1)
For example, assume a borrower’s mortgage
loan requires a borrower to make periodic
payments of principal, interest, and escrow by
the first of each month. The borrower does not
make the payment that is due on January 1. If
you establish live contact with the delinquent
borrower on January 31, you are in compliance
with the early intervention rule because live
contact was established within 36 days of the
date the borrower’s delinquency began. If the
borrower fails to make a payment on February 1,
you are required to establish or make good faith
efforts to establish live contact with the
delinquent borrower within 36 days of February
1, even though you previously established live contact on January 31.
To calculate the time period for establishing live contact, start with the date a payment sufficient
to cover principal, interest, and, if applicable, escrow for a given billing cycle is due and unpaid,
even if you give the borrower a grace period after the payment is due before you assess a late fee.
For example, if a payment due date is January 1 and the amount due is not fully paid by January
2, the borrower and the borrower’s mortgage loan obligation is one day delinquent. Assuming
the borrower does not make a payment during the 36-day period after January 1, you must
establish or make good faith efforts to establish live contact no later than 36 days after January 1
—meaning by February 6.
If your internal policy requires you to apply a borrower’s payment to the oldest outstanding
periodic payment due on the mortgage loan, the borrower’s payment advances the date that the
A borrower is not considered delinquent if
you treat a payment that is insufficient to
cover a periodic payment of principal,
interest, and (if applicable) escrow for any
given billing cycle as timely.
(Comment 31(Delinquency)-3)
You cannot rescind or change your decision
to treat the payment as timely for purposes of
determining the date on which the
borrower’s delinquency began.
For more information on when a borrower is
delinquent, see the Bureau’s factsheet on
Delinquency.
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borrower’s delinquency began, regardless of whether there is a period during which a periodic
payment is due and unpaid. (Comment 31(Delinquency)-2)
For example, assume a borrower’s mortgage loan requires a borrower to make periodic
payments of principal, interest, and escrow by the first of each month. The borrower does not
make the payment that is due on January 1. On January 31, the borrower is 30 days delinquent.
On February 3, the borrower makes a periodic
payment. You apply payments to the oldest
outstanding periodic payment (i.e., the periodic
payment that was due on January 1). On
February 4, borrower is 3 days delinquent.
(Comment 31(Delinquency)-2)
You may time your attempts to establish live
contact so that a single attempt will satisfy two
missed payments.
For example, assume the borrower’s mortgage
loan requires the borrower to make periodic
payments of principal, interest, and escrow by
the first of each month. The borrower does not
make the payments that are due on January 1 and February 1. If you attempt to establish live
contact on February 5, such a single attempt meets the requirements of § 1024.39(a) for both
January 1 and February 1 missed payments.
Borrowers who are performing as agreed under a loss mitigation option designed to bring them
current on a previously missed payment are not delinquent for the purposes of this section of
the Mortgage Servicing Rules. Thus, for such borrowers, you are not required to engage in early
intervention. (Comment 39(a)-1.ii)
Generally, if you establish and maintain
ongoing contact with a borrower, in
accordance with the loss mitigation
procedures under § 1024.41, you are not
required to establish or make good faith
efforts to establish live contact. Similarly,
continued live contact with a borrower is not
required if you determine that the borrower
does not qualify for any available loss
mitigation options. You will, however, need
to establish or make good faith efforts to
establish live contact for a borrower who
becomes delinquent again after curing a prior
delinquency. (Comment 39(a)-6)
11.4.1 What is “establishing live contact”? (Comment 39(a)-
2)
Live contact with a borrower includes
telephoning or conducting an in-person meeting
with the borrower, but not leaving a recorded
phone message. You may, but need not, rely on
While not required, certain electronic media,
such as live chat functions, can, in certain
circumstances, be compared to telephone or
in-person conversations that are permitted
as live contact under the Rules.
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live contact established at the borrower’s initiative to satisfy the live contact requirement of
early intervention.
The rule is designed to give you significant flexibility in tailoring your contact methods to
particular circumstances. For example, the Bureau would consider the live contact requirement
satisfied in cases where a borrower is delinquent in consecutive billing cycles if you have
established and maintain ongoing contact with the borrower regarding the borrower’s
completion of a loss mitigation application and your evaluation of that borrower for loss
mitigation options.
11.4.2 What are “good faith efforts”? (Comment 39(a)-3)
Good faith efforts to establish live contact consist of reasonable steps under the circumstances to
reach a borrower. Good faith efforts include telephoning a borrower on more than one occasion
or, in certain circumstances, sending a borrower a written or electronic communication
encouraging the borrower to establish live contact with you. When determining if you have
made good faith efforts, except in certain COVID-19 related situations as discussed in
Appendix
B, the length of the borrower’s delinquency as well as a borrower’s failure to respond to your
repeated attempts at establishing live contact may be relevant circumstances to consider.
11.4.3 Does providing loss mitigation information to a
borrower’s representative satisfy the requirement to
establish live contact? (Comment 39(a)-5)
The rules do not prohibit you from satisfying the live contact requirement by providing
information about loss mitigation options to the borrower’s authorized representative.
You may set up reasonable procedures to determine whether a person that claims to be the
borrower’s agent has authority to act on the borrower’s behalf. For example, you can require the
agent to provide documentation from the borrower stating that the purported agent is acting on
the borrower’s behalf.
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11.5 What Information must I share with
delinquent borrowers about loss
mitigation options? (Comment 39(a)-4.i)
The Rules require you to provide loss mitigation information where appropriate. Generally, it is
within your reasonable discretion to determine whether informing a borrower about the
availability of loss mitigation options is appropriate under particular circumstances, as you
determine from establishing live contact with the borrower. The following examples
demonstrate when a servicer has made a reasonable determination regarding the
appropriateness of providing information about loss mitigation options:
During live contact, the borrower notifies you of a material adverse change in financial
circumstances that is likely to cause the borrower to experience a long-term delinquency,
such as loss of a job, for which loss mitigation options may be available. You provide loss
mitigation information to the borrower.
A borrower who misses a January 1 payment notifies you that the borrower will make a
full late payment by February 15. You do not provide information about the availability
of loss mitigation options because there does not appear to be a long-term issue.
However, note that in certain COVID-19-related situations, certain loss mitigation information
must be discussed in all instances, and the servicer does not have discretion to determine if it is
appropriate. See Appendix B
of this Guide for more information.
11.5.1 What is required to “promptly inform” borrowers about
loss mitigation options? (Comment 39(a)-4.ii)
The Mortgage Servicing Rules require that, where appropriate (except when required in certain
COVID-19 related situations as discussed in Appendix B
of this Guide), you must “promptly
inform” borrowers about loss mitigation after establishing live contact. You may provide loss
mitigation information orally, in writing, or through electronic communication, as long as you
share the information promptly after you establish live contact.
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Except as discussed in Appendix B of this Guide, you do not need to notify a borrower about any
particular loss mitigation options promptly after establishing live contact. If appropriate, you
need only inform the borrower generally that loss mitigation options may be available.
You may satisfy the requirements of the early
intervention provisions of the Mortgage
Servicing Rules to inform borrowers about loss
mitigation options promptly after establishing
live contact by providing them with the early
intervention written notice. For example, you
may provide the model language in MS-4(A),
MS-4(B), and MS-4(C) found in appendix MS-4
of the Rules, as well as any information, if required, discussed in Appendix B of this Guide.
(See
“What information must be in the written notice about loss mitigation options?” in Section
11.7)
11.6 When must I provide a written notice
about loss mitigation to delinquent
borrowers? (§ 1024.39(b) and
comments 39(a)-1 and (b)(1)-2 and -5)
By the 45th day of delinquency, you must provide delinquent borrowers with a written notice
about loss mitigation. You must provide the written notice even if you provided information
about loss mitigation and foreclosure previously during an oral communication with the
borrower, as discussed above.
Delinquency, as discussed above, is defined as a period of time during which a borrower and the
borrower’s mortgage loan obligation are delinquent. A borrower and a borrower’s mortgage
loan obligation are delinquent beginning on the date a periodic payment sufficient to cover
principal, interest, and (if applicable) escrow becomes due and unpaid, until such time as no
periodic payment is due and unpaid, even if you offer the borrower a period of time after the due
date has passed to pay before you assess a late fee.
Spanish translations of the model clauses are
available on the Bureau’s website. The
Bureau encourages you to ascertain borrower
language preferences and utilize the
translations to assist limited English
proficiency borrowers, where appropriate
and to the extent permitted by applicable
law.
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For example, if a payment is due January 1 and unpaid during the 45-day period after January 1,
you must provide the written notice within 45 days after January 1—i.e., by February 15.
However, if the borrower satisfies the late payment in full on February 1, you would not need to
provide the written notice.
You are not required to provide the written notice more than once during any 180-day period.
For example, a borrower has a payment due on March 1. The amount due is not fully paid
during the 45 days after March 1, so you provide the written notice on April 15. The borrower
fails to make the April 1 payment and does not pay the amount due during the 45 days after
April 1. You do not need to provide the written notice again during the 180-day period
beginning on April 15—i.e., no sooner than on October 12—and then only if the borrower is at
that time 45 days or more delinquent. (Comment 39(b)(1)-2)
11.6.1 Must I provide a written notice when the servicing of a
loan is transferred? (Comment 39(b)(1)-5)
In the case of a transferred loan, you, the transferee servicer, are required to send a 45-day
notice regardless of whether the transferor servicer, the servicer transferring the loan, provided
a written notice to the borrower in the preceding 180-day period.
You would not be required to provide a written notice under § 1024.39(b), however, if the
transferor servicer provided the written notice within 45 days of the transfer date.
For example, assume a borrower has monthly payments, with a payment due on March 1. The
transferor servicer provides the notice required by § 1024.39(b) on April 10. The loan is
transferred on April 12. Assuming the borrower remains delinquent, you are not required to
provide another written notice until 45 days after May 1, the first post-transfer payment due
date—i.e., by June 15.
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11.7 What information must be in the written
notice about loss mitigation options?
(§ 1024.39(b)(2) to (3))
Model clauses MS-4(A), MS-4(B), and MS-4(C)
in appendix MS-4 have text you can use in your
loss mitigation notice.
The notice must include:
A statement encouraging the borrower to
contact you
The telephone number for the personnel
assigned to the borrower. (See “Do I have to assign a single point of contact to a
delinquent borrower? (Comment 40(a)-2)” in Section 12.4.2.)
Your mailing address
If applicable, a statement providing a
brief description of examples of loss
mitigation options that may be available
If applicable, either application
instructions or a statement informing the
borrower how to obtain more
information about loss mitigation
options from you
The website to access either the Bureau list or the HUD list of homeownership
counselors or counseling organizations, and the HUD toll-free telephone number to
access homeownership counselors or counseling organizations
You may also include additional information that you determine to be helpful, or which
may be required by applicable law or the owner or assignee of the mortgage loan
(Comment 39(b)(2)-1)
Spanish translations of the model clauses are
available on the Bureau’s website. The
Bureau encourages you to ascertain borrower
language preferences and utilize the
translations to assist limited English
proficiency borrowers, where appropriate
and to the extent permitted by applicable
law.
Borrowers are likely to benefit from
examples of options that would permit them
to retain ownership of their home and
examples of options that may require them to
end their ownership to avoid foreclosure.
You may send a generic list of loss mitigation
options you typically offer to borrowers and
include a warning that not all borrowers may
qualify for the listed options. (Comment
39(b)(2)(iii)-1)
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You may use any color, number of pages, size
and quality of paper, size and type of print, and
method of reproduction for your notice,
provided each of the required statements
satisfies the clear and conspicuous standard.
(§ 1024.32(a)(1) and comment 39(b)(2)-2)
You may combine this notice in a single mailing
with other notices that satisfy the content
requirements, provided each of the required
statements satisfies the clear and conspicuous standard. (Comment 39(b)(2)-2)
It may be helpful to give borrowers detailed
information and instructions about loss
mitigation, such as a list of documents they
should have in hand when contacting you, or
an estimate of how quickly you typically
evaluate applications. You can even
supplement your written notice with a loss
mitigation application form.
(Comment 39(b)(2)(iv)-1)
11.8 Do the rules provide any exemptions to
the early intervention requirements if a
borrower is in bankruptcy or invoked the
cease communication protection under
the FDCPA?
Under the Mortgage Servicing Rule, you are partially exempt from certain provisions of the early
intervention rules with respect to a mortgage loan when any borrower on that loan is a debtor in
bankruptcy or invokes the FDCPA’s cease communication protections.
11.8.1 When am I exempt from making good faith efforts to
establish live contact with a borrower in these
contexts? (§§ 1024.39(c)(1)(i) and (d)(1))
You are exempt from the live contact early intervention requirements on a mortgage loan when
either of the following conditions are met: (1) any borrower on the loan is a debtor in
bankruptcy; or (2) you are a debt collector under the FDCPA with respect to the mortgage loan,
and any borrower on the loan has invoked the FDCPA’s cease communication protection with
respect to that loan. (§§ 1024.39(c) and (d))
The live contact requirements occur for each billing cycle for which a borrower is delinquent.
Therefore, this exemption will, generally, not apply when a borrower is no longer a debtor in
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bankruptcy and continues to be delinquent. For example, assume the borrower’s mortgage loan
requires the borrower to make periodic payments of principal, interest, and escrow by the first
of each month. If the borrower’s bankruptcy case is dismissed on March 19, and the borrower
does not make the payment that is due on April 1, the exemption no longer applies and you must
establish or make good faith efforts to establish live contact no later than 36 days after April 1.
See “What are my obligations under the early intervention rule once the borrower is no longer
in bankruptcy?” in Section 11.8.7 for more information on when the exemption will and will not
continue to apply.
This information is summarized in a flowchart that is appended to the guide. See “Early
intervention bankruptcy and FDCPA exemptions” flowchart in Appendix A
of this Guide.
11.8.2 When am I exempt from the written notice
requirements in these contexts? (§§ 1024.39(c) and
(d))
You are exempt from the written notice requirements for the mortgage loan if no loss mitigation
option is available and either of the following conditions is met: (1) any borrower on the loan is
a debtor in bankruptcy; or (2) you are acting as a debt collector under the FDCPA with respect to
the mortgage loan, and any borrower on the loan has invoked the FDCPA’s cease
communication protection with respect to that loan. (§§ 1024.39(c)(1)(ii) and (d)(2)) However,
if any loss mitigation option is available and either of these two conditions is met, you must
comply with modified written notice requirements for the mortgage loan. (§§ 1024.39(c)(1)(iii)
and 39(d)(3))
You are also exempt from the written notice requirements for the mortgage loan if both of the
following conditions are met: (1) any borrower on the loan is a debtor in bankruptcy; and (2)
you are acting as a debt collector under the FDCPA with respect to the mortgage loan, and any
borrower on the loan has invoked the FDCPA’s cease communication protection with respect to
that loan. (§ 1024.39(c)(1)(ii))
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A loss mitigation option is available when the
owner or assignee of a mortgage loan offers an
alternative to foreclosure for which a borrower
may apply. For the purposes of
§ 1024.39(c)(1)(ii), a loss mitigation option is
available even if the borrower ultimately does
not qualify for such option.
(Comments 39(c)(1)(ii)-1 and 39(d)-1)
This information is summarized in a flowchart that is appended to the guide. See “Early
intervention bankruptcy and FDCPA exemptions” flowchart in Appendix A
of this Guide.
If a borrower is represented by a person
authorized by the borrower to communicate
with the servicer on the borrower’s behalf
(e.g., bankruptcy counsel), you may provide
the written notice to the borrower’s
representative. (Comment 39(c)-1)
11.8.3 Are there special timing and frequency requirements
for providing a written notice to borrowers in
bankruptcy? ((§ 1024.39(c)(1)(iii))
If you are not exempt from the written notice requirement for a mortgage loan, you must
provide a modified written notice no later than the 45th day after the first of the following two
trigger events.
First, if a borrower is delinquent when the borrower becomes a debtor in bankruptcy, you must
provide the modified written notice no later than the 45th day after the borrower files a
bankruptcy petition. For example, assume that the borrower’s bankruptcy case commences on
January 1 and the borrower is delinquent at the time the bankruptcy case commences. You
must provide the modified written notice on or before February 15. (§ 1024.39(c)(1)(iii))
Second, if the borrower is not delinquent when the borrower files a bankruptcy petition, but
subsequently becomes delinquent while in bankruptcy, you must provide the modified written
notice no later than the 45th day of the borrower’s delinquency. For example, assume that the
borrower’s mortgage loan requires the borrower to make a periodic payment by the first of each
month. Also assume that the borrower’s bankruptcy case commences on January 1. If the
borrower misses a payment on March 1, you must provide the modified written notice on or
before April 15. (§ 1024.39(c)(1)(iii))
Further, you are required to provide a borrower in bankruptcy with the modified written notice
even if you provided a written notice in the preceding 180-day period. For example, assume that
the borrower misses a payment that is due on March 1. You provide the written notice on or
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before April 15. The borrower then files a petition for bankruptcy on May 1. You must provide
the modified written notice on or before June 15. (§ 1024.39(c)(1)(iii))
You are not required to provide a modified written notice more than once during a single
bankruptcy case. For example, assume that the borrower files a petition for bankruptcy on June
1, you provide the modified written notice on July 10, and the bankruptcy case is dismissed on
August 1. If the court subsequently reopens or reinstates the borrower’s bankruptcy case and
you do not provide a second written notice, you have complied with § 1024.39(b) and (c)(1)(iii).
(Comment 39(c)(2)-1)
11.8.4 Can a modified written notice to a borrower in
bankruptcy request a payment?
((§ 1024.39(c)(1)(iii)(A))
No, the modified written notice you provide to the borrower in bankruptcy may not contain a
request for payment. (§ 1024.39(c)(1)(iii)(A))
11.8.5 Can I provide an early intervention modified written
notice to a borrower’s representative in the bankruptcy
context? (§ 1024.39(c)(1)(iii))
If the borrower in bankruptcy is represented by a person authorized by the borrower to
communicate with you on their behalf, you may provide the modified written notice to the
borrower’s representative. Before doing so, you must undertake reasonable procedures to
determine if that person, who claims to be authorized by the borrower to communicate with you,
has actual authority from the borrower to communicate with you on the borrower’s behalf.
(Comments 39(a)-5 and 39(c)-1)
What reasonable procedures you deploy to determine whether that person has actual authority
will depend on the particular facts and circumstances of the interaction. For example, assume
the borrower’s bankruptcy counsel is the borrower’s representative. Your procedures for
determining whether counsel is borrower’s representative are generally considered reasonable if
they are limited to, for example, confirming that the attorney’s name is listed on the borrower’s
bankruptcy petition or other court filing. (Comment 39(c)-1)
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11.8.6 Can I provide an early intervention modified written
notice to one joint obligor in the bankruptcy context?
(Comment 39(c)(1)(iii)-1)
When two or more borrowers are joint obligors with primary liability on a mortgage loan where
the modified written notice is required, you may comply with § 1024.39(c)(1)(iii) by providing
the written notice to any borrower. (Comment 39(c)(1)(iii)-1)
11.8.7 What are my obligations under the early intervention
rule once the borrower is no longer in bankruptcy?
(§ 1024.39(c)(2)(i) and (ii))
Generally, you must resume compliance with the early intervention requirements after the next
payment due date that follows the earliest of the following events: (1) the bankruptcy case is
dismissed; (2) the bankruptcy case is closed; or (3) the borrower reaffirms personal liability for
the mortgage loan. (§ 1024.39(c)(2)(i))
You are not required to resume compliance with the live contact early intervention
requirements if the borrower has discharged personal liability on a mortgage loan pursuant to
chapters 7, 11, 12, and 13 of the Bankruptcy Code. However, you must resume compliance with
the written early intervention notice requirements if the borrower has made any partial or
periodic payment on the mortgage loan after commencement of the borrower’s bankruptcy case.
(§ 1024.39(c)(2)(ii))
11.8.8 How often must I provide a written notice to a borrower
who has invoked the cease communication right under
the FDCPA? (§ 1024.39(d)(3)(iii))
If you are required to provide a written notice after a borrower has invoked the FDCPA’s cease
communication right with respect to that loan, you must not provide the modified written notice
more than once during any 180-day period. (§ 1024.39(d)(3)(iii))
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If the borrower is 45 or more days delinquent at the end of any 180-day period, you must
provide the written notice again no later than 10 days after the end of the 180-day period.
4
(§ 1024.39(d)(3)(iii))
But, if a borrower is less than 45 days delinquent at the end of any 180-day period, you
must provide the written notice again no later than whichever of the following is later:
45 days after the delinquent payment’s due date; or
190 days after the provision of the prior written notice.
11.8.9 What special statements must be included when I
provide a written notice to a borrower who has invoked
the cease communication right under the FDCPA?
(§ 1024.39(d)(3)(i) and (ii))
If you are required to provide a written notice after a borrower has invoked the FDCPA’s cease
communication right with respect to that loan, the modified written notice must include a
statement that you may or you intend to invoke a specified remedy of foreclosure.
Model Clause MS-4(D), in appendix MS-4 of Regulation X, contains model language that you
may use to satisfy this requirement. Use of this model clause provides you a safe harbor from
liability under FDCPA section 805(c) for providing the written notice. (§ 1024.39(d)(3)(i))
In addition, the written notice may not contain a request for payment. (§ 1024.39(d)(3)(ii))
11.8.10 How do the early intervention requirements interact
with bankruptcy law and the FDCPA?
Bankruptcy law: Generally, the Mortgage Servicing Rules do not require a servicer to
communicate with a borrower in a manner that would be inconsistent with applicable
4
See the October 2017 Interim Final Rule available at www.consumerfinance.gov/policy-
compliance/rulemaking/final-rules/amendments-2016-amendments-2013-mortgage-servicing-rules-under-real-
estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z/.
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bankruptcy law or a court order in a bankruptcy case. If necessary to comply with such law or
court order, you may adapt the requirements of § 1024.39 as appropriate. (Comment 39(c)-2)
FDCPA: Concurrently with the 2016 Mortgage Servicing Rule, the Bureau issued an interpretive
rule under the FDCPA relating to servicers’ compliance with certain mortgage servicing rules.
The interpretive rule, 81 FR 71977
, provides you with a safe harbor from:
1. Liability under FDCPA section 805(b) when you communicate about a mortgage loan
with a confirmed successor in interest in compliance with specified mortgage servicing
rules in Regulation X or Z; and
2. Liability under FDCPA section 805(c) when you:
a. Provide a written early intervention notice required by § 1024.39(b), as modified
by § 1024.39(d)(3), to a borrower who has invoked the cease communication
protection under the FDCPA; or
b. Respond to borrower-initiated communications concerning loss mitigation after
the borrower has invoked the cease communication protection under the FDCPA.
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12. Continuity of Contact with
Delinquent Borrowers
12.1 What does the continuity of contact rule
require?
In general, you must maintain policies and procedures reasonably designed to provide
delinquent borrowers with access to personnel who can assist them with loss mitigation options
where applicable.
12.2 What is the scope of the continuity of
contact rule?
The rule applies to federally related mortgage loans (as defined in § 1024.2(b)) except for the
exemptions in § 1024.5(b), the exemptions in § 1024.30(b) and (c), and open-end lines of credit.
Thus, these rules do not apply to:
HELOCs and other open-end lines of
credit
Small servicers
Reverse mortgage transactions
Loans for which the servicer is a qualified under the Farm Credit Act of 1971
Any loan that is secured by a property that is not the borrower’s principal residence
Determining a borrower’s principal residence
will depend on the specific facts and
circumstances regarding the property and
applicable state law. For example, a vacant
property may still be a borrower’s principal
residence. (Comment 30(c)(2)-1)
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12.3 Is there a small servicer exemption to
the continuity of contact rule?
Yes, there is a small servicer exemption. Small servicers are exempt from all the requirements of
the provisions on continuity of contact.
12.4 What is continuity of contact?
(§ 1024.40(a))
You must design policies and procedures to ensure, among other things, that:
You assign personnel to delinquent
borrowers by the time you send the
written notice required by the early
intervention requirements, but, in any
event, by the 45th day of the borrowers’
delinquency.
Borrowers can reach the assigned
personnel by phone and that such
personnel can respond to borrower
inquiries and, as applicable, help them
pursue loss mitigation options, including
by advising them about the status of any loss mitigation application and applicable
timelines.
Your personnel can retrieve, in a timely manner, the complete record of the borrower’s
payment history and all of the written information the borrowers provide in connection
with a loss mitigation application and, when appropriate, provide such information to
other persons responsible for evaluating a borrower for available loss mitigation options.
Your personnel can provide a timely live response to borrowers who call and have to
leave a message when they cannot reach a live person.
Consider who is a delinquent borrower.
Borrowers who have refinanced or paid off
their loan, brought it current by paying all
amounts owed in arrears, and those who
have transferred title (for example, though a
deed-in-lieu of foreclosure or a short sale)
are no longer delinquent borrowers. After a
foreclosure sale, borrowers are also no longer
delinquent borrowers, so the rule no longer
applies to them.
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12.4.1 How do I respond to people who claim they represent a
delinquent borrower? (Comment 40(a)-1)
You are required to interact with a person authorized by a borrower to act on the borrower’s
behalf.
You may set up reasonable procedures to determine if a person that claims to be the borrower’s
agent has authority to act on the borrower’s behalf. For example, you can require the agent to
provide documentation from the borrower stating that the purported agent is acting on his or
her behalf.
12.4.2 Do I have to assign a single point of contact to a
delinquent borrower? (Comment 40(a)-2)
It is up to you to decide whether to assign a single person or a team of personnel to respond to a
delinquent borrower.
The personnel you assign to the borrower to comply with the continuity of contact provisions
described in § 1024.40(a)(1) may be single-purpose or multi-purpose personnel. Single-purpose
personnel are employees whose primary responsibility is to respond to a delinquent borrower’s
inquiries and, if you offer loss mitigation, assist with loss mitigation. Multi-purpose personnel
are employees who do not have a primary responsibility at all or those for whom delinquency
and loss mitigation activities are not a primary duty.
You may assign personnel with specialized knowledge in bankruptcy law to assist borrowers
who file for bankruptcy.
12.5 When must continuity of contact
personnel be available to borrowers?
(§ 1024.40(a)(1) to (2))
You must maintain policies and procedures reasonably designed to ensure that you assign
personnel to delinquent borrowers by the time you send the written notice required by the early
intervention requirements, which means at least by the 45th day of the borrowers’ delinquency.
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As set forth above, delinquency is a period of time during which a borrower and the borrower’s
mortgage loan obligation are delinquent. A borrower and a borrower’s mortgage loan obligation
are delinquent beginning on the date a periodic payment sufficient to cover principal, interest,
and (if applicable) escrow becomes due and unpaid, until such time as no periodic payment is
due and unpaid. (§ 1024.31)
Your policies and procedures must be designed to ensure that personnel remain available until
the borrowers have made, without incurring a late charge, 2 consecutive mortgage payments in
accordance with the terms of a permanent loss mitigation agreement or the mortgage. If a
borrower redefaults after making 2 payments, the clock resets and personnel must be available
by the time you send the written notice required by the early intervention requirements, but in
any event, by the 45th day of the borrower’s delinquency.
12.6 What must personnel be able to do?
(§ 1024.40(b)(1)-(2))
Your policies and procedures must be reasonably designed to ensure that the personnel assigned
to delinquent borrowers provide them with accurate information about:
The specific loss mitigation options made available to them by the owner or assignee
How to submit a complete loss mitigation application, get it evaluated and, if applicable,
how to appeal an application that is denied
The status of a borrower’s submitted loss mitigation application
The circumstances under which you may refer borrowers to foreclosure
Loss mitigation deadlines set by the loan’s owner or assignee or the provisions of the
Mortgage Servicing Rules
How to submit a written notice of error or information request. (See Section 9 for more
on error resolutions and information requests.)
Your policies and procedure must be reasonably designed to ensure that personnel are able to
retrieve certain information in a timely manner, including:
A complete record of the borrower’s payment history
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All written information the borrower has provided to you, and, if applicable, to prior
servicers, in connection with a loss mitigation application
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13. Loss Mitigation Procedures
13.1 What does the loss mitigation rule
require? (§ 1024.41)
The loss mitigation provisions of the Mortgage Servicing Rules generally require you to:
Work with borrowers to complete timely applications for loss mitigation options.
Evaluate complete and timely loss mitigation applications within 30 days for all loss
mitigation options available to the borrower. If you require documents or information
not in the borrower’s control to determine if loss mitigation options are available, you
will be required to provide the borrower with a notice that informs the borrower of,
among other things, the specific information you are missing.
For complete and timely applications, inform borrowers of whether the servicer will offer
the borrower a loss mitigation option and, if the borrower is denied a loan modification
option, of the specific reasons for the denial.
Evaluate timely appeals submitted by eligible borrowers. The appeals must be reviewed
by independent personnel, that is, not the same personnel who initially evaluated the
loss mitigation application.
Refrain from beginning or completing the foreclosure process in certain circumstances,
as set forth below, when a borrower is being evaluated for loss mitigation options as
required under the rule.
The rule does not require you or the owner of a mortgage loan to offer any specific loss
mitigation option. Nor does it mandate any particular eligibility criteria. (See comment
41(c)(1)-2)
However, you must maintain policies and procedures reasonably designed to, for example,
properly evaluate the application for all loss mitigation options for which the borrower may be
eligible pursuant to any requirements established by the owner or assignee. In addition, where
applicable and in accordance with the requirements of § 1024.41, your policies and procedures
must address how you will apply any specific thresholds for eligibility for a particular loss
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mitigation option. (§ 1024.38(b)(2)(v) and comment 38(b)(2)(ii)-1). Subject to certain
limitations, you must evaluate borrowers for all loss mitigation options the owner or assignee
makes available, whether or not the individual borrower is ultimately eligible for any particular
loss mitigation option. See “Properly evaluating loss mitigation applications” in Section 10.4.2
for more information on loss mitigation evaluation policies and procedures.
13.2 What is the scope of the loss mitigation
rule?
The rule applies to federally related mortgage loans (as defined in § 1024.2(b)) except for the
exemptions in § 1024.5(b), the exemptions in § 1024.30(b) and (c), and open-end lines of credit.
Thus, these rules do not apply to:
HELOCs and open-end lines of credit
Reverse mortgage transactions
Loans for which the servicer is a qualified lender under the Farm Credit Act of 1971
Any loan that is secured by a property
that is not the borrower’s principal
residence
Servicers that are debt collectors under the
FDCPA to whom a borrower has sent a written
cease communication request must still comply
with the loss mitigation rules, unless the borrower specifically withdraws the request for the loss
mitigation. (See CFPB Bulletin 2013-12
for additional details.)
Determining a borrower’s principal residence
will depend on the specific facts and
circumstances regarding the property and
applicable state law. For example, a vacant
property may still be a borrower’s principal
residence. (Comment 30(c)(2)-1)
13.3 Is there a small servicer exemption to
the loss mitigation rule? (§ 1024.41(j))
Small servicers are exempt from the majority of the loss mitigation requirements. However, two
prohibitions apply to small servicers. Small servicers shall not:
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Make the first notice or filing required to foreclose unless a borrower’s mortgage loan
obligation is more than 120 days delinquent, the foreclosure is based on a borrower’s
violation of a due-on-sale clause, or the servicer is joining the foreclosure action of a
superior or subordinate lienholder
Make the first notice or filing required to foreclose if a borrower is performing pursuant
to the terms of a loss mitigation agreement
Move for foreclosure judgment or order of sale, or conduct a foreclosure sale, if a
borrower is performing pursuant to the terms of a loss mitigation agreement
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13.4 What must I do when I receive a loss
mitigation application?
When you receive a loss mitigation application 45 days or more before a foreclosure sale is
scheduled (or at any time when no foreclosure
sale has been scheduled), you must provide the
borrower a notification acknowledging receipt of
the application and inform the borrower
whether the application is complete or
incomplete. If the application is incomplete, the
notification must also inform the borrower of
any documents or information necessary to
complete the application.
(§ 1024.41(b)(2)(i)(B))
You must exercise reasonable diligence in
obtaining documents and information to
complete a loss mitigation application.
(§ 1024.41(b)(1))
If you receive a complete loss mitigation
application 37 days or more before a foreclosure
sale is scheduled (or at any time when no
foreclosure sale has been scheduled), you must
evaluate the complete loss mitigation
application and notify the borrower in writing:
Which loss mitigation options, if any, you
will offer the borrower; and
Information on an appeal process.
A loss mitigation application is defined as an
oral or written request for a loss mitigation
option that is accompanied by any
information required by a servicer for
evaluation for a loss mitigation option.
(§ 1024.31)
A servicer has the flexibility to establish its
own application requirements and decide the
type and amount of information it will
require from borrowers applying for loss
mitigation options. (Comment 41(b)(1)-1)
You should make sure your staff is trained to
recognize when an inquiry about loss
mitigation has become a loss mitigation
application. For example, when giving
information to a borrower about loss
mitigation programs, if the borrower
expresses an interest in applying for a loss
mitigation option and provides information
that you would evaluate in connection with a
loss mitigation application, the borrower's
inquiry has become a loss mitigation
application. For more information about
when an inquiry becomes an application, see
comments 41(b)(1)-2 and -3.
I
f you deny the borrower for any trial or permanent loan modification option, the notification
must also state the specific reason or reasons why an application for a loan modification option
was denied. The notification must include other specific information set forth in
§ 1024.41(c)(1)(ii). (§ 1024.41(c) and (d))
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13.4.1 Acknowledging loss mitigation applications
(§ 1024.41(b)(2) and comments 41(b)(1)-1 to -4)
If you receive a loss mitigation application 45 days or more before a scheduled foreclosure sale
(or when no foreclosure sale has been scheduled), you must do the following:
1. Determine if the application is complete, meaning you have received all the information you
need from the borrower to evaluate the borrower for all available loss mitigation options.
Generally, you have the flexibility to determine the type and amount of information required
from borrowers applying for loss mitigation.
2. Provide a written notice to the borrower within 5 days (excluding legal public holidays,
Saturdays and Sundays) of receiving the application, acknowledging receipt of the application
and stating that you have determined the application is either complete or incomplete.
If the application is incomplete, the notice must also state:
The additional documents and information the borrower must submit to make the loss
mitigation application complete.
A reasonable date by which the borrower
should submit the missing information
or documents needed to complete the
application.
A statement that the borrower should
consider contacting servicers of any
other mortgage loans secured by the
same property to discuss available loss
mitigation options.
The reasonable date is generally 30 days after
the date you provide the notice
acknowledging receipt of a loss mitigation
application. However, the reasonable date
must be no later than the earliest remaining
milestone, and must never be less than seven
days from the date you provide the
acknowledgment notice.
(Comments 41(b)(2)(ii)-1, 2, and 3). See
“Reasonable date” in Section 13.4.2 for more
information.
Yo
u must exercise reasonable diligence to make an incomplete application complete. In
exercising reasonable diligence, you may stop collecting a borrower’s documents and
information for a particular loss mitigation option once you receive information confirming that
that borrower is ineligible for that option, pursuant to requirements established by the owner or
assignee. You may not stop collecting a borrower’s documents and information for a particular
loss mitigation option based solely on a borrower’s stated preference—for example, a preference
for a short sale or, more generally, not to retain the property. However, you may stop collecting
information based on the borrower’s stated preference in conjunction with other information, as
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prescribed by any requirements established by the owner or assignee. See Comment 41(b)(1)-1
for more information and illustrations of these principals.
Although providing a notice to the borrower about the information or documents that are
missing from the application is a required step for applications submitted 45 days or more
before a foreclosure sale is scheduled (or when no sale has been scheduled), you may be
required to take additional steps to comply with the reasonable diligence standard. Examples of
reasonable diligence include:
You need additional information from the borrower, such as an address or a telephone
number to verify employment, and you contact the borrower promptly to obtain the
information after receiving a loss mitigation application. (Comment 41(b)(1)-4.i)
Servicing for a mortgage loan is transferred to your company. The borrower made an
incomplete loss mitigation application to you after the transfer. You review documents
provided by the transferor servicer and, if necessary, request from the borrower
additional documents needed to complete the application. (Comment 41(b)(1)-4.ii).
See “Conducting reasonable diligence to obtain information not in the borrower’s control” in
Section 13.4.7 and “Other requirements regarding short-term loss mitigation” in Section
13.4.10 for more information about reasonable diligence requirements.
When you determine the application is complete (that is, you do not require further documents
or information from the borrower), you must provide a notice to the borrower within 5 days of
receiving the application (excluding legal public holidays, Saturdays, and Sundays) stating that
you have determined the application is complete and that the borrower should consider
contacting servicers of any other mortgage loans secured by the same property to discuss
available loss mitigation options.
3. Once you receive a complete application, you must then proceed with evaluating that
application for all loss mitigation options available to the borrower within 30 days, as discussed
further below (unless you later discover corrected documents or additional information is
needed to evaluate the application, see “Incomplete loss mitigation applications)” in Section
13.4.9). Note that you must conduct this evaluation, within 30 days, for any complete loss
mitigation application you receive more than 37 days before a scheduled foreclosure sale.
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13.4.2 Reasonable date (Comments 41(b)(2)(ii)-1, -2, and -3)
The reasonable date is generally 30 days after the date you provide the notice acknowledging
receipt of a loss mitigation application pursuant to § 1024.41(b)(2)(i)(B).
However, the reasonable date must be no later than the earliest remaining milestone:
1. The date by which any document or information submitted by a borrower will be
considered stale or invalid pursuant to any requirements applicable to any loss
mitigation option available to the borrower;
2. The date that is the 120th day of the borrower's delinquency;
3. The date that is 90 days before a foreclosure sale; or
4. The date that is 38 days before a foreclosure sale.
In addition, the reasonable date must never be less than seven days from the date you provide
the acknowledgment notice.
For example, if you provide the written acknowledgment notice to a borrower on January 1, and
January 16 is the 120th day of the borrower’s delinquency (and the earliest remaining
milestone), the reasonable date must be at least seven days from January 1 (i.e., January 8) and
not later than the date that is the 120th day of the borrower’s delinquency (i.e., January 16). In
this example, the reasonable date must be less than 30 days because the 120th day of the
borrower’s delinquency occurs sooner.
13.4.3 Notice of complete loss mitigation application
(§ 1024.41(c)(3))
Upon receiving a complete application, you generally must send the borrower a written notice
acknowledging that you received the complete loss mitigation application. Your obligation to
provide this notice occurs every time a loss mitigation application becomes complete, even if you
have previously sent the borrower this notice. Comment 41(c)(3)(i)-3 offers an example of this
principle.
You must provide this notice, when required, within 5 days (excluding legal public holidays,
Saturdays, and Sundays) after receiving a borrower’s complete loss mitigation application.
(§ 1024.41(c)(3)(i))
This notice must contain the following information:
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1. That the loss mitigation application submitted is complete;
2. The date you received the complete application;
3. That you expect to complete your evaluation within 30 days of the date you received the
complete application;
4. That the borrower is entitled to certain foreclosure protections because you have received
the complete application.
5. One of the following, as applicable:
a. If you have not made the first notice or
filing required by applicable law for any
judicial or non-judicial foreclosure
process, that you cannot make the first
notice or filing required to commence or
initiate the foreclosure process under
applicable law before evaluating the
borrower’s complete application; or
b. If you have made the first notice or filing
required by applicable law for any
judicial or non-judicial foreclosure
process, that you have begun the
foreclosure process, and that you cannot
conduct a foreclosure sale before
evaluating the borrower’s complete
application;
6. That you may need additional information at
a later date to evaluate the application, and if
you should require additional information you will request that information from the
borrower and give the borrower a reasonable opportunity to submit it, the evaluation
process may take longer, and the foreclosure protections could end if you do not receive the
information as requested; and
7. That the borrower may be entitled to additional protections under state or federal law.
The date you received the complete
application may not be the same date as
when an application became facially
complete. For example, assume you receive a
complete application on March 1 and send
the borrower a notice acknowledging the
receipt of a complete loss mitigation
application on March 5. On March 10, you
discover that the application requires
additional information or corrected
documents to complete the application.
Following this determination, you promptly
request additional information or documents
from the borrower. If you receive the
requested documents, and thereby have a
complete application on March 21, you must
provide a second notice of complete loss
mitigation application and disclose March 21
as the date you received the complete
application. (Comment 41(c)(3)(i)-3)
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You are not required to provide a borrower with notice acknowledging that you received their
complete loss mitigation application when:
You provided the borrower with a notice of complete loss mitigation application and you
have not requested additional information or a corrected version of a previously
submitted document;
You have completed your evaluation and provided the borrower with a determination
notice under § 1024.41(c)(1)(ii) stating, among other things, which loss mitigation
options, if any, you will offer the borrower; or
The borrower’s loss mitigation application was not complete or facially complete more
than 37 days before a foreclosure sale.
(§ 1024.41(c)(3)(ii))
13.4.4 Evaluating loss mitigation applications (§ 1024.41(c))
The Mortgage Servicing Rules set certain deadlines and procedures concerning review of
applications for loss mitigation options.
In general, if you receive a complete loss mitigation application more than 37 days before a
scheduled foreclosure sale (or at a time when no foreclosure sale is scheduled), you must
evaluate it within 30 days for all available loss mitigation options and provide the borrower a
notice in writing stating (among other things) your determination of which loss mitigation
options, if any, you will offer to the borrower.
You may combine this notice with other notices required by applicable law, including, without
limitation, a Regulation B (12 CFR § 1002) adverse action notice or a Fair Credit Reporting Act
notice, unless otherwise prohibited by applicable law. (Comment 41(c)(1)-4)
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13.4.5 Facially complete loss mitigation applications
(§ 1024.41 (c)(2)(iv) and comments and 41(c)(2)(iv)-1
and -2)
An application is considered facially complete if:
A borrower submits all the missing
documents and information after
receiving notice from you that their
application was incomplete due to
missing documents or information under
§ 1024.41(b)(2)(i)(B);
No additional information is requested in
your notice to the borrower
acknowledging receipt of the loss
mitigation application, pursuant to
§ 1024.41(b)(2)(i)(B); or
You are required to provide the borrower
with a notice of complete application,
pursuant to § 1024.41(c)(3)(i).
In informing the borrower of the documents
and other information you need to evaluate
the borrower for loss mitigation options, at
the outset or in response to an incomplete
application, you should be as precise and
specific as possible.
For example, if you need a notarized tax
return but only request from the borrower a
tax return without specifying that it must be
notarized, then the borrower’s application is
considered facially complete even if the
borrower provides a tax return that is not
notarized.
Similarly, if you request a notarized tax
return but the borrower submits a return
that is not notarized, then the borrower’s
application also is considered facially
complete, because the borrower has
submitted all documents and information
requested. If the servicer requires the
notarized tax return to evaluate the
application, the servicer must promptly
request the corrected document from the
borrower.
Onc
e an application is facially complete, certain
protections apply, even if you later (in the course
of evaluating the application) discover you need
additional documents or information for the
application to be complete. There are several
steps you must take and protections you must
afford to the borrower:
1. If you discover additional information or corrections to a previously submitted document
are required to complete the application, you must promptly request them.
(§ 1024.41(c)(2)(iv))
2. You must give the borrower a reasonable amount of time to provide the documents and
information requested. What is considered a reasonable amount of time will depend on
the particular facts and circumstances. (§ 1024.41(c)(2)(iv) and comment 41(c)(2)(iv)-1)
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3. You may not make the first notice or filing required by applicable law for any judicial or
non-judicial foreclosure process, and you may not move for foreclosure judgment or
order of sale, or conduct a foreclosure sale, until the borrower has had a reasonable
opportunity to complete the application. (§ 1024.41(c)(2)(iv) and comments
41(c)(2)(iv)-1 and -2)
4. If the borrower completes the application by providing the corrected documents or
additional information to you in the reasonable period of time you provide, the
application is considered complete as of the date it was actually complete for the purpose
of evaluation provisions under § 1024.41(c), including that it must be evaluated within
30 days of completion.
5. There are several other borrower rights and protections that depend on when a complete
application was received. These include, among others, prohibitions on beginning the
foreclosure process and foreclosure sale (§ 1024.41(f)(2) and (g)), the right to appeal a
denial of a loan modification program (§ 1024.41(h)), and the right to a particular
amount of time for the borrower to respond to an offer of loss mitigation (§ 1024.41(e)).
For purposes of these protections, you must treat the application as complete as of the
date it first became facially complete, not the date any corrected documents or
information were received.
(§ 1024.41(c)(2)(iv))
13.4.6 Information not in the borrower’s control
A loss mitigation application is considered complete when a borrower provides all information
you require from the borrower, notwithstanding that you may require additional information
that is not in the borrower’s control. For example, if you require a borrower’s credit report for a
loss mitigation evaluation, a loss mitigation application is considered complete if the borrower
has submitted all the required information without regard to whether you have obtained a credit
report you requested from the consumer reporting agency. (Comment 41(b)(1)-5)
13.4.7 Conducting reasonable diligence to obtain information
not in the borrower’s control (§ 1024.41(c)(4)(i) and
comments 41(c)(4)(i)-1 & 2)
You are obligated to exercise reasonable diligence with respect to obtaining documents or
information not in the borrower’s control that you require to determine what loss mitigation
options, if any, you will offer to the borrower.
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During the first 30 days following the receipt of a complete loss mitigation application, if you
require documents or information not in the borrower’s control—which includes information in
your control—at a minimum, you must request the documents or information from the
appropriate party:
Promptly upon determining that you require them; and
By a date that will allow you to complete the evaluation within 30 days of receiving the
application, to the extent practicable. (Comment 41(c)(4)(i)-1)
If you have not received required documents or information from a third-party within 30 days of
receiving the complete application from the borrower, you act with reasonable diligence by
heightening your efforts to obtain the documents or information promptly, to minimize delay in
making a determination on the application. Heightening efforts include, for example, promptly
verifying that you have contacted the appropriate third-party and determining whether you
should obtain the required documents or information from a different third-party.
(Comment 41(c)(4)(i)-2)
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13.4.8 Denying a complete loss mitigation application
because of a lack of information not in the borrower’s
control (§ 1024.41(c)(4)(ii)(A))
Generally, § 1024.41(c)(4)(ii)(A)(1) prohibits servicers from denying complete loss mitigation
applications solely because the servicer lacks the required documents or information not in the
borrower’s control. However, you may deny a
complete loss mitigation application if the
following three conditions are met:
1. You exercised reasonable diligence to
obtain required documents or
information from the third-party.
2. You must have been unable to obtain
such documents or information for a
significant period of time following the
30-day period allowed under
§ 1024.41(c)(1) to evaluate a loss
mitigation application.
3. In accordance with applicable
requirements established by the owner
or assignee of the borrower’s mortgage
loan, you are unable to determine which
loss mitigation options, if any, you will
offer the borrower without the missing
documents or information.
Reasonable diligence depends on the facts and
circumstances of a particular loss mitigation
application. In this context, you act with
reasonable diligence by heightening your efforts
to obtain the documents or information
promptly, to minimize delay in making a
determination of which loss mitigations, if any,
you will offer the borrower. (Comment
41(c)(4)(ii)-2). See “Conducting reasonable diligence to obtain information not in the
borrower’s control” in Section 13.4.7 for more information.
The Mortgage Servicing Rules do not set
forth standard criteria you must use to
evaluate an application.
You are required to complete all possible
steps in the process of evaluating an
application within 30 days of receipt, even if
there is delay in obtaining required third-
party information. (Comment 41(c)(4)(ii)-1).
For example, when you need only investor
approval to make a determination, you
should complete your evaluation within 30
days even if the investor takes longer than
that to approve or deny the application.
Nothing in the Mortgage Servicing Rules
requires you to deny a loss mitigation
application. You are permitted to offer a
borrower a loss mitigation option, even if you
do not obtain the requested documents or
information. (Comment 41(c)(4)(ii)-2). In
addition, the Mortgage Servicing Rules
prohibits denial due to missing third-party
information unless, among other things, you
are unable to determine which loss
mitigation options to offer, in accordance
with applicable owner or assignee
requirements. (§ 1024.41(c)(4)(ii)(2))
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In notifying the borrower that you are denying their complete loss mitigation application
because of a lack of information not in the borrower’s control, you must provide a determination
notice under § 1024.41(c)(1), and you must also provide the borrower with a copy of the notice
you provided under § 1024.41(c)(4)(ii) informing them of your attempts to get information from
third-parties. (See below for more information).
Notifying the borrower of missing third-party information
(§ 1024.41(c)(4)(ii)(B) and 41(c)(4)(ii)(C))
Within the 30 days allotted to review a complete application, if you have not received required
documents or information not in the borrower’s control, you must provide a written notice to
the borrower informing the borrower you have not received these documents or information.
(§ 1024.41(c)(4)(ii)(B))
Specifically, the notice must include the following information:
A statement that you have not received documents or information not in the borrower’s
control that is required to determine what loss mitigation options, if any, will be offered
to the borrower;
The specific documents or information that you lack;
Notice that you have requested such documents or information from the appropriate
third-party; and
A statement letting the borrower know that you will complete the evaluation for all
available loss mitigation options promptly upon receiving the documents or information.
You are not required to disclose the date you contacted the third-party or disclose the specific
third-party that has not provided you with the requested information. Instead, you must inform
the borrower of the specific information you lack. See § 1024.41(c)(4)(ii)(B)
If you later deny the complete loss mitigation application because you have not received the
required documents or information, you must provide a borrower with a written notice,
pursuant to § 1024.41(c)(1), stating your determination of which loss mitigation options, if any,
you will offer, and you must also include a copy of the notice required under
§ 1024.41(c)(4)(ii)(B). See “Denying a complete loss mitigation application because of a lack of
information not in the borrower’s control” in Section 13.4.8 for more information.
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13.4.9 Incomplete loss mitigation applications
(§ 1024.41(c)(2) and comment 41(c)(2)(ii)-1)
In general, subject to the exceptions discussed below and for certain loss mitigation options
made available to borrowers experiencing a COVID-19 related hardship, discussed in
Appendix
B of this Guide, you may not evade the
requirement to evaluate complete loss
mitigation applications for all available loss
mitigation options by offering a loss mitigation
option based on an evaluation of an incomplete
application. Instead, you must exercise
reasonable diligence in obtaining a borrower’s
documents and information needed to complete
the application, and you must evaluate the
complete application for all available options.
But if you have exercised reasonable diligence to
complete the application and the application
nevertheless remains incomplete for a
significant period of time under the
circumstances without further progress by the
borrower to complete it, you may in your
discretion, evaluate the incomplete application
and offer the borrower a loss mitigation option
for which the borrower qualifies. The
requirements in § 1024.41 do not apply to such
evaluation, and it is not considered an
evaluation of a complete loss mitigation
application for purposes of determining whether
a complete application is duplicative pursuant to § 1024.41(i). (§ 1024.41(c)(2)(ii))
A significant period of time under the circumstances may include consideration of the timing of
the foreclosure process. For example, if a borrower has less than 50 days before a foreclosure
sale, an application remaining incomplete for 15 days may be a more significant period of time
under the circumstances than if the borrower is still less than 120 days delinquent on a
mortgage loan obligation. (Comment 41(c)(2)(ii)-1)
Nothing in the Mortgage Servicing Rules
prohibits you from offering a loss mitigation
option to a borrower who has not submitted
a loss mitigation application or has
submitted an incomplete application, if the
loss mitigation option is not based on any
evaluation of information submitted by the
borrower in connection with the application.
For example, if you offer a trial loan
modification to all 150-day delinquent
borrowers without an application or
consideration of any information the
borrower provides, you are not required to
comply with the loss mitigation procedures
of the Mortgage Servicing Rules with respect
to such program, and an offer of any such
program does not violate the prohibition
against evading the requirement to evaluate
complete loss mitigation applications for all
loss mitigation options available to the
borrower by offering a loss mitigation option
based upon an evaluation of any information
provided by a borrower. (§ 1024.41(c)(2)(i))
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13.4.10 Short-term loss mitigation options (§ 1024.41(c)(2)(iii) and
comments 41(b)(1)-4.iii and (c)(2)(iii)-1 through -3)
Notwithstanding the restrictions described above, you may offer a borrower a short-term
payment forbearance program or a short-term repayment plan (as those terms are defined for
purposes of the rule) based on an evaluation of an incomplete loss mitigation application.
(§ 1024.41(c)(2)(iii))
A short-term payment forbearance program is when you allow a borrower to forgo making
certain payments or portions of payments for a period of time of no more than six months. Such
a program would be considered “short-term” regardless of the amount of time you allow the
borrower to make up the missing payments. (Comment 41(c)(2)(iii)-1)
A short-term repayment plan exists when you allow a borrower to repay all past due payments,
of no more than three months, over a specified period of time, of no more than six months, to
bring the mortgage loan account current. The Mortgage Servicing Rules do not prevent you
from offering a repayment plan that exceeds the durational limitations. The rule does prohibit
you from doing so without obtaining a complete loss mitigation application and evaluating the
borrower for all available options. You may also offer a short-term payment forbearance
program to a borrower in conjunction with a short-term repayment plan. (Comment
41(c)(2)(iii)-4)
Short-term loss mitigation written notice
Promptly after offering the borrower a short-
term payment forbearance program or short-
term repayment plan, unless the borrower has
rejected the offer, you must provide the
borrower a written notice that contains the
following disclosures. (§ 1024.41(c)(2)(iii))
First, the notice must include the payment terms and duration of the plan or program. This
includes the amount and date of each payment due during the plan or program, and whether the
mortgage will be current at the end of the plan or program. If you lack the necessary information
to determine the amount of each payment at the time the notice is sent (for example, because of
an expected change in escrow or a scheduled interest rate adjustment), your notice must reflect
the best information reasonably available to you at the time the notice is provided. In that
circumstance, the notice also must:
Providing the notice no later than five days
(excluding legal public holidays, Saturdays,
and Sundays) after making the offer is
generally considered prompt for these
purposes. (Comment 41(c)(2)(iii)-6)
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Identify which payment amounts may change;
State that those payment amounts are estimates; and
State the general reason the payment amounts may change (e.g. an interest rate may
increase because it is tied to an index, or an escrow account computation year will end
during the program or plan).
Second, the notice must include a statement that you offered the program or plan based on an
evaluation of an incomplete application and other loss mitigation options may be available.
Last, the notice must contain a statement that the borrower has the option to submit a complete
loss mitigation application to receive an evaluation for all loss mitigation options available to the
borrower regardless of whether the borrower accepts the offered option. (§ 1024.41(c)(2)(iii))
Other requirements regarding short-term loss mitigation
While the borrower is performing according to the terms of the short-term loss mitigation, you
may not make the first notice or filing required by applicable law for any judicial or non-judicial
foreclosure process or moving for foreclosure judgment or order of sale or conducting a
foreclosure sale. (§ 1024.41(c)(2)(iii))
If the borrower fails to comply with the plan or requests further assistance, you must
immediately resume exercising reasonable diligence to obtain a complete application. (See
comment 41(b)(1)-4.iii.) Reasonable diligence is explained further in “Denying a complete loss
mitigation application because of a lack of information not in the borrower’s control” in
Section 13.4.8.
You continue to remain subject to the other requirements under the loss mitigation rules while
complying with the short-term loss mitigation rules. For example:
You are still obligated to conduct an initial review of the application for completeness,
and provide the borrower with the notice under § 1024.41(b)(2)(i)(B) informing the
borrower that you acknowledge receipt of the application and have determined the
application is incomplete, and also identifying any additional documents or information
that would be needed to complete the application. (Comment 41(c)(2)(iii)-2).
You continue to have an obligation to exercise reasonable diligence in obtaining
documents and information to complete a loss mitigation application. (Comment
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41(c)(2)(iii)-2). As explained in comment 41(b)(1)-4.iii, reasonable diligence includes
providing the written notice described above in this section of the Guide. (Comment
41(b)(1)-4.iii). Except as described in Appendix B
of this Guide, you may suspend efforts
to obtain any additional documents or information while a borrower is in compliance
with a short-term payment forbearance program or short-term repayment plan offered
under § 1024.41(c)(2)(iii), assuming the borrower does not request further assistance
and does not notify you that he or she wishes to complete the application and proceed
with a full loss mitigation evaluation.
Generally, near the end of a short-term payment forbearance program and prior to the
end of the forbearance period, if the borrower remains delinquent, you must contact the
borrower to determine if the borrower wishes to complete the application and proceed
with a full loss mitigation evaluation. Appendix B of this Guide discusses specific timing
requirements for borrowers in a short-term payment forbearance program made
available to borrowers experiencing a COVID-19 related hardship. This obligation does
not necessarily apply to short-term repayment plans, although you must resume
reasonable diligence efforts to complete the application if, at any time, the borrower fails
to comply with the short-term repayment plan.
13.4.11 Non-home retention options
After receiving and evaluating a complete loss mitigation application, you may offer the
borrower a non-home retention option conditioned upon receipt of further information not in
the borrower’s possession and necessary to establish the parameters of your offer.
For example, you can comply with the requirement for evaluating the borrower for a short sale
option if you offer the borrower the opportunity to enter into a listing or marketing period
agreement, but indicate that the specifics are subject to an appraisal or title search.
(Comment 41(c)(1)-3)
13.4.12 Potential successors in interest (Comments 41(b)-1.i
and 41(b)-1.ii)
When you receive a loss mitigation application from a potential successor in interest (prior to
confirming that person’s identity and ownership interest) you may, but are not required to,
review and evaluate the application in accordance with loss mitigation procedures.
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If you review a complete loss mitigation application from a potential successor in interest and
comply with the requirements of § 1024.41 with respect to the application prior to confirmation,
you do not need to re-evaluate the application after confirming the successor in interest’s status
(so long as the subsequent evaluation would not result in a different determination due to the
person’s confirmation as a successor in interest if it had been conducted after confirmation).
If you elect not to review an application from a potential successor in interest, you must
preserve the loss mitigation application and all documents submitted in connection with the
application. Once you confirm the person’s status, you must review and evaluate the loss
mitigation application. You must treat the application submitted by a potential successor in
interest as if it had been received on the date that you confirm that person’s status.
If an application is incomplete at the time of confirmation, because the documents submitted by
the potential successor in interest became stale or invalid after they were submitted, and
confirmation of that person’s status is 45 days or more before a foreclosure sale, within five days
(excluding legal public holidays, Saturdays, and Sundays) after confirmation you must identify
the stale or invalid documents and notify the successor in interest according to § 1024.41(b)(2).
Note that the loss mitigation requirements only apply if the property is the confirmed successor
in interest’s principal residence. See “What is the scope of the successor in interest rules?” in
Section 4.2 for more information about confirmed successors in interest.
13.5 What must I do when I deny a loan
modification application? (§ 1024.41(d)
and comments 41(d)(1)-1 to -4)
If you deny a borrower’s complete loss mitigation application received more than 37 days before
a scheduled foreclosure sale (or at any time when no foreclosure sale is scheduled) for any trial
or permanent loan modification option, you must send the borrower a notice that states:
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The specific reasons for your decision for each trial or permanent loan modification
option denied. See Comment 41(d)(1)-1
for additional guidance on denials based
on investor requirements
If you base your denial on a net present
value calculation, you must include in
your notice the specific inputs you used
in your net present value calculation
If the borrower may appeal, as discussed
below, you must include that the
borrower may appeal your
determination, and information about
the requirements for the appeal process,
including the deadline for requesting
that appeal. (See “What appeals must I allow when I offer loan modifications?” in
Section 13.7.)
Any decision not to offer a loan modification
option is a denial. If you have four loan
modification options and you offer the
borrower only one option, you have denied
the borrower for the other three options and
must provide the required contents of the
notice for those denials. (Comment 41(d)(1)-
3). You must disclose the actual reason for
the denial. You are not required to
determine or disclose whether the borrower
would have been denied based on criteria
that were not actually considered.
(Comment 41(d)(1)-4)
13.6 How long must I give borrowers to
respond to loss mitigation offers?
(§ 1024.41(e)(1))
How much time you must give a borrower to respond to loss mitigation offers under the rule
depends on the proximity of a foreclosure sale:
When a borrower submits a complete or facially complete loss mitigation application 90
days or more before a scheduled foreclosure sale (or at a time when no foreclosure sale is
scheduled), you must give the borrower 14 days to accept or reject a loss mitigation offer.
When a borrower submits a complete or facially complete loss mitigation application less
than 90 days but more than 37 days before a scheduled foreclosure sale, you must give
the borrower 7 days or more to accept or reject a loss mitigation offer.
If the borrower doesn’t respond within the 7-day or 14-day deadline, you can deem that as a
rejection of your loss mitigation offer except in these cases:
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If the borrower does not satisfy your requirements for accepting a trial loan modification
plan, but does submit the payments the trial plan calls for within the deadline, you must
give the borrower a reasonable period to fulfill any remaining requirements.
In cases where an appeal is available, if a borrower timely appeals your decision, you
must extend the deadline for accepting any loss mitigation option you offered until 14
days after you provide the notice concerning how the appeal was resolved. (See “What
appeals must I allow when I offer loan modifications?” below.)
(§ 1024.41(e)(2))
13.7 What appeals must I allow when I offer
loan modifications? (§ 1024.41(h))
You must allow borrowers to appeal your decision regarding loan modifications when you
receive a complete or facially complete loss mitigation application during the pre-foreclosure
review period (before a servicer has made the first notice or filing to begin the foreclosure
process) or 90 days or more before a scheduled foreclosure sale (or at a date when no
foreclosure sale is scheduled). The appeal process is limited to denial of loan modification
programs, and is not required for other loss
mitigation programs.
The appeal must include an independent
evaluation. That means you cannot use the
same personnel who evaluated the application to
review the appeal. Supervisors can review
appeals so long as they were not directly
involved in the initial evaluation of the
borrower’s complete loss mitigation application.
(§ 1024.41(h)(3) and comment 41(h)-1)
Within 30 days of a borrower making an appeal, you must notify the borrower of your decision
to offer or reject the loan modification option that is the subject of the appeal. You must give the
borrower at least 14 days to accept or reject an offer of a loss mitigation option resulting from
your independent evaluation, after the servicer provides this notice to the borrower. The rules
do not require that you provide any additional appeal. (§ 1024.41(h)(2))
If you previously offered a borrower a loss
mitigation option, and a borrower timely
requested an appeal of a denial for some
other loan modification option, the
borrower’s deadline for accepting the original
offer of a loss mitigation option must be
extended to 14 days after you notify the
borrower of your decision on the appeal.
(§ 1024.41(e)(2)(iii))
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13.8 When am I prohibited from starting
foreclosure or completing a foreclosure
for which I have already made the first
notice or filing? (§§ 1024.41(f)(1)-(2) and
(g) and comments 41(f)-1 and 41(g)-1 to -
5)
Generally, you cannot begin the foreclosure process until the borrower is more than 120 days
delinquent. Delinquency is a period of time during which a borrower and the borrower’s
mortgage loan obligation are delinquent. A borrower and a borrower’s mortgage loan obligation
are delinquent beginning on the date a periodic payment sufficient to cover principal, interest,
and (if applicable) escrow becomes due and unpaid, until such time as no periodic payment is
due and unpaid.
“Beginning the foreclosure process,” as used in this Guide, means making the first notice or
filing required by applicable law for any judicial or non-judicial foreclosure process under
certain circumstances. Whether a document is considered the first notice or filing is determined
based on foreclosure procedures under the applicable state law.
Where foreclosure procedure requires a court action or proceeding, a document is
considered the first notice or filing if it is the earliest document required to be filed with
a court or other judicial body to commence the action or proceeding (e.g., a complaint,
petition, order to docket, or notice of hearing).
Where foreclosure procedure does not require an action or court proceeding, such as
under a power of sale, a document is considered the first notice or filing if it is the
earliest document required to be recorded or published to initiate the foreclosure
process.
Where foreclosure procedure does not require any court filing or proceeding, and also
does not require any document to be recorded or published, a document is considered
the first notice or filing if it is the earliest document that establishes, sets, or schedules a
date for the foreclosure sale.
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A document provided to the borrower but not initially required to be filed, recorded, or
published is not considered the first notice or filing on the sole basis that the document must
later be included as an attachment accompanying another document that is required to be filed,
recorded, or published to carry out a foreclosure.
13.8.1 Additional foreclosure protections after submission of a
loss mitigation application
If you want to begin the foreclosure process
between August 31, 2021 to January 1, 2022,
you’ll also need to ensure you’ve met one of
the additional temporary procedural
safeguards discussed in Appendix B, below.
Loss mitigation application submitted before the foreclosure process begins
If a borrower has submitted a complete or facially complete loss mitigation application before
you have begun the foreclosure process, you may not begin the foreclosure process until one of
the following occurs.
1. In the case of a complete application:
You send the borrower a notice that the
borrower is not eligible for any loss
mitigation option, and the borrower has
exhausted the appeal process. This can
happen when the appeal process is not
applicable, the borrower has not
requested an appeal within the applicable time period, or you have denied the borrower’s
appeal.
The borrower rejects all loss mitigation options you offer.
The borrower fails to perform under an agreement on a loss mitigation option. (See
comments 41(g)(3)-1 and -2 for additional guidance on short sales.)
2. In the case of a facially complete application:
Recall that you must seek corrected documents or additional information necessary to complete
the application and must give the borrower a reasonable amount of time to provide those
materials. In addition, you may not begin the foreclosure process or otherwise refer the
borrower to foreclosure until the borrower has had a reasonable amount of time to provide the
documents or information. (§ 1024.41(c)(2)(iv), 1024.41(f)(2), and (g) and comments
41(c)(2)(iv)-1 and -2)
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Loss mitigation application submitted after the foreclosure process begins
If a borrower submits a complete loss mitigation application after you have begun the
foreclosure process but more than 37 days before a scheduled foreclosure sale (or at a time when
no sale has been scheduled), you must not move for foreclosure judgment or order of sale, or
conduct a foreclosure sale, until one of the following occurs:
You send the borrower a notice that the borrower is not eligible for any loss mitigation
option and the borrower has exhausted the appeal process. This can happen when the
appeal process is not applicable, the borrower has not requested an appeal within the
applicable time period, or you have denied the borrower’s appeal.
The borrower rejects all loss mitigation options you offer.
The borrower fails to perform under an agreement on a loss mitigation option. (See
comments 41(g)(3)-1 and -2 for additional guidance on short sales.)
Conducting a foreclosure sale, where none of the above conditions are applicable, is prohibited,
even if someone other than the servicer administers or conducts the foreclosure sale. (Comment
41(g)-5)
13.8.2 Dispositive motion
The prohibition on moving for judgment or order of sale includes making a dispositive motion
for foreclosure judgment such as a motion for default judgment, judgment on the pleadings, or
summary judgment, which may directly result in a judgment of foreclosure or order of sale.
(Comment 41(g)-1)
If you have made a dispositive motion (meaning you have asked the court to rule in your favor
without further trial proceedings) and you then receive a complete and timely loss mitigation
application, you should take reasonable steps to avoid a ruling on your dispositive motion until
you complete the loss mitigation evaluation process, such as requesting that the court delay
consideration of your dispositive motion.
13.8.3 Proceeding with the foreclosure process
The prohibition on moving for judgment or order of sale does not prevent you from proceeding
with the foreclosure process, including any publication, arbitration, or mediation requirements,
in cases where you receive a complete and timely loss mitigation application after you have
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begun a foreclosure proceeding—so long as the steps you take in the foreclosure process do not
cause or directly result in the issuance of a foreclosure judgment or order of sale, or the conduct
of a foreclosure sale, in violation of the loss mitigation provisions of the Mortgage Servicing
Rule. (Comment 41(g)-2). Conducting the foreclosure sale, where none of the conditions
described in “When am I prohibited from starting foreclosure or completing a foreclosure for
which I have already made the first notice or filing?” in Section 13.8 apply, violates the rule.
13.8.4 Interaction with foreclosure counsel
It is your responsibility to promptly instruct your foreclosure counsel not to make a dispositive
motion for foreclosure judgment or order of sale; where such a dispositive motion is pending, to
avoid a ruling on the motion or issuance of an order of sale; and, where a sale is scheduled, to
prevent conduct of a foreclosure sale, when you receive a complete loss mitigation application
within the deadlines specified in the rule and no exception under the rule exists. You are
responsible for violations caused by foreclosure counsel’s actions or inactions. (Comment 41(g)-
3)
13.9 What requirements apply to loss
mitigation applications submitted 37 days
or less before a foreclosure sale?
You are not required to comply with the loss mitigation requirements of this rule when
borrowers submit their complete loss mitigation application 37 days or less before a scheduled
foreclosure sale.
You are required separately by the general servicing policies, procedures, and requirements
provisions to maintain policies and procedures that are reasonably designed to achieve the
objective of properly evaluating loss mitigation applications. (See Section 10 for more
information on general servicing policies, procedures, and requirements). This objective
includes properly evaluating a borrower who submits an application for a loss mitigation option
for all loss mitigation options available to the borrower pursuant to any requirements
established by the owner or assignee of the borrower’s mortgage loan. Accordingly, if the owner
or assignee requires evaluations of loss mitigation applications received closer to a foreclosure
sale than required by the Bureau’s loss mitigation rule, your policies and procedures must
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ensure that such reviews are performed as required by the owner or assignee. Such evaluation
may be subject to requirements applicable to a review of a loss mitigation application submitted
by a borrower 37 days or less before a foreclosure sale. (Comment 41(g)-4)
13.10 What loss mitigation rules apply to
servicing transfers? (§ 1024.41(k))
The Mortgage Servicing Rules contain requirements applicable to loss mitigation applications
pending at the time of a servicing transfer. In addition, the rules provide specific requirements
that you, as a transferee servicer, and the transferor servicer must meet when a borrower has
initiated a loss mitigation application.
13.10.1 General rules when the servicing of a mortgage loan
is transferred
If you, as a transferee servicer, acquire the servicing of a mortgage loan for which a loss
mitigation application is pending on the transfer date, you must comply with the loss mitigation
rules that applied for that loss mitigation application prior to the transfer. A borrower continues
to retain the rights and protections under § 1024.41(c) through (h) to which a borrower was
entitled before the servicing was transferred. (§ 1024.41(k)(1)(i))
A loss mitigation application is considered pending if the application is subject to the loss
mitigation rules but was not fully resolved prior to the transfer date. This is the case, for
example, if a borrower submitted a complete loss mitigation application, but the transferor
servicer has not determined what loss mitigation
options, if any, are available. A loss mitigation
application would not be pending if the servicer
that transfers the servicing rights has denied the
borrower’s application for all loss mitigation and
the borrower does not have the right to appeal
the decision under § 1024.41(h). On the other
hand, the application would be a pending
complete application if it was complete as of the
transfer date under the transferor servicer’s
criteria for evaluating loss mitigation
You should ensure that borrowers are kept
updated as to the status of their loss
mitigation application.
You, as a transferee servicer, must comply
with the applicable requirements of § 1024.41
upon receipt of a loss mitigation application
from a borrower even if the borrower
previously received an evaluation of a
complete loss mitigation application from the
transferor servicer. (Comment 41(i)-2)
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applications and the borrower’s time to appeal the decision has not yet expired.
(Comment 41(k)-1)
The transfer date is the date you, as a transferee servicer, begin accepting payments for the
mortgage loan. The transfer date is disclosed on the notice of transfer of loan servicing pursuant
to § 1024.33(b)(4)(iv). The transfer date must not be confused with the transfer’s effective date,
which is disclosed on the notice of transfer of loan servicing pursuant to § 1024.33(b)(4)(i).
(§ 1024.41(k)(1)(i) and comment 41(k)(1)(ii)-1)
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13.10.2 Obtaining loss mitigation documents and information
after a transfer of servicing
If you, as a transferee servicer, receive a transfer of servicing of a mortgage loan, you must
ensure that the transferor servicer timely sends you documents and information the borrower
submitted in connection with a loss mitigation
application. (Comment 41(k)(1)(i)-1.i)
You must exercise reasonable diligence to
complete a loss mitigation application, including
a facially complete application, received as a
result of a transfer. Reasonable diligence, in the
transfer context, includes ensuring that a
borrower is informed of any changes to the
application process, such as a change in the
address to which the borrower should submit
documents and information to complete the
application. Reasonable diligence also includes
ensuring that the borrower is informed about
the information and documents that are
necessary to complete the application.
(Comment 41(k)(1)(i)-1.ii)
Upon reviewing the information and documents
constituting the application, you may find that
the application includes stale or invalid
documents. In these circumstances, you may
request the borrower provide you with updated
documents and information.
(Comments 41(k)(1)(i)-1.i and 1.ii)
After the transfer of servicing, borrowers may
continue to provide documents and information
to the transferor servicer. It is incumbent upon
both you, as a transferee servicer, and the
transferor servicer to ensure that the
information and documents are transferred to
Unless you are a small servicer, your
institution’s policies and procedures, as
maintained pursuant to § 1024.38(b)(4),
should accurately reflect your obligation to
ensure you receive or transfer documents
and information submitted by a borrower in
connection with a loss mitigation application.
The Mortgage Servicing Rules also require
transferor servicers to maintain policies and
procedures with respect to the transfer of any
information reflecting the current status of
discussions with a borrower regarding loss
mitigation options and any agreements
entered into with a borrower on a loss
mitigation option. (Comment 38(b)(4)(i)-2)
Section 1024.41(c)(3) requires servicers to
provide borrowers a written notice within
five days (excluding legal holidays,
Saturdays, and Sundays) of receipt of a
complete loss mitigation application.
As a transferee servicer, you are not required
to provide a loss mitigation notice that the
transferor servicer provided prior to the
transfer. For example, if the transferor
servicer provided the notice required by
§ 1024.41(b)(2)(i)(B) prior to the transfer,
you are not required to provide the notice
again for that application.
(Comment 41(k)(1)(i)-3).
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you. Both you and the transferor are obligated to ensure that borrowers are not adversely
affected by a servicing transfer. (Comment 41(k)(1)(i)-1.iii)
A borrower that submits a facially complete or complete application to the transferor servicer
after the transfer date has the same rights and protections that would have applied if the
borrower had submitted the complete application to you, as a transferee servicer. For example,
when a borrower submits documents or information to the transferor servicer, which causes an
application to be either facially complete or complete, you, as a transferee servicer, must treat
the application as either facially complete or complete, under § 1024.41(c)(2)(iv), as of the date
the application was facially complete or complete with respect to the transferor servicer.
(Comment 41(k)(1)(i)-2)
13.10.3 Acknowledging an application submitted before the
transfer date (§ 1024.41(k)(2)(ii) and
comments 41(k)(2)(ii)-1, -2, and -3)
If you, as a transferee service, acquire the servicing of a mortgage loan for which the transferor
servicer received a loss mitigation application but did not send the borrower a notice
acknowledging the receipt of the loss mitigation application prior to the transfer date and the
period to provide the acknowledgment notice has not expired as of the transfer date, you must
provide an acknowledgment notice, pursuant to the requirements § 1024.41(b)(2)(i)(B), within
10 days (excluding legal public holidays, Saturdays, and Sundays) of the transfer date. However,
if the transferor provided the acknowledgment notice prior the transfer, you do not need to send
an acknowledgment notice. (§ 1024.41(k)(2)(i))
In addition to sending a borrower a notice acknowledging the receipt of the loss mitigation
application within 10 days of the transfer date, the Mortgage Servicing Rules provide two
additional protections to borrowers who receive the acknowledgment notice from the transferee
servicer following transfer. (§ 1024.41(k)(2)(ii))
First, when you, as a transferee servicer, are required to send a borrower an acknowledgment
notice that states their application is incomplete, you must not make the first notice or filing
required by applicable law for any judicial or non-judicial foreclosure process until after the
reasonable date given to the borrower to submit missing documents in the notice. Moreover, if
the borrower submits a complete loss mitigation application on or before the reasonable date,
then for purposes of § 1024.41(f)(2), the borrower shall be treated as having done so during the
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pre-foreclosure review period set forth in § 1024.41(f)(1). (§ 1024.41(k)(2)(ii)(A) and
comment 41(k)(2)(ii)-2)
For example, assume a transferor servicer received a borrower’s incomplete loss mitigation
application on October 1, and transfers the loan within five days (excluding legal public holidays,
Saturdays, or Sundays) on October 8 without providing an acknowledgment notice pursuant to
§ 1024.41(b)(2)(i)(B). Further assume that Columbus Day, a legal public holiday, occurs on
October 14, and you, as a transferee servicer, provide the notice required by
§ 1024.41(b)(2)(i)(B) within 10 days of the transfer date, on October 23. With a 30-day
reasonable date (November 22), you cannot make the first notice or filing required by applicable
law for any judicial or non-judicial foreclosure process until after November 22, and then only if
the borrower has not submitted a complete application by that date, even if the borrower is 101
days delinquent on October 1. (Comment 41(k)(2)(ii)-1.i).
The reasonable date generally is 30 days after the date you provide the notice acknowledging
receipt of a loss mitigation application pursuant to § 1024.41(b)(2)(i)(B). However, the
reasonable date must be no later than the earliest of the remaining milestones and must never
be less than seven days from the date you provide the acknowledgment notice. See “Reasonable
date” in Section 13.4.2 for more information.
If none of the four milestones remain, you must determine the reasonable date, which may
occur less than 30 days but no less than 7 days
after you provide an acknowledgment notice,
pursuant to the requirements of
§ 1024.41(b)(2)(ii). (See Comment 41(k)(2)(ii)-
3)
Second, if a borrower submits a complete loss
mitigation application 37 days or less before a
scheduled foreclosure sale but on or before the reasonable date disclosed to the borrower, you,
as a transferee servicer, must comply with the requirements of §§ 1024.41(c), (d), and (g), even if
even you are not otherwise required to comply with these requirements due to the date the
application is submitted. (§ 1024.41(k)(2)(ii)(B))
For example, using similar facts as above, assume the transferor servicer receives a borrower’s
loss mitigation application on October 1, and transfers the loan within five days (excluding legal
public holidays, Saturdays, or Sundays) on October 8 without providing a notice pursuant to
Borrowers do not have the right to appeal a
decision, pursuant to § 1024.41(h), if the 90-
day milestone passes before you, as a
transferee servicer, or the transferor servicer,
receive the complete loss mitigation
application. (Comment 41(k)(2)(ii)-2)
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§ 1024.41(b)(2)(i)(B). Further assume that you provide loss mitigation acknowledgment notice
within 10 days of the transfer date, on October 23, and you request additional information,
pursuant § 1024.41(b)(2)(i). Last, assume you disclose a 30-day reasonable date, November 22,
pursuant to § 1024.41(b)(2)(ii). If the transferor servicer received borrower’s initial loss
mitigation application 55 days before the foreclosure sale (scheduled for November 25), then the
date you provided the acknowledgment notice is 33 days (October 23) before the foreclosure
sale. You must comply with § 1024.41(c), (d), and (g) if the borrower submits a complete loss
mitigation application on or before November 22, which is the reasonable date disclosed. (See
Comment 41(k)(2)(ii)-1.ii)
13.10.4 Complete application pending at transfer date
(§ 1024.41(k)(3))
If you acquire the servicing of a mortgage loan for which a complete loss mitigation application
is pending as of the transfer date, within 30 days of the transfer date you must evaluate the loss
mitigation application and exercise reasonable diligence in obtaining any required documents or
information not in the borrower’s control pursuant to § 1024.41(c)(1) and (c)(4).
(§ 1024.41(k)(3))
If you determine that additional information or a correction to a previously submitted document
is required, the application is considered facially complete as of the date it was first facially
complete or complete to the transferor servicer. The facially complete application, however, will
be treated as complete, for the purposes of § 1024.41(f)(2) and (g), until the borrower is given a
reasonable opportunity to complete the application. Once you receive the information or
corrections necessary to complete the application, you are required to provide a notice of
complete application, pursuant to § 1024.41(c)(3). (Comment 41(k)(3)-1)
If the borrower’s loss mitigation application was incomplete based on the transferor servicer’s
criteria prior to transfer, but is now complete based upon your criteria, the application is
considered a pending loss mitigation application complete as of the transfer date. In this
situation, you must provide the borrower with a notice of complete application, pursuant to
§ 1024.41(c)(3), and comply with the applicable requirements of § 1024.41(c)(1) and (c)(4)
within 30 days of the transfer date. For purposes of § 1024.41(c) through (h), the application is
complete as of the date the transferor servicer received the documents and information
constituting the complete application. (Comment 41(k)(3)-2)
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13.10.5 Applications subject to the appeals process
(§ 1024.41(k)(4))
When you acquire the servicing of a mortgage loan for which a borrower’s appeal has not been
resolved by the transferor servicer as of the transfer date (or is timely filed after the transfer
date), you must make a determination on the appeal, if you are able to do so. You must make the
determination and provide notice of your determination to the borrower (pursuant to
§ 1024.41(h)(4)) within 30 days of the transfer date or within 30 days of the date the borrower
made the appeal, whichever is later. At your option, you may evaluate the borrower for any loss
mitigation options you offer while determining the appeal. (§ 1024.41(k)(4)(i))
In certain circumstances, you may be unable to
make a determination on the borrower’s appeal.
This may be the case, for example, if the
transferor servicer denied a borrower for a loan
modification option that you do not offer. If you
are unable to make a determination, you must
treat the appeal as a pending complete loss
mitigation application and allow the borrower to
accept or reject any loss mitigation options
offered by the transferor servicer, even if you do
not offer that loss mitigation option. In
addition, you are required to comply with all
relevant sections of the loss mitigation rules,
which include evaluating the borrower for all
loss mitigation options available.
(Comment 41(k)(4)-2)
For example, assume a transferor servicer denied a borrower for all loan modification options
except for a short sale option, and assume that the borrower’s appeal of the loan modification
denial was pending as of the transfer date. If you, as a transferee servicer, are unable to
determine the borrower’s appeal, you must treat the appeal as a pending complete loss
mitigation application and evaluate the borrower for all available loss mitigation options in
accordance with § 1024.41(c) and (k)(3). At the conclusion of such evaluation, you must permit
the borrower to accept the short sale option offered by transferor servicer, even if you do not
offer the short sale option, in addition to any loss mitigation options you determine to offer the
borrower based upon your own evaluation. (Comment 41(k)(4)-2)
Under the Mortgage Servicing Rules,
borrowers may submit appeals to the
transferor servicer after the transfer date.
Upon receiving an appeal from a borrower,
the transferor servicer must timely transfer
appeal documents and information to you.
(Comment 41(k)(4)-1)
As either a transferee or transferor servicer,
you may not make the first notice or filing
required by applicable law for any judicial or
non-judicial foreclosure process, foreclosure
judgment or order of sale, or conduct a
foreclosure sale until a determination is
made on the borrower’s appeal.
(§ 1024.41(f)(2); (g); (h))
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For timing purposes under § 1024.41(c) or (k)(3), as applicable, the pending complete loss
mitigation application shall be considered complete as of the date the appeal was received by
you or the transferor servicer, whichever occurs first. However, for § 1024.41(e) through (h),
you must treat a pending complete loss mitigation application as facially complete (pursuant to
§ 1024.41(c)(2)(iv)) as of the date it was first facially complete or complete with respect to the
transferor servicer. (Comment 41(k)(4)-2)
13.10.6 Pending loss mitigation offers (§ 1024.41(k)(5))
A transfer of servicing does not affect the borrower’s ability to accept or reject a loss mitigation
option offered by the transferor servicer, so long as the offer had not expired. (§ 1024.41(k)(5)).
See “How long must I give borrowers to respond to loss mitigation offers” in Section 13.6 for
more information. The timeframe for borrowers to accept or reject a loss mitigation option
under § 1024.41(e) or (h), as applicable, is determined as of the date the servicer provides the
notice of the loss mitigation option.
In addition, borrowers may accept or reject a
pending loss mitigation offer made by the
transferor servicer by contacting the transferor
servicer after the transfer date. You, as a
transferee servicer, and the transferor servicer,
pursuant to § 1024.38(b)(4), should have
policies and procedures that ensure a timely
transfer of documents and information
regarding a borrower’s election to accept or
reject a previously offered loss mitigation
option. You, as a transferee servicer, must provide the borrower with any timely accepted loss
mitigation option, even if the borrower submitted the acceptance to the transferor servicer.
(Comment 41(k)(5)-1)
In certain circumstances, acceptance of a loss
mitigation option may be performed through
a borrower’s action. For example, a borrower
may be able to accept a trial modification
agreement by timely making an initial
payment of the modified amount to the
transferor servicer instead of to you, as a
transferee servicer.
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13.11 When must I evaluate a subsequent
complete loss mitigation application?
(§ 1024.41(i))
When a borrower previously received an evaluation of a complete loss mitigation application,
you must comply with all applicable requirements of § 1024.41 for a borrower’s subsequent loss
mitigation application, unless:
1. You have previously complied with the requirements of § 1024.41 for a complete loss
mitigation application submitted by the
borrower; and
2. The borrower has been delinquent at all
times since submitting the prior
complete application.
For example, if the borrower has previously
submitted a complete loss mitigation application and you complied fully with § 1024.41 for that
application, but the borrower then ceased to be delinquent and later became delinquent again,
you must again comply with § 1024.41 for any subsequent loss mitigation application submitted
by the borrower. (§ 1024.41(i) and comment 41(i)-1)
If you offered the borrower a loss mitigation option based on the evaluation of an incomplete
application as permitted by one of the exceptions under the Mortgage Servicing Rules discussed
in Section 13.4.9, you must evaluate a subsequent complete application submitted by the
borrower, even if the borrower remained delinquent at all times since you offered the loss
mitigation option. (Comments 41(b)(1)-4.iv., 41(c)(2)(iii)-3, and 41(i)-1)
Borrowers performing under a temporary
loss mitigation program that does not modify
the existing loan contract may be delinquent
for the purposes of § 1024.41(i).
(§ 1024.31(Delinquency) and its relevant
commentary)
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13.12 Is there a private right of action for a
borrower to enforce the loss mitigation
procedures?
Yes, there is a private right of action and the
borrower may enforce the loss mitigation
procedures pursuant to the provisions of Section
6(f) of RESPA (12 U.S.C. 2605(f)). However,
there is no private right of action under RESPA
for loss mitigation policies and procedures that
you design that are not required by the loss
mitigation rule.
The rule does not entitle a borrower to
receive an evaluation for (or an offer of) any
particular loss mitigation option. Under this
particular rule, you are not liable to a
borrower for a RESPA claim that your
agreement with an owner of a mortgage loan
requires you to evaluate a borrower for, or to
offer a borrower, any particular loss
mitigation option. Instead, a borrower may
have a RESPA cause of action if you fail to
follow the timelines and procedures required
by the loss mitigation rule.
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14. Practical Implementation
and Compliance
Considerations
You should consult with legal counsel or your compliance officer to understand your obligations
under the Mortgage Servicing Rules, including any amendments, and to devise the policies and
procedures you need to have in place to comply with the rules’ requirements.
How you comply with the Mortgage Servicing Rules may depend on your business model. When
mapping out your compliance plan, you should consider practical implementation issues in
addition to understanding your obligations under the rule. Your compliance plan may include:
1. Identifying affected products, departments, and staff
Servicers, or others subject to this rule, may offer some or all of the mortgage loan products and
servicing activities discussed in the Mortgage Servicing Rules. When creating a servicing
compliance program or updating a preexisting program, you may find it useful to identify all
affected products, services, departments, and staff.
2. Identifying what business process, operational, and technology changes will be
necessary for compliance
Fully understanding the changes required may involve a review of your existing business
processes, as well as the hardware and software that you, your agents, or other business partners
use. Gap analyses may be a helpful output of such a review and help to inform a robust
implementation plan.
3. Identifying impacts on key service providers or business partner impacts.
Third-party updates may be necessary to ensure you interact with borrowers in a compliant
fashion; to incorporate new disclosures; and to make sure your servicing software, compliance,
quality control, and records management protocols comply with this rule.
Software providers, or other vendors and business partners, such as subservicers, may offer
compliance solutions that can assist with any necessary changes. These key partners will
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depend on your business model. In some cases, you may need to negotiate revised or new
contracts with these parties, or seek a different set of services.
If you seek the assistance of vendors or business partners, make sure you understand the extent
of the assistance that they provide. For example, if vendors provide software that produces and
distributes ARM disclosures, do they guarantee the accuracy of their disclosures?
The CFPB expects supervised banks and nonbanks to have an effective process for managing the
risks of service provider relationships. For more information on this, view
CFPB Bulletin 2012-
03 Service Providers.
4. Identify training needs
Consider what training will be necessary for your servicing, compliance, loss mitigation,
collections, bankruptcy, and quality control staff. Training may also be required for other
individuals that are your employees, or your agents’ or business partners’ employees.
5. Considering other Title XIV rules
The Mortgage Servicing Rules are just one component of the Bureau’s Dodd-Frank Act Title XIV
rulemakings.
Other Title XIV rules include:
Ability-to-Repay and Qualified Mortgage Rule
2013 HOEPA Rule
ECOA Valuations Rule
TILA Higher-Priced Mortgage Loans Appraisal Rule
Loan Originator Rule
TILA Higher-Priced Mortgage Loans Escrow Rule
Each of these rules affects aspects of the mortgage industry and its regulation. Many of these
rules intersect with one or more of the others. Therefore, the compliance considerations for
these rules may overlap in your organization. You will find implementation aids and copies of
these rules online at
www.consumerfinance.gov/compliance/compliance-resources/mortgage-
resources/.
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15. Other Resources
15.1 Where can I find a copy of the Mortgage
Servicing Rules and get more information
about them?
You will find the Mortgage Servicing Rules, related amendments, and guidance documents on
the Bureau’s Implementation & Guidance website:
www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/mortserv/
.
In addition, that website also contains:
The preamble, which explains why the Bureau issued the rules; the legal authority and
reasoning behind the rules; responses to comments; and analysis of the benefits, costs,
and impacts of the rules.
Official Interpretations of the rules.
A copy of this Small Entity Compliance Guide.
Other implementation support materials including reference charts and any proposed
rule amendments.
Supervision and examination materials.
Useful resources related to regulatory implementation are also available at
www.consumerfinance.gov/compliance/compliance-resources/
.
For email updates about Bureau regulations and when additional Dodd-Frank Act Title XIV
implementation resources become available, please submit your email address within the “Sign
up for updates about mortgage rule implementation” box here
.
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APPENDIX A:
189 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
APPENDIX B:
Additional Provisions: 2020 and
2021 Mortgage Servicing
COVID-19 Rules
As discussed in Section 1.1, above, the Bureau issued an interim final rule on June 23, 2020 and
a final rule on June 28, 2021 amending certain Mortgage Servicing Rules provisions in
Regulation X to assist borrowers experiencing a COVID-19-related hardship.
The 2020 Mortgage Servicing COVID-19 Interim Final Rule and 2021 Mortgage Servicing
COVID-19 Rule amended the loss mitigation procedures discussed in Section 13 for certain
mortgages related to 1) the exceptions allowing evaluation of an incomplete loss mitigation
application (see Section 13.4.9), 2) the foreclosure protections (see Section 13.8), and 3)
reasonable diligence requirements for certain short-term forbearance programs (see Section
13.4.10). The 2021 Rule also adds requirements for servicers to provide specific information to
certain borrowers related to the early intervention live contact requirements (see Section 11.5).
The 2020 Mortgage Servicing COVID-19 Interim Final Rule and 2021 Mortgage Servicing
COVID-19 Rule do not change the scope of Mortgage Servicing Rules and have the same scope
as the underlying provisions. For the scope of the early intervention requirements, see Section
11.2. For the scope of the loss mitigation procedures, see Section 13.2.
This Appendix B provides a summary of the provisions, and explains how they intersect with the
other Mortgage Servicing Rule provisions.
Provision Sunsets
The 2020 Mortgage Servicing COVID-19 Interim Final Rule is effective July 1, 2020. The
2021 Mortgage Servicing COVID-19 Rule is effective August 31, 2021, although certain pre-
effective date actions may be used to demonstrate compliance or meet requirements of the Rule.
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All of these provisions are temporary. As illustrated below, these provisions phase out over
time.
FIGURE 1: SUNSET OF COVID-19 RELATED PROVISIONS AFTER AUGUST 31, 2021
2020 Interim Final Rule and 2021 Rule Provisions
Foreclosure Protections
If you are considering beginning the foreclosure
process from August 31, 2021 through December
31, 2021, then for certain accounts you must
make sure at least one of the temporary
procedural safeguards below has been met first,
in addition to the foreclosure protections discussed in Section 13.8. (§ 1024.41(f)(3)(1)).
Otherwise, you must not begin the foreclosure process until on or after January 1, 2022.
“Beginning the foreclosure process” as it
applies to the Mortgage Servicing Rules is
discussed in Section 13.8, above.
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PROCEDURAL SAFEGUARDS
The three procedural safeguards are:
1. The borrower was evaluated based on a
complete loss mitigation application and
existing foreclosure protection conditions
are met. To meet this safeguard, you must
confirm that:
The borrower submitted a complete
loss mitigation application, and you
evaluated the application.
The borrower remained delinquent
since submission of the loss mitigation application.
You are permitted by the Mortgage Servicing Rules to begin the foreclosure process
because the foreclosure protection conditions discussed in Section 13.8 have been
met.
Remember that actions taken before the
2021 Rule’s effective date can demonstrate
compliance with the procedural safeguard
provisions. For example, complete
application evaluations that took place before
August 31, 2021 (the 2021 Rule’s effective
date), and are otherwise in compliance with
the Mortgage Servicing Rules, would satisfy
part of this procedural safeguard.
§ 1024.41(f)(3)(ii)(A) and 41(f)(2).
The timing requirements for the Mortgage Servicing Rules’ foreclosure protection conditions
are discussed in Section 13 and are those that existed prior to the 2021 Mortgage Servicing
COVID-19 Rule. If choosing to meet this safeguard, you will need to take into account the
amount of time these existing Mortgage Servicing foreclosure protection conditions may
take. For example, under the 2013 and 2016 Mortgage Servicing Rules, if a borrower
submits a complete loss mitigation application more than 90 days before the foreclosure
process begins, assuming all requirements are utilized by both you and the borrower and
require the maximum time permitted for each, and that the evaluation includes review for
loan modification, generally the loss mitigation application review would take 74 days after
that application is submitted before a final denial could be issued and foreclosure
proceedings could begin, as illustrated below.
FIGURE 2: EXAMPLE LOSS MITIGATION APPLICATION REVIEW UNDER EXISTING MORTGAGE SERVICING
RULES’ FORECLOSURE PROTECTION CONDITIONS
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T
his example illustrates the maximum time limits assuming the borrower is already 120
days delinquent and the borrower is ultimately denied for loss mitigation options. If the
borrower is not yet 120 days delinquent or you approve the borrower for loss mitigation
options they later reject, additional time may be necessary before the foreclosure process
may begin.
2. The property is abandoned. To meet this safeguard, applicable state or local law must
consider the property securing the mortgage abandoned when you begin the foreclosure
process. (§ 1024.41(f)(3)(ii)(B))
3. The borrower is unresponsive to servicer
outreach. To meet this safeguard, you must
not have received any communications from
the borrower in the 90 days prior to
beginning the foreclosure process and you
must confirm:
You have complied with the early
intervention live contact
requirements in the Mortgage
Servicing Rules after each payment
due date during that 90-day period,
including those discussed below.
(§ 1024.41(f)(3)(ii)(C)(1)). See Section 11 for more information about complying with
the early intervention live contact requirements.
You have provided the early intervention written notice required by the Mortgage
Servicing Rules. You must send the notice at least 10 but no more than 45 days
before beginning the foreclosure process. (§ 1024.41(f)(3)(ii)(C)(2)). See Section 11
Remember that actions taken before the
2021 Rule’s effective date can demonstrate
compliance with the procedural safeguard
provisions. For example, early intervention
live contacts established before August 31,
2021 (the 2021 Rule’s effective date) that are
otherwise compliant with the Mortgage
Servicing Rules can be used to establish part
of this procedural safeguard, so long as they
comply with the applicable post-effective
date requirements.
193 SMALL ENTITY COMPLIANCE GUIDE: MORTGAGE SERVICING RULES v4.0
for more information about complying with the early intervention live contact
requirements.
You have complied with all loss mitigation notice requirements in the Mortgage
Servicing Rules, as applicable, during that 90-day period, such as the notice of an
incomplete loss mitigation application. (§ 1024.41(f)(3)(ii)(C)(3)). See Section 13 for
more information about complying with the loss mitigation procedures notice
requirements.
The borrower’s forbearance program, if applicable, ended at least 30 days before the
foreclosure process began. (§ 1024.41(f)(3)(ii)(C)(4))
The overlap of these unresponsive borrower safeguard requirements are laid out below.
Fo
r purposes of this safeguard, you have not received a communication from the borrower or
the borrower’s representative if you have not received any written or electronic
communications about the mortgage loan obligation, telephone calls about the mortgage
loan obligation, a payment on the mortgage loan obligation, or you have not successfully
established live contact with the borrower or their representative about the mortgage loan
obligation. Comments 41(f)(3)(ii)(C)-1 and -2.
COVERAGE EXCLUSIONS
The temporary procedural safeguards are not required if:
The foreclosure process begins (as permitted by applicable law) on or after January 1,
2022.
The borrower was more than 120 days delinquent prior to March 1, 2020.
The applicable statute of limitations will expire before January 1, 2022.
You began the foreclosure process before August 31, 2021.
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The Mortgage Servicing Rule’s general foreclosure protections (as discussed in Section
13.8) do not apply, as discussed in Section 13.2 and 13.3.
(§ 1024.41(f)(3)(i) and (f)(3)(iii))
If you have met any of the temporary procedural safeguards, or if the safeguards do not apply,
you may begin the foreclosure process, to the extent permitted by other law and the Mortgage
Servicing Rules.
If you begin the foreclosure process during this period, you are required to maintain records
that evidence compliance with the temporary procedural safeguards. Section 10.5.1 discusses
the requirements for maintaining records under the Mortgage Servicing Rules. For example,
records that evidence you did not receive any communications from the borrower during any
relevant time period for purposes of the unresponsive borrower safeguard may include, for
example: (1) call logs, servicing notes, and other systems of record cataloguing communications
showing the absence of written or oral communication from the borrower or their representative
during the relevant period; and (2) a schedule of all transactions credited or debited to the
mortgage loan account, including any escrow account and any suspense account illustrating you
did not receive any payments from the borrower or their representative. (Comment 41(f)(3)-1).
See Section 10.5 for more information about the requirements for the servicing file, including
this information, such as the time period those records must be kept and the method of
retention.
Offering Loss Mitigation Options Based on Incomplete Loss Mitigation
Applications
As discussed in Section 13.4.9, in general, the Mortgage Servicing Rules prohibit you from
evading the requirement to evaluate complete loss mitigation applications for all available loss
mitigation options by offering a loss mitigation option based on an evaluation of an incomplete
application, unless an exception applies.
In addition to the generally applicable exceptions to this prohibition, such as those for short-
term forbearance programs, the Bureau added two COVID-19 specific exceptions. First, the
2020 Mortgage Servicing COVID-19 Interim Final Rule created an exception for certain loss
mitigation options, such as certain payment deferrals or partial claims, that permit borrowers to
delay repayment of forborne or delinquent amounts accrued during a COVID-19-related
forbearance. Second, the 2021 Mortgage Servicing COVID-19 Rule provided an exception for
certain COVID-19-related streamlined loan modification options.
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COVID-19 PAYMENT DEFERRALS OR PARTIAL CLAIMS
To qualify for the COVID-19 payment deferral or partial claim exception, the program must do
all of the following:
1. Delay payment of certain amounts. The
loss mitigation option must delay
payment of certain amounts owed until
the property is sold, the mortgage is
refinanced, the term of the loan at the
time the loss mitigation option is offered
ends, or, for FHA insured loans, until the
mortgage insurance terminates. The
amounts must include principal and
interest payments either forborne under
a COVID-19-related forbearance
program or unpaid due to a COVID-19-
related hardship.
2. Prohibit interest accrual on delayed amounts. The loss mitigation option must not
permit interest to accrue on those delayed amounts.
3. End (or be designed to end) preexisting delinquency. The loss mitigation options must
end any pre-existing delinquency when the borrower accepts the modification offer.
4. Not include certain fees. You must not charge fees in connection with the loan
modification, and must promptly waive certain existing fees the borrower owes, such as
late fees, penalties, or stop-payment fees.
COVID-19-related hardship is defined as a
financial hardship due, directly or indirectly,
to the national emergency for the COVID-19
pandemic declared in Proclamation 9994 on
March 13, 2020 (beginning on March 1,
2020) and continued on February 24, 2021,
in accordance with section 202(d) of the
National Emergencies Act (50
U.S.C.1622(d)). (§ 1024.31 (COVID-19-
Related Hardship))
§
1024.41(c)(2)(v)(A)
If the borrower accepts a payment deferral or partial claim offer that you make under this
exception, you are not required to exercise reasonable diligence, as discussed in Section 13.4.9,
to complete any loss mitigation application submitted prior to the streamlined loan modification
offer. Similarly, you are not required to send an acknowledgement notice, as discussed in
Section 13.4.1, for any loss mitigation application submitted prior to the loan modification offer.
(§ 1024.41(c)(2)(v)(B)). However, if the borrower submits a new application after accepting a
payment deferral or partial claim offer under this exception, you will be required to comply with
the loss mitigation requirements discussed in Section 13.
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COVID-19 STREAMLINED LOAN MODIFICATION PROGRAMS
To qualify for the COVID-19 streamlined loan modification exception, the program must do all
of the following:
1. Limit loan term extensions. The loan
modification must not extend the loan
term more than 40 years from the date
the modification is effective.
2. Limit periodic payment increases. The
loan modification must not increase the
borrower’s monthly principal and interest payment beyond the amount that was
required prior to the modification.
3. Prohibit interest accrual on delayed amounts. If the loan modification allows the
borrower to delay payment of any portion of the amount owed until the property is sold,
the mortgage is refinanced, the modification matures, or, for FHA insured loans, until
the mortgage insurance terminates, then the loan modification must not allow interest to
accrue on those amounts. Such amounts could include, for example, forborne periodic
payments.
4. Be available to borrowers with COVID-
19-related hardships. The loan
modification must be made available to
borrowers experiencing COVID-19-
related hardships, although it need not
be only available to those borrowers.
5. End (or be designed to end) preexisting
delinquency. The loan modification
must end any pre-existing delinquency
when the borrower accepts the
modification offer. If a trial period
applies, the loan modification must be designed to end any pre-existing delinquency
when the borrower satisfactorily completes any trial period requirements and accepts the
permanent loan modification.
6. Not include certain fees. You must not charge fees in connection with the loan
modification, and you must promptly waive certain existing fees the borrower owes, such
as late fees, penalties, or stop-payment fees, that were incurred on or after March 1,
2020.
Remember, the Bureau does not anticipate
taking supervisory or enforcement action
against you if you offer a COVID-19
streamlined loan modification that meets
these requirements before the 2021 Rule’s
effective date.
COVID-19-related hardship is defined as a
financial hardship due, directly or indirectly,
to the national emergency for the COVID-19
pandemic declared in Proclamation 9994 on
March 13, 2020 (beginning on March 1,
2020) and continued on February 24, 2021,
in accordance with section 202(d) of the
National Emergencies Act (50
U.S.C.1622(d)). (§ 1024.31 (COVID-19-
Related Hardship))
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§ 1024.41(c)(2)(vi)(A)
If the borrower accepts a streamlined loan modification that you make under this exception, you
are not required to exercise reasonable diligence, as discussed in Section 13.4.9, to complete any
loss mitigation application submitted prior to the streamlined loan modification offer.
Similarly, you are not required to send an acknowledgement notice, as discussed in Section
13.4.1, for any loss mitigation application submitted prior to the loan modification offer.
However, you may be required to resume these activities for the most recent loss mitigation
application submitted if the streamlined loan modification offered includes a trial period and
the borrower fails to perform or if the borrower requests further assistance.
(§ 1024.41(c)(2)(vi)(B))
Offering a loan modification under this exception does not constitute offering a loan
modification based on a complete application. If a borrower subsequently submits a complete
loss mitigation application, it is not considered a duplicative request, as discussed in Sections
13.4.9 and 13.11. (§ 1024.41(i) and comment 41(b)(1)-4.iv). For example, if a borrower submits
a complete loss mitigation application after failing a trial period for an applicable COVID-19-
related streamlined loan modification offered under this exception, the borrower is not
considered to have submitted a duplicative request. You must review the complete application
and the foreclosure protections discussed above must be met before you can start or complete
certain foreclosure actions.
Reasonable Diligence Contact Near the End of a COVID-19 Related Short-
term Forbearance Program
In addition to the reasonable diligence requirements discussed in Section 13.4.10, if a borrower
is in a short-term payment forbearance program made available to borrowers with a COVID-19-
related hardship and that program was offered based on an evaluation of an incomplete
application, you must take certain actions before the end of the forbearance program.
In this situation, if the borrower remains delinquent, you must contact the borrower no later
than 30 days before the scheduled end of the forbearance period to determine if they wish to
complete the loss mitigation application. If the borrower requests further assistance, you must
reinstate reasonable diligence efforts to complete the loss mitigation application before the end
of the forbearance period. (Comment 41(b)(1)-4.iv)
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Early intervention live contact requirements
In addition to the requirements discussed in Section 11, promptly after establishing live contact
with certain borrowers, you must share specific additional information. If the borrower meets
the applicable criteria, you do not have the discretion that otherwise exists in the Mortgage
Servicing Rules to determine that it is not appropriate under the circumstances to inform the
borrower about the availability of loss mitigation options or to only provide the information in a
more generic manner. (Comment 39(a)-4). Until October 1, 2022, when complying with
existing early intervention live contact requirements discussed in Section 11, if you establish live
contact with (1) a borrower who is not in a forbearance program or (2) a borrower whose
forbearance program will end within the next 10 to 45 days, you must share the specific
additional information, as discussed below.
BORROWERS NOT IN FORBEARANCE
COVID-19-related hardship is defined as a
financial hardship due, directly or indirectly,
to the national emergency for the COVID-19
pandemic declared in Proclamation 9994 on
March 13, 2020 (beginning on March 1,
2020) and continued on February 24, 2021,
in accordance with section 202(d) of the
National Emergencies Act (50
U.S.C.1622(d)). (§ 1024.31 (COVID-19-
Related Hardship))
For delinquent borrowers that are not in a
forbearance program at the time live contact is
established, if the owner or assignee of the
mortgage provides forbearance programs for
borrowers with a COVID-19-related hardship,
then promptly after establishing live contact,
you must inform the borrower of the following:
1. Program availability statement. That
forbearance programs are available for
borrowers experiencing a COVID-19-related hardship. For example, you could say, “We
wanted to let you know that forbearance programs are available for borrowers that are
having difficulty making their payments
because of the COVID-19 emergency.”
2. List and description of applicable
programs. Unless the borrower states
that they are not interested in receiving
information about such programs, you
must then list and briefly describe to the
borrower the applicable programs.
The Mortgage Servicing Rules require you to
have certain policies and procedures to
provide accurate information about the
specific loss mitigation options made
available to borrowers by the owner or
assignee of the borrower’s mortgage loan.
(§§ 1024.38(b)(2)(i)-(iv) and 40(b)). See
Sections 10.4.2 and 12.6 for more
information about these existing
requirements.
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3. Homeownership counseling services.
Additionally, you must tell the borrower
at least one way that they can find
contact information for homeownership
counseling services, such as referencing
the borrower’s periodic statement.
(§ 1024.39(e)(1))
See Sections 5.6.1 and 11.7 for examples of
notices you might direct borrowers to so that
they might find this homeownership
counseling information.
BORROWERS IN FORBEARANCE
For borrowers in a forbearance program made
available to those experiencing a COVID-19-
related hardship at the time live contact is
established, you must provide additional
information during the live contact that occurs
10 t0 45 days before the scheduled end of the
borrower’s program.
For example, if the borrower’s forbearance
program is scheduled to end on November 1,
2021, you must provide the additional
information during a live contact that occurs between September 17, 2021 and October 22, 2021.
COVID-19-related hardship is defined as a
financial hardship due, directly or indirectly,
to the national emergency for the COVID-19
pandemic declared in Proclamation 9994 on
March 13, 2020 (beginning on March 1,
2020) and continued on February 24, 2021,
in accordance with section 202(d) of the
National Emergencies Act (50
U.S.C.1622(d)). (§ 1024.31 (COVID-19-
Related Hardship))
H
owever, if the borrower’s scheduled forbearance end date is within 10 days of the effective date
of the 2021 Rule, you must provide this information in the next applicable live contact, even if
that contact occurs less than 10 days before or some time after the scheduled end of the
forbearance program.
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W
hen live contact is established, you must inform the borrower of:
1. Scheduled end date. When the forbearance program is scheduled to end.
2. List and description of applicable
programs. A list and brief description of
any loss mitigation programs, including
forbearance extensions and repayment
options, that are available through the
owner or assignee of the mortgage, and
how the borrower can apply for those
options. You are only required to list loss
mitigation options available at the time
the live contact is established, and do not
need to include any options that have
already expired.
3. Homeownership counseling services. At
least one way that the borrower can find
contact information for homeownership
counseling services, such as referencing
the borrower’s periodic statement.
The Mortgage Servicing Rules require you to
have certain policies and procedures to
provide accurate information about the
specific loss mitigation options made
available to borrowers by the owner or
assignee of the borrower’s mortgage loan.
(§§ 1024.38(b)(2)(i)-(iv) and 40(b)). See
Sections 10.4.2 and 12.6 for more
information about these existing
requirements.
See Sections 5.6.1 and 11.7 for examples you
might direct borrowers to so that they might
find this homeownership counseling
information.
§
1024.39(e)(2).
For both groups of borrowers, nothing in the Mortgage Servicing Rules prevent you from
sharing additional information beyond these requirements. For example, you may also share
information about eligibility criteria for loss mitigation programs or discuss how investor review
standards, such as waterfalls, may impact which available options may be offered to the
borrower.
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The COVID-19 pandemic also presents circumstances that may impact what good faith efforts
are considered reasonable to establish live contact with the borrower. For example, given the
hardship COVID-19 places on borrower financially, the extended length of borrower forbearance
programs, and the limitations the pandemic has placed communication methods, generally you
are required to do more for unresponsive borrowers that are 6 or 7 payments delinquent than
include a statement encouraging they contact you on written or electronic notices you send.
(Comment 39(a)-3)
