Vol. 79 Monday, 

No. 240 December 15, 2014 

Part II 

Bureau of Consumer Financial Protection 

12 CFR Parts 1024 and 1026 

Amendments to the 2013 Mortgage Rules under the Real Estate 

Settlement Procedures Act (Regulation X) and the Truth in Lending Act 

(Regulation Z); Proposed Rule 


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74176 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

1Specifically, on January 10, 2013, the Bureau 

issued Escrow Requirements Under the Truth in 

Lending Act (Regulation Z), 78 FR 4725 (Jan. 22, 

2013) (2013 Escrows Final Rule), High-Cost 

Mortgage and Homeownership Counseling 

Amendments to the Truth in Lending Act 

(Regulation Z) and Homeownership Counseling 

Amendments to the Real Estate Settlement 

Procedures Act (Regulation X), 78 FR 6855 (Jan. 31, 

2013) (2013 HOEPA Final Rule), and Ability to 

Repay and Qualified Mortgage Standards Under the 

Truth in Lending Act (Regulation Z), 78 FR 6407 

(Jan. 30, 2013) (January 2013 ATR Final Rule). The 

Bureau concurrently issued a proposal to amend the 

January 2013 ATR Final Rule, which was finalized 

on May 29, 2013. See 78 FR 6621 (Jan. 30, 2013) 

(January 2013 ATR Proposal) and 78 FR 35429 (June 

12, 2013) (May 2013 ATR Final Rule). On January 

17, 2013, the Bureau issued the Real Estate 

Settlement Procedures Act (Regulation X) and Truth 

in Lending Act (Regulation Z) Mortgage Servicing 

Final Rules, 78 FR 10901 (Feb. 14, 2013) 

(Regulation Z) and 78 FR 10695 (Feb. 14, 2013) 

(Regulation X) (2013 Mortgage Servicing Final 

Rules). On January 18, 2013, the Bureau issued the 

Disclosure and Delivery Requirements for Copies of 

Appraisals and Other Written Valuations Under the 

Equal Credit Opportunity Act (Regulation B), 78 FR 

7215 (Jan. 31, 2013) (2013 ECOA Valuations Final 

Rule) and, jointly with other agencies, issued 

Appraisals for Higher-Priced Mortgage Loans 

(Regulation Z), 78 FR 10367 (Feb. 13, 2013) (2013 

Interagency Appraisals Final Rule). On January 20, 

2013, the Bureau issued the Loan Originator 

Compensation Requirements under the Truth in 

Lending Act (Regulation Z), 78 FR 11279 (Feb. 15, 

2013) (2013 Loan Originator Final Rule). 

2 78 FR 10695 (Feb. 14, 2013). 

3 78 FR 10901 (Feb. 14, 2013). 

4 78 FR 44685 (July 24, 2013). 

5 78 FR 60381 (Oct. 1, 2013). 

6 15 U.S.C. 1692 et seq. 

7 78 FR 62993 (Oct. 23, 2013). 

8Consumer Fin. Prot. Bureau, CFPB Bulletin 

2013–12, Implementation Guidance for Certain 

Mortgage Servicing Rules (Oct. 15, 2013), available 

at http://files.consumerfinance.gov/f/201310_cfpb_

mortgage-servicing_bulletin.pdf. 

9 79 FR 65300, 65304 (Nov. 3, 2014). 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Parts 1024 and 1026 

[Docket No. CFPB–2014–0033] 

RIN 3170–AA49 

Amendments to the 2013 Mortgage 

Rules under the Real Estate Settlement 

Procedures Act (Regulation X) and the 

Truth in Lending Act (Regulation Z) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Proposed rule with request for 

comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

proposing amendments to certain 

mortgage servicing rules issued in 2013. 

These proposed amendments focus 

primarily on clarifying, revising, or 

amending provisions regarding forceplaced insurance notices, policies and 

procedures, early intervention, and loss 

mitigation requirements under 

Regulation X’s servicing provisions; and 

periodic statement requirements under 

Regulation Z’s servicing provisions. The 

proposed amendments also address 

proper compliance regarding certain 

servicing requirements when a 

consumer is a potential or confirmed 

successor in interest, is in bankruptcy, 

or sends a cease communication request 

under the Fair Debt Collection Practices 

Act. The proposed rule makes technical 

corrections to several provisions of 

Regulations X and Z. The Bureau 

requests public comment on these 

changes. 

DATES: Comments must be received on 

or before March 16, 2015. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2014– 

0033 or RIN 3170–AA49, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: FederalRegisterComments@

cfpb.gov. Include CFPB–2014–0033 

AND/OR RIN 3170–AA49 in the subject 

line of the message. 

• Mail: Monica Jackson, Office of the 

Executive Secretary, Consumer 

Financial Protection Bureau, 1700 G 

Street NW., Washington, DC 20552. 

• Hand Delivery/Courier: Monica 

Jackson, Office of the Executive 

Secretary, Consumer Financial 

Protection Bureau, 1275 First Street NE., 

Washington, DC 20002. 

Instructions: All submissions should 

include the agency name and docket 

number or Regulatory Information 

Number (RIN) for this rulemaking. 

Because paper mail in the Washington, 

DC area and at the Bureau is subject to 

delay, commenters are encouraged to 

submit comments electronically. In 

general, all comments received will be 

posted without change to http://

www.regulations.gov. In addition, 

comments will be available for public 

inspection and copying at 1275 First 

Street NE., Washington, DC 20002, on 

official business days between the hours 

of 10 a.m. and 5 p.m. Eastern Time. You 

can make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Sensitive 

personal information, such as account 

numbers or Social Security numbers, 

should not be included. Comments will 

not be edited to remove any identifying 

or contact information. 

FOR FURTHER INFORMATION CONTACT: 

Dania L. Ayoubi, David H. Hixson, 

Bradley S. Lipton, Joel L. Singerman, or 

Shiri B. Wolf, Counsels; or William R. 

Corbett or Laura A. Johnson, Senior 

Counsels; Office of Regulations, at (202) 

435–7700. 

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule 

In January 2013, the Bureau issued 

several final rules concerning mortgage 

markets in the United States (2013 Title 

XIV Final Rules), pursuant to the DoddFrank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act), Public 

Law 111–203, 124 Stat. 1376 (2010).1

Two of these rules were (1) the Mortgage 

Servicing Rules Under the Real Estate 

Settlement Procedures Act (Regulation 

X) (2013 RESPA Servicing Final Rule); 2

and (2) the Mortgage Servicing Rules 

Under the Truth in Lending Act 

(Regulation Z) (2013 TILA Servicing 

Final Rule).3 These two rules are 

referred to collectively as the 2013 

Mortgage Servicing Final Rules. 

The Bureau clarified and revised 

those rules through notice and comment 

rulemaking during the summer and fall 

of 2013 in the (1) Amendments to the 

2013 Mortgage Rules under the Real 

Estate Settlement Procedures Act 

(Regulation X) and the Truth in Lending 

Act (Regulation Z) (July 2013 Mortgage 

Final Rule) 4 and (2) Amendments to the 

2013 Mortgage Rules under the Equal 

Credit Opportunity Act (Regulation B), 

Real Estate Settlement Procedures Act 

(Regulation X), and the Truth in 

Lending Act (Regulation Z) (September 

2013 Mortgage Final Rule).5 In October 

2013, the Bureau issued clarified 

compliance requirements in relation to 

successors in interest, early intervention 

requirements, bankruptcy law, and the 

Fair Debt Collection Practices Act 

(FDCPA),6 through an Interim Final 

Rule (October 2013 IFR or IFR) 7 and a 

contemporaneous compliance bulletin 

(October 2013 Servicing Bulletin).8 In 

addition, in October 2014, the Bureau 

added an alternative definition of small 

servicer in the Amendments to the 2013 

Mortgage Rules under the Truth in 

Lending Act (Regulation Z).9 The 

purpose of each of these updates was to 

address important questions raised by 

industry, consumer advocacy groups, 

and other stakeholders. The 2013 

Mortgage Servicing Final Rules, as 

amended in 2013 and 2014, are referred 

to herein as the Mortgage Servicing 

Rules. 

The Bureau is now proposing several 

additional amendments to the Mortgage 

Servicing Rules to revise regulatory 

provisions and official interpretations 

relating to the Regulation X and Z 


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10Note that RESPA and TILA differ in their 

terminology. Whereas Regulation X generally refers 

to ‘‘borrowers,’’ Regulation Z generally refers to 

‘‘consumers.’’ 

11This proposal uses the term ‘‘successor in 

interest’s status’’ to refer to the successor in 

interest’s identity and ownership interest in the 

property. 

mortgage servicing rules.10 The 

proposals cover nine major topics, 

summarized below generally in the 

order they appear in the proposed rule. 

More details can be found in the 

proposed rule. 

1. Successors in interest. The Bureau 

is proposing three sets of rule changes 

relating to successors in interest. First, 

the Bureau is proposing to apply all of 

the Mortgage Servicing Rules to 

successors in interest once a servicer 

confirms the successor in interest’s 

identity and ownership interest in the 

property.11 Second, the Bureau is 

proposing rules relating to how a 

mortgage servicer confirms a successor 

in interest’s status. Third, the Bureau is 

proposing that, to the extent that the 

Mortgage Servicing Rules apply to 

successors in interest, the rules apply 

with respect to all successors in interest 

who acquire an ownership interest in a 

transfer protected from acceleration, and 

therefore foreclosure, under Federal 

law. 

2. Definition of delinquency. The 

Bureau is proposing to add a general 

definition of delinquency that would 

apply to all of the servicing provisions 

of Regulation X and the provisions 

regarding periodic statements for 

mortgage loans in Regulation Z. Under 

the proposed definition, a borrower and 

a borrower’s mortgage loan obligation 

are delinquent beginning on the date a 

payment sufficient to cover principal, 

interest, and, if applicable, escrow, 

becomes due and unpaid. 

3. Requests for information. The 

Bureau is proposing amendments that 

would change how a servicer must 

respond to requests for information 

asking for ownership information for 

loans in trust for which the Federal 

National Mortgage Association (Fannie 

Mae) or Federal Home Loan Mortgage 

Corporation (Freddie Mac) is the trustee, 

investor, or guarantor. 

4. Force-placed insurance. The 

Bureau is proposing to amend the 

required disclosures to account for 

when a servicer wishes to force-place 

insurance when the borrower has 

insufficient, rather than expiring or 

expired, hazard insurance coverage on 

the property. Additionally, the Bureau 

is proposing to give servicers the option 

to include a borrower’s mortgage loan 

account number on the notices required 

under § 1024.37. The Bureau is also 

proposing several technical edits to 

correct discrepancies between the 

model forms and the text of § 1024.37. 

5. Early intervention. The Bureau is 

proposing to clarify generally the early 

intervention live contact obligations and 

written early intervention notice 

obligations. The Bureau is also 

proposing to require servicers to provide 

written early intervention notices to 

certain borrowers who are in 

bankruptcy or who have invoked their 

cease communication rights under the 

FDCPA. 

6. Loss mitigation. The Bureau is 

proposing to: (1) Require servicers to 

meet the loss mitigation requirements 

more than once in the life of a loan for 

borrowers who become current after a 

delinquency; (2) Modify the existing 

exception to the 120-day prohibition on 

foreclosure filing to allow a servicer to 

join the foreclosure action of a senior 

lienholder; (3) Clarify that servicers 

have significant flexibility in setting a 

reasonable date by which a borrower 

must return documents and information 

to complete an application, so long as 

the date maximizes borrower 

protections and allows borrowers a 

reasonable period of time to return 

documents and information; (4) Clarify 

that servicers must take affirmative 

steps to delay a foreclosure sale, even 

where the sale is conducted by a third 

party; clarify the servicer’s duty to 

instruct foreclosure counsel to take 

steps to comply with the dual-tracking 

prohibitions; and indicate that a servicer 

who has not taken, or caused counsel to 

take, all reasonable affirmative steps to 

delay the sale, is required to dismiss the 

foreclosure action if necessary to avoid 

the sale; (5) Require that servicers 

promptly provide a written notice once 

they receive a complete loss mitigation 

application; require that the notice 

indicate that the servicer has received a 

complete application but clarify that the 

servicer might later request additional 

information if needed; require that the 

notice provide the date of completion 

and a disclosure indicating whether a 

foreclosure sale was scheduled as of that 

date, the date foreclosure protections 

began, a statement informing the 

borrower of applicable appeal rights, 

and a statement that the servicer will 

complete its evaluation within 30 days 

from the date of the complete 

application; (6) Address and clarify how 

servicers obtain information not in the 

borrower’s control and evaluate a loss 

mitigation application while waiting for 

such third party information; prohibit 

servicers from denying borrowers based 

upon delay in receiving such third party 

information; require that servicers 

promptly provide a written notice to the 

borrower if the servicer lacks third party 

information 30 days after receiving the 

borrower’s complete application; and 

require servicers to notify borrowers of 

their determination in writing promptly 

upon receipt of the third party 

information; (7) Permit servicers to offer 

a short-term repayment plan based upon 

an evaluation of an incomplete 

application; (8) Clarify that servicers 

may stop collecting documents and 

information from a borrower pertaining 

to a loss mitigation option after 

receiving information confirming that 

the borrower is ineligible for that 

option; and (9) Address and clarify how 

loss mitigation procedures and 

timelines apply to a transferee servicer 

that receives a mortgage loan for which 

there is a loss mitigation application 

pending at the time of a servicing 

transfer. 

7. Prompt payment crediting. The 

Bureau is proposing to clarify how 

servicers must treat periodic payments 

made by consumers who are performing 

under either temporary loss mitigation 

programs or permanent loan 

modifications. Under the Bureau’s 

proposal, periodic payments made 

pursuant to temporary loss mitigation 

programs would continue to be credited 

according to the loan contract and 

could, if appropriate, be credited as 

partial payments, while periodic 

payments made pursuant to a 

permanent loan modification would be 

credited under the terms of the 

permanent loan agreement. 

8. Periodic statements. The Bureau is 

proposing to: (1) Clarify certain periodic 

statement disclosure requirements 

relating to mortgage loans that have 

been accelerated, are in temporary loss 

mitigation programs, or have been 

permanently modified, to conform 

generally the disclosure of the amount 

due with the Bureau’s understanding of 

the legal obligation in each of those 

circumstances; (2) Require servicers to 

send modified periodic statements to 

consumers who have filed for 

bankruptcy, subject to certain 

exceptions, with content varying 

depending on whether the consumer is 

a debtor in a Chapter 7 or Chapter 13 

bankruptcy case; and to conduct 

consumer testing on proposed sample 

periodic statement forms that servicers 

could use for consumers in bankruptcy 

to ensure compliance with § 1026.41; 

and (3) Exempt servicers from the 

periodic statement requirement for 

charged-off mortgage loans if the 

servicer will not charge any additional 

fees or interest on the account and 

provides a final periodic statement. 

9. Small servicer. The proposal would 

make certain changes to the small 


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74178 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

12See, e.g., sections 1011 and 1021 of the DoddFrank Act, 12 U.S.C. 5491 and 5511 (establishing 

and setting forth the purpose, objectives, and 

functions of the Bureau); section 1061 of the DoddFrank Act, 12 U.S.C. 5581 (consolidating certain 

rulemaking authority for Federal consumer 

financial laws in the Bureau); section 1100A of the 

Dodd-Frank Act (codified in scattered sections of 15 

U.S.C.) (similarly consolidating certain rulemaking 

authority in the Bureau). But see Section 1029 of 

the Dodd-Frank Act, 12 U.S.C. 5519 (subject to 

certain exceptions, excluding from the Bureau’s 

authority any rulemaking authority over a motor 

vehicle dealer that is predominantly engaged in the 

sale and servicing of motor vehicles, the leasing and 

servicing of motor vehicles, or both). 

13See title XIV of the Dodd-Frank Act, Public 

Law 111–203, 124 Stat. 1376 (2010) (codified in 

scattered sections of 12 U.S.C., 15 U.S.C., and 42 

U.S.C.). 

14See Dodd-Frank Act section 1400(c), 15 U.S.C. 

1601 note. 

15Press Release, Consumer Fin. Prot. Bureau, 

CFPB Lays Out Implementation Plan for New 

Mortgage Rules (Feb. 13, 2013), available at http:// 

www.consumerfinance.gov/newsroom/consumerfinancial-protection-bureau-lays-outimplementation-plan-for-new-mortgage-rules/. 

servicer definition. The small servicer 

definition generally applies to servicers 

who service 5,000 or fewer mortgage 

loans for all of which the servicer is the 

creditor or assignee. The proposal 

would exclude certain seller-financed 

transactions from being counted toward 

the 5,000 loan limit, allowing servicers 

that would otherwise qualify for small 

servicer status to retain their exemption 

while servicing those transactions. 

The proposed rule also makes 

technical corrections to several 

provisions of Regulations X and Z. The 

Bureau seeks public comment on all of 

the proposed changes. 

II. Background 

A. Title XIV Rules under the DoddFrank Act 

In response to an unprecedented cycle 

of expansion and contraction in the 

mortgage market that sparked the most 

severe U.S. recession since the Great 

Depression, Congress passed the DoddFrank Act, which was signed into law 

on July 21, 2010. In the Dodd-Frank Act, 

Congress established the Bureau and 

generally consolidated the rulemaking 

authority for Federal consumer financial 

laws, including the Truth in Lending 

Act (TILA) and the Real Estate 

Settlement Procedures Act (RESPA), in 

the Bureau.12 At the same time, 

Congress significantly amended the 

statutory requirements governing 

mortgages with the intent to restrict the 

practices that contributed to and 

exacerbated the crisis.13 Under the 

statute, most of these new requirements 

would have taken effect automatically 

on January 21, 2013, if the Bureau had 

not issued implementing regulations by 

that date.14 To avoid uncertainty and 

potential disruption in the national 

mortgage market at a time of economic 

vulnerability, the Bureau issued several 

final rules in a span of less than two 

weeks in January 2013 to implement 

these new statutory provisions and 

provide for an orderly transition. These 

rules included the 2013 Mortgage 

Servicing Final Rules, issued on January 

17. 

On January 17, 2013, the Bureau 

issued the 2013 Mortgage Servicing 

Final Rules. Pursuant to the Dodd-Frank 

Act, which permitted a maximum of one 

year for implementation, these rules 

became effective on January 10, 2014. 

The Bureau issued additional 

corrections and clarifications to the 

2013 Mortgage Servicing Final Rules in 

the summer and fall of 2013 and in the 

fall of 2014. 

B. Implementation Plan for New 

Mortgage Rules 

On February 13, 2013, the Bureau 

announced an initiative to support 

implementation of the new mortgage 

rules (Implementation Plan),15 under 

which the Bureau would work with the 

mortgage industry to ensure that the 

2013 Title XIV Final Rules could be 

implemented accurately and 

expeditiously. The Implementation Plan 

included: (1) Coordination with other 

agencies; (2) publication of plainlanguage guides to the new rules; (3) 

ongoing conversations with 

stakeholders involved in 

implementation with respect to 

questions and concerns they had 

identified; (4) publication of additional 

interpretive guidance and corrections or 

clarifications of the new rules as 

needed; (5) publication of readiness 

guides for the new rules; and (5) 

education of consumers on the new 

rules. 

In the course of the implementation 

process, the Bureau identified a number 

of respects in which the 2013 Mortgage 

Servicing Final Rules posed 

implementation challenges. As a result, 

in July 2013 and September 2013, 

following notice and comment, the 

Bureau issued two final rules amending 

discrete aspects of the 2013 Mortgage 

Servicing Final Rules. Among other 

things, the July 2013 Mortgage Final 

Rule clarified, corrected, or amended 

provisions on the relation to State law 

of Regulation X’s servicing 

requirements; implementation dates for 

certain adjustable-rate mortgage 

servicing notices under Regulation Z; 

and the small servicer exemption from 

certain servicing rules. Among other 

things, the September 2013 Mortgage 

Final Rule modified provisions of 

Regulation X related to error resolution, 

information requests, and loss 

mitigation procedures. In October 2013, 

the Bureau issued an IFR, which among 

other things, provisionally suspended 

the effectiveness of certain requirements 

of the 2013 Mortgage Servicing Final 

Rules with respect to consumers in 

bankruptcy and consumers who had 

exercised their rights under the FDCPA 

to direct that debt collectors cease 

contacting them with respect to 

outstanding debts. In the October 2013 

Servicing Bulletin, the Bureau also 

clarified compliance requirements 

regarding successors in interest, early 

intervention live contact requirements, 

and the FDCPA. In addition, in October 

2014, the Bureau issued a final rule that, 

among other things, adds an alternative 

definition of small servicer that applies 

to certain nonprofit entities that service, 

for a fee, only loans for which the 

servicer or an associated nonprofit 

entity is the creditor. 

C. Ongoing Monitoring 

After the January 10, 2014 effective 

date of the rules, the Bureau has 

continued to engage in ongoing outreach 

and monitoring with industry, 

consumer advocacy groups, and other 

stakeholders, including holding 

numerous individual meetings as well 

as hosting a bankruptcy roundtable 

discussion on June 16, 2014, among 

representatives of consumer advocacy 

groups, bankruptcy attorneys, mortgage 

servicers, trade groups, and bankruptcy 

trustees. As a result, the Bureau has 

identified further issues that continue to 

pose implementation challenges or 

require clarification. The Bureau has 

also recognized that there are instances 

in which the rules are creating 

unintended consequences or failing to 

achieve desired objectives. 

The Bureau recognizes both the 

implementation process that industry 

has experienced with respect to the 

Mortgage Servicing Rules and the costs 

that industry has incurred. The Bureau 

believes that the majority of the 

provisions in this proposal will impose, 

at most, minimal new compliance 

burdens, and in many cases will reduce 

the compliance burden relative to the 

existing rules. Where the Bureau is 

proposing adding new requirements, the 

Bureau is doing so after careful 

weighing of incremental costs and 

benefits. 

This proposal concerns additional 

revisions to the Mortgage Servicing 

Rules. The purpose of these revisions is 

to address important questions raised by 

industry, consumer advocacy groups, or 

other stakeholders. As discussed below, 

the Bureau contemplates additional 


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16See Dodd-Frank Act section 1002(14), 12 U.S.C. 

5481(14) (defining ‘‘Federal consumer financial 

law’’ to include the ‘‘enumerated consumer laws,’’ 

the provisions of title X of the Dodd-Frank Act, and 

the laws for which authorities are transferred under 

title X subtitles F and H of the Dodd-Frank Act); 

Dodd-Frank Act section 1002(12), 12 U.S.C. 

5481(12) (defining ‘‘enumerated consumer laws’’ to 

include TILA); Dodd-Frank Act section 1400(b), 12 

U.S.C. 5481(12) note (defining ‘‘enumerated 

consumer laws’’ to include certain subtitles and 

provisions of Dodd-Frank Act title XIV); DoddFrank Act section 1061(b)(7), 12 U.S.C. 5581(b)(7) 

(transferring to the Bureau all of HUD’s consumer 

protection functions relating to RESPA). 

revisions in several sections of 

Regulations X and Z. 

III. Legal Authority 

As discussed more fully in the 

section-by-section analysis, the Bureau 

is proposing this rule pursuant to the 

FDCPA and the Dodd-Frank Act. 

Section 1061 of the Dodd-Frank Act 

transferred to the Bureau the ‘‘consumer 

financial protection functions’’ 

previously vested in certain other 

Federal agencies, including the Board of 

Governors of the Federal Reserve 

System (Board). The term ‘‘consumer 

financial protection function’’ is defined 

to include ‘‘all authority to prescribe 

rules or issue orders or guidelines 

pursuant to any Federal consumer 

financial law, including performing 

appropriate functions to promulgate and 

review such rules, orders, and 

guidelines.’’ Section 1061 of the DoddFrank Act also transferred to the Bureau 

all of the Department of Housing and 

Urban Development’s (HUD’s) consumer 

protection functions relating to RESPA. 

Title X of the Dodd-Frank Act, 

including section 1061 of the DoddFrank Act, along with TILA, RESPA, the 

FDCPA, and certain subtitles and 

provisions of title XIV of the DoddFrank Act, are Federal consumer 

financial laws.16

A. RESPA 

Section 19(a) of RESPA, 12 U.S.C. 

2617(a), authorizes the Bureau to 

prescribe such rules and regulations, to 

make such interpretations, and to grant 

such reasonable exemptions for classes 

of transactions, as may be necessary to 

achieve the purposes of RESPA, which 

include its consumer protection 

purposes. In addition, section 6(j)(3) of 

RESPA, 12 U.S.C. 2605(j)(3), authorizes 

the Bureau to establish any 

requirements necessary to carry out 

section 6 of RESPA, and section 

6(k)(1)(E) of RESPA, 12 U.S.C. 

2605(k)(1)(E), authorizes the Bureau to 

prescribe regulations that are 

appropriate to carry out RESPA’s 

consumer protection purposes. As 

identified in the 2013 RESPA Servicing 

Final Rule, the consumer protection 

purposes of RESPA include ensuring 

that servicers respond to borrower 

requests and complaints in a timely 

manner and maintain and provide 

accurate information, helping borrowers 

avoid unwarranted or unnecessary costs 

and fees, and facilitating review for 

foreclosure avoidance options. Each of 

the proposed amendments or 

clarifications to Regulation X is 

intended to achieve some or all these 

purposes. 

Additionally, as explained below, 

certain of the proposed amendments to 

Regulation X implement specific 

provisions of RESPA. 

This proposed rule also includes 

amendments to the official Bureau 

commentary in Regulation X. Section 

19(a) of RESPA authorizes the Bureau to 

make such reasonable interpretations of 

RESPA as may be necessary to achieve 

the consumer protection purposes of 

RESPA. Good faith compliance with the 

interpretations would afford servicers 

protection from liability under section 

19(b) of RESPA. 

B. TILA 

Section 105(a) of TILA, 15 U.S.C. 

1604(a), authorizes the Bureau to 

prescribe regulations to carry out the 

purposes of TILA. Under section 105(a), 

such regulations may contain such 

additional requirements, classifications, 

differentiations, or other provisions, and 

may provide for such adjustments and 

exceptions for all or any class of 

transactions, as in the judgment of the 

Bureau are necessary or proper to 

effectuate the purposes of TILA, to 

prevent circumvention or evasion 

thereof, or to facilitate compliance 

therewith. Under section 102(a), 15 

U.S.C. 1601(a), the purposes of TILA are 

‘‘to assure a meaningful disclosure of 

credit terms so that the consumers will 

be able to compare more readily the 

various credit terms available and avoid 

the uniformed use of credit’’ and to 

protect consumers against inaccurate 

and unfair credit billing practices. For 

the reasons discussed in this proposal, 

the Bureau is proposing to adopt 

amendments to Regulation Z to carry 

out TILA’s purposes and such 

additional requirements, adjustments, 

and exceptions as, in the Bureau’s 

judgment, are necessary and proper to 

carry out the purposes of TILA, prevent 

circumvention or evasion thereof, or to 

facilitate compliance therewith. 

Section 105(f) of TILA, 15 U.S.C. 

1604(f), authorizes the Bureau to exempt 

from all or part of TILA any class of 

transactions if the Bureau determines 

that TILA coverage does not provide a 

meaningful benefit to consumers in the 

form of useful information or protection. 

For the reasons discussed in this notice, 

the Bureau is proposing to exempt 

certain transactions from the 

requirements of TILA pursuant to its 

authority under section 105(f) of TILA. 

Additionally, as explained below, 

certain of the proposed amendments to 

Regulation Z implement specific 

provisions of TILA. 

This proposed rule also includes 

amendments to the official Bureau 

commentary in Regulation Z. Good faith 

compliance with the interpretations 

would afford protection from liability 

under section 130(f) of TILA. 

C. FDCPA 

The Bureau also exercises its 

authority to prescribe rules with respect 

to the collection of debts by debt 

collectors pursuant to section 814(d) of 

the FDCPA, 15 U.S.C. 1692l(d). For the 

reasons discussed below, the Bureau 

proposes to rely on this authority to 

clarify a borrower’s cease 

communication protections under 

section 805(c) of the FDCPA and to 

interpret the exceptions set forth in 

section 805(c)(2) and (3) of the FDCPA 

to include the written early intervention 

notice required by proposed 

§ 1024.39(d)(2)(iii). The proposed rule 

also includes Bureau advisory opinions 

for purposes of section 813(e) of the 

FDCPA, 15 U.S.C. 1692k(e). Under that 

section, ‘‘[n]o provision of [the FDCPA] 

imposing any liability shall apply to any 

act done or omitted in good faith in 

conformity with any advisory opinion of 

the Bureau, notwithstanding that after 

such act or omission has occurred, such 

opinion is amended, rescinded, or 

determined by judicial or other 

authority to be invalid for any reason.’’ 

D. The Dodd-Frank Act 

Section 1022(b)(1) of the Dodd-Frank 

Act, 12 U.S.C. 5512(b)(1), authorizes the 

Bureau to prescribe rules ‘‘as may be 

necessary or appropriate to enable the 

Bureau to administer and carry out the 

purposes and objectives of the Federal 

consumer financial laws, and to prevent 

evasions thereof.’’ RESPA, TILA, the 

FDCPA, and title X of the Dodd-Frank 

Act are Federal consumer financial 

laws. 

Section 1032(a) of the Dodd-Frank 

Act, 12 U.S.C. 5532(a), provides that the 

Bureau ‘‘may prescribe rules to ensure 

that the features of any consumer 

financial product or service, both 

initially and over the term of the 

product or service, are fully, accurately, 

and effectively disclosed to consumers 

in a manner that permits consumers to 

understand the costs, benefits, and risks 

associated with the product or service, 

in light of the facts and circumstances.’’ 


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17A successor in interest is ‘‘[o]ne who follows 

another in ownership or control of property.’’ 

Black’s Law Dictionary (9th ed. 2009). For the 

purposes of this proposal, the Bureau is referring to 

successors in interest who have been transferred a 

legal interest in a property securing a mortgage loan 

from a borrower on the mortgage loan; the successor 

in interest may not necessarily have assumed the 

mortgage loan obligation (i.e., legal liability for the 

mortgage debt) under State law, and the servicer 

may not necessarily have agreed to add the 

successor in interest as obligor on the mortgage 

loan. 

18 78 FR 10695, 10781 (Feb. 14, 2013). 

19October 2013 Servicing Bulletin. 

20 Id. at 2. 

21 Id. 

22 Id. On July 17, 2014, the Bureau also issued an 

interpretive rule clarifying that where a successor 

in interest who has previously acquired a legal 

interest in a dwelling agrees to be added as obligor 

on the mortgage loan, the servicer’s express 

acknowledgment of the successor in interest as 

obligor does not constitute an ‘‘assumption’’ as that 

term is used in Regulation Z. See 79 FR 41631 (July 

17, 2014). Accordingly, the Regulation Z Ability-toRepay Rule does not apply when a creditor 

expressly accepts a successor in interest as obligor 

on a loan. See id. The interpretive rule also noted 

that the servicer must comply with any ongoing 

obligations pertaining to consumer credit, such as 

the ARM notice requirements (12 CFR 1026.20(c) 

and (d)) and periodic statement requirement (12 

CFR 1026.41), after the successor in interest is 

added as an obligor on the mortgage note. 

23See section-by-section analyses of 

§§ 1024.30(d), 1024.31, 1024.36(i), 1024.38(b)(1)(vi), 

1024.39(b)(1), 1024.41(b), 1026.2(a)(11), 

1026.2(a)(27), and 1026.41(a), infra. 

24 12 U.S.C. 1701j-3(d). 

The authority granted to the Bureau in 

section 1032(a) of the Dodd-Frank Act is 

broad and empowers the Bureau to 

prescribe rules regarding the disclosure 

of the ‘‘features’’ of consumer financial 

products and services generally. 

Accordingly, the Bureau may prescribe 

rules containing disclosure 

requirements even if other Federal 

consumer financial laws do not 

specifically require disclosure of such 

features. 

Section 1032(c) of the Dodd-Frank 

Act, 12 U.S.C. 5532(c), provides that, in 

prescribing rules pursuant to section 

1032 of the Dodd-Frank Act, the Bureau 

‘‘shall consider available evidence about 

consumer awareness, understanding of, 

and responses to disclosures or 

communications about the risks, costs, 

and benefits of consumer financial 

products or services.’’ Accordingly, in 

proposing to amend provisions 

authorized under section 1032(a) of the 

Dodd-Frank Act, the Bureau has 

considered available studies, reports, 

and other evidence about consumer 

awareness, understanding of, and 

responses to disclosures or 

communications about the risks, costs, 

and benefits of consumer financial 

products or services. 

IV. Proposed Effective Date 

The Bureau proposes that all of the 

changes proposed herein, except for the 

changes in proposed § 1026.41(e)(5) and 

(f), take effect 280 days after publication 

of a final rule in the Federal Register. 

The Bureau believes that the proposed 

changes generally reinforce existing 

Bureau guidance, provide greater clarity 

in an effort to facilitate compliance, 

expand existing preemptions, or 

otherwise provide relief from regulatory 

requirements; therefore the Bureau 

believes an effective date of 280 days 

after publication may be appropriate. 

The Bureau proposes that the changes 

to proposed § 1026.41(e)(5) and (f) take 

effect one year after publication of a 

final rule in the Federal Register. These 

proposed changes would limit the 

circumstances in which a servicer is 

exempt from the periodic statement 

requirements with respect to a 

consumer who is a debtor in bankruptcy 

and, when an exemption does not apply 

with respect to such consumers, require 

that periodic statements contain certain 

bankruptcy-related modifications; 

therefore the Bureau believes an 

effective date of one year after 

publication may be appropriate. 

The Bureau seeks comment on 

whether the proposed effective dates are 

appropriate, or whether the Bureau 

should adopt alternative effective dates. 

V. Section-by-Section Analysis of the 

Proposed Rule 

A. Regulation X and Regulation Z 

Several of the Bureau’s proposals 

under either Regulation X or Regulation 

Z affect provisions in both Regulations 

X and Z. For example, the proposed 

definition of delinquency in § 1024.31 

affects requirements in §§ 1024.39 

through 1024.41 of Regulation X, as well 

as § 1026.41 of Regulation Z. Generally, 

the Bureau discusses each section of the 

proposed rule under the heading 

designating the applicable regulation 

below—part V.B. for Regulation X and 

part V.C. for Regulation Z. However, 

because the proposed rule and 

commentary relating to successors in 

interest are interspersed throughout 

Regulation X and Regulation Z, the 

Bureau is providing an overview of the 

proposed rule under this combined part 

V.A for both Regulation X and 

Regulation Z. In this combined part, 

references to specific sections of part 

1024 refer to Regulation X, and 

references to specific sections of part 

1026 refer to Regulation Z. The Bureau 

then discusses each specific section of 

the proposed rule relating to successors 

in interest in more detail under the 

heading designating the applicable 

regulation below. 

Overview of Proposed Rule Relating to 

Successors in Interest 

Background. Current 

§ 1024.38(b)(1)(vi) provides that 

servicers are required to maintain 

policies and procedures that are 

reasonably designed to ensure that the 

servicer can, upon notification of the 

death of a borrower, promptly identify 

and facilitate communication with the 

successor in interest of the deceased 

borrower with respect to the property 

securing the deceased borrower’s 

mortgage loan.17 When the Bureau 

adopted this requirement in the 2013 

RESPA Servicing Final Rule, the Bureau 

stated that it ‘‘understands that 

successors in interest may encounter 

challenges in communicating with 

mortgage servicers about a deceased 

borrower’s mortgage loan account. The 

Bureau believes that it is essential that 

servicers’ policies and procedures are 

reasonably designed to facilitate 

communication with successors in 

interest regarding a deceased borrower’s 

mortgage loan accounts.’’ 18 The Bureau 

issued the October 2013 Servicing 

Bulletin to provide implementation 

guidance about this requirement.19 The 

Bureau noted that it had received 

‘‘reports of servicers either outright 

refusing to speak to a successor in 

interest or demanding documents to 

prove the successor in interest’s claim to 

the property that either do not exist . . . 

or are not reasonably available.’’ 20 The 

Bureau also stated that these practices 

‘‘often prevent a successor in interest 

from pursuing assumption of the 

mortgage loan and, if applicable, loss 

mitigation options.’’ 21 The October 

2013 Servicing Bulletin provided 

examples of servicer practices and 

procedures that would accomplish the 

objectives set forth in § 1024.38(b)(1)(vi) 

and alleviate these problems.22

As explained in more detail in the 

discussion that follows and in the 

section-by-section analysis of the 

proposed sections,23 the Bureau is 

proposing three sets of rules relating to 

successors in interest. First, the Bureau 

is proposing rules providing that, to the 

extent that the Mortgage Servicing Rules 

apply to successors in interest, the rules 

apply specifically with respect to 

successors in interest who acquired an 

ownership interest in the property 

securing a mortgage loan in a transfer 

protected by the Garn-St Germain 

Depository Institutions Act of 1982 (the 

Garn-St Germain Act).24 Second, the 

Bureau is proposing rules relating to 

how a mortgage servicer confirms a 

successor in interest’s identity and 

ownership interest in the property. 


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25As noted, the Bureau has also clarified in an 

interpretive rule that where a successor in interest 

who has previously acquired a legal interest in a 

dwelling agrees to be added as obligor on the 

mortgage loan, the servicer’s express 

acknowledgment of the successor in interest as 

obligor does not constitute an ‘‘assumption’’ as that 

term is used in Regulation Z. See 79 FR 41631 (July 

17, 2014). 

26 78 FR 60381, 60406 (Oct. 1, 2013). 27 12 U.S.C. 1701j–3(d). 

28 Id. The Garn-St Germain Act also prohibits 

exercise of due-on-sale clauses with respect to 

certain other situations that do not involve transfer 

of an ownership interest in the property. See id. The 

Bureau’s proposed rule would not apply to these 

situations. 

29As noted, the Bureau understands that whether 

a successor in interest has assumed a mortgage loan 

obligation under State law is a fact-specific 

question. 

30 78 FR 10695, 10781 (Feb. 14, 2013). 

31The Bureau interprets ‘‘spouse’’ to include 

married same-sex spouses. See Memorandum on 

Ensuring Equal Treatment for Same-Sex Married 

Couples (Same-Sex Married Couple Policy) (June 

25, 2015), available at http://

files.consumerfinance.gov/f/201407_cfpb_memo_

ensuring-equal-treatment-for-same-sex-marriedcouples.pdf (‘‘It is the Bureau’s policy, to the extent 

federal law permits and consistent with the legal 

position announced by the U.S. Department of 

Justice in interpreting relevant statutes, regulations 

and policies, to recognize all marriages valid at the 

time of the marriage in the jurisdiction where the 

marriage was celebrated. Accordingly, the Bureau 

will regard a person who is married under the laws 

of any jurisdiction to be married nationwide for 

purposes of the federal statutes and regulations 

under the Bureau’s jurisdiction regardless of the 

person’s place of residency.’’). 

Third, the Bureau is proposing to apply 

all of the Mortgage Servicing Rules to 

successors in interest whose identity 

and ownership interest in the property 

have been confirmed by the servicer 

(‘‘confirmed successors in interest’’). As 

explained in more detail in the 

discussion that follows and in the 

section-by-section analysis of the 

proposed sections, the Bureau believes 

that these changes are necessary to 

address the significant problems 

successors in interest continue to 

encounter with respect to the servicing 

of mortgage loans secured by their 

property. The Bureau has received 

information from consumers, consumer 

advocacy groups, and other stakeholders 

demonstrating that such problems 

remain pervasive, despite the Bureau’s 

earlier guidance. 

Successors in interest covered by the 

proposed rule would not necessarily 

have assumed the mortgage loan 

obligation (i.e., legal liability for the 

mortgage debt) under State law. The 

Bureau understands that whether a 

successor in interest has assumed a 

mortgage loan obligation under State 

law is a fact-specific question. The 

proposed rule would not affect this 

question but would apply with respect 

to a successor in interest regardless of 

whether that person has assumed the 

mortgage loan obligation under State 

law.25

Scope of successor in interest rules. 

The Bureau is proposing changes to the 

Mortgage Servicing Rules regarding who 

qualifies as a successor in interest for 

purposes of relevant provisions of the 

rules. Current § 1024.38(b)(1)(vi) refers 

to ‘‘the successor in interest of the 

deceased borrower.’’ As the Bureau 

noted in the 2013 Mortgage Rule 

Amendments, the Garn-St Germain Act 

‘‘generally prohibits the exercise of dueon-sale clauses with respect to certain 

protected transfers.’’ 26 These protected 

transfers include certain transfers 

involving the death of a borrower, 

specifically ‘‘a transfer to a relative 

resulting from the death of a borrower’’ 

and ‘‘a transfer by devise, descent, or 

operation of law on the death of a joint 

tenant or tenant by the entirety.’’ 27 In 

addition to these categories involving 

the death of a borrower, the Garn-St 

Germain Act protects other categories of 

transfers: ‘‘a transfer where the spouse 

or children of the borrower become an 

owner of the property;’’ ‘‘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;’’ ‘‘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;’’ 

and ‘‘any other transfer or disposition 

described in regulations prescribed by 

the Federal Home Loan Bank Board.’’ 28

The Bureau is proposing that, to the 

extent that the Mortgage Servicing Rules 

apply to successors in interest, the rules 

would apply to all successors in interest 

who acquired an ownership interest in 

the property securing a mortgage loan in 

a transfer protected by the Garn-St 

Germain Act, rather than only 

successors in interest who acquired an 

ownership interest upon a borrower’s 

death. Accordingly, for the purposes of 

Regulation X, the Bureau is proposing to 

define successor in interest in § 1024.31 

as a member of any of the categories of 

successors in interest who acquired an 

ownership interest in the property 

securing a mortgage loan in a transfer 

protected by the Garn-St Germain Act. 

The Bureau also is proposing to modify 

current § 1024.38(b)(1)(vi) to account for 

all transfers to successors in interest 

meeting this definition. Similarly, for 

the purposes of Regulation Z, proposed 

§ 1026.2(a)(27) defines successor in 

interest to cover all categories of 

successors in interest who acquired an 

ownership interest in the dwelling 

securing a mortgage loan in a transfer 

protected by the Garn-St Germain Act. 

Successors in interest covered by the 

proposed definitions would not 

necessarily have assumed the mortgage 

loan obligation (i.e., legal liability for 

the mortgage debt) under State law.29

When the Bureau issued current 

§ 1024.38(b)(1)(vi), it stated that it had 

‘‘received information about difficulties 

faced by surviving spouses, children, or 

other relatives who succeed in the 

interest of a deceased borrower to a 

property that they also occupied as a 

principal residence, when that property 

is secur[ing] a mortgage loan account 

solely in the name of the deceased 

borrower.’’ 30 Since that time, the 

Bureau has received additional 

information about difficulties faced by 

other categories of successors in interest 

who acquired an ownership interest in 

the property securing a mortgage loan in 

a transfer protected by the Garn-St 

Germain Act, such as divorced spouses 

of prior borrowers.31 For example, the 

Bureau has received reports from 

consumers and consumer advocacy 

groups that successors in interest who 

are transferred an ownership interest in 

property securing a mortgage loan upon 

divorce or legal separation face similar 

challenges to those faced by successors 

in interest in situations involving 

borrower death. 

The Bureau believes that successors 

in interest in situations other than those 

involving a borrower’s death face the 

same risk of unnecessary foreclosure 

and other consumer harm and have the 

same legal rights with respect to the 

mortgage loan and property as 

successors in interest upon death. 

Further, because the Bureau is 

proposing to apply all of the Mortgage 

Servicing Rules to confirmed successors 

in interest in large part to prevent 

unnecessary foreclosure, the Bureau 

believes that it is appropriate to defer to 

Congress’s policy choice about which 

categories of successors in interest 

should be protected from foreclosure. 

Accordingly, the Bureau is proposing 

that the Mortgage Servicing Rules 

should apply with respect to all 

categories of successors in interest who 

acquired an ownership interest in the 

property securing a mortgage loan in a 

transfer protected by the Garn-St 

Germain Act. 

Confirming a successor in interest’s 

status. The Bureau is proposing 

modifications to Regulation X’s 

mortgage servicing rules (subpart C of 

Regulation X) relating to how a 

mortgage servicer confirms a successor 

in interest’s identity and ownership 


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32The Bureau believes that similar modifications 

to Regulation Z’s mortgage servicing rules relating 

to how a mortgage servicer confirms a successor in 

interest’s identity and ownership interest in the 

dwelling are unnecessary. Regulation X’s mortgage 

servicing rules apply to the vast majority of 

mortgage loans to which Regulation Z’s mortgage 

servicing rules apply. Accordingly, the rules under 

Regulation X relating to how a mortgage servicer 

confirms a successor in interest’s identity and 

ownership interest in the property would generally 

apply to loans to which Regulation Z’s mortgage 

servicing rules apply, making unnecessary similar 

modifications to Regulation Z. 

33See, e.g., California Reinvestment Coalition, 

Chasm Between Words and Deeds X: How Ongoing 

Mortgage Servicing Problems Hurt California 

Homeowners and Hardest-Hit Communities, at 20 

(May 21, 2014) (noting that majority of housing 

counselors surveyed reported continuation of 

previously reported problems regarding successors 

in interest, such as that ‘‘servicers often . . . would 

require [such homeowners] to go through costly and 

unnecessary hoops’’). 

34CFPB Bulletin 2013–12. 

35 78 FR 10901, 10914 (Feb. 14, 2013). 36 Id. at 10703. 

interest in the property securing the 

mortgage loan.32 Proposed § 1024.36(i) 

requires a servicer to respond to a 

written request that indicates that the 

person making the request may be a 

successor in interest by providing that 

person with information regarding the 

documents the servicer requires to 

confirm the person’s identity and 

ownership interest in the property. 

Proposed § 1024.38(b)(1)(vi) provides 

several related modifications to the 

current policies and procedures 

provision involving successors in 

interest. 

Proposed § 1024.38(b)(1)(vi)(A) 

requires servicers to maintain policies 

and procedures that are reasonably 

designed to ensure that the servicer can, 

upon notification of the death of a 

borrower or of any transfer of the 

property securing a mortgage loan, 

promptly identify and facilitate 

communication with any potential 

successors in interest regarding the 

property. Proposed 

§ 1024.38(b)(1)(vi)(B) requires servicers 

to maintain policies and procedures 

reasonably designed to ensure that the 

servicer can, upon identification of a 

potential successor in interest, promptly 

provide to that person a description of 

the documents the servicer reasonably 

requires to confirm the person’s identity 

and ownership interest in the property 

and how the person may submit a 

written request under § 1024.36(i) 

(including the appropriate address). 

Proposed § 1024.38(b)(1)(vi)(C) requires 

servicers to maintain policies and 

procedures reasonably designed to 

ensure that the servicer can confirm 

promptly, upon the receipt of such 

documents, the person’s status as a 

successor in interest, where appropriate, 

and promptly notify the person, as 

applicable, that the servicer has 

confirmed the person’s status, has 

determined that additional documents 

are required (and what those documents 

are), or has determined that the person 

is not a successor in interest. 

The Bureau is proposing these 

changes because it believes, based on 

the information it has received from 

consumers, consumer advocacy groups, 

and other stakeholders, that successors 

in interest continue to have difficulty 

demonstrating their identity and 

ownership interest in the property to 

servicers’ satisfaction.33 The October 

2013 Servicing Bulletin indicated that 

servicers should have a practice of 

‘‘[p]romptly providing to any party 

claiming to be a successor in interest a 

list of all documents or other evidence 

the servicer requires, which should be 

reasonable in light of the laws of the 

relevant jurisdiction, for the party to 

establish (1) the death of the borrower 

and (2) the identity and legal interest of 

the successor in interest.’’34

Nonetheless, the Bureau has heard 

numerous reports that some servicers 

continue to require successors in 

interest to submit documents that the 

Bureau believes are unreasonable in 

light of the particular situation of that 

successor in interest, or in light of the 

laws of the relevant jurisdiction. For 

instance, the Bureau has heard reports 

that some servicers have required 

successors in interest to produce 

probate documents for estates that do 

not require probate. The Bureau has also 

heard reports that some servicers have 

taken a long time to confirm the 

successor in interest’s status, even after 

receipt of appropriate documentation. 

The Bureau has also heard reports that 

some servicers have failed to 

communicate to the successor in 

interest whether the servicer has 

confirmed the successor in interest’s 

status. 

The Bureau believes that these 

difficulties present significant problems 

related to RESPA’s purposes and 

therefore warrant an appropriate 

response in Regulation X’s mortgage 

servicing rules. When the Bureau issued 

the 2013 RESPA Servicing Final Rule, 

the Bureau stated that RESPA, as 

amended by the Dodd-Frank Act, 

‘‘reflects at least two significant 

consumer protection purposes: (1) To 

establish requirements that ensure that 

servicers have a reasonable basis for 

undertaking actions that may harm 

borrowers and (2) to establish servicers’ 

duties to borrowers with respect to the 

servicing of federally related mortgage 

loans.’’35 Further, the Bureau stated that 

the Dodd-Frank Act ‘‘provides the 

Bureau authority to establish 

prohibitions on servicers of federally 

related mortgage loans appropriate to 

carry out the consumer protection 

purposes of RESPA . . . . [I]n light of the 

systemic problems in the mortgage 

servicing industry . . ., the Bureau is 

exercising this authority in this 

rulemaking to implement protections for 

borrowers with respect to mortgage 

servicing.’’36 The Bureau believes that 

the proposed modifications to 

Regulation X’s mortgage servicing rules 

regarding confirmation of a successor in 

interest’s identity and ownership 

interest in the property similarly serve 

these purposes, in particular with 

respect to preventing unnecessary 

foreclosure and other homeowner 

harms. 

Where a successor in interest’s 

property secures a mortgage loan, a 

foreclosure or threatened foreclosure 

imperils that ownership interest and 

poses significant risk of consumer harm, 

even though the successor in interest 

may not have assumed the mortgage 

loan obligation under State law. 

Successors in interest may also have 

difficulty, beyond that of other 

homeowners, in avoiding foreclosure. 

The Bureau believes that such increased 

risk of harm may arise because 

successors in interest are more likely 

than other homeowners to experience 

an income disruption due to death or 

divorce, and because successors in 

interest have more difficulty than other 

homeowners obtaining information 

about the status of the mortgage loan, 

options for modification, and payoff 

information. Successors in interest may 

also be more likely than other 

homeowners to experience difficulty 

with the prompt crediting of their 

payments, resulting in unnecessary 

foreclosure. For all these reasons, the 

Bureau believes that successors in 

interest are a particularly vulnerable 

group at risk of substantial harms. 

These potential harms are most likely 

to occur when a servicer does not 

promptly confirm a successor in 

interest’s identity and ownership 

interest in the property. Before 

confirmation of the successor in 

interest’s identity and ownership 

interest, the servicer may, in some 

circumstances, have legitimate concerns 

about sharing information about the 

mortgage loan, crediting payments, or 

evaluating the unconfirmed successor in 

interest for loss mitigation options. 

Accordingly, when confirmation is 

delayed, the potential risk of foreclosure 

and other harms to the successor in 

interest increase. For these reasons, the 


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37See, e.g., California Reinvestment Coalition, 

Chasm Between Words and Deeds X How Ongoing 

Mortgage Servicing Problems Hurt California 

Homeowners and Hardest-Hit Communities, at 20 

(May 21, 2014) (noting that majority of housing 

counselors surveyed reported continuation of 

previously reported problems regarding successors 

in interest, such as that ‘‘servicers often would not 

speak to such homeowners, would require them to 

go through costly and unnecessary hoops, and 

would leave them more vulnerable to foreclosure’’). 

38See Fannie Mae, Servicing Guide 

Announcement SVC–2013–17 (Aug. 28, 2013), 

available at https://www.fanniemae.com/content/

announcement/svc1317.pdf; Freddie Mac, Bulletin 

2013–3 (Feb. 15, 2013), available at http://

www.freddiemac.com/singlefamily/guide/bulletins/

pdf/bll1303.pdf.. 

39Although successors in interest should not face 

the same credit reporting consequences after a 

foreclosure as signatories to the debt, 

inconsistencies in the credit scoring system make 

uncertain any generalization about the impact of a 

foreclosure on credit score, and successors in 

interest may, in some instances, face credit score 

risks comparable to those of an original signatory. 

For example, a foreclosure judgment may be 

reported against the successor in interest and 

reflected in the credit score as a judgment, 

regardless of whether the successor in interest has 

personal liability on the debt. 

40 78 FR 10695, 10709 (Feb. 14, 2013). 

41 Id. at 10815. 

Bureau believes that the difficulties 

faced by successors in interest with 

respect to confirmation of their status 

have caused successors in interest to 

face unnecessary problems with respect 

to the mortgage loans secured by the 

property, which may lead to 

unnecessary foreclosure on the 

property. 

The Bureau’s October 2013 Servicing 

Bulletin addressed these problems for a 

subset of successors in interest by 

requiring servicers to have policies and 

procedures in place to facilitate the 

provision of information to successors 

in interest who had inherited a property 

securing a deceased borrower’s 

mortgage loan. Nonetheless, the Bureau 

has continued to receive reports that all 

categories of successors in interest, 

including those who inherit the 

property upon death of a family 

member, continue to experience 

difficulties in having servicers confirm 

the successor in interest’s legal status. 

The Bureau believes, therefore, that 

proposing changes to the rules 

themselves is appropriate and necessary 

to clarify servicers’ obligations and to 

ensure that the requirements are widely 

understood and enforceable. The Bureau 

believes that enabling successors in 

interest to demonstrate efficiently their 

status to servicers and having servicers 

promptly confirm this status is 

particularly important. Such prompt 

confirmation will reduce the risk of 

unnecessary foreclosures and other 

consumer harm. Because the Bureau is 

proposing to apply all of the Mortgage 

Servicing Rules to confirmed successors 

in interest, enabling successors in 

interest to demonstrate their status to 

servicers efficiently and requiring 

servicers to confirm this status promptly 

would allow successors in interest to 

access the rules’ protections as quickly 

as possible. Moreover, as explained in 

the discussion above of the scope of 

successor in interest rules, the Bureau 

also believes that it is appropriate to 

extend protections to successors in 

interest in situations beyond a 

borrower’s death. 

Applying Mortgage Servicing Rules to 

successors in interest. The Bureau is 

proposing to apply all of the Mortgage 

Servicing Rules to confirmed successors 

in interest. Accordingly, proposed 

§ 1024.30(d) provides that a successor in 

interest shall be considered a borrower 

for the purposes of Regulation X’s 

mortgage servicing rules once a servicer 

confirms the successor in interest’s 

identity and ownership interest in the 

property. Similarly, proposed 

§ 1026.2(a)(11) provides that a 

confirmed successor in interest is a 

consumer with respect to Regulation Z’s 

mortgage servicing rules. Under the 

proposed rule, the Mortgage Servicing 

Rules would apply with respect to a 

confirmed successor in interest 

regardless of whether that person has 

assumed the mortgage loan obligation 

(i.e., legal liability for the mortgage debt) 

under State law. 

The Bureau believes, based on the 

information it has received from 

consumers, consumer advocacy groups, 

and other stakeholders, that successors 

in interest face many of the challenges 

that the Mortgage Servicing Rules were 

designed to prevent.37 For example, the 

Bureau has learned that successors in 

interest often have difficulty receiving 

information about the mortgage loan 

secured by the property or correcting 

errors regarding the mortgage loan 

account. The Bureau has also learned 

that servicers sometimes refuse to 

accept, or may misapply, payments from 

successors in interest. The Bureau has 

also heard numerous reports that 

successors in interest often encounter 

difficulties being evaluated for loss 

mitigation options, including that 

servicers often require successors in 

interest to assume the mortgage loan 

obligation under State law before 

evaluating the successor in interest for 

loss mitigation options. This practice 

appears to contravene Fannie Mae and 

Freddie Mac requirements that, for 

loans governed by Fannie Mae or 

Freddie Mac guidelines, servicers must 

evaluate successors in interest for loss 

mitigation options prior to processing 

an assumption.38 The problems 

encountered by successors in interest in 

correcting servicing errors and obtaining 

information may persist even after the 

servicer has confirmed the successor in 

interest’s identity and ownership 

interest in the property. 

The ability of successors in interest to 

sell, encumber, or make improvements 

to their property is limited by the lien 

securing the mortgage loan. As 

homeowners of property securing a 

mortgage loan, successors in interest 

typically must satisfy the loan’s 

payment obligations to avoid 

foreclosure, even though a successor in 

interest will not necessarily have 

assumed liability for the mortgage debt 

under State law. Successors in interest, 

like other homeowners, can face serious 

adverse consequences from foreclosure. 

These consumer harms may include loss 

of the home and accumulated equity, 

displacement, and damage to credit 

scores.39 Successors in interest, 

however, may have more difficulty 

preventing or resolving servicing errors 

than other borrowers. 

The Bureau believes that the problems 

faced by successors in interest are 

similar to many of the problems that 

prompted the Bureau to adopt the 

Mortgage Servicing Rules. When the 

Bureau issued the 2013 RESPA 

Servicing Final Rule, it stated that ‘‘the 

consumer protection purposes of RESPA 

include responding to borrower requests 

and complaints in a timely manner, 

maintaining and providing accurate 

information, helping borrowers avoid 

unwarranted or unnecessary costs and 

fees, and facilitating review for 

foreclosure avoidance options.’’40 The 

Bureau believes that these purposes 

similarly would be served by providing 

successors in interest with the 

protections available to borrowers under 

Regulation X. Specifically, the Bureau 

believes that applying Regulation X’s 

mortgage servicing rules to successors in 

interest would provide these 

homeowners with access to information 

about the mortgage, help successors in 

interest avoid unwarranted or 

unnecessary costs and fees, and prevent 

unnecessary foreclosure. 

The Bureau believes that it is 

especially important for the loss 

mitigation procedures in § 1024.41 to 

apply to successors in interest. When 

the Bureau issued the 2013 RESPA 

Servicing Final Rule, the Bureau stated 

that ‘‘establishing national mortgage 

servicing standards . . . ensure[s] that 

borrowers have a full and fair 

opportunity to receive an evaluation for 

a loss mitigation option before suffering 

the harms associated with 

foreclosure.’’41 The Bureau also stated 


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42 Id. 

43See 79 FR 41631 (July 17, 2014). 

44 78 FR 10901, 10914 (Feb. 14, 2013) (quoting 15 

U.S.C. 1601(a)). 

45 Id. 

46 Id. 

47Successor in interest, Black’s Law Dictionary 

(9th ed. 2009). 

48 ‘‘Property sold subject to redemption . . . may 

be redeemed in the manner hereinafter provided, by 

the . . . judgment debtor, or his successor in 

interest in the whole or any part of the property.’’ 

Phillips v. Hagart, 45 P. 843, 843 (Cal. 1896); see 

also, e.g., Forty-Four Hundred E. Broadway Co. v. 

4400 E. Broadway, 660 P.2d 866, 868 (Az. Ct. App. 

1982) (citing Call v. Thunderbird Mortg. Co., 375 

P.2d 169 (Cal. 1962)); Brastrup v. Ellingson, 161 

NW. 553, 554 (N.D. 1917); Tate v. Dinsmore, 175 

SW. 528, 529 (Ark. 1915). 

49See, e.g., Badran v. Household Fin. Corp., 2008 

WL 4335098, at *4 (Mich. Ct. App. 2008); Bermes 

v. Sylling, 587 P.2d 377 (Mont. 1978); In re 

Fogarty’s Estate, 300 N.Y.S. 231 (N.Y. Sur. Ct. 

1937). 

that ‘‘[t]hese standards are appropriate 

and necessary to achieve the consumer 

protection purposes of RESPA, 

including facilitating borrowers’ review 

for loss mitigation options, and to 

further the goals of the Dodd-Frank Act 

to ensure a fair, transparent, and 

competitive market for mortgage 

servicing.’’42 The Bureau believes that 

these same consumer protection 

purposes would be served by applying 

the loss mitigation procedures in 

§ 1024.41 to successors in interest, who, 

as homeowners of property securing a 

mortgage loan, may need to make 

payments on the loan to avoid 

foreclosure. 

The Bureau believes that successors 

in interest may represent a particularly 

vulnerable group of consumers. Because 

successors in interest can face serious 

adverse consequences from foreclosure, 

successors in interest often accede to the 

responsibilities of the mortgage loan 

following death or divorce. Further, 

successors in interest may be more 

likely than other homeowners to 

experience a disruption in household 

income and therefore may be more 

likely than other homeowners to need 

loss mitigation to avoid foreclosure. The 

Bureau therefore believes that requiring 

servicers to evaluate a complete loss 

mitigation application received from a 

confirmed successor in interest under 

§ 1024.41’s procedures would serve 

RESPA’s consumer protection purposes. 

Further, because a servicer’s 

acknowledgment of a successor in 

interest’s subsequent assumption of the 

mortgage loan under State law is not 

subject to the Regulation Z Ability-toRepay Rule,43 successors in interest are 

particularly dependent on a prompt loss 

mitigation evaluation to assess the 

mortgage loan’s affordability. A 

servicer’s evaluation of a complete loss 

mitigation application often provides 

the successor in interest with critical 

information about the long-term 

affordability of the loan. The Bureau 

therefore believes that requiring 

servicers to evaluate a complete loss 

mitigation application received from a 

confirmed successor in interest supports 

the successor in interest in making a 

fully informed decision about whether 

to assume the mortgage loan obligation 

under State law. The Bureau also 

believes that requiring servicers to 

comply with § 1024.41’s procedures 

with respect to confirmed successors in 

interest would not impose significant 

costs on servicers. 

With respect to Regulation Z, when 

the Bureau issued the 2013 TILA 

Servicing Final Rule, the Bureau stated 

that ‘‘[t]he purposes of TILA are to 

‘assure a meaningful disclosure of credit 

terms so that the consumers will be able 

to compare more readily the various 

credit terms available and avoid the 

uninformed use of credit’ and to protect 

consumers against inaccurate and unfair 

credit billing practices.’’44 Additionally, 

the Bureau noted that the Dodd-Frank 

Act ‘‘empowers the Bureau to prescribe 

rules regarding the disclosure of the 

‘features’ of consumer financial 

products and services generally . . . 

even if other Federal consumer financial 

laws do not specifically require 

disclosure of such features,’’45 and that 

the Dodd-Frank Act ‘‘is a broad source 

of authority to modify or exempt the 

disclosure requirements of TILA’’ 

regarding ‘‘residential mortgage loans if 

the Bureau determines that such 

exemption or modification is in the 

interest of consumers and in the public 

interest.’’46 The Bureau believes that 

these purposes would be served by 

applying Regulation Z’s mortgage 

servicing rules to successors in interest, 

who, as homeowners of dwellings 

securing mortgage loans, may be 

required to make payments on the loan 

to avoid foreclosure. Specifically, the 

Bureau believes that applying 

Regulation Z’s mortgage servicing rules 

to successors in interest would protect 

successors in interest against inaccurate 

and unfair payment crediting practices 

by the servicer of the mortgage loan on 

which they may be making payments 

and which encumbers their property. 

The Bureau also believes that applying 

Regulation Z’s mortgage servicing rules 

to successors in interest would benefit 

consumers and the public because the 

rules would help prevent unnecessary 

foreclosure by, for example, keeping 

successors in interest informed of the 

status of the mortgage loan and 

requiring a servicer to credit promptly 

payments from successors in interest. 

Moreover, the proposed amendments to 

Regulation Z would help ensure that 

successors in interest receive prompt 

information about the amount necessary 

to pay off the mortgage loan, as other 

homeowners do under Regulation Z. 

Legal Authority. For the reasons 

expressed above in this part V.A., the 

Bureau believes these proposed changes 

to the Mortgage Servicing Rules carry 

out the purposes of RESPA and TILA. 

The Bureau is proposing to exercise its 

authority under sections 6(j)(3), 

6(k)(1)(E) and 19(a) of RESPA to make 

these amendments relating to successors 

in interest to Regulation X’s mortgage 

servicing rules. The Bureau is proposing 

to exercise its authority under section 

105(a) of TILA to make these 

amendments relating to successors in 

interest to Regulation Z’s mortgage 

servicing rules. The Bureau is also 

proposing to exercise its authority under 

section 1022(b) of the Dodd-Frank Act 

to prescribe regulations necessary or 

appropriate to carry out the purposes 

and objectives of Federal consumer 

financial laws. 

The Bureau believes that it is 

reasonable to interpret ‘‘borrower’’ 

under RESPA and ‘‘consumer’’ under 

TILA to include successors in interest 

and to apply the Mortgage Servicing 

Rules to confirmed successors in 

interest. The Bureau believes that this 

treatment is consistent with State 

property law and thus the context in 

which RESPA and TILA were enacted. 

At common law, a successor in interest 

‘‘retains the same rights as the original 

owner, with no change in substance.’’47

As a matter of State law, successors in 

interest have historically been afforded 

many of the same rights and 

responsibilities as the prior borrower. 

For example, there is a significant 

amount of State law indicating that a 

successor in interest, like the prior 

borrower, possesses the right to redeem 

following the mortgagee’s foreclosure on 

the property.48 Moreover, there is 

significant State law providing that the 

contractual rights and obligations under 

the mortgage loan of the prior borrower 

are freely assignable to successors in 

interest.49 Further, before the enactment 

of the Garn-St Germain Act, several 

States had longstanding prohibitions on 

the exercise of due-on-sale clauses, 

thereby limiting servicers to the same 

contractual remedies with respect to 

successors in interest as were available 

against the prior borrower, whether or 

not the successor in interest under State 

law assumes the legal obligation to pay 


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50See, e.g., Continental Fed. Sav. & Loan Ass’n 

v. Fetter, 564 P.2d 1013, 1017 n.4 (Okla. 1977) 

(collecting cases). The Garn-St Germain Act later 

preempted restrictions on due-on-sale clauses 

generally, but prohibited exercise of due-on-sale 

clauses with respect to certain categories of 

successors in interest. See 12 U.S.C. 1701j–3(b) 

(preempting restrictions); id. § 1701j-3(d) 

(prohibiting exercise for certain categories). 

51 Deficiency judgments against borrowers upon 

foreclosure are disallowed with respect to most 

residential mortgages in several states, including 

Alaska, Arizona, California, Hawaii, Minnesota, 

Montana, Nevada, North Dakota, Oklahoma, 

Oregon, and Washington. See Connecticut General 

Assembly, Office of Legislative Research, OSR 

Research Report 2010–R–0327, Comparison of State 

Laws on Mortgage Deficiencies and Redemption 

Periods (Dec. 9, 2011) (citing and updating National 

Consumer Law Center, Survey of State Foreclosure 

Laws (2009)), available at http://www.cga.ct.gov/

2010/rpt/2010–R–0327.htm. 

52See, e.g., In re Smith, 469 B.R. 198, 202 (Bankr. 

S.D.N.Y. 2012); In re Curinton, 300 B.R. 78, 82 

(Bankr. M.D. Fla. 2003) (quoting In re Garcia, 276 

B.R. 627, 631 (Bankr. D. Ariz. 2002)). 

53See, e.g., Wilson v. Bank of Am., N.A., 2014 WL 

4744555, at *8-*10 (E.D. Pa. Sept. 24, 2014). 

54As indicated in part V.A., supra, the Bureau 

understands that whether a successor in interest has 

assumed a mortgage loan obligation (i.e., legal 

liability for the mortgage debt) under State law is 

a fact-specific question. 

55Section 1024.30(b) exempts small servicers 

from §§ 1024.38 through 1024.41 (except 

§ 1024.41(j)). Likewise, § 1024.30(b) provides an 

exemption from these sections with respect to 

reverse mortgage transactions and mortgage loan 

transactions for which the servicer is a qualified 

lender. Accordingly, except as otherwise provided 

in § 1024.41(j), §§ 1024.38 through 1024.41 would 

not apply to successors in interest with respect to 

small servicers, reverse mortgage transactions, and 

mortgage loans for which the servicer is a qualified 

lender. Consistent with 12 CFR 591.5(b)(1), which 

excludes reverse mortgages from the Garn-St 

Germain’s Act limitation on the exercise of certain 

due-on-sale clauses, the Bureau is therefore not 

proposing to apply § 1024.41’s foreclosure-related 

protections with respect to reverse mortgages 

secured by a property acquired by a successor in 

interest. Under the proposed rule, however, 

§§ 1024.30 through 1024.37 would apply with 

respect to reverse mortgages secured by a property 

acquired by a successor in interest. Similarly, 

§ 1040.30(c) provides that § 1024.33(a) only applies 

to mortgage loans that are secured by a first lien and 

that §§ 1024.39 through 1024.41 only apply to 

mortgage loans secured by property that is a 

borrower’s principal residence. Accordingly, with 

respect to successors in interest, § 1024.33(a) would 

only apply to mortgage loans that are secured by a 

first lien and §§ 1024.39 through 1024.41 would 

only apply to mortgage loans secured by property 

that is a borrower’s principal residence. 

56As described in the section-by-section analysis 

of § 1024.36(i), infra, in addition to proposing that 

Regulation X’s mortgage servicing rules, including 

§ 1024.36, apply with respect to confirmed 

successors in interest, the Bureau is also proposing 

a new information request requirement in 

§ 1024.36(i) that applies before the servicer has 

confirmed the successor in interest’s status. 

the mortgage.50 Additionally, while 

successors in interest may not be 

personally liable on the mortgage note, 

absent their express assumption of such 

liability under State law, in a significant 

number of mortgages across the United 

States, the borrower on the note is also 

under State law not personally liable for 

the debt upon foreclosure because a 

deficiency judgment is not allowed.51

Accordingly, under State law, a 

successor in interest is often in virtually 

the same legal position as the borrower 

on the note with respect to foreclosure. 

The Bureau also believes that this 

treatment of successors in interest is 

consistent with other aspects of Federal 

law. The Garn-St Germain Act, like the 

Bureau’s proposed amendments to the 

Mortgage Servicing Rules, protects 

successors in interest from foreclosure 

after transfer of homeownership to 

them. Additionally, several bankruptcy 

courts have held that successors in 

interest are entitled to the same 

treatment as prior borrowers, for 

example with respect to curing an 

arrearage on a mortgage and reinstating 

the loan.52

The Bureau is aware that some courts 

have indicated that successors in 

interest would not ordinarily be 

considered borrowers under RESPA.53

Notwithstanding these cases, which 

were decided without the benefit of 

regulations such as those that the 

Bureau is now proposing, the Bureau 

believes that the term ‘‘borrower’’ may 

also be interpreted to include successors 

in interest and that it is reasonable to 

consider confirmed successors in 

interest borrowers for the purposes of 

the Mortgage Servicing Rules. As 

homeowners of a property securing a 

mortgage loan, successors in interest 

typically must satisfy the loan’s 

payment obligations to avoid 

foreclosure. As described above, 

successors in interest therefore step into 

the shoes of the borrower for many legal 

purposes. 

B. Regulation X 

Section 1024.30 Scope 

30(d) Successors in Interest 

As explained in part V.A., the Bureau 

is proposing that all of the Mortgage 

Servicing Rules apply to confirmed 

successors in interest (as defined by the 

proposed definition of successor in 

interest, discussed in the section-bysection analysis of § 1024.31). Proposed 

§ 1024.30(d) accordingly provides that a 

successor in interest must be considered 

a borrower for the purposes of subpart 

C of Regulation X (Regulation X’s 

mortgage servicing rules) once a servicer 

confirms the successor in interest’s 

identity and ownership interest in a 

property that secures a mortgage loan 

covered by Regulation X’s mortgage 

servicing rules. Confirmed successors in 

interest covered by proposed 

§ 1024.30(d) would not necessarily have 

assumed the mortgage loan obligation 

(i.e., legal liability for the mortgage debt) 

under State law.54 The Bureau also 

notes that the exemptions and scope 

limitations in Regulation X’s mortgage 

servicing rules would also apply to the 

servicing of a mortgage loan with 

respect to a successor in interest.55

As described in part V.A., the Bureau 

is proposing this change because the 

Bureau believes, based on numerous 

reports from consumers, consumer 

advocacy groups, and other 

stakeholders, that successors in interest 

face many of the challenges that 

Regulation X’s mortgage servicing rules 

were designed to prevent. The Bureau 

believes that the same reasons 

supporting the Bureau’s adoption of the 

2013 RESPA Servicing Final Rule 

support proposed § 1024.30(d) because 

successors in interest are homeowners 

whose property is subject to foreclosure 

if the mortgage loan obligation is not 

satisfied, even though the successor in 

interest may not have assumed that 

obligation under State law. The Bureau 

has considered each section of 

Regulation X’s mortgage servicing rules 

and believes that each section should 

apply to confirmed successors in 

interest. 

The Bureau believes that it is 

appropriate to limit the application of 

this portion of the proposed rule to 

successors in interest whom servicers 

have confirmed have an ownership 

interest in the property. Because some 

people representing themselves as 

successors in interest may not actually 

have an ownership interest in the 

property, requiring servicers to apply 

Regulation X’s mortgage servicing rules’ 

communication, disclosure, and loss 

mitigation requirements to successors in 

interest before servicers have confirmed 

the successor in interest’s identity and 

ownership interest in the property may 

present privacy and other concerns. It 

would also be inappropriate to require 

servicers to incur substantial costs 

before confirming the successor in 

interest’s identity and ownership 

interest in the property. However, the 

Bureau believes that applying 

Regulation X’s mortgage servicing rules 

to confirmed successors in interest does 

not present privacy concerns. The 

Bureau believes that a confirmed 

successor in interest’s ownership 

interest in the property securing the 

mortgage loan is sufficient to allow the 

successor in interest to receive 

information about the mortgage loan. 

Specifically, the Bureau believes that 

§§ 1024.35 and 1024.36 should apply to 

confirmed successors in interest.56

When the Bureau issued §§ 1024.35 and 

1024.36 in the 2013 RESPA Servicing 


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57 78 FR 10695, 10736 (Feb. 14, 2013). 

58See Fannie Mae, Servicing Guide 

Announcement SVC–2013–17 (Aug. 28, 2013); 

Freddie Mac, Bulletin 2013–3 (Feb. 15, 2013). 

59 78 FR 10695, 10791 (Feb. 14, 2013) (discussing 

12 CFR 1024.39); see also id. at 10809–10 

(discussing 12 CFR 1024.40). 

60 Id. at 10791. 

Final Rule, the Bureau stated that ‘‘both 

borrowers and servicers would be best 

served if the Bureau were to clearly 

define a servicer’s obligation to correct 

errors or respond to information 

requests.’’57 The Bureau believes that 

clearly defining a servicer’s obligation 

with respect to a successor in interest 

would similarly benefit both servicers 

and successors in interest. Under 

current § 1024.38(b)(1)(vi), servicers are 

required to have policies and 

procedures reasonably designed to 

ensure that the servicer can identify and 

communicate with successors in 

interest. Because §§ 1024.35 and 

1024.36 do not currently necessarily 

apply to successors in interest, however, 

the extent of the obligation to 

communicate with successors in 

interest, as well as how a successor in 

interest may obtain information from a 

servicer, are not clear. The Bureau 

therefore believes that §§ 1024.35 and 

1024.36 would provide important 

protections to successors in interest. For 

instance, § 1024.35 would provide 

successors in interest with important 

protections regarding a servicer’s failure 

to accept payments conforming to the 

servicer’s written requirements for 

payments. Additionally, § 1024.36’s 

requirements to provide information 

about the mortgage loan would prevent 

unnecessary foreclosure on the 

successor in interest’s property by, for 

example, allowing a successor in 

interest to obtain information about the 

servicer’s requirements for payments. 

Because successors in interest, like prior 

borrowers, bear the risk of unnecessary 

foreclosure, the Bureau believes that 

§§ 1024.35 and 1024.36 should apply to 

successors in interest, as homeowners of 

the property, for the same reasons that 

these rules apply to prior borrowers. 

Providing successors in interest with 

protections under §§ 1024.35 and 

1024.36 may cause servicers to incur 

costs, such as the cost of providing 

responses to information requests from 

successors in interest and handling error 

resolution. The Bureau believes, 

however, that the resulting consumer 

protection of this vulnerable group 

justifies the cost. Further, because 

servicers are already required to comply 

with the requirements of §§ 1024.35 and 

1024.36 with respect to prior borrowers 

and may already expend some resources 

to communicate with successors in 

interest, the additional cost to servicers 

to apply these requirements to 

successors in interest will be minimal. 

As noted, the Bureau believes that 

providing confirmed successors in 

interest with information about the 

mortgage loan as required by §§ 1024.35 

and 1024.36 does not present privacy 

concerns. The Bureau solicits comment 

on whether any information that could 

be provided to successors in interest 

under §§ 1024.35 and 1024.36 presents 

privacy concerns and whether servicers 

should be permitted to withhold any 

information from successors in interest 

out of such privacy concerns. 

As explained in part V.A., the Bureau 

believes that the loss mitigation 

procedures contained in § 1024.41 

should apply to confirmed successors in 

interest and that servicers should be 

required to evaluate successors in 

interest for loss mitigation options to 

prevent unnecessary foreclosure. The 

Bureau believes that significant 

consumer harm flows from a servicer’s 

failure to afford a successor in interest 

the same access to loss mitigation as 

other homeowners. As discussed in part 

V.A., the Bureau also believes that 

requiring servicers to evaluate 

successors in interest for loss mitigation 

prior to the successor in interest’s 

assumption of liability for the mortgage 

debt under State law is consistent with 

Fannie Mae and Freddie Mac guidelines 

and serves RESPA’s purposes.58

Accordingly, under the proposed rule, 

once a servicer confirms a successor in 

interest’s identity and ownership 

interest in the property, if the servicer 

receives a complete loss mitigation 

application from the successor in 

interest more than 37 days before a 

foreclosure sale, for example, the 

servicer must evaluate the successor in 

interest for all loss mitigation options 

available to the successor in interest, as 

required by § 1024.41(c)(1). 

Consistent with § 1024.41’s treatment 

of borrowers generally, the proposal 

would not require a servicer to offer a 

successor in interest any particular loss 

mitigation option. Further, under the 

proposed rule, a servicer could require 

a successor in interest to provide the 

same information and meet the same 

criteria for loss mitigation as other 

borrowers. The proposed rule would 

also not prevent a servicer from 

conditioning an offer for a loss 

mitigation option on the successor in 

interest’s assumption of the mortgage 

loan obligation under State law or from 

offering loss mitigation options to the 

borrower that differ based on whether 

the borrower would simultaneously 

assume the mortgage loan obligation. 

Under the proposed rule, however, a 

servicer could not condition review and 

evaluation of a loss mitigation 

application on the successor in 

interest’s assumption of the mortgage 

obligation. Once a servicer confirms a 

successor in interest’s identity and 

ownership interest in the property, a 

servicer would, for example, be required 

under § 1024.41(b) to respond to a loss 

mitigation application from the 

successor in interest and exercise 

reasonable diligence in obtaining 

documents and information to complete 

the loss mitigation application. The 

foreclosure prohibitions under 

§ 1024.41(f) and (g) would also apply. 

Providing successors in interest with 

§ 1024.41’s protections may cause 

servicers to incur costs. Servicers may 

have to devote additional resources to 

responding to and evaluating loss 

mitigation applications from successors 

in interest. Further, providing 

successors in interest with § 1024.41’s 

protections may delay or prevent 

foreclosure on the property securing the 

mortgage loan. The Bureau believes, 

however, that the resulting consumer 

protection of this vulnerable group 

justifies the cost. Further, because 

servicers are already required to comply 

with § 1024.41’s requirements with 

respect to prior borrowers, the 

additional cost to servicers to apply 

these requirements to successors in 

interest should be minimal. 

For similar reasons, the early 

intervention and continuity of contact 

requirements contained in §§ 1024.39 

and 1024.40 should apply to confirmed 

successors in interest. In issuing these 

provisions in the 2013 RESPA Servicing 

Final Rule, the Bureau stated that 

§§ 1024.39 and 1024.40 are ‘‘appropriate 

to achieve the consumer protection 

purposes of RESPA, including to help 

borrowers avoid unwarranted or 

unnecessary costs and fees and to 

facilitate review of borrowers for 

foreclosure avoidance options.’’59 The 

Bureau further stated that §§ 1024.39 

and 1024.40 are ‘‘necessary and 

appropriate to carry out the purpose . . 

. of the Dodd-Frank Act of ensuring that 

markets for consumer financial products 

and services are fair, transparent, and 

competitive’’ and that ‘‘consumers are 

provided with timely and 

understandable information to make 

responsible decisions about financial 

transactions, and markets for consumer 

financial products and services operate 

transparently and efficiently to facilitate 

access and innovation.’’60 The Bureau 

believes that these same consumer 

protection purposes would be served by 


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61See id. at 10727 (describing 12 CFR 1024.33); 

id. at 10734 (describing 12 CFR 1024.34); id. at 

10763 (describing 12 CFR 1024.37). 

62As described in the section-by-section analysis 

of § 1024.41(b), infra, proposed comment 41(b)–1.ii 

provides that if a servicer receives a loss mitigation 

application from a potential successor in interest 

before confirming that person’s identity and 

ownership interest in the property, the servicer is 

required to review and evaluate that loss mitigation 

application upon such confirmation in accordance 

with the procedures set forth in § 1024.41. 

63Under proposed comment 30(d)–2, in the 

absence of confirmation of a successor in interest, 

the servicer is still required to comply with 

Regulation X’s mortgage servicing rules with 

respect to the prior borrower (i.e., the prior 

borrower’s estate) even if the prior borrower has 

died. 

64See, e.g., Wilson, 2014 WL 4744555, at *8, *10- 

*18 (describing RESPA claims brought by ‘‘Plaintiff 

as Administratrix of the Estate’’). 

applying §§ 1024.39 and 1024.40 to 

successors in interest, who as 

homeowners of a property securing a 

mortgage loan may be required to make 

payments on the loan to avoid 

foreclosure. In particular, the 

protections provided by §§ 1024.39 and 

1024.40 would serve to prevent 

unnecessary foreclosure by alerting 

successors in interest to any 

delinquency on the mortgage loan 

secured by their property and assisting 

with the process of applying for loss 

mitigation options. 

Providing successors in interest with 

protections under §§ 1024.39 and 

1024.40 may cause servicers to incur 

costs. In particular, servicers may be 

required to devote additional staffing 

and personnel to communicating with 

successors in interest. The Bureau 

believes, however, that providing 

consumer protections to this vulnerable 

group justifies the cost. Further, because 

servicers are already required to comply 

with §§ 1024.39’s and 1024.40’s 

requirements with respect to prior 

borrowers, the additional cost to 

servicers to apply these requirements to 

successors in interest should be 

minimal. 

Finally, the Bureau believes that the 

requirements contained in § 1024.33 

(regarding mortgage servicing transfers), 

§ 1024.34 (regarding escrow payments 

and account balances), and § 1024.37 

(regarding force-placed insurance) 

should apply to confirmed successors in 

interest. The same rationale for applying 

these rules to prior borrowers applies 

with respect to successors in interest, 

who are also homeowners and may be 

required to make payments on the loan 

to avoid foreclosure.61 Further, it would 

add unnecessary complexity to the rules 

to apply the rest of Regulation X’s 

mortgage servicing rules to confirmed 

successors in interest but not to apply 

§§ 1024.33, 1024.34, and 1024.37 to 

such successors in interest. The Bureau 

believes it is preferable to apply all of 

Regulation X’s mortgage servicing rules 

to confirmed successors in interest, 

unless there is a compelling reason not 

to apply a particular rule. The Bureau is 

aware of no such compelling reason 

with respect to §§ 1024.33, 1024.34, and 

1024.37 but solicits comment as to 

whether any such compelling reasons 

exist. 

Providing successors in interest with 

protections under §§ 1024.33, 1024.34, 

and 1024.37 may cause servicers to 

incur costs, in particular the costs 

involved in communicating with 

successors in interest. The Bureau 

believes, however, that the resulting 

consumer protection of this vulnerable 

group justifies the cost. Further, because 

servicers are already required to comply 

with the requirements of §§ 1024.33, 

1024.34, and 1024.37 with respect to 

prior borrowers, the additional cost to 

servicers to apply these requirements to 

successors in interest should be 

minimal. 

The Bureau solicits comment on 

whether any particular sections of 

Regulation X’s mortgage servicing rules 

should apply with respect to successors 

in interest even if the servicer has not 

confirmed the successor in interest’s 

identity and ownership interest in the 

property. Further, the Bureau solicits 

comment on whether any particular 

sections of Regulation X’s mortgage 

servicing rules should not apply with 

respect to confirmed successors in 

interest. 

Proposed commentary. Proposed 

comment 30(d)–1 clarifies the 

requirement in proposed § 1024.30(d) 

that a successor in interest must be 

considered a borrower for the purposes 

of Regulation X’s mortgage servicing 

rules once a servicer confirms the 

successor in interest’s identity and 

ownership interest in the property. The 

proposed comment provides the 

example of the application of 

§ 1024.41’s loss mitigation procedures to 

successors in interest: If a servicer 

receives a loss mitigation application 

from a successor in interest after 

confirming the successor in interest’s 

identity and ownership interest in the 

property, the servicer must review and 

evaluate the application and notify the 

successor in interest in accordance with 

the procedures set forth in § 1024.41.62

The proposed comment also notes, in 

contrast, § 1024.36(i)’s requirement that 

a servicer must respond to written 

requests for certain information from a 

potential successor in interest in 

accordance with the requirements of 

§ 1024.36(c) through (g) before 

confirming that person’s status. 

Proposed comment 30(d)–2 clarifies 

the effect on the prior borrower of a 

servicer’s confirmation of a successor in 

interest’s identity and ownership 

interest in the property. The proposed 

comment provides that, even after a 

servicer’s confirmation of a successor in 

interest’s identity and ownership 

interest in the property, the servicer is 

still required to comply with the 

requirements of Regulation X’s mortgage 

servicing rules with respect to the prior 

borrower, unless that borrower also has 

either died or been released from the 

obligation on the mortgage loan.63

Accordingly, once a servicer confirms a 

successor in interest’s identity and 

ownership interest in the property and 

the prior borrower has either died or 

been released from the obligation on the 

mortgage loan, the servicer would no 

longer be required to comply with the 

requirements of Regulation X’s mortgage 

servicing rules with respect to the prior 

borrower. The proposed comment also 

provides that the prior borrower retains 

any rights under Regulation X’s 

mortgage servicing rules that accrued 

prior to the confirmation of the 

successor in interest to the extent these 

rights would otherwise survive the prior 

borrower’s death or release from the 

obligation. Accordingly, for example, a 

deceased borrower’s estate would still 

have any claims that accrued prior to 

the borrower’s death.64 (As described in 

the section-by-section analysis of 

§ 1026.2(a)(11), the Bureau is proposing 

similar commentary with respect to 

Regulation Z’s requirements.) 

The Bureau is proposing comment 

30(d)-2 because the Bureau believes that 

Regulation X’s mortgage servicing rules 

would generally provide important 

protections to prior borrowers even after 

confirmation of a successor in interest. 

The prior borrower may still be liable on 

the mortgage note, and so the prior 

borrower may have significant legal 

interests at stake with respect to the 

mortgage loan, including potential 

credit reporting and any subsequent 

foreclosure or resulting deficiency. The 

Bureau believes that these ongoing 

interests of prior borrowers generally 

justify the continued application of 

Regulation X’s mortgage servicing rules 

to prior borrowers after confirmation of 

a successor in interest. Alternatively, 

the Bureau seeks comment on whether 

the prior borrower should not continue 

to receive Regulation X’s mortgage 

servicing protections once a successor 

in interest’s identity and ownership 

interest have been confirmed. 


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65Comments 39(a)–1.i and 40(a)–3. 

66The proposed definition would not affect the 

interpretation of § 1024.33(c), which prohibits 

servicers from treating a borrower as ‘‘late for any 

purpose’’ if a transferee servicer receives a payment 

from a borrower within the 60-day period beginning 

on the effective date of a transfer. 

67All three concepts—delinquency, delinquent 

borrower, and delinquent mortgage loan 

obligation—are used interchangeably throughout 

subpart C. See, e.g., 12 CFR 1024.39(a) (‘‘delinquent 

borrower’’; ‘‘borrower’s delinquency’’); 12 CFR 

1024.39(b) (same); 12 CFR 1024.41(f)(1)(i) (‘‘A 

borrower’s mortgage loan obligation is more than 

120 days delinquent’’). 

68See 77 FR 57199, 57252 (Sept. 17, 2012). 

The Bureau acknowledges that, under 

proposed comment 30(d)–2, servicers 

will sometimes be required to comply 

with Regulation X’s mortgage servicing 

rules with respect to more than one 

person—both the prior borrower and the 

successor in interest, as well as, in some 

cases, multiple successors in interest 

who each acquire an ownership interest 

in a property. The Bureau notes that, 

under the Mortgage Servicing Rules, it 

is already the case that the rules may 

apply with respect to more than one 

borrower for a particular mortgage loan. 

It is quite common for more than one 

borrower (for example, spouses) to be 

obligated on the mortgage note, and the 

Mortgage Servicing Rules apply with 

respect to each borrower in such cases. 

Accordingly, the Bureau does not 

believe that applying Regulation X’s 

mortgage servicing rules to successors in 

interest presents novel challenges for 

servicers in this regard. 

On the other hand, the Bureau does 

not believe that it often would be useful 

to the prior borrower or the borrower’s 

estate after the borrower has either died 

or been released from the obligation on 

the mortgage loan to continue to receive 

the protections of Regulation X’s 

mortgage servicing rules once a servicer 

confirms a successor in interest’s 

identity and ownership interest in the 

property. When a successor in interest 

has been confirmed and the prior 

borrower has died, the borrower’s estate 

would typically have a relatively narrow 

interest in the mortgage loan. Likewise, 

when the prior borrower has been 

released from the obligation on the 

mortgage loan, that borrower may have 

interests relating to loan activity prior to 

the release of the obligation but would 

have little or no interest in subsequent 

loan activity. Accordingly, the Bureau 

believes that prior borrowers should not 

receive Regulation X’s mortgage 

servicing protections when a successor 

in interest has been confirmed and the 

prior borrower has also died or been 

released from the mortgage obligation, 

but should retain any rights that accrued 

previously to the extent such rights 

would otherwise survive the death of 

the borrower or the release of the 

borrower from the obligation. 

The Bureau solicits comment on 

whether other circumstances exist, 

beyond death and relief of the obligation 

on the mortgage loan, in which 

Regulation X’s mortgage servicing rules 

should not apply to the prior borrower 

once a successor in interest has been 

confirmed. 

Section 1024.31 Definitions 

Delinquency 

Section 1024.31 contains definitions 

for various terms that are used 

throughout the provisions of subpart C 

of Regulation X. It does not contain a 

definition of the term ‘‘delinquency,’’ 

although it is defined for purposes of 

§§ 1024.39(a) and (b) and 1024.40(a). 

Since the publication of the 2013 

RESPA Servicing Final Rule, the Bureau 

has received numerous inquiries about 

how servicers should calculate 

delinquency with respect to those 

provisions of the Mortgage Servicing 

Rules that refer to delinquency but do 

not define delinquency. In particular, 

stakeholders have asked the Bureau how 

servicers should calculate the 120-day 

foreclosure referral waiting period set 

forth in § 1024.41(f)(1)(i). To provide 

greater clarity, the Bureau is proposing 

to add a single definition of 

‘‘delinquency’’ that will apply to all 

provisions in subpart C of Regulation X, 

and to remove the definitions from the 

commentary to §§ 1024.39(a) and (b) 

and 1024.40(a). 

Delinquency is currently defined for 

purposes of §§ 1024.39(a) and (b) and 

1024.40(a) as beginning ‘‘on the day a 

payment sufficient to cover principal, 

interest, and, if applicable, escrow for a 

given billing cycle is due and unpaid, 

even if the borrower is afforded a period 

after the due date to pay before the 

servicer assesses a late fee.’’ 65

Delinquency is not defined for purposes 

of other sections of subpart C, including 

§ 1024.41(f)(1), which prohibits a 

servicer from making the first notice or 

filing for foreclosure unless ‘‘[a] 

borrower’s mortgage loan obligation is 

more than 120 days delinquent.’’ 

To address apparent confusion, as 

well as to ensure that the term 

‘‘delinquency’’ is interpreted 

consistently throughout Regulation X’s 

mortgage servicing rules, the Bureau is 

proposing to remove the current 

definition of delinquency applicable to 

§§ 1024.39(a) and (b) and 1024.40(a) and 

to add a general definition of 

delinquency in § 1024.31 that would 

apply to all sections of subpart C.66 The 

Bureau is proposing to define 

delinquency as a period of time during 

which a borrower and the borrower’s 

mortgage loan obligation are delinquent, 

and to clarify within the proposed 

definition that a borrower and a 

borrower’s mortgage loan obligation are 

delinquent beginning on the day a 

periodic payment sufficient to cover 

principal, interest, and, if applicable, 

escrow, became due and unpaid, until 

such time as the payment is made.67

Delinquency under the proposed 

definition is not triggered by a 

borrower’s failure to pay a late fee, 

consistent with current comments 

39(a)–1.i and 40(a)–3. As the Bureau 

explained in the 2012 RESPA Servicing 

Proposal, the Bureau believes that there 

is a low risk that borrowers who are 

otherwise current with respect to 

principal, interest, and escrow 

payments will be pushed into 

foreclosure solely because of a failure to 

pay accumulated late charges.68

In contrast with the definition of 

delinquency currently found in 

comments 39(a)–1.i and 40(a)–3, the 

proposed definition does not include 

the phrase ‘‘for a given billing cycle.’’ 

As used in the context of the live 

contact and continuity of contact 

requirements under §§ 1024.39 and 

1024.40, respectively, that phrase was 

intended to ensure that the servicer met 

the respective requirements of those 

rules during each billing cycle in which 

the borrower was delinquent. However, 

such a definition would have created 

incongruities if applied to the 120-day 

foreclosure referral waiting period in 

§ 1024.41(f)(1)(i). 

By proposing to define 

‘‘delinquency,’’ the Bureau intends to 

provide servicers, borrowers, and other 

stakeholders with clear guidance on 

how to determine whether a borrower is 

delinquent for purposes of Regulation 

X’s servicing provisions and when the 

borrower’s delinquency began. Servicers 

may use different definitions of 

‘‘delinquency’’ for operational purposes, 

and servicers may use different or 

additional terminology when referring 

to borrowers who are late or behind on 

their payments—for example, servicers 

may refer to borrowers as ‘‘past due’’ or 

‘‘in default,’’ and may distinguish 

between borrowers who are 

‘‘delinquent’’ and ‘‘seriously 

delinquent.’’ Except as provided in the 

Mortgage Servicing Rules themselves, 

the Bureau does not intend the 

proposed definition of delinquency to 

affect industry’s existing procedures for 

identifying and dealing with borrowers 


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69See, e.g., Fannie Mae, Security Instruments, 

https://www.fanniemae.com/singlefamily/securityinstruments (security instruments for various states 

but with a uniform covenant that payments shall be 

applied to each periodic payment in the order in 

which it became due); Fannie Mae & Freddie Mac, 

California Single Family Uniform Instrument, Form 

3005–4, available at https://www.fanniemae.com/ 

content/legal_form/3005w.doc; Fannie Mae & 

Freddie Mac, New York Single Family Uniform 

Instrument, Form 3033, available at https:// 

www.fanniemae.com/content/legal_form/ 

3033w.doc. 

70Am. Bankers Ass’n. Letter to Consumer Fin. 

Prot. Bureau (Oct. 24, 2014), available at http:// 

www.aba.com/Advocacy/commentletters/ 

Documents/ 

ABALetterRollingDelinquencies102414.pdf. 

71See 77 FR 57318, 57352–53 (Sept. 17, 2012). 72See 78 FR 10901, 10955–56 (Feb. 14, 2013). 

73The variation in the payment tolerance 

amounts used could relate to whether the servicer 

is bound by the terms of the National Mortgage 

Settlement, which includes a mandatory payment 

tolerance policy: Servicers subject to the National 

Mortgage Settlement must accept and credit up to 

two payments that come within $50 of the 

scheduled payment to the borrower’s account. The 

National Mortgage Settlement is available at: http:// 

www.nationalmortgagesettlement.com/. The five 

servicers subject to the National Mortgage 

Settlement are Bank of America, JP Morgan Chase, 

Wells Fargo, CitiMortgage, and Ally/GMAC. Ocwen 

reached a separate settlement agreement containing 

an identical provision at a later time, also available 

at http://www.nationalmortgagesettlement.com/. 

who are late or behind on their 

payments. The Bureau therefore seeks 

comment regarding whether the 

proposed definition has the potential of 

interfering with industry’s existing 

policies and procedures. In addition, the 

Bureau seeks comment on whether there 

are alternative ways to articulate the 

proposed definition that may improve 

uniform interpretation and 

implementation. 

The Bureau is also proposing to add 

three comments to the proposed 

definition of delinquency to provide 

servicers additional guidance in 

determining whether and for how long 

a borrower has been delinquent. 

Proposed comment 31 (Delinquency)–1 

essentially restates existing comments 

39(a)–1.i and 40(a)–3: that a borrower 

becomes delinquent beginning the day 

on which the borrower fails to make a 

periodic payment, even if the servicer 

grants the borrower additional time after 

the due date to pay before charging the 

borrower a late fee. 

Proposed comment 31 (Delinquency)– 

2 explains how delinquency should be 

calculated if a servicer applies a 

borrower’s payments to the oldest 

outstanding periodic payment. The 

Bureau understands from its outreach 

that many servicers credit payments 

made to a delinquent account to the 

oldest outstanding periodic payment; 

the model deed of trust provided by the 

GSEs provides that the servicer will 

apply payments ‘‘in the order in which 

[they] became due.’’ 69 The Bureau also 

understands that some servicers that use 

this method may be concerned about 

how to calculate the length of a 

borrower’s delinquency without 

increased certainty from the Bureau.70

As it stated in the 2012 TILA Servicing 

Proposal, the Bureau believes that this 

method of crediting payments provides 

greater consumer protection, because it 

advances the date the borrower’s 

delinquency began and therefore 

shortens the length of a borrower’s 

delinquency.71 Nonetheless, consistent 

with its decision in the context of the 

2013 TILA Servicing Final Rule, the 

Bureau is not requiring servicers to 

apply payments to the oldest 

outstanding periodic payment at this 

time. The Bureau initially proposed to 

require servicers to apply payments in 

this way in the 2012 TILA Servicing 

Proposal, but it ultimately decided not 

to adopt the proposed provision, finding 

that it provided limited consumer 

benefit and posed a potential conflict 

with State law.72 The Bureau is not 

revisiting that decision in this 

rulemaking. The Bureau will continue 

to monitor the market to evaluate 

servicers’ payment crediting practices 

and those practices’ effects on 

consumers. 

At this time, rather than requiring that 

servicers apply payments to the oldest 

outstanding periodic payment, the 

Bureau is proposing comment 31 

(Delinquency)–2 to clarify that, if a 

servicer applies payments to the oldest 

outstanding periodic payment, the date 

of the borrower’s delinquency must 

advance accordingly. The proposed 

comment includes an example 

illustrating this concept. The example 

assumes a mortgage loan obligation with 

a periodic payment due on the first of 

each month. The borrower misses the 

periodic payment due on January 1, but 

makes a payment in full on February 1. 

The servicer credits the payment it 

received on February 1 to the January 

deficiency. Pursuant to proposed 

comment 31 (Delinquency)–2, on 

February 2, the borrower is one day 

delinquent. Servicers have indicated to 

the Bureau that if they apply payments 

in this manner, this method of 

calculating delinquency means that, in 

light of the 120-day foreclosure referral 

waiting period in § 1024.41(f)(1)(i), 

servicers will not be able to foreclose on 

a borrower who misses one or two 

payments but does not become seriously 

delinquent—for example, a borrower 

who misses one payment over the 

course of a year but makes all other 

payments in full and on time. The 

Bureau understands that most servicers 

would not treat such a borrower as 

seriously delinquent and would not 

initiate loss mitigation procedures or 

seek to foreclose on that borrower. As 

such, the Bureau believes that the 

proposed comment will not place a 

significant additional burden on most 

servicers. The Bureau will continue to 

monitor the market to evaluate whether 

and to what extent servicers are 

choosing to foreclose on borrowers who 

are only one or two payments behind, 

including whether such foreclosure 

practices raise consumer protection 

concerns that would be appropriately 

addressed through formal guidance or 

rulemaking. 

Proposed comment 31 (Delinquency)- 

3 permits servicers to apply a payment 

tolerance to partial payments under 

certain circumstances. The Bureau has 

learned from its outreach that some 

servicers elect or are required to treat 

borrowers as having made a timely 

payment even if they make payments 

that are less than the amount due by 

some small amount (perhaps as a result 

of a scrivener’s error or recent ARM 

payment adjustment). The Bureau 

understands that servicers that apply a 

payment tolerance advance the 

outstanding payment amount to the 

borrower’s account, such that the 

account is reflected as current in the 

servicer’s systems. The Bureau 

understands that the maximum amount 

these servicers use for a payment 

tolerance varies from $10 to $50.73

These servicers would prefer not to 

initiate early intervention 

communications, continuity of contact 

requirements, or loss mitigation 

procedures with those borrowers for 

that given billing cycle. Proposed 

comment 31 (Delinquency)–3 permits 

servicers that elect to advance 

outstanding funds to a borrower’s 

mortgage loan account to treat the 

borrower’s insufficient payment as 

timely, and therefore not delinquent, for 

purposes of Regulation X’s mortgage 

servicing rules. The comment clarifies, 

however, that if a servicer chooses not 

to treat the borrower as delinquent for 

purposes of subpart C of Regulation X, 

the borrower is not delinquent as 

defined in § 1024.31. This clarification 

is intended to prevent servicers from 

selectively applying a payment 

tolerance only where doing so benefits 

the servicer. Specifically, the 

clarification is intended to prevent the 

circumstance under which a servicer 

treats a borrower as current in order to 

avoid the early intervention, continuity 

of contact, or loss mitigation 

requirements, while treating the same 

borrower as delinquent for purposes of 


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74 12 U.S.C. 1701j-3(d). 

initiating foreclosure under 

§ 1024.41(f)(1). The Bureau seeks 

comment on whether it should limit 

servicers’ use of a payment tolerance to 

a specific dollar amount or percentage 

of the periodic payment amount, and if 

so, what the specific amount or 

percentage should be. 

Successors in Interest 

As described in part V.A., the Bureau 

is proposing that, to the extent that the 

Mortgage Servicing Rules apply to 

successors in interest, those rules 

should apply with respect to transfers to 

all categories of successors in interest 

who acquired an ownership interest in 

the property securing a mortgage loan in 

a transfer protected by the Garn-St 

Germain Act.74 Accordingly, the Bureau 

is proposing to add a definition of 

successor in interest to § 1024.31 that is 

broader than the category of successors 

in interest contemplated by current 

§ 1024.38(b)(1)(vi) and that would cover 

all categories of successors in interest 

who acquired an ownership interest in 

the property securing a mortgage loan in 

a transfer protected by the Garn-St 

Germain Act. (As discussed in the 

section-by-section analysis of 

§ 1026.2(a)(27), the Bureau is proposing 

to add a similar definition to Regulation 

Z.) 

The proposed definition states that a 

successor in interest is a person to 

whom an ownership interest in a 

property securing a mortgage loan is 

transferred from the borrower, provided 

that the transfer falls under an 

exemption specified in the appropriate 

section of the Garn-St Germain Act. The 

Bureau intends the proposed definition 

to apply throughout the relevant 

proposed rule and commentary. (As 

discussed in the section-by-section 

analysis of § 1024.38(b)(1)(vi), the 

Bureau is also proposing modifying 

current § 1024.38(b)(1)(vi) to account for 

all protected transfers under the Garn-St 

Germain Act.) 

The Bureau solicits comment on 

whether the proposed definition of 

successor in interest is appropriate for 

the purposes of the Mortgage Servicing 

Rules. The Bureau also solicits comment 

on whether certain categories of 

successors in interest protected by the 

Garn-St Germain Act should not be 

covered by the Bureau’s definition of 

successor in interest. The Bureau further 

solicits comment on whether additional 

categories of successors in interest, 

beyond those protected by the Garn-St 

Germain Act, should be covered by the 

Bureau’s definition of successor in 

interest. 

The Bureau also solicits comment on 

whether the Mortgage Servicing Rules 

should expressly and specifically 

address the status of persons who 

possess an ownership interest in the 

property, have not have assumed the 

mortgage loan obligation (i.e., legal 

liability for the mortgage debt) under 

State law, but did not acquire an 

ownership interest from a prior 

borrower on the mortgage loan. Such 

persons would include, for example, 

persons who purchased the property 

jointly with the prior borrower but did 

not undertake the mortgage loan 

obligation when the loan was originated 

and may not necessarily have assumed 

the mortgage loan obligation thereafter. 

The Bureau is considering, but is not 

proposing at this time, expressly 

providing that such persons are 

borrowers for the purposes of the 

Mortgage Servicing Rules. The Bureau 

solicits comment on whether this 

category of persons are having difficulty 

with their treatment by mortgage 

servicers, and if so, the extent and 

nature of the difficulty. 

Section 1024.36TMRequests for 

Information 

36(a) Information Request 

Section 1463(a) of the Dodd-Frank Act 

amended RESPA to add section 

6(k)(1)(D), which states that a servicer 

shall not fail to provide information 

regarding the owner or assignee of a 

mortgage loan within ten business days 

of a borrower’s request. Currently, when 

a borrower submits a request for 

information under § 1024.36(a) asking 

for the owner or assignee of a mortgage 

loan held by a trust in connection with 

a securitization transaction and 

administered by an appointed trustee, 

comment 36(a)-2 provides that the 

servicer complies with § 1024.36(d) by 

responding by identifying both the 

name of the trust and the name, address, 

and appropriate contact information for 

the trustee. The comment provides that, 

among other examples, if a mortgage 

loan is owned by Mortgage Loan Trust, 

Series ABC–1, for which XYZ Trust 

Company is the trustee, the servicer 

complies with § 1024.36(d) by 

responding to a request for information 

regarding the owner or assignee of the 

mortgage loan by identifying the owner 

as Mortgage Loan Trust, Series ABC–1, 

and providing the name, address, and 

appropriate contact information for XYZ 

Trust Company as the trustee. Proposed 

amendments to comment 36(a)-2 would 

change how a servicer must respond to 

such requests when Fannie Mae or 

Freddie Mac is the trustee, investor, or 

guarantor. 

The Bureau has received feedback 

from industry suggesting that providing 

borrowers with detailed information 

about the trust when Fannie Mae or 

Freddie Mac is the trustee, investor, or 

guarantor is unnecessarily burdensome 

on servicers. According to industry, 

servicers’ systems do not typically track 

the name of the trust for each such loan, 

so a servicer must ask the trustee for this 

information each time it receives an 

information request asking for the loan’s 

owner or assignee. Moreover, because 

the loss mitigation provisions for loans 

governed by Fannie Mae or Freddie Mac 

are determined by Fannie Mae or 

Freddie Mac and not by the trust, the 

trust-identifying information may be of 

less value to borrowers when Fannie 

Mae or Freddie Mac is the trustee, 

investor, or guarantor. Industry has 

therefore requested that the Bureau 

reconsider the requirement for a servicer 

to provide specific trust-identifying 

information for loans governed by 

Fannie Mae’s or Freddie Mac’s servicing 

guidelines. 

While the Bureau acknowledges 

industry’s concerns, the Bureau 

continues to believe that a borrower 

should be able to obtain the identity of 

the trust by submitting a request for 

information under § 1024.36(a). 

Consumer advocacy groups have 

informed the Bureau that borrowers 

require trust-identifying information in 

order to raise certain claims or defenses 

during litigation, as well as to exercise 

the extended right of rescission under 

§ 1026.23(a)(3) when applicable. 

Further, for loans held in a trust for 

which Fannie Mae or Freddie Mac is not 

the trustee, investor, or guarantor, a 

borrower would require the trustidentifying information to determine 

what loss mitigation options are 

available. 

Nonetheless, the Bureau believes that, 

with respect to a loan for which Fannie 

Mae or Freddie Mac is the trustee, 

investor, or guarantor, it may not be 

necessary for a servicer to identify both 

the trustee and the trust in response to 

all requests for information seeking 

ownership information. To the extent 

that borrowers asking for the owner or 

assignee of a loan are seeking 

information about loss mitigation 

options or the requirements imposed on 

the servicer by the owner of the loan, 

such information is usually publicly 

available in Fannie Mae’s or Freddie 

Mac’s respective Seller-Servicing Guide 

without distinction based on the 

particular trust. If a borrower knows that 

Fannie Mae or Freddie Mac is the 

trustee, investor, or guarantor, the 

borrower can look to those guides and 

related bulletins to learn what loss 


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mitigation options are available, what 

foreclosure processes the servicer must 

follow, how the servicer is 

compensated, and a wide variety of 

other information applicable to the loan. 

Alternatively, borrowers can access the 

appropriate Web site to learn more 

information once they know which 

entity’s guidelines apply; both Fannie 

Mae and Freddie Mac maintain Web 

sites containing a considerable amount 

of information relating to standards 

affecting borrowers’ mortgage loans. 

Fannie Mae and Freddie Mac also 

maintain dedicated telephone lines for 

borrower inquiries. As such, requiring a 

servicer to identify Fannie Mae or 

Freddie Mac as the owner or assignee of 

the loan (without also identifying the 

name of the trust) would give most 

borrowers access to the information they 

seek. 

Given the foregoing considerations, 

the Bureau is proposing to revise 

comment 36(a)–2 to provide that, for 

loans for which Fannie Mae or Freddie 

Mac is the trustee, investor, or 

guarantor, a servicer complies with 

§ 1024.36(d) by responding to requests 

for information asking only for the 

owner or assignee of the loan by 

providing only the name and contact 

information for Fannie Mae or Freddie 

Mac, as applicable, without also 

providing the name of the trust. 

However, proposed comment 36(a)–2 

also provides that, if a request for 

information expressly requests the name 

or number of the trust or pool, the 

servicer complies with § 1024.36(d) by 

providing the name of the trust, and the 

name, address, and appropriate contact 

information for the trustee, regardless of 

whether or not Fannie Mae or Freddie 

Mac is the trustee, investor, or 

guarantor. 

The Bureau believes that proposed 

comment 36(a)–2 would preserve a 

borrower’s access to information while 

reducing burden on servicers by no 

longer requiring them to obtain trustidentifying information for loans for 

which Fannie Mae or Freddie Mac is the 

trustee, investor, or guarantor. Further, 

the Bureau believes that, by requiring 

servicers to provide specific trustidentifying information upon a request 

expressly seeking such information, 

proposed comment 36(a)–2 would 

ensure that borrowers who do require 

specific trust-identifying information 

can obtain it. For other borrowers, 

receiving trust-identifying information, 

which could appear technical or 

unfamiliar, might be confusing and is 

unlikely to benefit the borrower. 

The proposed amendments also 

restructure comment 36(a)–2 to improve 

clarity. The proposed changes would 

not affect a servicer’s existing 

obligations with respect to loans not 

held in a trust for which an appointed 

trustee receives payments on behalf of 

the trust, or with respect to any loan 

held in a trust for which neither Fannie 

Mae nor Freddie Mac is the trustee, 

investor, or guarantor. For loans that are 

not held in a trust for which an 

appointed trustee receives payments on 

behalf of the trust, proposed 

amendments to comment 36(a)–2.i 

would preserve the requirement for 

servicers to respond 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. This proposed revision 

subsumes the requirement in current 

comment 36(a)–2.i to identify the 

servicer or its affiliate as the owner or 

assignee when a loan is held in portfolio 

and would therefore eliminate the 

current comment’s explicit reference to 

portfolio loans. 

Proposed comment 36(a)–2.i also 

clarifies that a servicer is not the owner 

or assignee for purposes of § 1024.36(d) 

if the servicer holds title to the loan, or 

title is assigned to the servicer, solely 

for the administrative convenience of 

the servicer in servicing the mortgage 

loan obligation. This change is intended 

to bring the commentary to § 1024.36(d) 

clearly in line with the Regulation Z 

provisions in § 1026.39 related to 

transfer of ownership notices. As to 

loans held in a trust for which Fannie 

Mae or Freddie Mac is not the investor, 

guarantor, or trustee, proposed 

comments 36(a)–2.ii.A and 36(a)–2.ii.B 

preserve the obligation in existing 

comment 36(a)–2.ii that servicers would 

still comply with § 1024.36(d) by 

identifying both the trust and the trustee 

of such loans to the borrower, regardless 

of how the borrower phrased the request 

for ownership information. 

Similarly, the proposed amendments 

would not change a servicer’s 

requirements for responding to requests 

for ownership information for loans for 

which the Government National 

Mortgage Association (Ginnie Mae) is 

the guarantor. As noted in both current 

comment 36(a)–2 and proposed 

comment 36(a)–2.ii.B, Ginnie Mae is not 

the owner or assignee of the loan solely 

as a result of its role as a guarantor. In 

addition, servicing requirements for 

those loans are governed by the Federal 

agency insuring the loan—such as the 

Federal Housing Association, the 

Department of Veterans’ Affairs, the 

Rural Housing Services, or the Office of 

Public and Indian Housing—not by 

Ginnie Mae itself. 

36(i) Successors in Interest 

The Bureau is proposing a new 

request for information requirement 

regarding the confirmation of a 

successor in interest’s identity and 

ownership interest in the property. 

Proposed § 1024.36(i) requires a servicer 

to respond to a written request that 

indicates that the person may be a 

successor in interest and that includes 

the name of the prior borrower and 

information that enables the servicer to 

identify that borrower’s mortgage loan 

account. Under the proposed rule, a 

servicer must respond to such a request 

by providing the person with 

information regarding the documents 

the servicer requires to confirm the 

person’s identity and ownership interest 

in the property. With respect to the 

written request, the proposed rule 

requires the servicer to treat the person 

as a borrower for the purposes of the 

procedural requirements of § 1024.36(c) 

through (g)—for instance, the servicer 

must acknowledge receipt within five 

days and respond in writing within 30 

days without charge. The proposed rule 

also provides that if a servicer has, 

under § 1024.36(b), established an 

address that a borrower must use to 

request information, a servicer must 

comply with the requirements of 

§ 1024.36(i) only for requests received at 

the established address. As with the 

policies and procedures requirement 

regarding successors in interest 

(proposed § 1024.38(b)(1)(vi), discussed 

in the section-by-section analysis of 

§ 1024.38(b)(1)(vi)), but unlike the 

application of Regulation X’s mortgage 

servicing rules to successors in interest 

generally (proposed § 1024.30(d), 

discussed in the section-by-section 

analysis of § 1024.30(d)), servicers 

would be required to comply with 

proposed § 1024.36(i) before confirming 

the successor in interest’s identity and 

ownership interest in the property. 

As indicated in part V.A., the Bureau 

is proposing § 1024.36(i) to address 

problems faced by successors in interest 

in confirming their identity and 

ownership interest in the property 

securing the mortgage loan; the Bureau 

believes that these problems may lead to 

unnecessary foreclosure on 

homeowners’ property. The Bureau is 

proposing § 1024.36(i) in conjunction 

with proposed § 1024.38(b)(1)(vi)(B) (see 

section-by-section analysis of 

§ 1024.38(b)(1)(vi)), which would 

require servicers to maintain policies 

and procedures that are reasonably 

designed to ensure that the servicer can, 

upon identification of any potential 

successor in interest—including through 

any request made by a potential 


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74192 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

75Pursuant to the Bureau’s Same-Sex Marriage 

Couple Policy, see note 31, supra., a same-sex 

spouse would be evaluated for confirmation as a 

successor in interest under proposed 

§ 1024.38(b)(1)(vi)(B) as would any other potential 

successor in interest. As with any potential 

successor in interest, confirmation of that person’s 

status as a successor in interest would depend on 

whether, under State law, the person had acquired 

an ownership interest in a property securing a 

mortgage loan in a transfer protected by the GarnSt Germain Act. 

successor in interest under § 1024.36(i) 

or any loss mitigation application 

received from a potential successor in 

interest—promptly provide to the 

potential successor in interest a 

description of the documents the 

servicer reasonably requires to confirm 

that person’s identity and ownership 

interest in the property and how the 

person may submit a written request 

under § 1024.36(i) (including the 

appropriate address). The Bureau 

intends that proposed 

§ 1024.38(b)(1)(vi)(B) would require 

servicers to have policies and 

procedures to determine what 

documents are reasonable to require 

from successors in interest in particular 

circumstances, so that the servicer is 

prepared to provide promptly a 

description of these documents, while 

proposed § 1024.36(i) would give 

potential successors in interest a 

mechanism to obtain this information 

from servicers. The Bureau believes that 

the separate requirement in proposed 

§ 1024.36(i) is appropriate, in addition 

to the policies and procedures 

requirement in proposed 

§ 1024.38(b)(1)(vi)(B), because 

information regarding the documents 

the servicer requires to confirm a 

successor in interest’s status may be of 

importance to each individual successor 

in interest and so each successor in 

interest should have a mechanism to 

obtain this information from a servicer. 

The Bureau intends that proposed 

§ 1024.36(i) would apply to a broad 

range of written communication from 

potential successors in interest. Under 

the proposed rule, the successor in 

interest would not need to specifically 

request information regarding the 

documents the servicer requires to 

confirm the person’s identity and 

ownership interest in the property. As 

with other requests for information, the 

successor in interest would also not 

need to indicate specifically that the 

request is a written request under 

§ 1024.36 or to make the request in any 

particular form. Accordingly, servicers 

would be required to provide the 

information in response to any written 

communication indicating that the 

person may be a successor in interest 

that is accompanied by the name of the 

prior borrower and information that 

enables the servicer to identify that 

borrower’s mortgage loan account. For 

instance, a servicer would be required to 

provide the information regarding the 

documents the servicer requires to 

confirm a person’s identity and 

ownership interest in the property in 

response to a written request for loss 

mitigation from a person other than a 

known borrower, because such a request 

suggests that the person may be a 

successor in interest, or in response to 

a written statement from a person other 

than the known borrower that the 

known borrower has died. 

The Bureau is proposing this broad 

language because the Bureau is 

concerned that some successors in 

interest may not be aware that they need 

to confirm their identity and ownership 

interest in the property. In the 

alternative, the Bureau is also 

considering requiring servicers to 

respond only to a written 

communication that actually requests 

this information. The Bureau solicits 

comment on each approach. 

Additionally, the Bureau intends that 

proposed § 1024.36(i) would apply with 

respect to the servicer’s receipt of 

written communication from any 

potential successor in interest unless 

and until the servicer becomes aware 

that the transfer to the successor in 

interest was not protected by the GarnSt Germain Act.75 The Bureau is 

proposing that the requirement apply in 

this manner because the Bureau believes 

that even though a servicer may be 

unaware at the time of initial contact 

with a potential successor in interest 

whether the transfer was protected, in 

these situations the servicer should still 

communicate with the potential 

successor in interest about confirmation 

and should not wait until it has reason 

to believe that the transfer was 

protected. 

The Bureau anticipates that many 

requests under proposed § 1024.36(i) 

will indicate the nature of the transfer 

of the ownership interest from the prior 

borrower to the successor in interest. In 

that case, the Bureau anticipates that 

servicers will respond with information 

that is specifically relevant to that 

successor in interest’s specific situation. 

The Bureau anticipates that, if the 

potential successor in interest does not 

indicate the nature of the transfer of the 

ownership interest to the successor in 

interest and the servicer does not 

otherwise have that information, 

servicers will respond with more 

general information about how 

successors in interest may confirm their 

identity and ownership interest in the 

property in a range of situations. 

The Bureau solicits comment on 

whether a servicer should only be 

required to respond under proposed 

§ 1024.36(i) when a possible successor 

in interest expressly requests 

information regarding how to confirm 

the successor in interest’s identity and 

ownership interest in the property. 

The Bureau believes that it is 

appropriate for the requirements of 

§ 1024.36(c) through (g) to apply to 

requests under proposed § 1024.36(i). In 

particular, the Bureau believes that 

requiring servicers to state in writing 

what documents the servicer requires to 

confirm a successor in interest’s status 

would avoid confusion about what 

documents are required. The Bureau 

also believes that applying the timing 

requirements in § 1024.36(c) through (g) 

to requests under § 1024.36(i) would 

ensure that potential successors in 

interest promptly receive this 

information from servicers. 

The Bureau also believes that it is 

appropriate to require that requests 

under § 1024.36(i) be sent to an 

exclusive address if a servicer has 

established one under § 1024.36(b), as is 

required for other requests for 

information under § 1024.36. It would 

be unnecessarily burdensome to require 

servicers to respond to requests for 

information from potential successors in 

interest that the servicer receives at 

other locations. Because servicers are 

not ordinarily required to respond to 

requests for information received at 

other locations, servicers would need to 

train staff and set up systems at these 

locations solely to comply with 

§ 1024.36(i). Further, the Bureau 

believes that successors in interest 

would be able to send information 

requests to the designated address 

because, under § 1024.36(b), a servicer 

that designates an address for receipt of 

information requests must post the 

designated address on any Web site 

maintained by the servicer if the Web 

site lists any contact address for the 

servicer and because successors in 

interest may in some circumstances 

have access to written communications 

provided to the prior borrower that 

identify the address. In the alternative, 

however, the Bureau is considering 

requiring servicers to respond to 

requests for information received from 

potential successors in interest at any 

location. The Bureau solicits comment 

on these two approaches and whether 

there is another approach that would 

better facilitate communication between 

successors in interest and servicers 

without unnecessarily burdening 

servicers. 


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76As described in the section-by-section analysis 

of § 1024.41(b), infra, proposed comment 41(b)–1.ii 

similarly provides that if a servicer receives a loss 

mitigation application from a potential successor in 

interest before confirming that person’s status, upon 

such confirmation, the servicer is required to 

review and evaluate that loss mitigation application 

in accordance with the procedures set forth in 

§ 1024.41. 

The Bureau notes that, because 

§ 1024.36(c) through (g) apply to 

requests under proposed § 1024.36(i), 

§ 1024.36(f)(1)(i)’s rule on duplicative 

information applies to requests under 

proposed § 1024.36(i). A servicer is 

therefore not required to respond to a 

request under proposed § 1024.36(i) if 

the information requested is 

substantially the same as information 

previously requested for which the 

servicer has previously complied with 

its obligation to respond. Accordingly, a 

servicer would not repeatedly need to 

provide substantially similar 

information in response to every 

communication from successors in 

interest meeting the criteria described in 

proposed § 1024.36(i). The Bureau 

solicits comment on whether this 

limitation is sufficiently clear from the 

application of § 1024.36(c) through (g) to 

requests under proposed § 1024.36(i) or 

whether instead the Bureau should 

issue appropriate clarifying 

commentary. 

The application of Regulation X’s 

mortgage servicing rules’ scope 

provision (§ 1024.30(b)) to successors in 

interest means that proposed 

§ 1024.36(i), but not proposed 

§ 1024.38(b)(1)(vi), would apply to small 

servicers, with respect to reverse 

mortgage transactions, and with respect 

to mortgage loans for which the servicer 

is a qualified lender. Accordingly, small 

servicers, for example, would be 

required to respond to requests for 

information under § 1024.36(i) by 

providing information about the 

documents the servicer requires to 

confirm the person’s identity and 

ownership interest in the property, even 

though small servicers would not be 

required to maintain policies and 

procedures to decide promptly what 

documents the servicer reasonably 

requires to confirm the successor in 

interest’s identity and ownership 

interest in the property. The Bureau 

believes that this approach 

appropriately balances the burden on 

small servicers with the need for 

successors in interest to receive this 

information. The Bureau solicits 

comment on alternatives to this 

approach. 

Proposed commentary. Proposed 

comment 36(i)-1 provides that, for the 

purposes of requests under § 1024.36(i), 

a servicer is only required to provide 

information regarding the documents 

the servicer requires to confirm the 

person’s identity and ownership interest 

in the property, not any other 

information that may also be requested 

by the person. The Bureau is proposing 

this comment to make clear that, while 

servicers would need to comply with 

the procedural requirements of 

§ 1024.36(c) through (g) with respect to 

providing information regarding the 

documents the servicer requires to 

confirm the person’s identity and 

ownership interest in the property, 

servicers are not required to provide any 

other information about the mortgage 

loan that the potential successor in 

interest may request before confirmation 

of the potential successor in interest’s 

status. The Bureau is proposing this 

comment because the Bureau believes 

that it would be inappropriate to require 

servicers to provide information about 

the mortgage loan before confirming a 

successor in interest’s identity and 

ownership interest in the property. As 

discussed in the section-by-section 

analysis of § 1024.30(d), based on the 

application of proposed § 1024.30(d) to 

current § 1024.36, successors in interest 

would be able to request information 

about the mortgage loan more generally 

once the servicer confirms the successor 

in interest’s identity and ownership 

interest in the property. 

The Bureau is not proposing, but is 

considering, additional requirements 

regarding requests for information about 

the mortgage loan received by servicers 

from a potential successor in interest 

before confirmation of that person’s 

status. The Bureau is considering 

requiring servicers to provide the 

information requested upon 

confirmation of the successor in 

interest’s status. A servicer would 

therefore be required to preserve any 

information requests received from a 

potential successor in interest, so that 

the servicer would be able to respond to 

the request upon confirmation of that 

person’s status.76 Alternatively, the 

Bureau is considering requiring 

servicers to respond to any such 

requests from a potential successor in 

interest by informing the potential 

successor in interest that the 

information request must be 

resubmitted upon confirmation of the 

person’s status. The Bureau seeks 

comment on these approaches. 

Section 1024.37 Force-Placed 

Insurance 

37(c) Requirements Before Charging 

Borrower for Force-Placed Insurance 

37(c)(2) Content of Notice 

37(c)(2)(v) 

Under § 1024.37(b), a servicer may not 

charge a borrower for force-placed 

insurance ‘‘unless the servicer has a 

reasonable basis to believe that the 

borrower has failed to comply with the 

mortgage loan’s contract requirement to 

maintain hazard insurance.’’ Section 

1024.37(c)(1) requires a servicer to 

provide to a borrower an initial notice 

and a reminder notice before assessing 

a fee or charge related to force-placed 

insurance. Sections 1024.37(c)(2) and 

1024.37(d)(2) specify the notices’ 

content. Section 1024.37(c)(2)(v) 

requires the initial and reminder forceplaced insurance notices to include a 

statement that a borrower’s hazard 

insurance has expired or is expiring, as 

applicable. This provision does not 

specify what a notice must state if a 

borrower has insufficient coverage, such 

as when the borrower’s insurance 

provides coverage in a dollar amount 

less than that required by the mortgage 

loan contract. The Bureau is proposing 

to amend § 1024.37(c)(2)(v) to address 

situations in which a borrower has 

insufficient, rather than expiring or 

expired, hazard insurance. (As 

discussed in the section-by-section 

analysis of § 1024.37(d)(2)(ii), the 

Bureau is proposing a related 

amendment to § 1024.37(d)(2)(ii)). 

Specifically, § 1024.37(c)(2)(v) 

currently requires the initial notice to 

include a statement that, among other 

things, ‘‘the borrower’s hazard 

insurance is expiring or has expired, as 

applicable, and that the servicer does 

not have evidence that the borrower has 

hazard insurance coverage past the 

expiration date. * * * ’’ Section 

1024.37(d)(2)(i)(C) requires the reminder 

notice to include the same statement if, 

after providing the initial notice, a 

servicer does not receive any evidence 

of hazard insurance. 

The Bureau is concerned that the 

statements required by § 1024.37(c)(2)(v) 

and (d)(2)(i)(C) may not afford servicers 

flexibility to address circumstances in 

which a borrower has insufficient 

coverage. When a borrower has hazard 

insurance that is insufficient under the 

mortgage loan contract’s requirements, a 

statement that coverage has expired or 

is expiring may not be applicable. 

Similarly, the notices must state that the 

servicer does not have evidence that the 

borrower has hazard insurance past the 

coverage date, but § 1024.37 does not 


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77See 12 CFR 1024.37(c)(2) and (d)(2). 78 78 FR 10695, 10770 (Feb. 14, 2013). 

permit the notice to instead state that 

the servicer lacks evidence that the 

borrower’s hazard insurance provides 

sufficient coverage. Moreover, 

§ 1024.37(c)(4) and (d)(4) prohibit a 

servicer from including in the forceplaced insurance notices any 

information other than that required by 

§ 1024.37(c)(2) or (d)(2). As a result, a 

servicer cannot explain on the notice 

itself that the borrower’s hazard 

insurance is insufficient rather than 

expired or expiring. Although a servicer 

could include such an explanation on a 

separate piece of paper in the same 

transmittal as the force-placed insurance 

notice,77 the Bureau believes that 

servicers and borrowers may benefit if 

servicers are able to state on the notice 

itself that the servicer lacks evidence of 

sufficient coverage. 

Accordingly, the Bureau is proposing 

to amend § 1024.37(c)(2)(v) to provide 

that the force-placed insurance notices 

must include a statement that the 

borrower’s hazard insurance is expiring, 

has expired, or provides insufficient 

coverage, as applicable, and that the 

servicer does not have evidence that the 

borrower has hazard insurance coverage 

past the expiration date or evidence that 

the borrower has hazard insurance that 

provides sufficient coverage, as 

applicable. The Bureau believes that 

this amendment may enable servicers to 

provide borrowers with notices that are 

more accurately tailored for their 

precise circumstances and potentially 

avoid confusing a borrower whose 

coverage is not expiring but is 

insufficient under the mortgage loan 

contract. 

The Bureau solicits comments on 

whether other modifications to the 

required content of the force-placed 

insurance notices are necessary or 

appropriate to address circumstances in 

which a servicer force-places insurance 

for reasons other than expired or 

expiring coverage. 

37(c)(4) Additional Information 

Section 1024.37(c) currently requires 

servicers to provide a borrower a notice 

at least 45 days before assessing a fee or 

charge related to force-placed insurance. 

Section 1024.37(c)(4) prohibits a 

servicer from including in the notice 

any information other than that required 

by § 1024.37(c)(2), though a servicer 

may provide a borrower with additional 

information on separate pieces of paper 

in the same transmittal. The Bureau is 

proposing to amend § 1024.37(c)(4) to 

grant servicers the flexibility to include 

a borrower’s mortgage loan account 

number in the notice required by 

§ 1024.37(c)(1)(i). (As discussed in the 

section-by-section analyses of 

§ 1024.37(d)(4) and (e)(4), the Bureau is 

also proposing to make parallel 

amendments to § 1024.37(d)(4) and 

(e)(4) with respect to the notices 

required by § 1024.37(c)(1)(ii) and 

(e)(1)(i).) 

The Bureau has received questions 

inquiring whether servicers may include 

a borrower’s mortgage loan account 

number in the notices required by 

§ 1024.37, including the initial notice 

required by § 1024.37(c)(1)(i). The 

Bureau understands that providing a 

borrower’s mortgage loan account 

number in the notice may facilitate 

identifying a borrower and locating the 

borrower’s account information when 

the borrower contacts the servicer in 

response to the force-placed insurance 

notice. Under the current rule, however, 

servicers may not include any 

additional information on the required 

notices and therefore may include a 

borrower’s account number only on a 

separate piece of paper in the same 

transmittal. 

In the 2013 RESPA Servicing Final 

Rule, the Bureau explained that 

providing required information along 

with additional information in the same 

notice could obscure the most important 

information or lead to information 

overload. The Bureau stated that it 

would be better if servicers have the 

latitude to provide the additional 

information on separate pieces of paper 

in the same transmittal.78

Nonetheless, the Bureau believes it 

may be appropriate to give servicers the 

flexibility to include a borrower’s 

mortgage loan account number in the 

notices required by § 1024.37. An 

account number is a customary 

disclosure on communications between 

a servicer and a borrower. The Bureau 

believes that an account number is 

unlikely to obscure other information on 

the notices or lead to information 

overload. The Bureau also believes that 

including the borrower’s mortgage loan 

account number may help to facilitate 

communications between a borrower 

and a servicer regarding a notice 

provided under § 1024.37. The Bureau 

does not believe that servicers should be 

required to include a separate piece of 

paper in the transmittal solely to 

identify the mortgage loan account 

number. Therefore, the Bureau is 

proposing to amend § 1024.37(c)(4) to 

grant servicers the flexibility to include 

a borrower’s mortgage loan account 

number in the notices required by 

§ 1024.37. 

The Bureau seeks comment on this 

proposal to grant servicers flexibility to 

include a borrower’s mortgage loan 

account number in the notices required 

by § 1024.37 and whether there are 

other types of information that servicers 

should be allowed to include that would 

not obscure the required disclosures or 

create information overload. 

37(d) Reminder Notice 

37(d)(2) Content of the Reminder Notice 

37(d)(2)(ii) Servicer Not Receiving 

Demonstration of Continuous Coverage 

The Bureau is proposing to amend 

§ 1024.37(d)(2)(ii), which specifies the 

information a force-placed insurance 

reminder notice must contain if a 

servicer does not have evidence that the 

borrower has had hazard insurance in 

place continuously. This provision does 

not address the scenario in which a 

servicer receives evidence that the 

borrower has had hazard insurance in 

place continuously, but the servicer 

lacks evidence that the continued 

hazard insurance is sufficient under the 

mortgage loan contract. As discussed in 

the section-by-section analysis of 

§ 1024.37(c)(2)(v), while a servicer could 

include on a separate piece of paper a 

statement clarifying that it is purchasing 

insurance due to insufficient coverage, 

the Bureau believes it may be preferable 

for the notice itself to be clear in this 

regard. 

In order to align the requirements of 

§ 1024.37(d)(2)(ii) with the proposed 

changes to § 1024.37(c)(2)(v), the Bureau 

is proposing to amend § 1024.37(d)(2)(ii) 

to clarify that the provision applies 

when a servicer has received hazard 

insurance information after providing 

the initial notice but has not received 

evidence demonstrating that the 

borrower has had sufficient hazard 

insurance coverage in place 

continuously. The Bureau believes that 

this amendment would clarify 

§ 1024.37(d)(2)(ii)’s applicability when a 

borrower has insufficient hazard 

insurance. 

The Bureau solicits comment on 

whether other modifications to the 

required contents of the force-placed 

insurance notices are necessary or 

appropriate to address circumstances in 

which a servicer force-places insurance 

for reasons other than expired or 

expiring coverage. 

37(d)(2)(ii)(B) 

The proposal makes a technical 

correction to § 1024.37(d)(2)(ii)(B) to 

correct the statement that the notice 

must set forth the information required 

by § 1024.37(c)(2)(ii) through (iv), (x), 

(xi), and (d)(2)(i)(B) and (D). Section 


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1024.37(d)(2)(ii)(B) should state that the 

notice must also set forth information 

required by § 1024.37(c)(2)(ix). 

37(d)(3) Format 

Section 1024.37(d)(3) sets forth 

certain formatting requirements for the 

reminder notice required by 

§ 1024.41(c)(1)(ii). The reminder notice 

contains some of the same information 

as the initial notice provided under 

§ 1024.37(c)(1)(i). The proposal makes a 

technical correction to § 1024.37(d)(3) to 

state that the formatting instructions in 

§ 1024.37(c)(3), which apply to 

information set forth in the initial 

notice, also apply to the information set 

forth in the reminder notice provided 

pursuant to § 1024.37(d). The purpose of 

this change is to clarify that, when the 

same information appears in both the 

initial notice and the reminder notice, 

that information must be formatted the 

same way in both notices. 

37(d)(4) Additional Information 

The Bureau is proposing two 

amendments with respect to 

§ 1024.37(d)(4). First, the Bureau is 

proposing to amend § 1024.37(d)(4) to 

give servicers the flexibility to include 

a borrower’s mortgage loan account 

number in the notice required by 

§ 1024.37(c)(1)(ii). For the reasons 

discussed in the section-by-section 

analysis of § 1024.37(c)(4), the Bureau 

believes that giving servicers flexibility 

to include the account number may 

benefit servicers and borrowers without 

obscuring other information on the 

notice or leading to information 

overload. 

The Bureau seeks comment on this 

proposal to grant servicers flexibility to 

include a borrower’s mortgage loan 

account number in the notices required 

by § 1024.37 and whether there are 

other types of information that servicers 

should be allowed to include that would 

not obscure the required disclosures or 

create information overload. 

Second, the proposal makes technical 

corrections to redesignate comment 

37(d)(4)–1 as comment 37(d)(5)–1, and 

to correct an erroneous reference in that 

comment to § 1024.37(d)(4), which 

instead should be a reference to 

§ 1024.37(d)(5). 

37(e) Renewing or Replacing ForcePlaced Insurance 

37(e)(4) Additional Information 

The Bureau is proposing two 

amendments with respect to 

§ 1024.37(e)(4). First, the Bureau is 

proposing to amend § 1024.37(e)(4) to 

give servicers the flexibility to include 

a borrower’s mortgage loan account 

number in the notice required by 

§ 1024.37(e)(1)(i). For the reasons 

discussed in the section-by-section 

analysis of § 1024.37(c)(4), the Bureau 

believes that giving servicers flexibility 

to include the account number may 

benefit servicers and borrowers without 

obscuring other information on the 

notice or leading to information 

overload. 

The Bureau seeks comment on this 

proposal to grant servicers flexibility to 

include a borrower’s mortgage loan 

account number in the notices required 

by § 1024.37 and whether there are 

other types of information that servicers 

should be allowed to include that would 

not obscure the required disclosures or 

create information overload. 

Second, the proposal makes a 

technical correction to remove the 

unnecessary words ‘‘[a]s applicable’’ 

from § 1024.37(e)(4). 

Legal Authority 

These proposed amendments and 

clarifications to § 1024.37 implement 

sections 6(k)(1)(A), 6(k)(2), 6(l), and 

6(m) of RESPA. 

Section 1024.38 General Servicing 

Policies, Procedures, and Requirements 

38(b) Objectives 

(38)(b)(1)(vi) Successors in Interest 

Current § 1024.38(b)(1)(vi) provides 

that servicers shall maintain policies 

and procedures that are reasonably 

designed to achieve the objective of, 

upon notification of the death of a 

borrower, promptly identifying and 

facilitating communication with the 

successor in interest of the deceased 

borrower with respect to the property 

securing the deceased borrower’s 

mortgage loan. The Bureau is proposing 

several modifications to this 

requirement. Like proposed § 1024.36(i) 

(see section-by-section analysis of 

§ 1024.36(i)), proposed 

§ 1024.38(b)(1)(vi) applies with respect 

to potential successors in interest before 

the servicer confirms the successor in 

interest’s identity and ownership 

interest in the property. By contrast, the 

Mortgage Servicing Rules generally 

would not apply to successors in 

interest (see section-by-section analysis 

of § 1024.30(d)) until the servicer has 

confirmed the person’s identify and 

ownership interest in the property 

securing the mortgage loan. 

Consistent with the proposed 

definition of successor in interest (see 

section-by-section analysis of 

§ 1024.31), proposed § 1024.38(b)(1)(vi) 

expands the current policies and 

procedures requirement regarding 

identifying and communicating with 

successors in interest beyond the 

situation of borrower death. Proposed 

§ 1024.38(b)(1)(vi)(A) requires servicers 

to maintain policies and procedures that 

are reasonably designed to ensure that 

the servicer can identify and facilitate 

communication with any potential 

successors in interest upon notification 

either of the death of a borrower or of 

any transfer of the property securing a 

mortgage loan. The Bureau expects that 

a servicer may be notified of the 

existence of a potential successor in 

interest in a variety of ways, either 

directly (by the successor in interest 

identifying him or herself) or indirectly 

(such as by receipt of a loss mitigation 

application from someone other than 

the prior borrower). The Bureau also 

notes that, although the proposed rule 

applies only with respect to transfers to 

successors in interest who acquired an 

ownership interest in the property 

securing a mortgage loan in a transfer 

protected by the Garn-St Germain Act, 

proposed § 1024.38(b)(1)(vi)(A) applies 

with respect to the servicer’s initial 

notification of any transfer of the 

property securing a mortgage loan 

unless and until the servicer becomes 

aware that the transfer to the successor 

in interest was not protected by the 

Garn-St Germain Act. The Bureau is 

proposing that the requirement apply in 

this manner because the Bureau believes 

that even though a servicer may be 

unaware at the time of initial contact 

with a potential successor in interest 

whether the transfer was protected, the 

servicer should still identify and 

facilitate communication with the 

potential successor in interest; the 

servicer should not wait until it has 

reason to believe that the transfer was 

protected. 

Proposed § 1024.38(b)(1)(vi)(B) 

requires servicers to maintain policies 

and procedures that are reasonably 

designed to ensure that the servicer can, 

upon identification of a potential 

successor in interest—including through 

any request made by a potential 

successor in interest under § 1024.36(i) 

or any loss mitigation application 

received from a potential successor in 

interest—provide promptly to the 

potential successor in interest a 

description of the documents the 

servicer reasonably requires to confirm 

that person’s identity and ownership 

interest in the property and how the 

person may submit a written request 

under § 1024.36(i) (including the 

appropriate address). The Bureau 

intends that this rule would require 

servicers to have policies and 

procedures in place so that the servicer 

can determine what documents are 

reasonable to require from successors in 


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74196 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

interest in particular circumstances, so 

that servicers are able to provide a 

description of these documents 

promptly. (As explained in the sectionby-section analysis of proposed 

§ 1024.38(b)(1)(vi), proposed comment 

38(b)(1)(vi)–1 further clarifies the 

requirement that the documents 

required by the servicer are reasonable 

in the particular circumstances of a 

specific successor in interest.) As 

explained in the section-by-section 

analysis of § 1024.36(i), the Bureau is 

proposing § 1024.38(b)(1)(vi)(B) in 

conjunction with proposed § 1024.36(i), 

which requires servicers to respond to 

information requests indicating that a 

person may be a successor in interest by 

providing information regarding the 

documents the servicer requires to 

confirm the person’s identity and 

ownership interest in the property. 

Accordingly, proposed 

§ 1024.38(b)(1)(vi)(B) requires servicers 

to have policies and procedures in place 

to determine what documents to 

provide to potential successors in 

interest who contact them. Proposed 

§ 1024.36(i) also provides potential 

successors in interest a mechanism to 

prompt servicers to provide this 

information. 

Additionally, proposed 

§ 1024.38(b)(1)(vi)(C) requires servicers 

to maintain policies and procedures that 

are reasonably designed to ensure that 

the servicer can, upon the receipt of 

such documents (i.e., those the servicer 

reasonably requires to confirm that 

person’s identity and ownership interest 

in the property), promptly notify the 

person, as applicable, that the servicer 

has confirmed the person’s status, has 

determined that additional documents 

are required (and what those documents 

are), or has determined that the person 

is not a successor in interest. The 

proposed rule would require servicers to 

have policies and procedures in place to 

confirm promptly potential successors 

in interest’s status, so that a servicer can 

promptly notify the person whether the 

servicer has confirmed the person’s 

status or if additional documents are 

required. The Bureau intends to provide 

servicers with flexibility under this 

proposed rule regarding the form of 

notification to a potential successor in 

interest. The Bureau does not believe 

that it is appropriate to require servicers 

to notify the potential successor in 

interest in writing. Adding an additional 

written notice requirement could be 

unnecessarily burdensome on servicers 

and may delay servicer responses to 

successors in interest. The Bureau 

solicits comment, however, on whether 

servicers should instead be required to 

notify a potential successor in interest 

in writing whether the servicer has 

confirmed the person’s status. 

As explained in part V.A., the Bureau 

is proposing these changes to 

§ 1024.38(b)(1)(vi) because the Bureau 

believes, based on reports from 

consumers, consumer advocacy groups, 

and other stakeholders, that successors 

in interest often have difficulty 

demonstrating their identity and 

ownership interest in the property to 

servicers’ satisfaction. The Bureau 

believes, therefore, that changes to the 

Bureau’s rules are appropriate to clarify 

servicers’ obligations and ensure that 

the requirements are widely understood 

and enforceable. 

The Bureau also solicits comment on 

whether other changes to Regulation X’s 

mortgage servicing rules would protect 

successors in interest from unnecessary 

foreclosure before a servicer has 

confirmed the successor in interest’s 

status, and, if so, what these changes 

would be. 

Proposed commentary. Proposed 

comment 38(b)(1)(vi)–1 clarifies that the 

documents a servicer requires to 

confirm a potential successor in 

interest’s identity and ownership 

interest in the property must be 

reasonable in light of the laws of the 

relevant jurisdiction, the successor in 

interest’s specific situation, and the 

documents already in the servicer’s 

possession. The proposed comment 

provides that the required documents 

may, where appropriate, include, for 

example, a death certificate, an executed 

will, or a court order. 

The Bureau is proposing comment 

38(b)(1)(vi)–1 because, as described in 

part V.A, the Bureau believes, based on 

repeated reports from consumers, 

consumer advocacy groups, and other 

stakeholders, that servicers may request 

documentation to prove the successor in 

interest’s identity and ownership 

interest in the property that is 

unreasonable in the successor in 

interest’s particular situation. For 

instance, the Bureau has heard reports 

that servicers may request probate 

documents for transfers upon death in 

which probate is not required, such as 

when spouses own a property in joint 

tenancy and the ownership interest in 

the property transfers as a matter of law 

upon one spouse’s death. 

Proposed comment 38(b)(1)(vi)–2 

provides examples illustrating 

documents that a servicer may require 

to confirm a potential successor in 

interest’s identity and ownership 

interest in the property and that 

generally would be reasonable, subject 

to the relevant law governing each 

situation, in four common situations 

involving potential successors in 

interests. These situations are: 

(1) Tenancy by the entirety or joint 

tenancy. A potential successor in 

interest indicates (or the servicer knows 

from its records or other sources) that 

the prior borrower and the potential 

successor in interest owned the property 

as tenants by the entirety or joint 

tenants and that the prior borrower has 

died. To demonstrate that the potential 

successor in interest has an ownership 

interest in the property upon the death 

of the prior borrower, applicable law 

does not require a probate proceeding, 

but requires only that there be a prior 

recorded deed listing both the potential 

successor in interest and the prior 

borrower as tenants by the entirety (e.g., 

married grantees) or joint tenants. The 

proposed comment provides that it 

would be reasonable for the servicer to 

require the potential successor in 

interest to provide documentation of the 

recorded instrument, if the servicer does 

not already have it, and the deceased 

borrower’s death certificate. The 

proposed comment also provides that, 

because a probate proceeding is not 

required under applicable law, requiring 

documentation of a probate proceeding 

would be unreasonable. 

(2) Affidavits of heirship. A potential 

successor in interest indicates that he or 

she acquired an ownership interest in 

the property upon the death of the prior 

borrower through intestate succession. 

To demonstrate that the potential 

successor in interest has an ownership 

interest in the property upon the death 

of the prior borrower, applicable law 

does not require a probate proceeding, 

but requires only an appropriate 

affidavit of heirship documenting the 

chain of title. The proposed comment 

provides that it would be reasonable for 

the servicer to require the potential 

successor in interest to provide the 

affidavit of heirship and the death 

certificate of the prior borrower. The 

proposed comment also provides that, 

because a probate proceeding is not 

required under applicable law, requiring 

documentation of a probate proceeding 

would be unreasonable. 

(3) Divorce or legal separation. A 

potential successor in interest indicates 

that he or she acquired an ownership 

interest in the property from a spouse 

who is a borrower as a result of a 

property agreement incident to a 

divorce proceeding. Under applicable 

law, transfer from the borrower spouse 

is demonstrated by a final divorce 

decree and accompanying separation 

agreement executed by both spouses. 

Applicable law does not require a deed 

conveying the interest in the property. 

The proposed comment provides that it 


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79Proposed comment 41(b)(2)(ii)–2 provides the 

following milestones: ‘‘i. 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; ii. The date that 

is the 120th day of the borrower’s delinquency; iii. 

The date that is 90 days before a foreclosure sale; 

iv. The date that is 38 days before a foreclosure 

sale.’’ 

would be reasonable for the servicer to 

require the potential successor in 

interest to provide documentation of the 

final divorce decree and an executed 

separation agreement. The proposed 

comment also provides that because 

applicable law does not require a deed, 

requiring documentation of a deed 

would be unreasonable. 

(4) Living spouses or parents. A 

potential successor in interest indicates 

that he or she acquired an ownership 

interest in the property from a living 

spouse or parent who is a borrower by 

quitclaim deed or act of donation. The 

proposed comment provides that it 

would be reasonable for the servicer to 

require the potential successor in 

interest to provide the quitclaim deed or 

act of donation. The proposed comment 

also provides that it would be 

unreasonable to require additional 

documents to establish ownership. 

The Bureau is proposing comment 

38(b)(1)(vi)–2 because the Bureau 

believes that it would be helpful to 

provide more specific guidance about 

what are reasonable documents to 

require from a potential successor in 

interest to confirm the person’s status as 

a successor in interest in very common 

and straightforward situations. The 

Bureau recognizes that this proposed 

comment does not cover all possible 

situations involving successors in 

interest and that additional documents 

may be required in certain less 

straightforward situations. In particular, 

the Bureau notes that this proposed 

comment does not describe situations 

involving the death of a borrower with 

a will or trust. The Bureau has not 

included commentary regarding such 

situations because the Bureau believes 

that such situations may not always be 

as straightforward as the examples 

provided. For instance, situations 

involving the death of a borrower with 

a will may require probate 

documentation. Additionally, the 

Bureau believes that servicers may be 

more familiar with situations where the 

borrower has a will or trust and that 

therefore servicers may need less 

guidance from the Bureau in 

determining what documents are 

appropriate in these circumstances. 

The Bureau solicits comment on 

whether proposed comment 

38(b)(1)(vi)–2 accurately describes 

examples of reasonably required 

documents to confirm a successor in 

interest’s identity and ownership 

interest in the property. The Bureau also 

solicits comment on whether it would 

be reasonable for servicers to require 

additional documents (such as affidavits 

or notarized copies) from a potential 

successor in interest to confirm the 

validity of documents submitted by the 

potential successor in interest. The 

Bureau also solicits comment on 

whether the Bureau should include 

other common examples of reasonably 

required documents to confirm a 

successor in interest’s identity and 

ownership interest in the property and 

what those examples should be. 

Proposed comment 38(b)(1)(vi)–3 

clarifies proposed 

§ 1024.38(b)(1)(vi)(C)’s requirement that 

servicers maintain policies and 

procedures reasonably designed to 

ensure that the servicer can, upon the 

receipt of the documents that the 

servicer reasonably requires, promptly 

notify the person, as applicable, that the 

servicer has confirmed the person’s 

status, has determined that additional 

documents are required (and what those 

documents are), or has determined that 

the person is not a successor in interest. 

The proposed comment provides that, 

upon the receipt of the documents, the 

servicer’s confirmation must be 

sufficiently prompt so as not to interfere 

with the successor in interest’s ability to 

apply for loss mitigation options 

according to the procedures provided in 

§ 1024.41. The proposed comment also 

provides that, in general, a servicer’s 

policies and procedures must be 

reasonably designed to ensure that 

confirmation of a successor in interest’s 

status occurs at least 30 days before the 

next applicable milestone provided in 

proposed comment 41(b)(2)(ii)–2.79

The Bureau is proposing comment 

38(b)(1)(vi)–3 because the Bureau 

understands that successors in interest 

may have difficulty pursuing loss 

mitigation options to avoid foreclosure 

when the servicer does not promptly 

confirm the successor in interest’s 

identity and ownership interest in the 

property. The Bureau has heard reports 

that miscommunication and delay in the 

process of confirming successors in 

interest’s identity and ownership 

interest in the property sometimes 

prevent successors in interest from 

successfully applying for loss 

mitigation. In general, as each milestone 

provided in proposed comment 

41(b)(2)(ii)–2 passes, a borrower is likely 

to enjoy fewer protections under 

§ 1024.41 when the application becomes 

complete. 

Proposed comment 38(b)(1)(vi)–3 

would help to ensure that servicer delay 

in confirmation of successor in interest 

status would not unnecessarily hinder 

successors in interest’s ability to apply 

for loss mitigation options. The Bureau 

believes that servicers generally are 

aware of the progress of each loan in the 

foreclosure process. Accordingly, the 

Bureau believes that it would not be 

particularly burdensome for servicers to 

design policies and procedures for 

confirming potential successors in 

interest’s status that take into account 

the foreclosure status of a particular 

loan, so that the servicer would be able 

to confirm the successor in interest’s 

status sufficiently promptly for the 

successor in interest to apply for loss 

mitigation under § 1024.41. The 

proposed comment provides that, in 

general, confirmation of a successor in 

interest’s status at least 30 days before 

the next applicable milestone would 

provide the successor in interest 

sufficient opportunity to pursue loss 

mitigation. 

As with other policies and procedures 

required by § 1024.38, the policies and 

procedures required under proposed 

§ 1024.38 (b)(1)(vi) would have to be 

‘‘reasonably designed’’ to achieve the 

stated objective. The Bureau recognizes 

that, for various reasons (e.g., the timing 

of the servicer’s receipt of documents 

from the potential successor, the status 

of pending foreclosure proceedings, 

etc.), it may not be possible in every 

case to confirm a successor in interest’s 

status sufficiently promptly so as not to 

interfere with the successor in interest’s 

ability to apply for loss mitigation 

options according to the procedures 

provided in § 1024.41 or to confirm a 

successor in interest’s status 30 days 

before the next applicable milestone 

provided in proposed comment 

41(b)(2)(ii)–2. However, the Bureau 

believes that servicers should be able to 

adopt policies and procedures to ensure 

that they generally confirm the status of 

successors in interest sufficiently 

promptly for successors in interest to 

apply for loss mitigation options 

according to the procedures provided in 

§ 1024.41. 

The Bureau solicits comment 

generally on proposed 

§ 1024.38(b)(1)(vi). Further, proposed 

§ 1024.38(b)(1)(vi) uses the word 

‘‘promptly’’ in several instances. The 

Bureau is considering adding 

commentary clarifying what the Bureau 

considers ‘‘promptly’’ to mean in the 

various instances. The Bureau solicits 

comment on whether it should add this 

commentary and if so, what should be 

considered ‘‘promptly’’ for the purposes 

of § 1024.38(b)(1)(vi). 


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80 12 CFR 1024.41(b)(1). 

81See comment 41(b)(1)–5. 82 77 FR 57199, 57248 (Sept. 17, 2012). 

38(b)(2) Properly Evaluating Loss 

Mitigation Applications 

38(b)(2)(vi) 

The Bureau is proposing to add 

§ 1024.38(b)(2)(vi), which requires a 

servicer to maintain policies and 

procedures reasonably designed to 

ensure that the servicer can 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 

proposed § 1024.41(c)(4), discussed 

below. 

Under current § 1024.41(c)(1), if a 

servicer receives a complete loss 

mitigation application more than 37 

days before a foreclosure sale, the 

servicer shall, within 30 days of receipt, 

evaluate the borrower for all loss 

mitigation options available to the 

borrower and provide the notice 

required under § 1024.41(c)(1)(ii). 

Section 1024.41(b)(1) defines a complete 

loss mitigation application to include 

information that the servicer requires 

from a borrower in evaluating 

applications for the loss mitigation 

options available to the borrower.80

Thus, a loss mitigation application 

becomes complete notwithstanding that 

a servicer might require additional 

information that is not in the control of 

the borrower.81

Through outreach efforts, the Bureau 

has learned that servicers cannot always 

obtain necessary third-party information 

in time to evaluate a borrower’s 

complete loss mitigation application 

within 30 days of receipt as required by 

§ 1024.41(c)(1). Servicers and Federal 

agencies have informed the Bureau that 

this can occur because a servicer delays 

requesting the information or because a 

third party from whom the servicer 

requested the information delays 

providing it. Currently, § 1024.41 does 

not specifically address this 

circumstance—when a servicer is 

unable to obtain information not in the 

borrower’s control within 30 days of 

receiving a complete application and 

thus cannot complete the evaluation 

within that timeframe as required by 

§ 1024.41(c)(1). Proposed 

§ 1024.41(c)(4), discussed in more detail 

in the section-by-section analysis of 

§ 1024.41(c)(4), addresses these issues 

by adding requirements with respect to 

the servicer’s obligation to pursue 

necessary information not in the 

borrower’s control and the servicer’s 

responsibilities if such information is 

not obtained within 30 days after a 

complete application is received. 

Servicers often need to be able to 

access information from parties other 

than the borrower at different points 

during a loss mitigation application 

process. The Bureau believes that the 

policies and procedures requirements in 

proposed § 1024.38(b)(2)(vi) would 

facilitate compliance with the 

requirements for gathering information 

not in the borrower’s control under 

proposed § 1024.41(c)(4). Maintaining 

such policies and procedures would 

ensure that servicers efficiently identify 

and obtain information not in the 

borrower’s control in accordance with 

§ 1024.41(c)(4). Efficiency in obtaining 

information not in the borrower’s 

control provides enhanced consumer 

protection benefits by shortening the 

loss mitigation evaluation process and 

facilitating compliance with 

§ 1024.41(c)(1)’s requirement to evaluate 

complete loss mitigation applications 

within 30 days. 

The Bureau also believes that 

proposed § 1024.38(b)(2)(vi) would 

contribute to the goals of § 1024.38(b)(2) 

more generally. Section 1024.38(b)(2) 

requires servicers to maintain policies 

and procedures regarding various 

aspects of evaluation of loss mitigation 

applications, including (among others) 

document collection and proper 

evaluation. As the Bureau explained in 

the 2012 RESPA Servicing Proposal, 

these and other requirements of 

§ 1024.38(b)(2) facilitate servicer 

compliance with § 1024.41 and lead to 

loss mitigation processes that better 

protect consumers.82 Similarly, the 

Bureau believes that requiring servicers 

to maintain policies and procedures 

regarding the identification and 

collection of non-borrower information 

under proposed § 1024.38(b)(2)(vi) 

would protect borrowers by facilitating 

compliance with proposed 

§ 1024.41(c)(4) and the evaluation 

timelines provided under 

§ 1024.41(c)(1). 

Legal Authority 

The Bureau is proposing these 

amendments to § 1024.38 pursuant to its 

authority under section 19(a) of RESPA. 

As explained above, the Bureau believes 

that the servicing policies, procedures, 

and requirements set forth in these 

proposed amendments are necessary to 

achieve the purposes of RESPA, 

including to avoid unwarranted or 

unnecessary costs and fees, to ensure 

that servicers are responsive to 

consumer requests and complaints, to 

ensure that servicers provide accurate 

and relevant information about the 

mortgage loan accounts that they 

service, and to facilitate the review of 

borrowers for foreclosure avoidance 

options. The Bureau believes that, 

without sound policies and procedures 

and without achieving certain standard 

requirements, servicers will not be able 

to achieve those purposes. The Bureau 

is also proposing these amendments to 

§ 1024.38 pursuant to its authority 

under section 1022(b) of the Dodd-Frank 

Act to prescribe regulations necessary or 

appropriate to carry out the purposes 

and objectives of Federal consumer 

financial laws. Specifically, the Bureau 

believes that these proposed 

amendments to § 1024.38 are necessary 

and appropriate to carry out the purpose 

under section 1021(a) of the Dodd-Frank 

Act of ensuring that markets for 

consumer financial products and 

services operate transparently and 

efficiently to facilitate access and 

innovation. The Bureau additionally is 

relying on its authority under section 

1032(a) of the Dodd-Frank Act, which 

authorizes the Bureau to prescribe rules 

to ensure that the features of any 

consumer financial product or service, 

both initially and over the term of the 

product or service, are fully, accurately, 

and effectively disclosed to consumers 

in a manner that permits consumers to 

understand the costs, benefits, and risks 

associated with the product or service, 

in light of the facts and circumstances. 

Section 1024.39 Early Intervention 

Requirements for Certain Borrowers 

39(a) Live Contact 

The Bureau is proposing several 

clarifications, revisions, and 

amendments to § 1024.39(a) and its 

commentary. The proposed changes are 

intended to clarify that a servicer’s early 

intervention live contact obligations 

recur in each billing cycle while a 

borrower is delinquent and to provide 

additional examples illustrating how the 

live contact requirements apply in 

certain circumstances, such as when a 

borrower is unresponsive or is in the 

process of applying for loss mitigation 

pursuant to § 1024.41. 

Repeated Attempts To Establish Live 

Contact 

Section 1024.39(a) currently requires 

a servicer to establish or make good 

faith efforts to establish live contact 

with a delinquent borrower not later 

than the 36th day of the borrower’s 

delinquency. Current comment 39(a)–1 

states that a borrower’s delinquency 

begins ‘‘on the day a payment sufficient 

to cover principal, interest, and, if 

applicable, escrow for a given billing 


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83Comment 39(a)–1 (emphasis added). 

84 77 FR 57199, 57256 (Sept. 17, 2012). 

85 78 FR 10696, 10795 (Feb. 14, 2013) (emphasis 

added). 86October 2013 Servicing Bulletin at 5. 

87October 2013 Servicing Bulletin at 5. 

88See, e.g., 78 FR 10695, 10793 (Feb. 14, 2013). 

cycle is due and unpaid . . . .’’ 83). The 

Bureau has always understood these 

provisions to require servicers to make 

continual attempts to contact a borrower 

who remains delinquent for more than 

one billing cycle. The Bureau is 

proposing to revise § 1024.39(a) to 

codify this interpretation. The proposed 

revision would expressly require 

servicers to establish or make good faith 

efforts to establish live contact with a 

delinquent borrower no later than the 

36th day after each payment due date 

for the duration of the borrower’s 

delinquency. 

As it stated in the 2012 RESPA 

Servicing Proposal, the Bureau intended 

the live contact provisions to create an 

ongoing obligation for a servicer to 

attempt to communicate with a 

delinquent borrower. In its discussion of 

the decision to limit a servicer’s 

obligation to provide written notice 

under § 1024.39(b)(1) to once every 180 

days, the Bureau noted that it was not 

including a similar limitation in 

§ 1024.39(a) because it expected a 

servicer to contact a borrower during 

each period of delinquency.84 In the 

2013 RESPA Final Servicing Rule, the 

Bureau confirmed that it expected 

servicers to attempt to make live contact 

on a recurring basis and stated that, 

‘‘[w]ith respect to the live contact 

requirement . . . a servicer must 

establish or make good faith effort to 

establish live contact, even with 

borrowers who are regularly delinquent, 

by the 36th day of a borrower’s 

delinquency.’’85 In the October 2013 

Servicing Bulletin, the Bureau again 

clarified that servicers have an 

obligation to make good faith efforts to 

contact a borrower within 36 days of 

when a borrower first becomes 

delinquent, ‘‘and for each of any 

subsequent billing periods for which the 

borrower’s obligation is due and 

unpaid.’’ 

The Bureau continues to believe that 

borrowers who remain delinquent for 

more than one billing cycle benefit from 

receiving repeated live contact and that 

relieving a servicer of its obligations to 

establish live contact after the initial 

delinquent billing cycle would 

undermine the intent of § 1024.39(a). 

Accordingly, the Bureau is proposing to 

clarify § 1024.39(a) to codify its 

understanding and require servicers 

expressly to establish or make good faith 

efforts to establish live contact with a 

delinquent borrower no later than 36 

days after each payment due date for the 

duration of the borrower’s delinquency. 

To provide additional guidance, the 

Bureau is proposing to revise and reorder comment 39(a)–1 and its 

subsections. First, the Bureau proposes 

to remove the language in current 

comment 39(a)–1.i. As discussed in the 

section-by-section analysis of § 1024.31, 

the Bureau is proposing a new 

definition of delinquency applicable to 

all of subpart C. If adopted as proposed, 

the new definition generally would 

mirror the language in current comment 

39(a)–1.i, making that language 

superfluous. Second, the Bureau is 

proposing to revise existing comments 

39(a)–1 and 39(a)–1.i and add comments 

39(a)–1.i.A and 39(a)–1.i.B to illustrate 

how a servicer may comply with the 

recurring live contact obligation when a 

borrower is delinquent for one or more 

billing cycles. Proposed comment 39(a)– 

1.i.B gives the example of a borrower 

with a payment due date on the first of 

the month who misses three consecutive 

payments, on January 1, February 1, and 

March 1. The proposed comment 

provides that a servicer can meet the 

requirements of § 1024.39(a) by, for 

example, attempting to make live 

contact with the borrower on February 

5, and again on March 25. Because a 

servicer has 36 days from the date a 

borrower first becomes delinquent to 

establish or make good faith efforts to 

establish live contact with the borrower, 

the proposed comment explains that an 

attempt to establish live contact with 

the borrower on February 5 meets the 

requirements of § 1024.39(a) for both 

January and February. 

The Bureau is also proposing to revise 

comment 39(a)–2 to codify guidance 

from the October 2013 Servicing 

Bulletin, which clarified that servicers 

are permitted to combine their live 

contact attempts with their attempts to 

contact borrowers for other purposes, 

including, for example, by providing a 

borrower with information about 

available loss mitigation options when 

contacting the borrower for purposes of 

collection.86

Finally, the Bureau is proposing to 

add comment 39(a)–3 to clarify that, 

while the Bureau expects servicers to 

continue to attempt to make live contact 

with borrowers who are regularly 

delinquent, a borrower’s failure to 

respond to such attempts, as well as the 

length of the borrower’s delinquency, 

are relevant circumstances to consider 

when evaluating a servicer’s good faith. 

To this end, the Bureau is proposing to 

add an example it first provided in the 

October 2013 Servicing Bulletin. The 

example would provide that, in the case 

of a borrower with six or more 

consecutive delinquencies, good faith 

efforts to establish live contact might 

include adding a sentence in the 

borrower’s periodic statement or 

another communication encouraging the 

borrower to contact the servicer. The 

Bureau is proposing to re-designate 

current comments 39(a)–3 and 39(a)–4 

as, respectively, comments 39(a)–4 and 

39(a)–5 to accommodate the addition of 

proposed comment 39(a)–3. 

Compliance With § 1024.41 

The Bureau is also proposing to add 

comment 39(a)–6 to illustrate how a 

servicer can meet its early intervention 

live contact requirements when a 

delinquent borrower is engaged in 

various stages of the loss mitigation 

procedures set forth in § 1024.41. 

Proposed comment 39(a)–6 codifies 

guidance the Bureau provided in its 

October 2013 Servicing Bulletin. In the 

bulletin, the Bureau reiterated that the 

live contact requirements are designed 

to give servicers significant flexibility to 

tailor their procedures to particular 

circumstances. As explained in 

comment 39(a)–2, good faith efforts to 

establish live contact consist of 

‘‘reasonable steps under the 

circumstances to reach a borrower . . . 

’’ The Bureau went on to provide several 

examples of reasonable steps, including 

the example of a servicer that has 

established and is maintaining live 

contact with a borrower ‘‘with regard to 

the borrower’s completion of a loss 

mitigation application and the servicer’s 

evaluation of that borrower for loss 

mitigation options.’’87

The Bureau is now proposing to 

codify its guidance from the October 

2013 Servicing Bulletin. As the Bureau 

stated in the 2013 RESPA Servicing 

Final Rule, the live contact 

requirements are intended, in part, to 

ensure that borrowers receive timely 

information about loss mitigation 

options at an early stage of 

delinquency.88 For borrowers who have 

already applied or are in the process of 

applying for loss mitigation, however, 

repeated or parallel attempts by the 

servicer to establish live contact 

pursuant to the requirements of 

§ 1024.39(a) may be confusing or 

harassing. Therefore, the Bureau is 

proposing to add commentary codifying 

the bulletin’s guidance and clarifying 

generally that a servicer working with a 

borrower pursuant to the procedures of 

§ 1024.41 complies with the 

requirements of § 1024.39(a). 


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89 12 CFR 1024.39(b)(1). 

90 77 FR 57199, 57257 (Sept. 17, 2012). 

Specifically, proposed comment 39(a)-6 

clarifies that a servicer that has 

established and is maintaining ongoing 

contact with regard to a borrower’s 

completion of a loss mitigation 

application, or in connection with the 

servicer’s evaluation of the borrower’s 

complete loss mitigation application, 

complies with the requirements of 

§ 1024.39(a). In addition, the proposed 

comment clarifies that a servicer that 

has evaluated and denied a borrower for 

all available loss mitigation options has 

complied with the requirements of 

§ 1024.39(a). The Bureau believes that, 

once a servicer has complied with the 

requirements of § 1024.41 with respect 

to a specific borrower, and has 

determined that the borrower does not 

qualify for any available loss mitigation 

options, continued live contact between 

a borrower and a servicer no longer 

serves the purpose of § 1024.39(a). 

Indeed, at that point, continued 

attempts by the servicer to establish live 

contact may frustrate or even harass a 

borrower who was recently denied for 

loss mitigation. Accordingly, the Bureau 

is proposing to clarify that a servicer 

complies with § 1024.39(a) if the 

servicer has sent a notice to a borrower 

(in compliance with § 1024.41(c)(1)(ii)) 

notifying the borrower that the borrower 

is not eligible for any loss mitigation 

options. 

The Bureau believes, however, that a 

borrower who cures a prior delinquency 

but subsequently becomes delinquent 

again would benefit from the servicer 

resuming compliance with the live 

contact requirement. Therefore, 

proposed comment 39(a)–6 also clarifies 

that a servicer is again subject to the 

requirements of § 1024.39(a) with 

respect to a borrower who becomes 

delinquent after curing a prior 

delinquency. The Bureau is proposing 

to add a reference to proposed comment 

39(a)–6 in proposed comment 39(a)–3 to 

indicate that the examples set forth in 

comment 39(a)–6 represent examples of 

‘‘good faith efforts.’’ 

39(b) Written Notice 

39(b)(1) 

The Bureau is proposing certain 

revisions to § 1024.39(b)(1) and its 

commentary to clarify the frequency 

with which a servicer must provide the 

written early intervention notice and to 

ensure consistency with the proposed 

revisions to the live contact 

requirements in § 1024.39(a). Under the 

proposed revision, a servicer must send 

a written notice to a delinquent 

borrower no later than the 45th day of 

the borrower’s delinquency, but a 

servicer does not have to send such a 

notice more than once in any 180 day 

period. If the borrower remains 

delinquent or becomes 45 days 

delinquent again after the 180-day 

period expires, the proposed revision 

requires the servicer to provide the 

written notice again. 

Current comment 39(b)(1)–1 

references the definition of delinquency 

in current comment 39(a)–1.i. As 

explained in the section-by-section 

analysis of § 1024.39(a), the definition of 

delinquency included in current 

comment 39(a)–1.i and referenced in 

comment 39(b)(1)–1 states that a 

borrower’s delinquency begins on the 

day a payment sufficient to cover 

principal, interest, and, if applicable, 

escrow for a given billing cycle is due 

and unpaid. As with § 1024.39(a), the 

inclusion of the phrase ‘‘for a given 

billing cycle’’ in the definition of 

delinquency for purposes of 

§ 1024.39(b)(1) creates a recurring 

obligation on the part of servicers to 

provide a delinquent borrower with a 

written notice. In contrast with the 

recurring obligation to make live contact 

under § 1024.39(a), however, servicers 

only have to comply with the 

requirement to send a written notice 

once in a 180-day period.89 This is 

because, as the Bureau explained in the 

2012 RESPA Servicing Proposal, the 

Bureau did not believe ‘‘that borrowers 

who are consistently delinquent would 

benefit from receiving the same written 

notice every month.’’90

As discussed in the section-by-section 

analysis of § 1024.31, the Bureau’s 

proposed new definition of delinquency 

in § 1024.31 does not use the phrase 

‘‘for a given billing cycle.’’ The Bureau 

wishes to clarify that it continues to 

expect servicers to send a written notice 

more than once, notwithstanding the 

revised language in the proposed 

definition of delinquency. Accordingly, 

the Bureau is proposing revisions to 

§ 1024.39(b)(1) and comment 39(b)(1)–2 

to preserve the recurring nature of the 

written notice requirement, as well as 

the limitation that a servicer has to send 

a written notice only once during any 

180-day period. Under the proposed 

revision, a servicer must send a written 

notice to a delinquent borrower no later 

than the 45th day of the borrower’s 

delinquency, but no more than once in 

any 180-day period. If the borrower 

either remains delinquent or becomes 

delinquent again at some point after the 

180-day period expires, the proposed 

revision would require the servicer to 

provide the borrower with another 

written notice 45 days from the date of 

her most recent missed payment. 

In addition, the Bureau is proposing 

to clarify through a revision to comment 

39(b)(1)–2 that a servicer is again 

required to send written notice to a 

borrower who remains delinquent more 

than 180 days after the servicer sent the 

first notice. Current comment 39(b)(1)– 

2 provides an example of a borrower 

who fails to make a payment due on 

March 1. The comment states that the 

servicer is required to send a written 

notice within 45 days thereafter—i.e., by 

April 15; it further provides that, if the 

borrower fails to make the April 1 

payment, the servicer does not need to 

send a second written notice because it 

already did so within the previous 180 

days. The Bureau is proposing to add a 

further explanation that, if the borrower 

misses a payment on October 1, the 

servicer is again obligated to provide a 

written notice within 45 days after 

October 1, since the 45th day 

(November 15) falls more than 180 days 

from the date the servicer provided the 

first written notice. This proposal also 

makes a minor technical change to 

comment 39(b)(1)–2 to correct an 

erroneous reference to § 1024.39(a), 

which should instead be a reference to 

§ 1024.39(b). 

Finally, the Bureau is proposing to 

add comment 39(b)(1)–6 to clarify the 

obligation of a transferee servicer to 

provide the written notice required by 

§ 1024.39(b). Proposed comment 

39(b)(1)–6 states that a transferee 

servicer is not required to provide a 

second written notice to a borrower who 

already received a written notice from 

the transferor servicer on or before the 

borrower’s 45th day of delinquency. The 

comment further clarifies, however, that 

a servicer is required to comply with 

§ 1024.39(b) regardless of whether the 

transferor servicer sent the borrower a 

written notice in the preceding 180-day 

period. In other words, if the transferor 

servicer provided a first written notice 

after an initial missed payment and, 

following the transfer, the borrower 

remains or becomes 45 days delinquent 

again, the transferee servicer would 

have to provide a written notice again, 

regardless of whether or not 180 days 

had passed since the date the transferor 

servicer provided the first written notice 

to the borrower. 

The Bureau is proposing this 

clarification because it believes that the 

rationale that justified applying the 180- 

day limitation to mortgage loans 

serviced by a single servicer may not 

apply in the case of a loan whose 

servicing rights are transferred to 

another servicer. The Bureau explained 

in the 2013 RESPA Servicing Final Rule 


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91See 78 FR 10695, 10800 (Feb. 14, 2013). 

that it did not believe that borrowers 

who are repeatedly delinquent would 

benefit from receiving essentially the 

same written notice month after 

month.91 Accordingly, it adopted a 

once-every-180-days limitation on the 

general requirement to provide a written 

notice under § 1024.39(b). In the case of 

a transferred loan, however, the Bureau 

believes that a transferee servicer may 

provide additional and different 

information to a delinquent borrower 

under § 1024.39(b)(2) and that a 

borrower would benefit from receiving 

this information sooner rather than later 

following a transfer. Accordingly, the 

Bureau believes it is appropriate to 

clarify that the 180-day limitation in 

§ 1024.39(b)(1) does not apply where the 

prior notice triggering the 180-day 

waiting period was provided by the 

transferor servicer prior to transfer. 

Successors in interest. As described in 

the section-by-section analysis of 

§ 1024.30(d), proposed § 1024.30(d) 

provides that a confirmed successor in 

interest must be considered a borrower 

for the purposes of Regulation X’s 

mortgage ervicing rules. Accordingly, 

once a servicer confirms a successor in 

interest’s identity and ownership 

interest in the property, a servicer 

would be required to make reasonable 

efforts to establish live contact and to 

make written contact with the successor 

in interest regarding a delinquent 

mortgage loan under § 1024.39’s early 

intervention requirements. 

Proposed comment 39(b)(1)–5 

clarifies that, where a servicer has 

already provided a written early 

intervention notice to a prior borrower 

under § 1024.39(b) before confirming a 

successor in interest’s status, the 

servicer is not required also to provide 

that notice to the confirmed successor in 

interest, but the servicer must provide 

the confirmed successor in interest with 

any additional written early 

intervention notices required after 

confirming the successor in interest’s 

status. The Bureau believes that it 

would be unnecessary and difficult for 

servicers to provide additional copies of 

the written early intervention notices 

that servicers have already provided to 

the prior borrower. The Bureau also 

believes that, in many cases, successors 

in interest may have received the 

original notice mailed by the servicer to 

the prior borrower. Further, as described 

in the section-by-section analysis of 

§ 1026.2(a)(11), servicers would be 

required to provide confirmed 

successors in interest with periodic 

statements under § 1026.41 of 

Regulation Z, so confirmed successors 

in interest will generally be kept 

apprised of the status of the mortgage 

loan. 

39(b)(2) Content of the Written Notice 

The Bureau is proposing to clarify 

when a servicer must include the 

disclosures under § 1024.39(b)(2)(iii) 

and (iv) in the written early intervention 

notice. Section 1024.39(b)(2)(iii) and (iv) 

currently state that, ‘‘if applicable,’’ the 

written notice must include a statement 

providing a brief description of 

examples of loss mitigation options that 

may be available and either application 

instructions or a statement informing 

the borrower how to obtain more 

information about loss mitigation 

options from the servicer. The Bureau is 

proposing to add a comment to clarify 

when such disclosures are ‘‘applicable’’ 

and when a servicer is therefore 

required to include them in the written 

early intervention notice. Specifically, 

proposed comment 39(b)(2)–4 provides 

that, if loss mitigation options are 

available, a servicer must include in the 

written notice the disclosures set forth 

in § 1024.39(b)(2)(iii) and (iv). The 

proposed comment further provides that 

loss mitigation options are available if 

the owner or assignee of a borrower’s 

mortgage loan offers an alternative to 

foreclosure that is made available 

through the servicer. Additionally, the 

proposed comment provides that the 

availability of loss mitigation options 

does not depend upon a borrower’s 

eligibility for those options, but simply 

depends upon whether the owner or 

assignee of a borrower’s mortgage loan 

generally offers loss mitigation options 

through the servicer. Proposed comment 

39(b)(2)-4 is generally intended to assist 

servicers in determining when they are 

required to include the 

§ 1024.39(b)(2)(iii) and (iv) disclosures 

in the written early intervention notice, 

and whether they are exempt from 

providing the written notice under 

proposed § 1024.39(d)(1)(ii) or (d)(2)(ii) 

as discussed in the section-by-section 

analyses of § 1024.39(d)(1) and (d)(2). 

Legal Authority 

The Bureau is proposing the 

amendments to § 1024.39(a) and (b) 

pursuant to its authorities under 

sections 6(j)(3), 6(k)(1)(E), and 19(a) of 

RESPA. As explained above, the Bureau 

finds, consistent with section 6(k)(1)(E), 

that the proposed amendments to 

§ 1024.39(a) and (b) are appropriate to 

achieve the consumer protection 

purposes of RESPA, including to help 

borrowers avoid unwarranted or 

unnecessary costs and fees and to 

facilitate review of borrowers for 

foreclosure avoidance options. For the 

same reasons, the proposed 

amendments to § 1024.39(a) and (b) are 

authorized under section 6(j)(3) of 

RESPA as necessary to carry out section 

6 of RESPA, and under section 19(a) as 

necessary to achieve the purposes of 

RESPA, including borrowers’ avoidance 

of unwarranted or unnecessary costs 

and fees and the facilitation of review of 

borrowers for foreclosure avoidance 

options. 

The Bureau is also proposing the 

amendments to § 1024.39(a) and (b) 

pursuant to its authority under section 

1022(b) of the Dodd-Frank Act to 

prescribe regulations necessary or 

appropriate to carry out the purposes 

and objectives of Federal consumer 

financial laws, including the purposes 

and objectives of Title X of the DoddFrank Act. Specifically, the Bureau 

believes that these amendments are 

necessary and appropriate to carry out 

the purpose under section 1021(a) of the 

Dodd-Frank Act of ensuring that 

markets for consumer financial products 

and services are fair, transparent, and 

competitive, and the objectives under 

section 1021(b) of the Dodd-Frank Act 

of ensuring that consumers are provided 

with timely and understandable 

information to make responsible 

decisions about financial transactions, 

and markets for consumer financial 

products and services operate 

transparently and efficiently to facilitate 

access and innovation. The Bureau 

additionally relies on its authority 

under section 1032(a) of the Dodd-Frank 

Act, which authorizes the Bureau to 

prescribe rules to ensure that the 

features of any consumer financial 

product or service, both initially and 

over the term of the product or service, 

are fully, accurately, and effectively 

disclosed to consumers in a manner that 

permits consumers to understand the 

costs, benefits, and risks associated with 

the product or service, in light of the 

facts and circumstances. 

39(d) Exemptions 

39(d)(1) Borrowers in Bankruptcy 

The Bureau is proposing to revise 

§ 1024.39(d)(1) to narrow the scope of 

the bankruptcy exemption from 

§ 1024.39(a) and (b)’s early intervention 

requirements. Section 1024.39(d)(1) 

currently exempts a servicer from the 

early intervention requirements with 

respect to a mortgage loan if at least one 

of the borrowers is a debtor in 

bankruptcy. The proposed revisions 

preserve the current exemption from the 

live contact requirements of § 1024.39(a) 

as it relates to a borrower in bankruptcy, 

but they provide that the exemption 

would no longer apply to a borrower 


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92 ‘‘Consumer homeowners typically seek relief 

under either Chapter 7 or Chapter 13 of the 

Bankruptcy Code. Chapter 7 requires the debtor to 

surrender all nonexempt property for distribution to 

creditors. In return, the debtor’s debts are 

discharged, with some exceptions. Chapter 13 

permits debtors with regular income to keep their 

property and to repay creditors in whole or in part 

by making monthly payments to a Chapter 13 

trustee, who then distributes the payments to 

creditors.’’ Alan M. White & Carolina Reid, Saving 

Homes, Bankruptcies and Loan Modifications in the 

Foreclosure Crisis, 65 Fla. L. Rev. 1713, 1717 (Dec. 

2013) (citing Adam J. Levitin, Resolving the 

Foreclosure Crisis: Modification of Mortgages in 

Bankruptcy, 2009 Wis. L. Rev. 565, 579, 643 

(2009)). Some consumer homeowners seek relief 

under Chapter 11 of the Bankruptcy Code, usually 

because their debt levels exceed Chapter 13’s 

limitations, and family farmers and fishermen may 

file under Chapter 12. See 11 U.S.C. 109(d)-(f) 

(defining who may be a debtor under Chapter 11, 

Chapter 12, and Chapter 13). Because relatively few 

consumer homeowners seek relief under Chapter 11 

or Chapter 12 of the Bankruptcy Code, the 

discussion of early intervention focuses primarily 

on homeowners in Chapter 7 or Chapter 13 cases. 

See Administrative Office of the U.S. Courts, U.S. 

Bankruptcy Courts—Business and Nonbusiness 

Cases Commenced, by Chapter of the Bankruptcy 

Code, During the 12-Month Period Ending 

December 31, 2013, available at http://

www.uscourts.gov/uscourts/Statistics/

BankruptcyStatistics/BankruptcyFilings/2013/

1213_f2.pdf (indicating that in 2013, there were 

only 1,320 nonbusiness Chapter 11 filings and 495 

Chapter 12 filings nationwide). 

93See 77 FR 57199, 57251 (Sept. 17, 2012); 78 FR 

10695, 10787 (Feb. 14, 2013). 

94 77 FR 57199, 57260–61 (Sept. 17, 2012). 

95 Id. See also 11 U.S.C. 362(a). 

96 78 FR 10695, 10806–07 (Feb. 14, 2013). 

97 Id. 

98 Id. at 10806. 

99 78 FR 62993, 62997 (Oct. 23, 2013). 

100See id. 

101 Id. 

who is jointly liable on the mortgage 

loan with someone who is a debtor in 

a Chapter 7 or Chapter 11 bankruptcy 

case.92 The proposal partially lifts the 

exemption from the written notice 

requirements of § 1024.39(b) and 

requires a servicer to provide the 

written notice unless no loss mitigation 

options are available, the borrower’s 

confirmed plan of reorganization 

provides for the surrendering of the 

property or avoidance of the lien 

securing the mortgage loan, the 

borrower files a Statement of Intention 

in the bankruptcy case identifying an 

intent to surrender the mortgage loan, or 

a court enters an order avoiding the lien 

securing the mortgage loan or lifting the 

automatic stay with respect to the 

property securing the mortgage loan. 

That is, if loss mitigation options are 

available, the proposal requires that a 

servicer, with certain exceptions, 

provide the written early intervention 

notice required by § 1024.39(b) to 

borrowers in bankruptcy. 

The objectives of the early 

intervention requirements under 

§ 1024.39 include ensuring that 

delinquent borrowers have an 

opportunity to pursue loss mitigation 

options at the early stages of 

delinquency, encouraging 

communication between servicers and 

delinquent borrowers, and encouraging 

delinquent borrowers to work with their 

servicers to identify alternatives to 

foreclosure.93 Section 1024.39(a) 

requires a servicer to establish or make 

good faith efforts to establish live 

contact with a delinquent borrower not 

later than the 36th day of the borrower’s 

delinquency and, promptly after 

establishing live contact, inform the 

borrower about the availability of loss 

mitigation options, if appropriate. 

Section 1024.39(b) requires a servicer to 

provide to a delinquent borrower a 

written notice with specific information, 

including examples of loss mitigation 

options that may be available and 

instructions on how to obtain more 

information about loss mitigation 

options from the servicer, not later than 

the 45th day of the borrower’s 

delinquency. 

In the 2012 RESPA Servicing 

Proposal, the Bureau sought comment 

on ‘‘whether servicers may reasonably 

question how they could comply with 

[the] Bureau’s propos[ed early 

intervention requirements] in light of 

other applicable laws,’’ including the 

Bankruptcy Code.94 The preamble 

acknowledged that the Bankruptcy 

Code’s automatic stay generally 

prohibits, among other things, actions to 

collect, assess, or recover a claim against 

the debtor that arose before the debtor 

filed for bankruptcy.95 In response, 

industry expressed concerns that the 

early intervention requirements could 

conflict with existing law, including the 

Bankruptcy Code.96

In the 2013 RESPA Servicing Final 

Rule, the Bureau addressed these 

concerns by adopting § 1024.39(c), 

which provides that nothing in 

§ 1024.39 requires a servicer to 

communicate with a borrower in a 

manner otherwise prohibited under 

applicable law.97 The Bureau also added 

a comment to § 1024.39(c), specifying 

that servicers are not required to 

communicate with borrowers in a 

manner that would be inconsistent with 

applicable bankruptcy law or a court 

order in a bankruptcy case, and that 

servicers could adapt the requirements 

of § 1024.39 in any manner that would 

permit them to inform borrowers of loss 

mitigation options. The Bureau 

explained that these additions were 

intended to clarify that servicers could 

take a flexible approach to complying 

with § 1024.39 and that the Bureau did 

not intend for its early intervention 

requirements to require servicers to take 

any action that may be prohibited 

under, among other things, the 

Bankruptcy Code’s automatic stay 

provisions.98

Notwithstanding this flexibility, 

servicers continued to express concerns 

to the Bureau about their ability to 

comply with the early intervention 

requirements while also avoiding 

violations of bankruptcy law. 

Specifically, servicers sought guidance 

regarding whether § 1024.39 would 

require some attempt at compliance 

even if the borrower was protected by 

the automatic stay, and whether 

servicers would be subject to claims by 

private litigants asserting that 

bankruptcy was not an excuse for a 

servicer’s lack of performance under 

§ 1024.39. 

Based on these inquiries, the Bureau 

determined that the interaction of 

bankruptcy law and the early 

intervention requirements required 

further study and that there was 

insufficient time before the final rule’s 

January 10, 2014 effective date to 

calibrate the requirements.99

Accordingly, the Bureau issued the 

October 2013 IFR, which added current 

§ 1024.39(d)(1), exempting servicers 

from the early intervention 

requirements for a mortgage loan when 

the borrower is a debtor in bankruptcy. 

The Bureau clarified in comment 

39(d)(1)–2 that, when two or more 

borrowers are joint obligors with 

primary liability on the mortgage loan, 

the exemption applies if any of the 

borrowers is in bankruptcy. The Bureau 

further clarified in comment 39(d)(1)–3 

that a servicer has no obligation to 

resume compliance with § 1024.39 with 

respect to any portion of a mortgage 

loan that is discharged under applicable 

provisions of the Bankruptcy Code. 

In issuing the IFR, the Bureau did not 

take a position as to whether early 

intervention efforts might violate the 

Bankruptcy Code’s automatic stay or 

discharge injunction.100 The Bureau 

encouraged servicers that had been 

communicating with borrowers in 

bankruptcy about loss mitigation 

options to continue doing so and 

expressed the opinion that some 

borrowers in bankruptcy may benefit 

from receiving tailored loss mitigation 

information that is appropriate to their 

circumstances.101 The Bureau also 

solicited comments on the scope of the 

exemption, the triggers for qualifying for 

the exemption and when to resume 

early intervention, and how 

communications might be tailored to 


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102 Id. at 62998. 

103 Id. 

104The IFR comment period closed on November 

22, 2013. Subsequent written and oral presentations 

to the Bureau imparting information or argument 

directed to the merits or outcome of the IFR were 

subject to the Bureau’s policy on ex parte 

presentations. See Consumer Fin. Prot. Bureau, 

CFPB Bulletin 11–3, Policy on Ex Parte 

Presentations in Rulemaking Proceedings (Aug. 16, 

2011) (CFPB Bulletin 11–3), available at http://

files.consumerfinance.gov/f/2011/08/Bulletin_

20110819_

ExPartePresentationsRulemakingProceedings.pdf. 

105 78 FR 62993, 62998 (Oct. 23, 2013). 

106Comment 39(a)–2. 

107This proposal would redesginate this 

comment as comment 39(a)–4.i.B. 

108See, e.g., Brown v. Bank of Am. (In re Brown), 

481 B.R. 351, 360 (Bankr. W.D. Pa. 2012) (holding 

that creditor did not violate the automatic stay by 

making telephone calls to a borrower regarding 

foreclosure alternatives); In re Silva, No. 09–02504, 

2010 WL 605578, at *1 (Bankr. D. Haw. Feb. 19, 

2010) (‘‘Nothing in the Bankruptcy Code prevents 

or prohibits a chapter 7 or chapter 13 debtor or its 

secured creditors from entering into 

communications or negotiations about the 

possibility of a loan modification.’’); In re Medina, 

Continued 

meet the particular needs of borrowers 

in bankruptcy.102 Finally, the Bureau 

stated that it would continue to examine 

this issue and might reinstate an early 

intervention requirement with respect to 

borrowers in bankruptcy, though the 

Bureau indicated that it would not 

reinstate any such requirement without 

notice and comment rulemaking and an 

appropriate implementation period.103

During the IFR’s official comment 

period, the Bureau received 

approximately 30 comments, several of 

which discussed § 1024.39(d)(1)’s 

exemption from the early intervention 

requirements for borrowers in 

bankruptcy.104 The Bureau has since 

continued to engage stakeholders on the 

scope of this exemption, including by 

hosting the roundtable discussion on 

June 16, 2014, among representatives of 

consumer advocacy groups, bankruptcy 

attorneys, servicers, trade groups, and 

bankruptcy trustees. The Bureau has 

also sought comment from bankruptcy 

judges and experts and conducted its 

own analysis of the intersection of the 

early intervention requirements and 

bankruptcy law. 

Based upon its review of the 

comments received and its study of the 

intersection of the early intervention 

requirements and bankruptcy law, the 

Bureau believes it may be appropriate to 

reinstate the early intervention 

requirements with respect to borrowers 

in bankruptcy, under certain 

circumstances. The Bureau is proposing 

to do so in the present rulemaking 

because, as noted in the IFR, the Bureau 

believes that it would be preferable to 

use notice and comment rulemaking, 

rather than simply finalizing the IFR 

with modifications, to reinstate the early 

intervention requirements with respect 

to such borrowers.105 The Bureau 

believes that this approach will allow 

stakeholders to more fully consider and 

comment on the Bureau’s specific 

proposal. The Bureau also believes that 

it is appropriate for the Bureau to 

address comments it already received in 

response to the IFR. Accordingly, the 

following discussion of the proposed 

revisions to § 1024.39(d)(1) and 

accompanying commentary includes 

discussion of the comments received 

regarding the IFR, as well as ex parte 

comments received after the IFR’s 

official comment period ended. 

Live Contact 

Commenters supported almost 

uniformly the IFR’s exemption from 

§ 1024.39(a)’s live contact requirement. 

Servicers and trade groups urged the 

Bureau to maintain the exemption in 

order to avoid conflicts with the 

Bankruptcy Code. One trade group 

added that a borrower likely would have 

received early intervention outreach 

prior to filing for bankruptcy, such that 

additional early intervention attempts 

during bankruptcy would be redundant 

or unnecessary. Two bankruptcy judges 

commented that the Bureau should not 

require servicers to attempt to establish 

live contact with borrowers because 

such attempts may violate the automatic 

stay under certain circumstances. One 

bankruptcy judge and two industry 

participants further noted that 

contacting a borrower represented by 

bankruptcy counsel might, under 

certain circumstances, implicate ethics 

rules or State laws prohibiting direct 

contact with a party that is represented 

by counsel. 

A consortium of consumer advocacy 

groups submitted comments generally 

opposing the exemption from the early 

intervention requirements, arguing that 

the flexibility afforded by § 1024.39(c) is 

sufficient to address any concerns about 

violating the automatic stay or discharge 

injunction. In subsequent ex parte 

comments, however, several of these 

groups clarified that, with one exception 

discussed below, they were comfortable 

with the exemption from the live 

contact requirements. Finally, during 

the bankruptcy roundtable discussion, 

which included representatives from 

industry and consumer advocacy 

groups, as well as bankruptcy trustees, 

no attendees took the position that the 

Bureau should lift the exemption with 

respect to live contact. 

In light of these comments, the 

Bureau is proposing to maintain the 

exemption from the live contact 

requirements with respect to a borrower 

who is in bankruptcy, has discharged 

personal liability for the mortgage loan, 

or shares liability on a mortgage loan 

with a person who is a debtor in a 

Chapter 12 or Chapter 13 bankruptcy 

case. In addition to the issues identified 

in the comments, two other factors 

inform the Bureau’s proposal to 

maintain the exemption. First, the 

Bureau believes that live contact may be 

perceived as more intrusive and of less 

value to a borrower in bankruptcy. As 

discussed in the section-by-section 

analysis of § 1024.39(a), the live contact 

requirements are ongoing and generally 

require a servicer to make continued 

efforts to establish live contact with a 

borrower so long as a borrower remains 

delinquent. In addition, compliance 

with § 1024.39(a) is not limited to—and 

does not in every case require—a 

discussion of available loss mitigation 

options. Section 1024.39(a) requires a 

servicer to inform a borrower of loss 

mitigation options ‘‘if appropriate.’’ 

More broadly, ‘‘[l]ive contact provides 

servicers an opportunity to discuss the 

circumstances of a borrower’s 

delinquency,’’106 and, based on this 

discussion, a servicer may determine 

not to inform a borrower of loss 

mitigation options. Current comment 

39(a)–3.i.B provides an example 

demonstrating that it is reasonable for a 

servicer to not provide information 

about the availability of loss mitigation 

options to a borrower who has missed 

a January 1 payment and notified the 

servicer that full late payment will be 

transmitted to the servicer by February 

15.107 In that situation, a live contact 

conversation could serve as a reminder 

to a borrower who inadvertently missed 

a payment, or it could give the servicer 

an opportunity to discuss when the 

borrower would cure a temporary 

delinquency; it would not necessarily 

involve a discussion of loss mitigation 

options. Borrowers who seek protection 

under the Bankruptcy Code, however, 

may do so in part to terminate 

unwelcome creditor communications 

about outstanding payment obligations. 

For such borrowers, the Bureau believes 

that a servicer’s repeated attempts to 

establish live contact, which may not 

lead to a discussion of available loss 

mitigation options between the parties, 

may be of diminished value to the 

borrower. 

Second, while some courts have 

determined that a creditor may properly 

contact a borrower in bankruptcy, 

including by telephone, to inform the 

borrower about loss mitigation options 

or to negotiate the terms of a loss 

mitigation agreement,108 other courts 


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No. 6:12–bk–00066–ABB, 2012 WL 2090419, at *1 

(Bankr. M.D. Fla. June 8, 2012) (‘‘The automatic stay 

and the discharge provisions of the Bankruptcy 

Code do not prevent the parties from negotiating 

and entering into a loan modification postpetition.’’). 

109See, e.g., In re Culpepper, 481 B.R. 650, 659– 

60 (Bankr. D. Or. 2012) (stating that a creditor’s 

reasonable contacts with a debtor regarding 

foreclosure alternatives may be permissible, but 

nonetheless finding a stay violation because the 

creditor made more than 100 phones calls to a 

borrower who had requested the creditor stop 

contacting her and the creditor discussed only loss 

mitigation options (i) for which the borrower was 

ineligible, (ii) in which the borrower was not 

interested, and (iii) which would have revived at 

least a portion of the borrower’s discharged 

mortgage debt); In re Whitmarsh, 383 B.R. 735, 737 

(Bankr. D. Neb. 2008) (stating that ‘‘[a] phone call 

or two to follow up a letter regarding loss mitigation 

efforts is understandable,’’ but finding that the 

creditor violated the automatic stay by making at 

least 22 phone calls, some of which threatened legal 

action, to borrowers who had already decided to 

surrender the property and had requested in writing 

on several occasions that the creditor make contact 

only with the borrowers’ attorney). 

110Culpepper, 481 B.R. at 659–60; Whitmarsh, 

383 B.R. at 737. 

111 11 U.S.C. 1201(a) and 1301(a) (both stating 

that ‘‘[e]xcept as provided in subsections (b) and (c) 

of this section, after the order for relief under this 

chapter, a creditor may not act, or commence or 

continue any civil action, to collect all or any part 

of a consumer debt of the debtor from any 

individual that is liable on such debt with the 

debtor, or that secured such debt, unless—(1) such 

individual became liable on or secured such debt 

in the ordinary course of such individual’s 

business; or (2) the case is closed, dismissed, or 

converted to a case under chapter 7 or 11 of this 

title.’’). 

112 In re Chugach Forest Products, Inc., 23 F.3d 

241, 246 (9th Cir. 1994) (‘‘As a general rule, ‘[t]he 

automatic stay of section 362(a) protects only the 

debtor, property of the debtor or property of the 

estate. It does not protect non-debtor parties or their 

property. Thus, section 362(a) does not stay actions 

against guarantors, sureties, corporate affiliates, or 

other non-debtor parties liable on the debts of the 

debtor.’’’) (quoting Advanced Ribbons & Office 

Prods. v. U.S. Interstate Distrib. (In re Advanced 

Ribbons & Office Prods.), 125 B.R. 259, 263 (B.A.P. 

9th Cir. 1991)). 

have found that a creditor violated the 

automatic stay by making live contact 

with a borrower to discuss loss 

mitigation.109 The Bureau notes that 

these violations appear to involve 

extreme facts, such as creditors making 

dozens of phone calls, some of which 

threatened legal action, to borrowers 

who had requested that the creditor stop 

contacting them and either had already 

decided to surrender the property or 

were not interested in the offered loss 

mitigation options.110 Nonetheless, 

while the Bureau does not believe that 

compliance with § 1024.39(a)’s live 

contact requirement would generally 

violate the stay, the Bureau is concerned 

that, given the interactive and 

potentially unscripted nature of live 

contact, as well as the fact that live 

contact does not necessarily require a 

discussion of loss mitigation options, 

borrowers or courts may view a 

servicer’s attempts to establish live 

contact as a communication prohibited 

by the automatic stay under certain 

circumstances. Accordingly, the Bureau 

believes it may not be appropriate to 

require servicers to engage in live 

contact with borrowers in bankruptcy. 

For these reasons, the Bureau is 

proposing § 1024.39(d)(1)(i), which 

provides that a servicer is exempt from 

the early intervention live contact 

requirements with respect to a borrower 

who is a debtor in bankruptcy or has 

discharged personal liability through 

bankruptcy. Proposed § 1024.39(d)(1)(i) 

also provides that a servicer is exempt 

from the live contact requirements with 

respect to a borrower if any borrower on 

the mortgage loan is a debtor in a 

Chapter 12 or Chapter 13 bankruptcy 

case. When a debtor files for protection 

under Chapter 12 or Chapter 13, the 

Bankruptcy Code implements a ‘‘codebtor stay,’’ prohibiting creditors from 

engaging in collection efforts against 

certain of the debtor’s joint obligors, 

such as a joint obligor on the debtor’s 

mortgage loan, even though the joint 

obligor has not filed for bankruptcy.111

Because contacting a borrower covered 

by the ‘‘co-debtor stay’’ raises some of 

the same concerns as contacting a 

borrower covered by the automatic stay, 

the Bureau believes it may be 

appropriate to exempt servicers from 

compliance with § 1024.39(a) with 

respect to a borrower who is jointly 

liable on mortgage loan with someone 

who is a debtor in a Chapter 12 or 

Chapter 13 bankruptcy case. 

Proposed § 1024.39(d)(1)(i) provides 

that the exemption from § 1024.39(a)’s 

live contact requirements applies to 

only those non-bankrupt borrowers who 

are jointly liable on a mortgage loan 

with a debtor in a Chapter 12 or Chapter 

13 bankruptcy case; the proposed 

exemption therefore excludes borrowers 

who are jointly liable on a mortgage 

loan with a debtor in a Chapter 7 or 

Chapter 11 case. This is a departure 

from current § 1024.39(d)(1), under 

which the Bureau intentionally crafted 

a broad exemption from § 1024.39, 

making the exemption applicable to any 

joint obligor of a debtor in bankruptcy, 

irrespective whether the joint obligor 

was in bankruptcy or protected against 

collection attempts by the co-obligor 

stay under 11 U.S.C. 1201(a) or 1301(a). 

A consortium of consumer advocacy 

groups commented that this exemption 

is too broad, as there is no ‘‘co-obligor 

stay’’ provision in Chapter 7 or Chapter 

11 of the Bankruptcy Code. Thus, they 

argued, there is no prohibition against 

contacting a joint obligor of a Chapter 7 

or Chapter 11 debtor and therefore no 

reason to exempt a servicer from the live 

contact requirements in these 

circumstances. The consumer advocacy 

groups gave the example of a married 

couple who jointly own a home. If one 

spouse filed for protection under 

Chapter 7, the automatic stay would not 

apply to the other spouse, and a servicer 

would not violate the automatic stay by 

contacting or attempting to negotiate a 

loss mitigation option with the nondebtor spouse. Under the current broad 

exemption, however, a servicer has no 

obligation to make reasonable efforts to 

establish live contact with the nondebtor spouse, even if the couple were 

legally separated or living apart for 

years. 

The Bureau believes that it may not be 

necessary to exempt a servicer from the 

live contact requirements with respect 

to a joint obligor of a debtor in a Chapter 

7 or Chapter 11 case. As the consumer 

advocacy groups noted, the Bankruptcy 

Code does not prevent collection 

attempts against such joint obligors and 

servicers do not violate the automatic 

stay by contacting them.112 Further, the 

Bureau believes that these joint obligors 

may benefit from early intervention in 

the same way that borrowers who are 

not in bankruptcy do. Therefore, 

proposed § 1024.39(d)(i) does not 

exempt a servicer from the live contact 

requirement with respect to a joint 

obligor of a debtor in a Chapter 7 or 

Chapter 11 case. 

Proposed comment 39(d)(1)(i) clarifies 

when the exemption from the live 

contact requirements begin. The 

proposed comment states that the 

requirements of § 1024.39(a) would not 

apply once a petition is filed under the 

Bankruptcy Code, commencing any case 

in which the borrower is a debtor, or a 

Chapter 12 or Chapter 13 case in which 

any borrower on the mortgage loan is a 

debtor. The proposed comment further 

clarifies that the requirements of 

§ 1024.39(a) also do not apply if the 

borrower has discharged personal 

liability for the mortgage loan under 11 

U.S.C. 727, 1141, 1228, or 1328. 

Written Notice 

The Bureau received several 

comments regarding the bankruptcy 

exemption from § 1024.39(b)’s written 

early intervention notice requirement. 

Most initial industry comments in 

response to the IFR did not draw a 

distinction between the live contact and 

written notice requirements, arguing 

broadly in favor of a blanket exemption 

from early intervention. One servicer 

commented specifically that the written 

notice requirements could implicate the 


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113U.S. Dep’t of Housing and Urban Dev., 

Mortgagee Letter 2008–32, Use of FHA Loss 

Mitigation During Bankrutpcy (Oct. 17, 2008) (HUD 

Mortgagee Letter 2008–32), available at http:// 

www.hud.gov/offices/adm/hudclips/letters/ 

mortgagee/2008ml.cfm. 

114 Id. 

115U.S. Dep’t of the Treasury & U.S. Dep’t of 

Housing and Urban Dev., MHA Handbook v. 4.4, 

Making Home Affordable Program Handbook for 

Servicers of Non-GSE Loans, at 79, 82 (Mar. 3, 2014) 

(‘‘Borrowers in active Chapter 7 or Chapter 13 

bankruptcy cases are eligible for HAMP at the 

servicer’s discretion in accordance with investor 

guidelines, but servicers are not required to solicit 

these borrowers proactively for HAMP. * * * 

Borrowers who have received a Chapter 7 

bankruptcy discharge in a case involving the first 

lien mortgage who did not reaffirm the mortgage 

debt under applicable law are eligible for HAMP. 

* * * [A] servicer is deemed to have made a 

Reasonable Effort to solicit [those] borrower[s] after 

sending two written notices to the last address of 

record in addition to the two required written 

notices. * * *’’), available at https:// 

www.hmpadmin.com/portal/programs/docs/ 

hamp_servicer/mhahandbook_44.pdf. 

116See, e.g., Zotow v. Johnson (In re Zotow), 432 

B.R. 252, 258 (B.A.P. 9th Cir. 2010) (‘‘[T]he 

automatic stay does not prevent all communications 

between a creditor and the debtor.’’) (citations 

omitted); In re Duke, 79 F.3d 43, 45 (7th Cir. 1996) 

(holding that creditor does not violate automatic 

stay by sending a ‘‘nonthreatening and noncoercive’’ offer to reaffirm a pre-petition debt and 

stating that ‘‘the respite provided by § 362 ‘is * * * 

from the threat of immediate action by creditors, 

such as a foreclosure or a lawsuit’’’) (quoting Brown 

v. Pa. State Emps. Credit Union, 851 F.2d 81, 86 

(3d Cir. 1988)). 

117See section-by-section analysis of 12 CFR 

1026.41, infra; see also Zotow, 432 B.R. at 260 

(notice of payment change due to escrow 

deficiency); Duke, 79 F.3d at 45 (offer to reaffirm 

debt); Schatz v. Chase Home Fin. (In re Schatz), 452 

B.R. 544 (Bankr. M.D. Pa. 2011) (periodic 

statements); Singh v. U.S. Bank (In re Singh), 457 

B.R. 790 (Bankr. E.D. Cal. 2011) (notice of payment 

change); see also Morgan Guaranty Trust Co. of 

N.Y. v. Am. Sav. & Loan Ass’n, 804 F.2d 1487, 1491 

(9th Cir. 1986) (‘‘[M]ere requests for payment are 

not barred absent coercion or harassment by the 

creditor. * * *’’). 

automatic stay or raise issues about 

contacting a borrower represented by 

counsel. The servicer also stated that it 

was considering whether it would be 

more appropriate to send a borrower 

loss mitigation information immediately 

upon the filing of a bankruptcy petition, 

rather than notices only at specific 

points in a borrower’s delinquency. 

Most commenters that specifically 

addressed the written notice 

requirements, however, stated that 

servicers could comply with 

§ 1024.39(b) without violating the 

automatic stay. Consumer advocacy 

groups argued that borrowers in 

bankruptcy would benefit from 

information about loss mitigation 

options and that there is no case law 

holding that a written notice describing 

loss mitigation options violates the 

automatic stay. The consumer advocacy 

groups argued further that the written 

notice required by § 1024.39(b) could 

not violate the automatic stay because it 

is purely informational and contains no 

payment demand. Two bankruptcy 

judges and a bankruptcy law professor 

commented that a written notice 

compliant with § 1024.39(b) and 

containing a bankruptcy disclaimer 

would raise fewer concerns about the 

automatic stay than live contact because 

the notice does not contain any payment 

demand and because the nature of the 

notice is an invitation to apply for debt 

relief. 

During the bankruptcy roundtable, 

several industry participants stated that 

it would be appropriate for servicers to 

provide a borrower in bankruptcy with 

the written notice containing 

information related to available loss 

mitigation options, particularly as 

§ 1024.39(b) does not require a servicer 

to send the notice more than once in a 

six-month period. Thus, these 

participants took the position that the 

notice is unlikely to harass a borrower. 

Several roundtable participants further 

stated that any written notice 

requirement should be limited to 

borrowers in Chapter 7 who first 

become delinquent after filing 

bankruptcy and borrowers in Chapter 13 

who are delinquent on their bankruptcy 

plan payments (as opposed to 

delinquent under the mortgage loan 

contract). 

The Bureau continues to believe that 

borrowers in bankruptcy will benefit 

from receiving the written notice 

required under § 1024.39(b). 

Specifically, the Bureau believes that 

the content of the notice, including the 

statement providing a brief description 

of loss mitigation options that may be 

available from the servicer and the 

application instructions or a statement 

informing the borrower how to obtain 

more information about loss mitigation 

options from the servicer, may be of 

particular value to a delinquent 

borrower in bankruptcy. The Bureau 

believes that receipt of the written early 

intervention notice may be critical in 

educating borrowers about available loss 

mitigation options. The Bureau further 

believes that borrowers who have filed 

for bankruptcy should not be denied an 

opportunity to obtain information about 

available loss mitigation options. This 

information may be uniquely critical for 

borrowers in bankruptcy as they make 

decisions about how best to eliminate or 

reorganize their debts. 

Other Federal agencies have similarly 

recognized that borrowers in bankruptcy 

are in need of information regarding loss 

mitigation options and should be 

considered for available foreclosure 

alternatives. In 2008, HUD issued FHA 

loss mitigation guidance requiring 

mortgagees to provide information to a 

bankrupt borrower’s attorney regarding 

foreclosure alternatives and instructions 

on how to apply.113 HUD further 

recommended that mortgagees should 

provide debtors not represented by 

counsel with the same loss mitigation 

information and review debtors’ 

bankruptcy petitions to determine if 

they are eligible for loss mitigation.114

The Department of the Treasury does 

not require HAMP participants to 

actively solicit borrowers in bankruptcy 

for loss mitigation options, but it has 

made clear that such borrowers may be 

eligible for HAMP.115

The Bureau understands that even 

after a borrower files for bankruptcy, a 

servicer is not categorically barred from 

communicating with the borrower.116

Courts have found that, under 

appropriate circumstances, servicers 

may provide periodic statements, 

notices of change in payments, and 

other communications without violating 

the automatic stay.117 As noted above, 

several courts have determined that a 

servicer may properly contact a 

borrower to inform the borrower about 

loss mitigation options or to negotiate 

the terms of a loss mitigation agreement. 

Consumer advocacy groups and 

bankruptcy attorneys have also 

commented that sending a notice of 

potential loss mitigation options, 

without any accompanying demand for 

payment, would not implicate the 

automatic stay. 

Accordingly, the Bureau is proposing 

to revise the exemption set forth in 

§ 1024.39(d)(1). Under the proposal, a 

servicer would, with certain exceptions, 

be required to provide the written early 

intervention notice required by 

§ 1024.39(b) to a delinquent borrower 

who is in bankruptcy or has discharged 

personal liability for the mortgage loan. 

Specifically, proposed § 1024.39(d)(ii) 

generally limits the exemption to 

instances where there are no loss 

mitigation options available or where 

the borrower is surrendering the 

property or avoiding the lien securing 

the mortgage loan. Thus, under the 

proposal, a servicer would be required 

to provide the written early intervention 

notice to a borrower in bankruptcy, 

except in limited circumstances. As 

discussed above, the Bureau believes 

that information in the written early 

intervention notice is valuable to all 

borrowers and may be particularly 

useful to a borrower who is in 

bankruptcy for the purpose of reducing 

or reorganizing outstanding debts. 

The Bureau notes that servicers have 

expressed concerns about 

communicating with a borrower 


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118See also 78 FR 10695, 10796 (Feb. 14, 2013) 

(‘‘[Section] 1024.39 requires that servicers reach out 

to borrowers. * * * [T]he Bureau believes it would 

mitigate the burden on the servicer to be able to 

communicate with either the borrower or the 

borrower’s representative.’’); id. at 10797 

(‘‘[C]omment 39(a)–4 [clarifies] that the Bureau’s 

guidance with respect to communicating with a 

borrower’s representative also applies to the written 

notice provision at § 1024.39(b).’’). 

119HUD Mortgagee Letter 2008–32 (‘‘As a result 

of these discussions [with bankruptcy experts], the 

Department understands that contact with debtor’s 

counsel or a bankruptcy trustee does not constitute 

a violation of the automatic stay and that waiting 

until a bankruptcy is discharged or dismissed 

before offering loss mitigation may be injurious to 

the interests of the borrower, the mortgagee and the 

FHA insurance funds.’’); see also Henry v. Assocs. 

Home Equity Servs., Inc. (In re Henry), 266 B.R. 457 

(Bankr. C.D. Cal. 2001) (‘‘If a debtor is represented 

by counsel, any creditor may communicate with 

counsel for the debtor without violating the 

automatic stay. Counsel has no need to be shielded 

from a client’s creditors. It is part of the job of 

counsel for a debtor to deal with the client’s 

creditors.’’); United States v. Nelson, 969 F.2d 626, 

628 (8th Cir. 1992) (holding that creditor did not 

violate the stay by sending a letter to debtor’s 

counsel); Cash Am. Pawn, L.P. v. Murphy, 209 B.R. 

419, 424 (E.D. Tex. 1997) (similar); Murray v. Great 

Valley Sav. Ass’n, (In re Murray), 89 B.R. 533, 536 

(Bankr. E.D. Pa. 1988) (similar); cf. Duke, 79 F.3d 

at 45 (holding that creditor did not violate stay by 

copying debtor on letter it sent to debtor’s counsel). 

120See Ed Flynn, Chapter 13 Revisited: Can it 

help Solve the Judiciary’s Fiscal Problems?, 32 a.m. 

Bankr. Inst. J. 20, 20 (Dec. 2013) (stating that over 

55% of Chapter 13 cases are dismissed before plan 

completion); U.S. Dep’t of Justice, Office of the U.S. 

Trustee, Chapter 13 Trustee Data and Statistics, 

available at http://www.justice.gov/ust/eo/ 

private_trustee/data_statistics/ch13.htm. 

(indicating that over 50% of Chapter 13 cases filed 

since 2004 have been dismissed prior to 

completion). 

121 In Chapter 13, for example, a borrower who is 

delinquent on a mortgage loan as of the date of the 

bankruptcy filing may, subject to certain 

restrictions, confirm a plan of reorganization that 

provides for the borrower to make payments that 

will pay down the pre-bankruptcy arrearage over 

time while the borrower also continues to make the 

periodic payments as they come due under the 

mortgage loan. See 11 U.S.C. 1322(b)(5) (stating that 

the plan of reorganization may ‘‘provide for the 

curing of any default within a reasonable time and 

maintenance of payments while the case is pending 

on any unsecured claim or secured claim on which 

the last payment is due after the date on which the 

final payment under the plan is due’’). 

122See 11 U.S.C. 521(a)(2) (requiring a Chapter 7 

debtor to file ‘‘a statement of intention with respect 

to the retention or surrender of [secured property 

of the estate]’’). 

represented by counsel, but the Bureau 

does not believe that these concerns 

warrant a blanket exemption from 

providing the written early intervention 

notice to borrowers in bankruptcy. 

Section 1024.39(c) already provides that 

a servicer is not required to 

communicate with a borrower in a 

manner otherwise prohibited by 

applicable law, which could include 

State laws regarding communications 

with a represented party. Moreover, as 

existing comments 39(a)–4 and 39(b)–3 

clarify, a servicer may satisfy the live 

contact and written notice requirements 

of § 1024.39 by providing information 

about loss mitigation options to a person 

authorized by the borrower to 

communicate with the servicer on the 

borrower’s behalf.118 To the extent that 

a servicer is concerned about 

communicating with a borrower 

represented by counsel, it may 

communicate with the borrower’s 

authorized representative instead. As 

HUD has recognized, communicating 

with a borrower’s bankruptcy counsel 

about available loss mitigation does not 

raise concerns about violating the 

automatic stay.119

The Bureau also does not believe that 

it is appropriate, as some commenters 

suggested, to limit the written early 

intervention notice to instances where a 

borrower in Chapter 7 first becomes 

delinquent while in bankruptcy or to 

where a borrower in Chapter 13 fails to 

make payments due under the 

bankruptcy plan. Although a borrower 

in Chapter 7 who was delinquent prebankruptcy may have already received 

early intervention, such a borrower may 

benefit from updated information 

related to available loss mitigation 

options, particularly when determining 

whether to retain the property. 

Additionally, a borrower in Chapter 13 

making timely plan payments may still 

be delinquent under the mortgage loan 

contract and may benefit from receiving 

timely information about loss mitigation 

options. The Bureau understands that 

most Chapter 13 cases are unsuccessful, 

with more than half resulting in 

dismissal,120 indicating that a borrower 

who is temporarily current on 

bankruptcy plan payments may 

ultimately need to modify the mortgage 

loan to enable a successful bankruptcy 

plan. The Bureau therefore believes that 

it may be better to provide such 

borrowers with information about loss 

mitigation options earlier rather than 

later. 

Nonetheless, as noted above, 

proposed § 1024.39(d)(1)(ii) retains the 

exemption from the written early 

intervention notice in certain 

circumstances. Proposed 

§ 1024.39(d)(1)(ii)(A) provides that a 

servicer is exempt from the written 

notice requirement if no loss mitigation 

options are available. The Bureau 

believes that a primary value of the 

written early intervention notice to a 

delinquent borrower in bankruptcy is to 

inform the borrower of potential loss 

mitigation options to avoid foreclosure. 

If no loss mitigation options are 

available, however, the value of the 

written notice may be significantly 

diminished for a borrower in 

bankruptcy. 

In addition, proposed 

§ 1024.39(d)(1)(ii)(B) through (D) 

exempt a servicer from the written early 

intervention notice requirement in 

several situations where the borrower in 

bankruptcy surrenders the property 

securing the mortgage loan or avoids 

(i.e., renders unenforceable) the lien 

securing the mortgage loan. First, 

proposed § 1024.39(d)(1)(ii)(B) provides 

that a servicer is exempt if the 

borrower’s confirmed plan of 

reorganization provides for the borrower 

to surrender the property, 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.121 Second, proposed 

§ 1024.39(d)(1)(ii)(C) provides that a 

servicer is exempt if the borrower files 

a statement of intention with the 

bankruptcy court that identifies an 

intent to surrender the property 

securing the mortgage loan.122 Finally, 

proposed § 1024.39(d)(1)(ii)(D) provides 

that a servicer is exempt if the 

bankruptcy court enters an order 

providing for the avoidance of the 

servicer’s lien or lifting the automatic 

stay with respect to the property 

securing the mortgage loan. In each of 

these situations, the borrower 

relinquishes the property or otherwise 

discontinues making regular payments 

on the mortgage loan. The Bureau 

believes that apprising a borrower in 

bankruptcy of loss mitigation options at 

that time may be of diminished value. 

Moreover, in these situations, the 

borrower may be significantly 

delinquent and may have already 

received information about loss 

mitigation options, either before or 

during bankruptcy. 

The Bureau is also proposing two 

comments to clarify proposed 

§ 1024.39(d)(1)(ii). First, proposed 

comment 39(d)(1)(ii)–1 provides that for 

purposes of § 1024.39(d)(1)(ii), the term 

‘‘plan of reorganization’’ refers to a 

borrower’s plan of reorganization filed 

under the applicable provisions of 

Chapter 11, Chapter 12, or Chapter 13 of 

the Bankruptcy Code and confirmed by 

a court with jurisdiction over the 

borrower’s bankruptcy case. This 

comment is intended to avoid any 

confusion about what the term ‘‘plan of 

reorganization’’ means when used in 

§ 1024.39(d)(1). 

Second, proposed comment 

39(d)(1)(ii)—2 states that, if the FDCPA 

applies to a servicer’s communications 

with a borrower in bankruptcy and the 

borrower has sent a notification under 


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123This proposal discusses the impact of a 

borrower’s cease communication notification on a 

servicer’s obligations under the early intervention 

requirements, and is intended to apply equally to 

a borrower’s notice to the servicer that the borrower 

refuses to pay a debt. See FDCPA section 805(c) (‘‘If 

a consumer notifies a debt collector in writing that 

the consumer refuses to pay a debt or that the 

consumer wishes the debt collector to cease further 

communication with the consumer, the debt 

collector shall not communicate further with the 

consumer with respect to such debt. * * *’’). 

FDCPA section 805(c), proposed 

comment 39(d)(2)(iii)–2 may be 

applicable. As discussed more fully in 

the section-by-section analysis of 

§ 1024.39(d)(2), proposed comment 

39(d)(2)(iii)–2 would, under certain 

circumstances, exempt a servicer from 

the written notice requirements if the 

borrower has sent a notification 

pursuant to FDCPA section 805(c) and 

is unrepresented by a person authorized 

by the borrower to communicate with 

the servicer on the borrower’s behalf. 

Resuming Compliance 

The Bureau is also proposing to revise 

current comment 39(d)(1)–2 and 

redesignate it as comment 39(d)(1)–1. 

As revised and redesignated, proposed 

comment 39(d)(1)–1 addresses a 

servicer’s obligation to resume 

compliance with the early intervention 

requirements following a borrower’s 

bankruptcy. The proposed comment 

provides that, with respect to any 

borrower who has not discharged the 

mortgage debt, a servicer must resume 

compliance with § 1024.39(a) and (b), as 

applicable, as of the first delinquency 

that follows the earliest of the following 

outcomes in the bankruptcy case: (1) the 

case is dismissed, (2) the case is closed, 

(3) the borrower reaffirms the mortgage 

loan under 11 U.S.C. 524, or (4) the 

borrower receives a discharge under 11 

U.S.C. 727, 1141, 1228, or 1328. 

However, proposed comment 39(d)(1)–1 

also clarifies that the requirement to 

resume compliance with § 1024.39 does 

not require a servicer to communicate 

with a borrower in a manner that would 

be inconsistent with applicable 

bankruptcy law or a court order in a 

bankruptcy case. The proposed 

revisions provide that, to the extent 

necessary to comply with such law or 

court order, a servicer may adapt the 

requirements of § 1024.39 as 

appropriate. In addition, proposed 

comment 39(d)(1)–1 provides that 

compliance with § 1024.39(a) is not 

required with respect to any borrower 

who has discharged the mortgage debt 

under applicable provisions of the 

Bankruptcy Code. If the borrower’s 

bankruptcy case is revived—for 

example, if the court reinstates a 

previously dismissed case or reopens 

the case—the servicer is again exempt 

from the requirements of proposed 

§ 1024.39(a). 

The Bureau requests comment on 

proposed § 1024.39(d)(1), including the 

scope of the exemptions, the triggers for 

qualifying for the exemptions and 

resuming early intervention, and how 

communications may be tailored to 

meet the particular needs of borrowers 

in bankruptcy. The Bureau further 

solicits comment on whether servicers 

have had difficulties receiving notices 

regarding the dismissal or closing of a 

bankruptcy case or of the debtor’s 

discharge, and whether the obligation to 

resume early intervention should be 

contingent on receiving such notices. 

Additionally, the Bureau requests 

comment on whether the timing of the 

written early intervention notice should 

be different for a borrower in 

bankruptcy, such as whether a servicer 

should be required to provide the 

written notice to a borrower in 

bankruptcy within 45 days after the 

bankruptcy case commences, rather 

than by the 45th day of the borrower’s 

delinquency. 

Legal Authority 

The Bureau is proposing to exercise 

its authority under sections 6(j)(3) and 

19(a) of RESPA to exempt servicers from 

the early intervention live contact 

requirements in § 1024.39(a) for a 

mortgage loan while the borrower is a 

debtor in bankruptcy, while any 

borrower on the mortgage loan is a 

debtor in Chapter 12 or Chapter 13 

bankruptcy, or if the borrower has 

discharged personal liability for the 

mortgage loan through bankruptcy. For 

the reasons discussed above, the Bureau 

does not believe at this time that the 

consumer protection purposes of RESPA 

would be furthered by requiring 

servicers to comply with § 1024.39(a) for 

a mortgage loan under those 

bankruptcy-related circumstances. 

The Bureau is also proposing to 

exercise its authority under sections 

6(j)(3) and 19(a) of RESPA to exempt a 

servicer from the written early 

intervention notice requirements in 

§ 1024.39(b) if no loss mitigation 

options are available and the borrower 

is a debtor in bankruptcy, any borrower 

on the mortgage loan is a debtor in 

Chapter 12 or Chapter 13 bankruptcy, or 

the borrower has discharged personal 

liability for the mortgage loan through 

bankruptcy. The Bureau is also 

proposing to exercise its authority under 

sections 6(j)(3) and 19(a) of RESPA to 

exempt a servicer from the written early 

intervention notice requirements in 

§ 1024.39(b) if the borrower is a debtor 

in bankruptcy and any of the three 

following conditions are met: (1) The 

borrower’s confirmed plan of 

reorganization provides that the 

borrower will surrender the property 

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; (2) the borrower files 

with the court a Statement of Intention 

pursuant to 11 U.S.C. 521(a) identifying 

an intent to surrender the property 

securing the mortgage loan; or (3) a 

court enters an order in the bankruptcy 

case providing for the avoidance of the 

lien securing the mortgage loan or lifting 

the automatic stay pursuant to 11 U.S.C. 

362 with respect to the property 

securing the mortgage loan. For the 

reasons discussed above, the Bureau 

believes at this time that the consumer 

protection purposes of RESPA would 

not be furthered by requiring 

compliance with § 1024.39(b) under 

those circumstances. 

39(d)(2) Fair Debt Collection Practices 

Act 

The Bureau is proposing to revise the 

scope of the current exemption from the 

early intervention requirements set forth 

in § 1024.39(d)(2). Section 1024.39(d)(2) 

currently exempts servicers subject to 

the FDCPA with respect to a mortgage 

loan for which a borrower has sent a 

cease communication notification 

pursuant to FDCPA section 805(c) (15 

U.S.C. 1692c(c)) from the early 

intervention requirements.123 The 

proposal maintains the current 

exemption from the live contact 

requirements of § 1024.39(a) but 

partially lifts the exemption from the 

written early intervention notice 

requirements of § 1024.39(b). 

Specifically, the proposal requires that a 

servicer must provide a modified 

written early intervention notice if loss 

mitigation options are available. In 

addition to the information set forth in 

§ 1024.39(b)(2), the proposal provides 

that the modified written early 

intervention notice must include a 

statement that the servicer may or 

intends to invoke its specified remedy 

of foreclosure. Proposed model clause 

MS–4(D) in appendix MS–4 to this part 

may be used to comply with this 

requirement. The proposal provides that 

the written notice may not contain a 

request for payment. In addition, it 

prohibits a servicer from providing the 

written notice more than once during 

any 180-day period. To the extent a 

servicer would be required to provide 

the modified written notice under 

§ 1024.39(d)(2)(iii), the proposal 


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124See 77 FR 57199, 57251 (Sept. 17, 2012); 78 

FR 10695, 10788–89 (Feb. 14, 2013). 

125 77 FR 57199, 57260–61 (Sept. 17, 2012). 

126FDCPA section 805(c)(1) through (3). 

127 78 FR 10695, 10806–07 (Feb. 14, 2013). 

128 78 FR 62993 (Oct. 23, 2013); CFPB Bulletin 

2013–12. 

129 78 FR 62993, 62994 (Oct. 23, 2013). 

130 Id. at 62998–99. 

provides the servicer with a safe harbor 

from liability under the FDCPA. 

Consistent with the discussion in this 

section, the Bureau is proposing to issue 

an advisory opinion interpreting the 

FDCPA cease communication 

requirement in relation to the Mortgage 

Servicing Rules under FDCPA section 

813(e) (15 U.S.C. 1692k(e)). As provided 

in that section, no liability arises under 

the FDCPA for an act done or omitted 

in good faith in conformity with an 

advisory opinion of the Bureau while 

that advisory opinion is in effect. For 

the reasons discussed below, the Bureau 

is proposing to provide a safe harbor for 

certain communications between a 

servicer and a borrower notwithstanding 

a borrower’s invocation of the ‘‘cease 

communication’’ right. 

The objectives of the early 

intervention requirements under 

§ 1024.39 include ensuring that 

servicers provide delinquent borrowers 

with information about their options at 

the early stages of delinquency, 

encouraging communication between 

servicers and delinquent borrowers, and 

encouraging delinquent borrowers to 

work with their servicers to identify 

alternatives to foreclosure.124 Section 

1024.39(a) requires a servicer to 

establish or make good faith efforts to 

establish live contact with a delinquent 

borrower not later than the 36th day of 

the borrower’s delinquency and, 

promptly after establishing live contact, 

inform the borrower about the 

availability of loss mitigation options, if 

appropriate. Section 1024.39(b) requires 

a servicer to provide to a delinquent 

borrower a written notice with specific 

information, including examples of loss 

mitigation options that may be available 

and instructions on how to obtain more 

information about loss mitigation 

options from the servicer, not later than 

the 45th day of the borrower’s 

delinquency. 

In the Bureau’s 2012 RESPA Servicing 

Proposal, the Bureau sought comment 

on ‘‘whether servicers may reasonably 

question how they could comply with 

[the] Bureau’s propos[ed early 

intervention requirements] in light of 

[other applicable] laws,’’ including the 

FDCPA.125 A servicer of a mortgage that 

was in default at the time the servicer 

acquired it may be a debt collector 

under FDCPA section 803(6). The 

FDCPA generally grants consumers the 

right to bar debt collectors from 

communicating with them regarding a 

debt by sending a written cease 

communication notification pursuant to 

FDCPA section 805(c). However, even 

after a borrower sends a servicer a cease 

communication notification, the 

servicer is not categorically barred 

under the FDCPA from all 

communication with the borrower. 

FDCPA section 805(c) contains specific 

exceptions that allow further 

communications with the borrower with 

respect to a debt for the following 

reasons: (1) To advise the borrower that 

the debt collector’s further efforts are 

being terminated; (2) to notify the 

borrower that the debt collector or 

creditor may invoke specified remedies 

which are ordinarily invoked by such 

debt collector or creditor; or (3) where 

applicable, to notify the borrower that 

the debt collector or creditor intends to 

invoke a specified remedy.126

To address industry concerns about 

conflicts with existing law, in the 2013 

RESPA Servicing Final Rule, the Bureau 

added § 1024.39(c), which provides that 

nothing in § 1024.39 requires a servicer 

to communicate with a borrower in a 

manner otherwise prohibited under 

applicable law, including the FDCPA.127

The Bureau subsequently clarified 

compliance requirements in relation to 

the FDCPA in the October 2013 IFR and 

October 2013 Servicing Bulletin.128

Under the IFR, a servicer subject to the 

FDCPA with respect to a borrower is 

exempt from the requirements of 

§§ 1024.39 and 1026.20(c) with regard to 

a mortgage loan for which the borrower 

has sent a cease communication 

notification pursuant to FDCPA section 

805(c). The Bureau explained that, 

because the early intervention rule 

(§ 1024.39) and the adjustable-rate 

mortgage (ARM) payment adjustment 

notice rule (§ 1026.20(c)) are neither 

statutorily mandated by the Dodd-Frank 

Act nor in response to a borrowerinitiated communication, the interplay 

between §§ 1024.39 and 1026.20(c) and 

the cease communication provision of 

FDCPA section 805(c) was unclear. At 

that time, the Bureau did not make a 

determination as to the legal status of 

early intervention efforts or the ARM 

payment adjustment notice 

requirements following the receipt of a 

borrower’s proper cease communication 

request. The Bureau stated that it would 

explore, as part of a broader rulemaking 

on debt collection, the legal issues and 

practical benefits of requiring: (1) Some 

type of early intervention to notify 

borrowers of the potential availability of 

loss mitigation options, balancing the 

rights of debtors to protect themselves 

against certain debt collector practices 

with the consumer protections afforded 

by servicer-borrower contact that may 

lead to the resolution of borrower 

default; and (2) some form of 

§ 1026.20(c) notice, balancing the rights 

of debtors to prevent debt collectors 

from communicating with them with 

the consumer protection afforded by 

timely notice of interest rate and 

payment adjustments.129 The Bureau 

noted that the future rulemaking on debt 

collection issues may alter or eliminate 

the exemptions set forward in the 

IFR.130

The Bureau received a number of 

comments in response to the IFR during 

the official comment period and ex 

parte comments after the close of the 

official comment period. Accordingly, 

the following discussion of the 

proposed rule refers to both sets of 

comments. The Bureau received 

comments from various trade 

associations in support of the FDCPArelated exemptions under the IFR and 

the safe harbor from liability under the 

FDCPA that the Bureau granted 

servicers. One trade association 

encouraged the Bureau to make a 

comprehensive determination as to the 

legal status of communications required 

under the servicing rules and their 

impact on or conflict with the FDCPA 

before making additional changes. Two 

commenters stated that the Bureau 

should address these questions through 

rulemaking rather than through a 

subsequent compliance bulletin. 

A consumer advocacy group’s 

comment requested that the Bureau not 

require borrowers to choose between 

their rights under the FDCPA and the 

benefits of the servicing rules. The 

comment described the written early 

intervention notice as a ‘‘form letter’’ 

and argued that most borrowers would 

not view the notice as the type of debt 

collection that they meant to stop 

through a cease communication 

notification. In a follow-up ex parte 

meeting with the Bureau, the consumer 

advocacy group stated that servicers that 

are careful to send only mandated 

notices in compliance with the Bureau’s 

requirements are unlikely to face 

litigation risk and suggested that a 

servicer could include language on a 

required notice acknowledging that the 

borrower has exercised cease 

communication rights. 

The Bureau has learned through 

continued outreach that important 

consumer protections may be 

implicated by the current FDCPArelated exemption from the early 


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131The Bureau is not, however, making a 

determination as to the legal status of the 

requirements under § 1026.20(c) following receipt 

of proper cease communication requests at this 

time. As noted in the IFR, the Bureau continues to 

encourage servicers to provide ARM payment 

adjustment notices to the extent that the FDCPA 

permits. See 78 FR 62993, 62999 (Oct. 23, 2013). 

132See comment 39(a)–3.i. This proposal would 

redesignate current comment 39(a)–3.i as comment 

39(a)–4.i. 

133See comment 39(a)-2 (‘‘Good faith efforts to 

establish live contact consist of reasonable steps 

under the circumstances to reach a borrower and 

may include telephoning the borrower on more 

than one occasion or sending written or electronic 

communication encouraging the borrower to 

establish live contact with the servicer.’’). This 

proposal would move this language into comment 

39(a)–3. 

134See 78 FR 10695, 10793 (Feb. 14, 2013). 

135Comment 39(a)–2. 

136Comment 39(a)–3.i. This proposal would 

redesignate current comment 39(a)–3.i as comment 

39(a)–4.i. 

137This proposal would redesginate current 

comment 39(a)–3.i.B as comment 39(a)–4.i.B. 

138See CFPB Bulletin 2013–12; section-by-section 

analysis of § 1024.39(a), supra. 

139See FDCPA section 806 (‘‘A debt collector may 

not engage in any conduct the natural consequence 

of which is to harass, oppress, or abuse any person 

in connection with the collection of a debt.’’). 

intervention requirements under 

§ 1024.39(d)(2). Specifically, the Bureau 

believes that a borrower may send a 

blanket cease communication 

notification and thus unwittingly forfeit 

the opportunity to gain information 

about potential loss mitigation options 

under the early intervention rules. 

Borrowers assisted by counsel or 

housing counselors may find themselves 

choosing between their rights to invoke 

cease communication protections 

pursuant to FDCPA section 805(c) or the 

benefits of the early intervention rules 

under § 1024.39. Therefore, the Bureau 

is taking the opportunity to revisit the 

exemption from the early intervention 

requirements at this time rather than as 

part of a later and broader rulemaking 

on debt collection.131

The Bureau considers whether it may 

be appropriate to alter or eliminate the 

exemption from the early intervention 

live contact requirements in 

§ 1024.39(a), the written notice 

requirements in § 1024.39(b), or both. 

The proposal maintains the current 

exemption from the live contact 

requirements of § 1024.39(a), but would 

partially lift the exemption from the 

written early intervention notice 

requirements of § 1024.39(b) if loss 

mitigation options are available. After 

careful consideration, the Bureau 

believes that a modified written early 

intervention notice is closely linked to 

the exceptions promulgated to the cease 

communication rights by FDCPA 

section 805(c), and that the written 

notice is more closely linked to those 

exceptions than the live contact 

requirements. 

Live Contact 

The Bureau understands that the 

nature of live contact and the 

information conveyed may be highly 

variable. The information conveyed, the 

manner for conveying that information, 

and whether any information is 

conveyed depends on the borrower’s 

circumstances, the servicer’s perception 

of those circumstances, and the 

servicer’s exercise of reasonable 

discretion.132 The servicer may contact 

the borrower in person, by telephone, or 

not at all, if the servicer’s good faith 

efforts to reach the borrower fail.133 By 

their nature, discussions or 

conversations resulting from live 

contact are not and cannot be closely 

prescribed.134 Such variability is 

inconsistent with the narrow exceptions 

in FDCPA section 805(c), which permit 

a debt collector to communicate further 

with a borrower for extremely limited 

purposes after a borrower has sent a 

servicer a cease communication 

notification. Because the information 

conveyed and the manner for conveying 

such information may be highly variable 

in the context of live contact, the Bureau 

believes that requiring a servicer to 

comply with the live contact 

requirements with regard to a mortgage 

loan for which a borrower has sent a 

notification pursuant to FDCPA section 

805(c) is inappropriate and may put a 

servicer subject to the FDCPA with 

respect to that borrower’s loan at risk of 

violating the FDCPA. The Bureau is 

proposing no general rule about whether 

oral versus written communications are 

more likely to violate the FDCPA, but 

notes only that the live contact 

requirements of § 1024.39(a) are less 

susceptible to standard, uniform 

delivery in compliance with the cease 

communication exceptions in FDCPA 

section 805(c) than are the written early 

intervention notice requirements. 

The Bureau also believes that live 

contact may be less valuable to a 

delinquent borrower who has properly 

invoked the FDCPA’s cease 

communication protections. 

Compliance with § 1024.39(a) is not 

limited to—and does not in every case 

require—a discussion of available loss 

mitigation options. Section 1024.39(a) 

requires that a servicer inform the 

borrower about the availability of loss 

mitigation options, ‘‘if appropriate.’’ 

More broadly, ‘‘[l]ive contact provides 

servicers an opportunity to discuss the 

circumstances of a borrowers’ 

delinquency,’’135 and, based on this 

discussion, a servicer may determine 

not to inform a borrower of loss 

mitigation options. As current comment 

39(a)–3.i explains, ‘‘[i]t is within a 

servicer’s reasonable discretion to 

determine whether informing a 

borrower about the availability of loss 

mitigation options is appropriate under 

the circumstances.’’136 Under certain 

circumstances, a servicer may determine 

that promptly informing the borrower 

about the availability of loss mitigation 

options is not appropriate under the 

circumstances. Current comment 39(a)– 

3.i.B provides an example that 

demonstrates it is reasonable for a 

servicer to not provide information 

about the availability of loss mitigation 

options to a borrower who has missed 

a January 1 payment and notified the 

servicer that full late payment will be 

transmitted to the servicer by February 

15.137 The purpose of such a 

conversation could be to remind a 

borrower who perhaps inadvertently 

missed a payment of a past due amount, 

or to give the servicer an opportunity to 

discuss when the borrower may cure a 

temporary delinquency, but the 

conversation may not necessarily 

involve a discussion of loss mitigation 

options. 

When a delinquent borrower has 

instructed the servicer to stop 

communicating with the borrower about 

the debt, the Bureau believes that 

repeated attempts to establish live 

contact with such a borrower that may 

not lead to a discussion of available loss 

mitigation options may be unwanted 

and in contravention to the purposes of 

the FDCPA’s cease communication 

protections. The early intervention live 

contact requirement is a recurring 

obligation that generally requires 

servicers to make continued efforts to 

establish live contact with a borrower so 

long as a borrower remains 

delinquent.138 A borrower who has sent 

a servicer a cease communication 

notification may perceive a servicer’s 

early intervention live contact under 

§ 1024.39(a) as a repeated, intrusive, and 

unwanted communication. The Bureau 

is also concerned that, given the 

recurring and relatively unstructured 

nature of the live contact requirements, 

requiring early intervention through live 

contact may increase the potential for 

harassment in direct contravention of 

the FDCPA.139

Balancing the considerations 

discussed above, the Bureau is 

proposing to maintain the current 

exemption from the live contact 

requirements of § 1024.39(a). 


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140See 12 CFR 1024.41(f)(1)(i). 

141See 78 FR 10695, 10796–97 (Feb. 14, 2013). 142 Id. at 10787. 

143See section-by-section analysis of 

§ 1024.39(b)(2), supra. 

Specifically, proposed § 1024.39(d)(2)(i) 

provides that a servicer subject to the 

FDCPA with respect to a borrower is 

exempt from the early intervention live 

contact requirement under § 1024.39(a) 

with regard to a mortgage loan for which 

the borrower has sent a notification 

pursuant to FDCPA section 805(c). 

Written Notice 

The Bureau believes that the written 

early intervention notice will generally 

be closely linked to the invocation of 

foreclosure. Current § 1024.39(b) 

requires a servicer to provide a 

delinquent borrower with the written 

notice not later than the 45th day of the 

borrower’s delinquency. As a general 

matter, this written notice must be sent 

well before the servicer may initiate 

foreclosure: in most cases, the servicer 

must wait until a borrower’s mortgage 

loan obligation is more than 120 days 

delinquent, after the written notice has 

been sent, to make the first notice or 

filing to initiate the foreclosure 

process.140 As the Bureau explained in 

the preamble to the 2013 RESPA 

Servicing Final Rule, the purpose of the 

written notice is to provide more 

information to a borrower who has not 

cured by the 45th day of delinquency. 

Providing a borrower with notice in 

writing that includes, for example, the 

servicer’s contact information as well as 

relevant information regarding loss 

mitigation options and housing 

counselors, conveys important 

information to a borrower that the 

servicer may not have communicated to 

the borrower through live contact. 

Additionally, the written notice 

generally provides more information 

than likely would have been provided 

through live contact and provides the 

borrower with information that may be 

reviewed and discussed with a housing 

counselor or other advisor.141

The Bureau understands that in most 

cases, there may be some loss mitigation 

options available. Therefore, in most 

cases, borrowers receiving the written 

early intervention notice will have an 

opportunity to respond to the written 

notice by applying for loss mitigation, 

should they so choose. Where a 

borrower responds to the written notice 

by applying for loss mitigation, the dual 

tracking restrictions of the 2013 RESPA 

Servicing Final Rule apply, further 

limiting the servicer’s ability to invoke 

the remedy of foreclosure. Pursuant to 

§ 1024.41(f)(2) and (g), respectively, a 

servicer may not make the first notice or 

filing for foreclosure if a borrower 

submits a complete loss mitigation 

application before foreclosure referral, 

and cannot move for foreclosure 

judgment or order of sale or conduct a 

foreclosure sale if a borrower submits a 

complete loss mitigation application 

more than 37 days before a foreclosure 

sale. 

The failure to provide a borrower with 

the written early intervention notice 

may impede a servicer’s ability to 

invoke foreclosure, particularly if loss 

mitigation options are available. For 

example, because failure to provide a 

borrower with the written early 

intervention notice may result in 

borrowers submitting requests for loss 

mitigation at a later point in time—e.g., 

closer to the foreclosure sale—failure to 

provide the written early intervention 

notice may delay or otherwise interfere 

with the servicer’s exercise of its 

specified remedy of foreclosure. In 

addition, the Bureau understands that 

some states require documentation of a 

servicer’s efforts to modify the loan, or 

require a servicer to provide the 

borrower with information substantially 

similar to the written early intervention 

notice, prior to initiating foreclosure or 

conducting a foreclosure sale (e.g., 

California, Illinois). Therefore, the 

Bureau believes that when loss 

mitigation options are available, the 

written early intervention notice is 

particularly critical to a servicer’s ability 

to invoke its specified remedy of 

foreclosure, and that the information 

conveyed through the written notice is 

closely linked to the exceptions in 

FDCPA section 805(c)(2) and (3) to 

permit a servicer to communicate 

further with a borrower after a borrower 

has sent a servicer a cease 

communication notification. 

If loss mitigation options are 

available, as will generally be the case, 

the Bureau believes that the written 

early intervention notice may be of 

significant value to borrowers, as well as 

tied closely to the servicer’s ability to 

invoke its specified remedy of 

foreclosure. Indeed, the Bureau has 

stated that the early intervention notice 

requirements were designed primarily 

to encourage delinquent borrowers to 

work with their servicers to identify 

options for avoiding foreclosure.142

Specifically, the Bureau believes that 

the content of the written early 

intervention notice, including the 

statement providing a brief description 

of examples of loss mitigation options 

that may be available from the servicer 

and the application instructions or a 

statement informing the borrower how 

to obtain more information about loss 

mitigation options from the servicer,143

may be of particular value and relevance 

to a delinquent borrower facing debt 

collection in informing the borrower of 

the availability of loss mitigation. The 

Bureau believes that receipt of the 

modified written early intervention 

notice may be critical in educating 

delinquent borrowers about potentially 

available loss mitigation options. The 

Bureau further believes that borrowers 

who have sent a cease communication 

notification under the FDCPA may 

benefit from receiving information about 

loss mitigation options that may be 

available, which would be provided to 

other borrowers who have not sent the 

servicer a cease communication 

notification. Given its broad experience 

with consumers in debt, facing 

foreclosure, or dealing with other 

financial difficulties, the Bureau 

believes that, in invoking the FDCPA’s 

cease communication protections, 

borrowers are unlikely to have intended 

to prevent communication about loss 

mitigation options. Regardless of 

whether the borrower is in fact eligible 

for or takes advantage of loss mitigation 

options that may be available, if the 

borrower receives the written early 

intervention notice, the borrower at a 

minimum has an opportunity to gain 

information about potential options. 

The Bureau has also learned that 

consumer advocates, in some cases, may 

advise a borrower to refrain from 

sending a servicer a cease 

communication notification pursuant to 

FDCPA section 805(c) in order to 

preserve access to information about 

loss mitigation and continue to receive 

early intervention communications from 

a servicer. The Bureau believes that 

borrowers who have invoked the 

FDCPA’s cease communication 

protections should not be denied an 

opportunity to obtain information about 

potential loss mitigation options; 

indeed, this information may be even 

more critical for delinquent borrowers 

facing debt collection. 

In the limited circumstances where no 

loss mitigation options are available, the 

Bureau believes that the written early 

intervention notice will be of 

significantly less value to a borrower 

who has exercised cease communication 

rights under the FDCPA and is not as 

closely tied to the servicer’s right to 

invoke foreclosure due to the limited 

impact of the dual-tracking restrictions 

in the absence of loss mitigation 

options. Therefore, the Bureau believes 

that it is not appropriate to require 

servicers to provide the written early 


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intervention notice to such borrowers 

who have exercised their FDCPA cease 

communication rights. 

Balancing the considerations 

discussed above, the Bureau is 

proposing to partially lift the exemption 

in current § 1024.39(d)(2) and to require 

the provision of a modified form of the 

written early intervention notice to 

borrowers who have exercised their 

cease communication rights, while 

retaining the exemption from 

§ 1024.39(b) if no loss mitigation 

options are available. Specifically, the 

Bureau is proposing § 1024.39(d)(2)(ii) 

to explain that, with regard to a 

mortgage loan for which the borrower 

has sent a notification pursuant to 

section 805(c) of the FDCPA, a servicer 

subject to the FDCPA with respect to 

that borrower’s loan is exempt from the 

written early intervention notice 

requirement under § 1024.39(b) if no 

loss mitigation options are available. 

And proposed § 1024.39(d)(2)(iii) 

provides that a servicer subject to the 

FDCPA with respect to a borrower must 

provide a modified written early 

intervention notice with regard to a 

mortgage loan for which the borrower 

has sent a notification pursuant to 

section 805(c) of the FDCPA if loss 

mitigation options are available. 

In addition to the information 

required pursuant to § 1024.39(b)(2), 

proposed § 1024.39(d)(2)(iii) would 

modify the written early intervention 

notice to: (1) Include a statement that 

the servicer may or intends to invoke its 

specified remedy of foreclosure; (2) 

prohibit that the written notice contain 

a request for payment; and (3) prohibit 

a servicer from providing the written 

notice more than once during any 180- 

day period. To assist servicers in 

complying with the requirements of 

proposed § 1024.39(d)(2)(iii), the Bureau 

has developed proposed model clause 

MS–4(D), contained in appendix MS–4 

to Part 1024. A more detailed discussion 

of the proposed model clause is 

contained in the section-by-section 

analysis of appendix MS. 

The Bureau is also proposing to add 

comment 39(d)(2)(iii)–1 to offer 

servicers additional guidance on 

complying with the modified written 

early intervention notice required by 

proposed § 1024.39(d)(2)(iii). First, the 

proposed comment explains that in 

requiring servicers to provide a 

borrower the written early intervention 

notice under proposed 

§ 1024.39(d)(2)(iii), the Bureau provides 

servicers a safe harbor from liability 

under the FDCPA with respect to the 

written notice. Specifically, proposed 

comment 39(d)(2)(iii)–1 provides that, 

to the extent the FDCPA applies to a 

servicer’s communications with a 

borrower, a servicer does not violate 

section 805(c) of the FDCPA by 

providing the modified written notice 

required by § 1024.39(d)(2)(iii) after a 

borrower has sent a notification 

pursuant to section 805(c) of the FDCPA 

with respect to that borrower’s loan. 

Second, the proposed comment reminds 

servicers that in providing the written 

early intervention notice, they must 

continue to comply with all other 

applicable provisions of the FDCPA. 

Specifically, comment 39(d)(2)(iii)–1 

provides that, in providing the borrower 

the written notice, the servicer must 

continue to comply with all other 

applicable provisions of the FDCPA, 

including prohibitions on unfair, 

deceptive, and abusive practices as 

contained in sections 805 through 808 

of the FDCPA, 15 U.S.C. 1692c through 

1692f. 

The Bureau is proposing an additional 

comment to address circumstances in 

which a borrower has invoked the 

FDCPA’s cease communication 

protections and is also a borrower in 

bankruptcy. Specifically, proposed 

comment 39(d)(2)(iii)–2 provides that, 

to the extent the FDCPA applies to a 

servicer’s communications with a 

borrower and the borrower has sent a 

notification pursuant to section 805(c) 

of the FDCPA, a servicer is not required 

to provide the written notice required 

by § 1024.39(d)(2)(iii) if the borrower is 

in bankruptcy and is not represented by 

a person authorized by the borrower to 

communicate with the servicer on the 

borrower’s behalf. Proposed comment 

39(d)(2)(iii)–2 further provides that if 

the borrower is represented by a person 

authorized by the borrower to 

communicate with the servicer on the 

borrower’s behalf, however, the servicer 

must provide the modified written 

notice required by § 1024.39(d)(2)(iii) to 

the borrower’s representative. The 

Bureau requests comment on whether 

including proposed comment 

39(d)(2)(iii)–2 is appropriate. The 

Bureau also seeks comment on whether 

there may be a conflict between the 

language of proposed model clause MS– 

4(D) and applicable bankruptcy laws 

when a borrower has exercised cease 

communication rights under the FDCPA 

and is also a borrower in bankruptcy 

and the scope of any conflict. Proposed 

model clause MS–4(D) is contained in 

appendix MS–4. A more detailed 

discussion of the proposed model clause 

is contained in the section-by-section 

analysis of appendix MS. 

The Bureau intends this proposal to 

partially lift the current exemption for a 

servicer subject to the FDCPA with 

respect to a borrower to be limited to the 

Bureau’s explicit interpretation. 

Accordingly, the Bureau intends the 

proposal to be narrow and based only 

upon the interplay between two specific 

federal requirements providing 

consumer protections—the early 

intervention requirements of § 1024.39 

of Regulation X and the cease 

communication provision of section 

805(c) of the FDCPA. The Bureau 

believes that, in the limited 

circumstance where a servicer is subject 

to the FDCPA with respect to a 

borrower, and that borrower has sent the 

servicer a cease communication 

notification, the strong consumer 

interest in receiving timely information 

about potentially available loss 

mitigation options under § 1024.39(b) 

may outweigh or at least equal the 

consumer protection offered by section 

805(c) of the FDCPA. Under that limited 

circumstance, the Bureau also believes 

that the relationship between the 

Bureau’s required written early 

intervention notice and the servicer’s 

invocation of its specified remedy of 

foreclosure is closely linked so as to 

bring a proposed modified written early 

intervention notice requirement within 

the statutory exceptions of section 

805(c) of the FDCPA. The Bureau seeks 

comment on whether partially lifting 

the exemption for the written early 

intervention notice if loss mitigation 

options are available is appropriate. 

The Bureau reminds servicers that 

they may only rely on the exemptions 

in proposed § 1024.39(d)(2)(i) and (ii) if 

both the servicer is subject to the 

FDCPA with respect to a borrower, 

meaning that the servicer of a defaulted 

mortgage loan is also acting as a debt 

collector under section 803(6) of the 

FDCPA (i.e., the servicer acquired the 

mortgage at the time that it was in 

default) and the borrower has properly 

sent the servicer a written cease 

communication notification under 

section 805(c) of the FDCPA. Therefore, 

even if a servicer receives a written 

cease communication notification from 

a borrower, if the servicer is not also 

acting as a debt collector for purposes of 

the FDCPA with respect to that 

borrower’s mortgage loan, the servicer 

must continue to comply with all of the 

early intervention requirements under 

§ 1024.39. 

The Bureau has narrowly tailored the 

proposal to reduce the risk that servicers 

will circumvent a borrower’s cease 

communication rights. As noted above, 

the proposed requirement that a servicer 

subject to the FDCPA with respect to a 

borrower provide a delinquent borrower 

with the modified written early 

intervention notice applies only if the 

servicer is subject to the FDCPA with 


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144See FDCPA section 805(c) (‘‘If such notice 

from the consumer is made by mail, notification 

shall be complete upon receipt.’’). 

145See section-by-section analysis of 

§ 1024.39(b)(2)–4, supra. 

146See 53 FR 50097, 50103 (Dec. 13, 1988) 

(Section 805(c)–2 of the Federal Trade 

Commission’s (FTC) Official Staff Commentary on 

FDCPA section 805(c)) (‘‘A debt collector’s response 

to a ‘cease communication’ notice from a consumer 

may not include a demand for payment, but is 

limited to the three statutory exceptions [under 

FDCPA section 805(c)(1) through (3)].’’). 

respect to that borrower, meaning that 

the servicer of a mortgage loan that was 

in default at the time the servicer 

acquired it is also acting as a debt 

collector under section 803(6) of the 

FDCPA, and only if that borrower has 

properly invoked the FDCPA’s cease 

communication protections. The Bureau 

believes that the proposal to partially 

lift the exemption for the written early 

intervention notice will generally only 

be relevant in instances where the 

servicer has received a cease 

communication notification prior to the 

45th day of the borrower’s 

delinquency.144 Additionally, the 

proposal relates to only the modified 

written early intervention notice, while 

maintaining the exemption for early 

intervention live contact and the 

exemption for the written notice if no 

loss mitigation options are available. If 

no loss mitigation options are available, 

i.e., the owner or assignee of a 

borrower’s mortgage loan does not offer 

an alternative to foreclosure that is 

made available through the servicer, this 

proposal leaves the current exemption 

in place.145 Furthermore, this proposal 

requires that the modified written early 

intervention notice include a statement 

that the servicer may or intends to 

invoke its specified remedy of 

foreclosure, prohibits the servicer from 

making a request for payment via the 

written early intervention notice, and 

prohibits a servicer from providing the 

written notice more than once during 

any 180-day period. The Bureau 

believes that limiting the proposal in 

this manner reduces the risk that the 

modified written early intervention 

notice will be used to circumvent a 

borrower’s cease communication rights 

under section 805(c) of the FDCPA. 

Borrower-Initiated Communications 

The Bureau expects that, after the 

borrower has sent a cease 

communication notification, any 

subsequent borrower-initiated 

communications with a servicer for the 

purposes of loss mitigation will be 

limited to a discussion of loss mitigation 

options that may be available. 

Therefore, even after a borrower has 

sent a cease communication notification 

under the FDCPA, a servicer should 

respond to a borrower who inquires 

about loss mitigation with information 

limited to potentially available loss 

mitigation options. For example, a 

servicer may discuss with a borrower 

available loss mitigation options that the 

owner or assignee of the borrower’s 

mortgage loan offers, instructions on 

how the borrower can apply for loss 

mitigation, what documents and 

information the borrower would need to 

provide to complete a loss mitigation 

application, and the potential terms or 

details of a loan modification program, 

including the monthly payment and 

duration of the program. The Bureau is 

proposing to issue an advisory opinion 

interpreting the FDCPA cease 

communication requirement in relation 

to the Mortgage Servicing Rules under 

section 813(e) of the FDCPA. As 

provided in that section, no liability 

arises under the FDCPA for an act done 

or omitted in good faith in conformity 

with an advisory opinion of the Bureau 

while that advisory opinion is in effect. 

The Bureau believes that a servicer’s 

responding to borrower-initiated 

communications with specific 

information about loss mitigation 

options that may be available does not 

undermine the protections offered by 

section 805(c) of the FDCPA, which 

empowers borrowers to direct debt 

collectors to cease contacting them to 

collect a debt and frees borrowers from 

the burden of being subject to unwanted 

communications. Borrower-initiated 

communications are by their nature 

wanted communications and therefore 

do not impose such a burden. Such 

communications benefit borrowers by 

providing them with valuable 

information about potentially available 

loss mitigation options. The Bureau 

believes that when a servicer 

communicates with a borrower who has 

invoked the FDCPA’s cease 

communication protections about 

potentially available loss mitigation 

options in the limited manner described 

in this proposal, the servicer does not 

violate section 805(c) of the FDCPA. The 

Bureau believes that a borrower’s cease 

communication notification pursuant to 

the FDCPA should ordinarily be 

understood to exclude borrowerinitiated communications with a 

servicer for the purposes of loss 

mitigation because the borrower has 

specifically requested the 

communication at issue. As the Bureau 

explained in the October 2013 Servicing 

Bulletin, even if the borrower sends a 

cease communication notification while 

a specific action the borrower requested 

of the servicer is in process, the 

borrower usually should be understood 

to have excluded the specific action 

from the general request to cease 

communication. Thus, only if the 

borrower sends a communication to the 

servicer specifically withdrawing the 

request for such action may a servicer 

cease to carry out the requirements of 

these provisions. Accordingly, these 

communications would—under the 

Bureau’s proposed advisory opinion— 

be consistent with the FDCPA’s 

requirements, and a servicer would not 

be liable for violating the FDCPA with 

respect to such communications. 

However, the Bureau’s proposed 

advisory opinion would not protect a 

servicer from using such borrowerinitiated communications for the 

purpose of loss mitigation as a pretext 

for collection of a debt in circumvention 

of a borrower’s cease communication 

protections. In any subsequent 

borrower-initiated communications 

with a servicer for the purposes of loss 

mitigation, the servicer may not and is 

strictly prohibited from making a 

request for payment, including, for 

example, initiating conversations with 

the borrower related to repayment of the 

debt (through a debt payment plan or 

otherwise), demanding that the 

borrower make a payment, requesting 

that the borrower bring the account 

current or make a partial payment on 

the account, or attempting to collect the 

outstanding balance or arrearage.146

Only if the borrower, without prompting 

from the servicer, independently 

inquires about or requests to make a 

payment or initiates a discussion of 

possible payment plans other than as 

part of loss mitigation, may the servicer 

engage in a discussion related to 

payment of the debt. The Bureau 

reiterates that servicers may not misuse 

borrower-initiated communications for 

the purpose of loss mitigation as an 

opportunity or pretext to direct or steer 

borrowers to a discussion of repayment 

or collection of the debt in 

circumvention of a borrower’s cease 

communication protections. 

Additionally, the servicer may not begin 

or resume contacting the borrower in 

contravention of the cease 

communication notification, unless the 

borrower consents or revokes a prior 

cease communication request. As 

discussed above, all other provisions of 

the FDCPA, including the prohibitions 

on unfair, deceptive, and abusive 

practices as contained in sections 805 

through 808 of the FDCPA, remain 

intact notwithstanding the proposed 

requirement that the servicer provide 

the modified written early intervention 


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147See 77 FR 57199, 57260 (Sept. 17, 2012). 

notice if loss mitigation options are 

available to borrowers who have 

exercised their FDCPA cease 

communication rights. The Bureau 

seeks comment generally on borrowerinitiated communications for the 

purpose of loss mitigation in this 

context and the scope of the Bureau’s 

proposed advisory opinion. 

Legal Authority 

The Bureau is proposing to exercise 

its authority under sections 6(j)(3) and 

19(a) of RESPA to exempt a servicer that 

is a debt collector pursuant to the 

FDCPA with regard to a mortgage loan 

from the early intervention live contact 

requirements in § 1024.39(a) when a 

borrower has exercised the cease 

communication right under the FDCPA 

prohibiting the servicer from 

communicating with the borrower 

regarding the debt. For the reasons 

discussed above, the Bureau believes at 

this time that the consumer protection 

purposes of RESPA would not be 

furthered by requiring compliance with 

§ 1024.39(a) at a time when a borrower 

has specifically requested that the 

servicer stop communicating with the 

borrower about the debt. Accordingly, 

the Bureau is proposing to implement 

proposed § 1024.39(d)(2)(i) pursuant to 

its authority under sections 6(j)(3) and 

19(a) of RESPA. 

The Bureau is also proposing to 

exercise its authority under sections 

6(j)(3) and 19(a) of RESPA to exempt a 

servicer that is a debt collector pursuant 

to the FDCPA with regard to a mortgage 

loan from the written early intervention 

notice requirements in § 1024.39(b) 

when a borrower has exercised the cease 

communication right under the FDCPA 

if no loss mitigation options are 

available. For the reasons discussed 

above, the Bureau believes at this time 

that the consumer protection purposes 

of RESPA would not be furthered by 

requiring compliance with § 1024.39(b) 

at a time when a borrower has 

specifically requested that the servicer 

stop communicating with the borrower 

about the debt and when no loss 

mitigation options are available. 

Accordingly, the Bureau is proposing to 

implement proposed § 1024.39(d)(2)(ii) 

pursuant to its authority under sections 

6(j)(3) and 19(a) of RESPA. 

The Bureau is proposing to exercise 

its authority under section 6(k)(1)(E) of 

RESPA to add proposed 

§ 1024.39(d)(2)(iii). The Bureau has 

authority to implement requirements for 

servicers to provide information about 

borrower options pursuant to section 

6(k)(1)(E) of RESPA. As the Bureau has 

previously determined, providing 

borrowers with timely information 

about loss mitigation options and the 

foreclosure process, disclosures 

encouraging servicers to work with 

borrowers to identify any appropriate 

loss mitigation options, and information 

about housing counselors and State 

housing finance authorities are 

necessary to provide borrowers a 

meaningful opportunity to avoid 

foreclosure.147 The Bureau also 

exercises its authority to prescribe rules 

with respect to the collection of debts by 

debt collectors pursuant to section 

814(d) of the FDCPA, 15 U.S.C. 

1692l(d). Pursuant to this authority, the 

Bureau is clarifying a borrower’s cease 

communication protections under the 

FDCPA. Section 805(c) of the FDCPA 

sets forth both the cease communication 

requirement and its exceptions. Under 

section 805(c)(2) and (3) of the FDCPA, 

a borrower’s cease communication 

request does not prohibit a debt 

collector from communicating with the 

borrower ‘‘to notify the consumer that 

the debt collector or creditor may 

invoke specified remedies which are 

ordinarily invoked by such debt 

collector or creditor’’ or ‘‘where 

applicable, to notify the consumer that 

the debt collector or creditor intends to 

invoke a specified remedy.’’ For the 

reasons given above, the Bureau 

believes that requiring a servicer to 

provide the written early intervention 

notice if loss mitigation options are 

available is a reasonable interpretation 

of the exceptions under section 

805(c)(2) and (3) of the FDCPA. The 

Bureau believes that because the written 

early intervention notice will generally 

be closely linked to the invocation of 

foreclosure, such a notice informs a 

borrower that the servicer may invoke or 

intends to invoke the specified remedy 

of foreclosure and thus falls within the 

scope of the exceptions under section 

805(c)(2) and (3) of the FDCPA. 

Accordingly, the Bureau is proposing to 

implement proposed § 1024.39(d)(2)(iii) 

pursuant to its authority under section 

6(k)(1)(E) of RESPA and section 814(d) 

of the FDCPA. 

Section 1024.41 Loss Mitigation 

Procedures 

41(b) Receipt of a Loss Mitigation 

Application 

Successors in interest. As described in 

the section-by-section analysis of 

§ 1024.30(d), proposed § 1024.30(d) 

provides that once a servicer confirms a 

successor in interest’s identity and 

ownership interest in the property, the 

successor in interest must be considered 

a borrower for the purposes of 

Regulation X’s mortgage servicing rules. 

Accordingly, the servicer must comply 

with § 1024.41’s loss mitigation 

procedures with respect to a loss 

mitigation application submitted by a 

confirmed successor in interest. 

Proposed comment 41(b)–1.i clarifies 

that, if a servicer receives a loss 

mitigation application, including a 

complete loss mitigation application, 

from a potential successor in interest 

before confirming that person’s identity 

and ownership interest in the property, 

the servicer may, but is not required to, 

review and evaluate the loss mitigation 

application in accordance with the 

procedures set forth in § 1024.41. The 

proposed comment also provides that if 

a servicer complies with the 

requirements of § 1024.41 for a complete 

loss mitigation application submitted by 

a potential successor in interest before 

confirming that person’s identity and 

ownership interest in the property, 

§ 1024.41(i)’s limitation on duplicative 

requests applies with respect to any loss 

mitigation application subsequently 

submitted by that person, provided that 

confirmation of the successor in 

interest’s status would not affect the 

servicer’s evaluation of the application. 

The Bureau is proposing comment 

41(b)–1.i to make clear that servicers 

may, but are not required to, review and 

evaluate loss mitigation applications 

from successors in interest before 

confirming a successor in interest’s 

identity and ownership interest in the 

property, even though servicers would 

not be required to do so under the 

proposed rule. The Bureau is proposing 

this comment to ensure that the 

proposed requirement to review and 

evaluate applications from a successor 

in interest upon confirmation of the 

successor in interest’s status would not 

imply that the servicer may not do so 

before confirmation. Further, the Bureau 

believes that where a servicer complies 

with the requirements of § 1024.41 for a 

complete loss mitigation application 

submitted by a potential successor in 

interest and confirmation of the 

successor in interest’s status would not 

affect the outcome of the successor’s 

application for loss mitigation, a 

subsequent request would be 

duplicative and thus should be subject 

to § 1024.41(i)’s limitation. 

Proposed comment 41(b)–1.ii 

provides that if a servicer receives a loss 

mitigation application from a potential 

successor in interest before confirming 

that person’s status, upon such 

confirmation the servicer must review 

and evaluate that loss mitigation 

application in accordance with the 

procedures set forth in § 1024.41. For 

purposes of § 1024.41, the servicer must 


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148See 78 FR 10695, 10824 (Feb. 14, 2013). 

149See id. 150 Id. at 10828. 151See id. 

treat the loss mitigation application as if 

it had been received on the date that the 

servicer confirmed the successor in 

interest’s status. Accordingly, servicers 

would be required to preserve any loss 

mitigation application received from a 

potential successor in interest, so that 

the servicer can review and evaluate 

that application upon confirmation of 

the successor in interest’s status and the 

successor in interest would not have to 

resubmit the loss mitigation application. 

The Bureau is proposing comment 

41(b)–1.ii because successors in interest 

may be confused by having to resubmit 

identical documents simply because the 

servicer has confirmed the successor in 

interest’s status. The Bureau believes 

that it is preferable to require servicers 

to preserve loss mitigation applications 

received from potential successors in 

interest and review and evaluate those 

loss mitigation applications upon 

confirming the successor in interest’s 

status. 

41(b)(1) Complete Loss Mitigation 

Application 

The Bureau is proposing to revise 

comment 41(b)(1)–1 to clarify that, in 

the course of gathering documents and 

information from a borrower to 

complete a loss mitigation application, 

a servicer may stop collecting 

documents and information pertaining 

to a particular loss mitigation option 

after receiving information confirming 

that the borrower is ineligible for that 

option. 

Section 1024.41(b)(1) defines a 

complete application as an application 

for which a servicer has received all the 

information the servicer requires from a 

borrower in evaluating applications for 

the loss mitigation options available to 

the borrower. Current comment 

41(b)(1)–1 explains that a servicer has 

the flexibility to establish the type and 

amount of information that it will 

require from borrowers applying for loss 

mitigation options, and the Bureau 

explained in the 2013 RESPA Servicing 

Final Rule that the servicer may tailor 

application requirements to each 

individual borrower.148 In exercising 

reasonable diligence to obtain a 

complete application under 

§ 1024.41(b)(1), therefore, a servicer may 

determine that an application is 

complete even when the borrower has 

not submitted certain information that 

the servicer regularly requires but is 

irrelevant with respect to that particular 

borrower.149

The Bureau has learned from servicers 

and consumer advocacy groups that 

some servicers have been attempting to 

collect a large number of documents 

from borrowers, including some that are 

irrelevant to determining whether a 

particular borrower is eligible for any 

loss mitigation option. To the extent 

that this practice represents a servicer’s 

good faith effort to exercise reasonable 

diligence under § 1024.41(b)(1), the 

Bureau wishes to clarify that 

§ 1024.41(b)(1) does not require it. The 

Bureau believes that an interpretation 

that § 1024.41(b)(1) requires a servicer to 

collect documents or information after 

the servicer has confirmed that such 

documents cannot affect the outcome of 

an evaluation unnecessarily burdens 

both the servicer and the borrower and 

hinder efforts to complete the loss 

mitigation application. 

Therefore, the Bureau is proposing to 

amend comment 41(b)(1)–1 to explain 

that, in the course of gathering 

documents and information from a 

borrower to complete a loss mitigation 

application, a servicer may stop 

collecting documents or information for 

a particular loss mitigation option after 

receiving information confirming that 

the borrower is ineligible for that 

option. As revised, proposed comment 

41(b)(1)-1 includes the following 

example: if a particular loss mitigation 

option is only available for military 

servicemembers, once a servicer 

receives documents or information 

confirming that the borrower is not a 

military servicemember, the servicer 

may stop collecting documents or 

information from the borrower that the 

servicer would use to evaluate the 

borrower for that loss mitigation option. 

The proposed comment further explains 

that making such a determination does 

not affect a servicer’s obligation to 

exercise reasonable diligence in 

obtaining a complete application; the 

servicer must continue its efforts to 

obtain documents and information from 

the borrower that pertain to all other 

available loss mitigation options. 

Finally, the proposed comment provides 

that a servicer may not stop collecting 

documents and information for any loss 

mitigation option based solely upon the 

borrower’s stated preference for a 

different loss mitigation option. 

As the Bureau explained in the 2013 

RESPA Servicing Final Rule, the Bureau 

believes that an application process that 

would impose an obligation on 

borrowers to select a desired loss 

mitigation option and permit servicers 

to evaluate the borrower for only that 

option would be inappropriate.150 The 

Bureau believes that requiring servicers 

to evaluate loss mitigation applications 

for all loss mitigation options available 

to a borrower helps the borrowers make 

better-informed decisions about the 

complex options involved in loss 

mitigation.151 The Bureau is also 

concerned that permitting a servicer to 

stop collecting borrower information 

based solely upon a borrower’s stated 

preference for one option or another 

might allow the servicer to 

inappropriately influence the borrower’s 

preference during communications with 

the borrower. It also might allow the 

servicer to otherwise circumvent 

§ 1024.41 by simply choosing to review 

a borrower for a particular loss 

mitigation option, as it would be 

difficult to verify whether a borrower 

has expressed such a preference. 

However, the Bureau believes that, 

where a servicer receives information 

that conclusively demonstrates that a 

borrower is not eligible for a particular 

loss mitigation option, as in the example 

in proposed comment 41(b)(1)–1, 

borrowers and servicers will benefit 

from clarity in the comment that the 

servicer may stop collecting information 

from the borrower that the servicer 

might otherwise need to complete the 

application. The Bureau believes that 

proposed comment 41(b)(1)-1 would 

help ensure that servicers continue to 

consider borrowers for all loss 

mitigation options in a single 

application process notwithstanding the 

significant flexibility servicers enjoy in 

establishing application requirements. 

The Bureau also notes that pursuant 

to proposed comment 41(b)(1)–1, a 

servicer may stop collecting documents 

and information from a borrower 

pertaining to a particular loss mitigation 

option after receiving information 

confirming that the borrower is 

ineligible for that option, even if the 

servicer previously requested such 

documents and information in the 

notice sent pursuant to 

§ 1024.41(b)(2)(i)(B). 

41(b)(2) Review of a Loss Mitigation 

Application Submission 

41(b)(2)(i) Requirements 

The Bureau is proposing to add 

comment 41(b)(2)(i)–1 to clarify the 

timelines for when a servicer must 

review and acknowledge a borrower’s 

loss mitigation application when no 

foreclosure sale has been scheduled as 

of the date the loss mitigation 

application is received. Under 

§ 1024.41(b)(2)(i), if a servicer receives a 

loss mitigation application 45 days or 

more before a foreclosure sale, the 

servicer must: (1) Promptly review the 


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152 12 CFR 1024.41(b)(2)(i). 

153 In the September 2013 Mortgage Final Rule, 

the Bureau adopted new § 1024.41(b)(3) and related 

commentary to address borrowers’ rights where no 

foreclosure sale has been scheduled as of the date 

a complete loss mitigation application is received. 

The final rule clarified that if a foreclosure sale has 

not yet been scheduled as of the date that a 

complete loss mitigation application is received, the 

application shall be treated as if it were received at 

least 90 days before a foreclosure sale. See 78 FR 

60381, 60397 (Oct. 1, 2013). 154 78 FR 60381, 60395–96 (Oct. 1, 2013). 155See id. 

application to determine if it is 

complete, and (2) within five days of 

receiving the application, notify the 

borrower that the application was 

received and is complete or incomplete, 

and if incomplete, state the additional 

documents and information needed to 

complete the application.152

Section 1024.41(b)(2)(i) does not 

expressly address whether this 

requirement applies when an 

application is received before a 

foreclosure sale is scheduled.153 The 

Bureau believes that, in that scenario, 

the application was still received ‘‘45 

days or more before a foreclosure sale,’’ 

and that the requirements of 

§ 1024.41(b)(2)(i) still apply. To codify 

this interpretation, the Bureau is 

proposing to add new comment 

41(b)(2)(i)–1, which provides that for 

purposes of § 1024.41(b)(2)(i), if a 

foreclosure sale has not been scheduled 

as of the date an application is received, 

the application shall be treated as if it 

were received at least 45 days before a 

foreclosure sale. The proposed comment 

clarifies that servicers must comply 

with all of the requirements of 

§ 1024.41(b)(2)(i) even when no 

foreclosure sale has been scheduled as 

of the date a servicer receives a 

borrower’s loss mitigation application. 

The Bureau believes that the proposed 

comment will provide certainty to 

servicers and borrowers. 

41(b)(2)(ii) Time Period Disclosure 

The Bureau is proposing to revise 

commentary discussing a servicer’s 

obligations in setting a reasonable date 

for the return of documents and 

information under § 1024.41(b)(2)(ii). 

When a borrower submits an 

incomplete loss mitigation application 

at least 45 days before a scheduled 

foreclosure sale, § 1024.41(b)(2)(ii) 

requires the servicer to select a 

reasonable date by which the borrower 

should return documents and 

information to complete the application. 

Current comment 41(b)(2)(ii)–1 clarifies 

that, in selecting this date, the servicer 

should consider four specific milestones 

that implicate borrower protections 

under § 1024.41: (1) The date by which 

any document or information that a 

borrower submitted will be considered 

stale or invalid pursuant to any 

requirements applicable to any available 

loss mitigation option, (2) the date that 

is the 120th day of the borrower’s 

delinquency, (3) the date that is 90 days 

before a foreclosure sale, and (4) the 

date that is 38 days before a foreclosure 

sale. In general, as each milestone 

passes, it becomes more likely that a 

borrower will enjoy fewer protections 

under § 1024.41 when the application 

becomes complete. As the Bureau 

explained in the September 2013 

Mortgage Final Rule, § 1024.41(b)(2)(ii) 

was drafted to afford the servicer 

sufficient flexibility to set a date for the 

return of documents that will maximize 

a borrower’s protections in light of the 

borrower’s individual application 

timeline.154

The Bureau has received a number of 

inquiries from servicers seeking 

guidance on how they should determine 

the reasonable date under 

§ 1024.41(b)(2)(ii) when the nearest 

remaining milestone is not scheduled to 

take place for a significant amount of 

time. This might be the case, for 

example, when the borrower has not 

submitted any information that can go 

stale, the loan is more than 120 days 

delinquent, and the foreclosure sale is 

scheduled to take place in six months. 

In this circumstance, the nearest 

remaining milestone might not occur for 

three months—the date that is 90 days 

before the foreclosure sale. Servicers 

have questioned whether, in similar 

situations, § 1024.41(b)(2)(ii) requires a 

servicer to select a reasonable date that 

allows the borrower months to return 

the necessary documents, or whether 

the servicer may select an earlier date in 

order to encourage the borrower to 

respond more promptly. 

The Bureau has learned that different 

servicers use different approaches when 

the nearest remaining milestone is 

months away. One servicer informed the 

Bureau that it selects the nearest 

remaining milestone as the reasonable 

date for the return of documents, even 

when the milestone is many months in 

the future. Several other servicers 

indicated that they always select the 

earlier of 90 days or the nearest 

remaining milestone. 

The Bureau believes that selecting a 

reasonable date that is months away 

may ultimately disadvantage some 

borrowers. As the Bureau explained in 

the September 2013 Mortgage Final 

Rule, the reasonable date provision 

under § 1024.41(b)(2)(ii) was intended, 

in part, to maximize borrower 

protections by encouraging the borrower 

to submit necessary information in time 

to receive the most protections possible 

under § 1024.41.155 The Bureau believes 

that allowing a borrower 90 days or 

more to return documents may 

discourage borrowers from promptly 

providing documents and information 

necessary to complete a loss mitigation 

application, which ultimately may not 

further the goal of maximizing their 

protections under § 1024.41. Generally, 

the longer a borrower waits to submit 

documentation to complete an 

application, the greater the risk that a 

delinquency will grow, which might 

negatively affect the borrower’s 

eligibility to receive loss mitigation and 

might make it more difficult for the 

borrower to perform under a loss 

mitigation program that the servicer 

later offers. Several servicers have 

informed the Bureau that they share 

these concerns but have been reluctant 

to set an earlier return date for fear of 

violating § 1024.41(b)(2)(ii). 

In order to encourage servicers to set 

reasonable dates that will avoid these 

outcomes, as well as to clarify the 

contents of comment 41(b)(2)(ii)–1, the 

Bureau is proposing to revise comment 

41(b)(2)(ii)–1 and add comments 

41(b)(2)(ii)–2 and 3. As amended, 

proposed comment 41(b)(2)(ii)–1 states 

that, in setting a reasonable date for the 

return of documents and information 

under § 1024.41(b)(2)(ii), a servicer must 

allow a reasonable period of time for the 

borrower to obtain and submit 

documents and information necessary to 

make the loss mitigation application 

complete. The proposed comment also 

explains that, generally, a reasonable 

period of time would not be less than 

seven days. 

Proposed comment 41(b)(2)(ii)–2 also 

provides, as 41(b)(2)(ii)–1 currently 

does, that a servicer must preserve 

maximum borrower rights under 

§ 1024.41 in setting a reasonable date 

under § 1024.41(b)(2)(ii). However, 

proposed comment 41(b)(2)(ii)–2 also 

states that subject to comment 

41(b)(2)(ii)’s clarification that the 

servicer allow the borrower a reasonable 

period of time to obtain and submit 

necessary documents, a servicer 

generally should not set a reasonable 

date that is further away than the 

nearest of the remaining milestones, 

which would be listed in proposed 

comment 41(b)(2)(ii)–2. 

Finally, proposed comment 

41(b)(2)(ii)–3 addresses situations where 

the nearest remaining milestone will not 

occur for several months based on the 

timing of a scheduled foreclosure sale 

and the documents that the borrower 

had already submitted when the 


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156See id. 157 78 FR 10695, 10836 (Feb. 14, 2013). 

servicer selects a reasonable date for the 

return of documents or information. The 

proposed comment states that a servicer 

has flexibility in selecting a reasonable 

date, subject to comments 41(b)(2)(ii)–1 

and 2, and that a servicer may select any 

date that it determines both maximizes 

borrower rights under § 1024.41 and 

allows the borrower a reasonable period 

of time to obtain and submit documents 

and information necessary to make the 

loss mitigation application complete. 

The proposed comment also provides 

the following explanatory example: a 

servicer may set a reasonable date that 

is earlier than the nearest remaining 

milestone listed in comment 

41(b)(2)(ii)–2 and does not need to 

select that milestone as the reasonable 

date itself. 

The Bureau believes that the proposed 

revisions would clarify servicers’ 

obligations under § 1024.41(b)(2)(ii). 

The Bureau believes that the proposed 

revisions would help servicers by 

clarifying that they have significant 

flexibility in setting a reasonable date 

under § 1024.41(b)(2)(ii)—servicers may 

select any date that they determine 

preserves maximum borrower 

protections and allows borrowers a 

reasonable period of time to submit the 

requested information. As noted above, 

the Bureau believes that a flexible 

standard permits servicers to account 

for borrowers’ individual circumstances 

and maximize protections for each 

borrower when selecting a reasonable 

date under § 1024.41(b)(2)(ii).156 The 

proposed revisions should shorten 

application timelines where 

appropriate, encourage borrowers to 

respond more promptly, and increase 

the likelihood of a successful loss 

mitigation outcome for the borrower. 

The Bureau seeks comment on 

whether this proposal will provide 

servicers with sufficient guidance in 

setting a reasonable date for the return 

of documents and information under 

§ 1024.41(b)(2)(ii) that will maximize 

borrower protections. The Bureau also 

seeks comment on whether to address 

expressly those situations where the 

nearest remaining milestone will not 

occur for several months based on the 

date of a scheduled foreclosure sale and 

the documents the borrower had 

submitted at the time the servicer 

selects the reasonable date under 

§ 1024.41(b)(2)(ii). The Bureau also 

seeks comment on whether the Bureau 

should adopt a less flexible standard 

that would leave servicers with little or 

no discretion in setting a reasonable 

date under § 1024.41(b)(2)(ii), and if so, 

what would constitute an appropriate 

standard under such an approach. 

41(c) Evaluation of Loss Mitigation 

Applications 

41(c)(1) Complete Loss Mitigation 

Application 

Under § 1024.41(c)(1), a servicer that 

receives a complete loss mitigation 

application more than 37 days before a 

foreclosure sale must, within 30 days of 

receiving the complete application, 

evaluate the borrower for all loss 

mitigation options available to the 

borrower and provide the borrower with 

a notice in writing stating, among other 

things, the servicer’s determination of 

which loss mitigation options, if any, it 

will offer to the borrower. Furthermore, 

pursuant to § 1024.41(e)(1), if a 

complete loss mitigation application is 

received less than 90 days but more 

than 37 days before a foreclosure sale, 

a servicer may require that a borrower 

accept or reject an offer of a loss 

mitigation option no earlier than seven 

days after the servicer provides the offer 

to the borrower. In the Bureau’s 

February 2013 RESPA Servicing Final 

Rule, the Bureau stated that it believes 

the timing of the loss mitigation 

procedures, including the appeal 

process, are clear—‘‘[a]ll such deadlines 

are based on when information is 

received by or provided by a 

servicer.’’157

However, the Bureau has heard some 

concerns about the scenario where a 

servicer receives a complete loss 

mitigation application 38 days before a 

foreclosure sale, evaluates the borrower 

for all loss mitigation options available, 

and 30 days later provides the borrower 

the written notice stating the servicer’s 

determination of which loss mitigation 

options it will offer. The borrower has 

a minimum of seven days to accept or 

reject the offer, but accounting for the 

time it takes for the notice to reach the 

borrower, particularly if provided by 

mail, the borrower may effectively have 

less than seven days to accept or reject 

the offer. Additionally, assuming that 

the borrower mails an acceptance of a 

loss mitigation option to the servicer in 

this scenario, it is possible that the 

servicer may not receive the borrower’s 

response until after the date of the 

foreclosure sale. The Bureau believes 

that this potential timeline may be 

problematic and may impact a 

borrower’s ability to timely respond, 

especially when a borrower is just days 

away from a scheduled foreclosure sale. 

The Bureau understands that a similar 

situation may arise with respect to the 

length of time that a borrower has to 

make an appeal. Section 1024.41(h)(2) 

provides that a servicer shall permit a 

borrower to make an appeal within 14 

days after the servicer provides the offer 

of a loss mitigation option to the 

borrower. Again, accounting for the time 

it takes for the notice to reach the 

borrower, particularly if provided by 

mail, the borrower may effectively have 

less than 14 days to make an appeal. 

The Bureau makes no proposal at this 

time but seeks comment on whether the 

timing and method of correspondence of 

loss mitigation offers and appeals 

between servicers and borrowers 

generally is presenting a problem. The 

Bureau further seeks comment on the 

specific scenario described above in 

which a complete loss mitigation 

application is received on or near the 

38th day before a foreclosure sale and 

whether borrowers are facing particular 

difficulties timely responding to 

servicers in this context. The Bureau 

reminds servicers that under 

§ 1024.38(b)(1)(i), a servicer must 

maintain policies and procedures that 

are reasonably designed to ensure that 

the servicer can provide accurate and 

timely disclosures to a borrower as 

required by Regulation X’s mortgage 

servicing rules, including § 1024.41, or 

other applicable law. 

41(c)(2) Incomplete Loss Mitigation 

Application Evaluation 

41(c)(2)(iii) Payment Forbearance 

The Bureau is proposing to revise 

§ 1024.41(c)(2)(iii) to permit servicers to 

offer short-term repayment plans based 

upon an evaluation of an incomplete 

loss mitigation application. Section 

1024.41(c)(2) generally prohibits a 

servicer from evading the requirement 

to evaluate a complete loss mitigation 

application by offering a loss mitigation 

option based upon an evaluation of any 

information provided by a borrower in 

connection with an incomplete 

application. However, current 

§ 1024.41(c)(2)(iii) offers an exception to 

this rule—it permits a servicer to offer 

a short-term payment forbearance 

program based upon an incomplete 

application. 

The Bureau has received inquiries 

seeking clarification of whether 

§ 1024.41(c)(2)(iii) also permits a 

servicer to offer a short-term repayment 

plan based upon an evaluation of an 

incomplete application. For the reasons 

explained below, the Bureau believes 

that it is appropriate, under certain 

conditions, to permit servicers to offer 

short-term repayment plans based upon 

an evaluation of an incomplete loss 

mitigation application. 


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158 78 FR 60381, 60398–400 (Oct. 1, 2013). 

159See id. at 60399–400 (discussing the rationale 

for permitting short-term forbearance programs 

based upon the evaluation of an incomplete 

application). 

160The Bureau appreciates that some industry 

participants consider repayment plans to be a form 

of forbearance. In order to avoid confusion 

regarding the definition of a forbearance program, 

proposed § 1024.41(c)(2)(iii) explicitly differentiates 

between the two. See note 166, infra, (clarifying the 

primary distinction between the definitions of 

short-term repayment plans and short-term 

payment forbearance programs). 

161See 78 FR 60381, 60399–400 (Oct. 1, 2013) 

(discussing the rationale for permitting short-term 

forbearance programs based on an evaluation of an 

incomplete application). 

162See 78 FR 39901, 39913 (July 2, 2013) 

(discussing similar considerations about expending 

the protections of § 1024.41 in context of short-term 

paymentforbearance programs). 

163 78 FR 60381, 60399–400 (Oct. 1, 2013). 

164See id. 

165 Id. at 603400 (discussing similar 

considerations in context of short-term payment 

forbearance programs offered under 

§ 1024.41(c)(2)(iii)). 

In the Bureau’s September 2013 

Mortgage Final Rule, the Bureau 

explained that permitting a servicer to 

offer a short-term payment forbearance 

program based upon an incomplete 

application was an appropriate 

exception to § 1024.41(c)(1)’s general 

requirement that a borrower should be 

evaluated for all available loss 

mitigation options at once, and only 

after a servicer receives a complete 

application.158 The Bureau determined 

that allowing the short-term payment 

forbearance exception under 

§ 1024.41(c)(2)(iii) would, with 

appropriate safeguards, benefit 

borrowers by permitting a relatively 

efficient solution to a temporary 

hardship without exhausting a 

borrower’s protections under 

§ 1024.41.159 The Bureau believes that 

the same considerations apply to shortterm repayment plans and therefore 

proposes to expressly include them 

under § 1024.41(c)(2)(iii).160

Therefore, the Bureau is proposing to 

amend § 1024.41(c)(2)(iii) to permit 

servicers to offer a short-term payment 

forbearance program or a short-term 

repayment plan to a borrower based 

upon an evaluation of an incomplete 

loss mitigation application. Proposed 

§ 1024.41(c)(2)(iii) requires that the 

short-term payment forbearance 

program or repayment plan must be 

provided to the borrower in writing 

before the program or plan begins and 

must clearly specify the payment terms 

and duration. As is already the case 

where a servicer offers a short-term 

payment forbearance program, proposed 

§ 1024.41(c)(2)(iii) requires that a 

servicer shall not make the first notice 

or filing required by applicable law for 

any judicial or non-judicial foreclosure 

process, and shall not move for 

foreclosure judgment or order of sale, or 

conduct a foreclosure sale, if a borrower 

is performing pursuant to the terms of 

a payment forbearance program or 

repayment plan offered under 

§ 1024.41(c)(2)(iii). Finally, proposed 

§ 1024.41(c)(2)(iii) provides that a 

servicer may offer a short-term 

forbearance program in conjunction 

with a short-term repayment plan. 

As with short-term payment 

forbearance programs, the Bureau 

believes that permitting a servicer to 

offer a short-term repayment plan based 

upon an evaluation of an incomplete 

application affords a servicer flexibility 

to address a borrower’s temporary 

hardship in a relatively efficient 

manner.161 The Bureau further believes 

that permitting a servicer to offer a 

short-term repayment plan based on an 

evaluation of an incomplete application 

could reduce the burden on both 

servicers and some borrowers by 

eliminating the need to gather many 

borrower documents that may be 

necessary to complete an application 

under § 1024.41(b)(1). Further, the 

Bureau believes that permitting a 

servicer to offer a short-term repayment 

plan based upon an evaluation of an 

incomplete application provides 

borrowers a way to address a temporary 

hardship without exhausting 

protections provided under § 1024.41 

that begin once an application becomes 

complete.162

However, as the Bureau discussed in 

the September 2013 Mortgage Final 

Rule, permitting a servicer to offer loss 

mitigation based upon an evaluation of 

an incomplete application could 

potentially have adverse consequences 

for a borrower.163 If a servicer were to 

inappropriately divert a borrower into a 

loss mitigation program based upon an 

incomplete application, it could 

exacerbate a delinquency and put the 

borrower at risk of losing the 

opportunity to complete the application 

and receive the full protections of 

§ 1024.41.164 Also, a borrower who is 

offered a short-term payment 

forbearance program or short-term 

repayment plan under proposed 

§ 1024.41(c)(2)(iii) may be experiencing 

a hardship for which other, longer-term 

loss mitigation solutions might be more 

appropriate for a particular borrower’s 

circumstance. 

To mitigate these concerns, the 

Bureau is proposing to apply comments 

41(c)(2)(iii)–2 and 41(c)(2)(iii)–3, which 

currently mitigate against such risks for 

short-term payment forbearance 

programs, to short-term repayment 

plans. Proposed comment 41(c)(2)(iii)–2 

explains that, where a servicer offers a 

short-term payment forbearance 

program or a short-term repayment plan 

based on the evaluation of an 

incomplete application, the application 

remains subject to the other obligations 

in § 1024.41. These obligations include 

reviewing the application for 

completeness under § 1024.41(b)(2), 

exercising reasonable diligence under 

§ 1024.41(b)(1), and providing the 

borrower with the § 1024.41(b)(2)(i)(B) 

notice acknowledging the servicer’s 

receipt of the application and indicating 

that the servicer has determined that the 

application is incomplete. Proposed 

comment 41(c)(2)(iii)–3 explains that, 

even if a servicer offers a short-term 

payment forbearance program or a shortterm repayment plan based on an 

evaluation of an incomplete loss 

mitigation application, the servicer must 

comply with all the requirements in 

§ 1024.41 if the borrower completes the 

loss mitigation application. 

The Bureau believes that the proposed 

revisions to comments 41(c)(2)(iii)–2 

and 3 would help ensure that servicers 

do not offer short-term repayment plans 

based on incomplete loss mitigation 

applications to evade their obligations 

under § 1024.41. As the Bureau 

explained in the September 2013 

Mortgage Final Rule, these protections 

help preserve a borrower’s option to 

submit a complete application and be 

considered for a long-term loss 

mitigation solution where 

appropriate.165

To further mitigate the risks 

associated with permitting a servicer to 

offer a loss mitigation option based 

upon an evaluation of an incomplete 

application, the Bureau also is 

proposing to revise comment 41(b)(1)– 

4.iii to clarify a servicer’s obligation to 

exercise reasonable diligence during a 

short-term payment forbearance 

program or short-term repayment plan. 

Proposed comment 41(b)(1)–4.iii 

provides that reasonable diligence 

under § 1024.41(b)(1) requires a servicer 

to notify a borrower when a short-term 

repayment plan is being offered based 

on an evaluation of an incomplete 

application. The servicer must notify 

the borrower that the borrower has the 

option of completing the application to 

receive a full evaluation of all loss 

mitigation options available to the 

borrower. Proposed comment 41(b)(1)– 

4.iii. further explains that, if a servicer 

provides such a notification, the 

borrower remains in compliance with a 

payment forbearance program or 

repayment plan, and the borrower does 


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166The proposed definition of ‘‘short-term 

repayment plan’’ would address repayment of 

already existing arrearage, in contrast to the 

definition of a payment forbearance program 

(defined under comment 41(c)(2)(iii)–1), which 

allows a borrower to forgo making certain payments 

or portions of payments for a period of time. 

not request further assistance, the 

servicer may suspend reasonable 

diligence efforts while the borrower 

remains in compliance with the shortterm repayment plan and does not 

request further assistance, but that, if 

the borrower remains delinquent near 

the end of the program or plan, the 

servicer should contact the borrower 

near the end of the forbearance or 

repayment period to determine if the 

borrower wishes to complete the 

application and proceed with a full loss 

mitigation evaluation. The Bureau 

believes that permitting the servicer to 

suspend document collection while a 

borrower is performing under a shortterm repayment plan will limit borrower 

confusion and avoid unnecessary 

servicer burden, but that continued 

servicer engagement at the outset and 

near the end of the plan will help the 

borrower make well-informed decisions 

about the mortgage loan. 

As noted above, the Bureau is 

proposing to amend § 1024.41(c)(2)(iii) 

to require that a short-term payment 

forbearance program or a short-term 

repayment plan must be provided to the 

borrower in writing before the program 

or plan begins and must clearly specify 

the payment terms and duration. The 

Bureau believes that requiring a servicer 

to send the borrower the terms of any 

loss mitigation option offered under 

proposed § 1024.41(c)(2)(iii) in writing 

before the program or plan begins will 

reduce misunderstandings between the 

servicer and the borrower regarding the 

terms and existence of a payment 

forbearance program or repayment plan. 

The Bureau understands that, in the 

past, such misunderstandings 

sometimes resulted in the borrower 

making incorrect payments, causing the 

delinquency to grow in size and 

duration. 

The Bureau is also proposing a change 

to comment 41(c)(2)(iii)–1 to clarify that 

§ 1024.41(c)(2)(iii) no longer applies 

exclusively to short-term payment 

forbearance programs. As amended, the 

first sentence of comment 41(c)(2)(iii)– 

1 states that the exemption under 

§ 1024.41(c)(2)(iii) applies to, ‘‘among 

other things,’’ short-term payment 

forbearance programs. The comment 

would otherwise remain in its current 

form. 

Definition of ‘‘Short-Term Repayment 

Plan’’ 

The Bureau is also proposing to add 

comment 41(c)(2)(iii)–4 to define a 

repayment plan as a loss mitigation 

option pursuant to which a servicer 

allows a borrower to repay past due 

payments over a specified period of 

time until the mortgage loan account is 

current.166 Under this definition, only 

those plans that would cure a 

delinquency would be permitted under 

§ 1024.41(c)(2)(iii). The Bureau believes 

that this is essential to protect a 

borrower because a borrower generally 

remains delinquent during a repayment 

plan—and the longer a delinquency 

exists without a complete application, 

the fewer borrower protections 

§ 1024.41 is likely to provide if the 

borrower later completes the 

application. By requiring the plan to 

cure the borrower’s delinquency if 

successfully completed, the Bureau 

seeks to prohibit a servicer from offering 

a repayment plan that would likely 

leave the borrower in a worse position. 

Proposed comment 41(c)(2)(iii)–4 

defines short-term repayment plans to 

include no more than three months of 

payments due and a repayment period 

lasting no more than six months. The 

Bureau believes that the definition of a 

short-term repayment plan should limit 

both the maximum amount of the 

arrearage that may be included in the 

plan and the maximum time of 

repayment. The Bureau believes that 

these limitations will help protect 

borrowers who accept offers for shortterm repayment plans by increasing the 

likelihood that the borrowers will 

successfully complete the plans. The 

Bureau believes that a borrower is less 

likely to complete a repayment plan that 

accounts for a larger delinquency; and 

that longer-term plans may be more 

difficult for borrowers to complete 

successfully. The Bureau also believes 

that borrowers may not be served as 

well by extended repayment plans—the 

longer the repayment period lasts, the 

longer the delinquency remains and the 

longer negative credit reporting 

continues. 

Additionally, a borrower who accepts 

a short-term repayment plan based upon 

an evaluation of an incomplete 

application risks losing the protections 

of § 1024.41 depending on whether and 

when the borrower completes the 

application. Generally, the longer a 

borrower’s application remains 

incomplete, the greater the risk that the 

borrower will enjoy fewer protections 

under § 1024.41. For example, under 

§ 1024.41(f)(1)(i), a servicer may not 

make the first notice or filing for any 

judicial or non-judicial foreclosure 

process until a borrower’s mortgage loan 

obligation is more than 120 days 

delinquent. Similarly, several 

protections under § 1024.41 only apply 

if a borrower completes the loss 

mitigation application a certain number 

of days before a foreclosure sale, 

including the evaluation timelines 

under § 1024.41(c)(1), foreclosure 

protections under § 1024.41(g), and 

appeal rights under § 1024.41(h), among 

others. Therefore, the longer a shortterm repayment plan offered under 

§ 1024.41(c)(2)(iii) lasts, the greater the 

risk that a borrower will lose important 

protections under § 1024.41 if the 

borrower fails to complete the plan. 

Consequently, the Bureau is proposing, 

in the context of incomplete 

applications, to limit the duration of a 

short-term repayment plan offered based 

upon an incomplete application, require 

that the plan bring the borrower current, 

and prohibit servicers from proceeding 

to foreclosure while the borrower is 

performing on the short-term repayment 

plan. The Bureau seeks comment on the 

adequacy of these protections for 

borrowers. 

The Bureau also solicits comment on 

the appropriate maximum duration for 

short-term repayment plans offered 

under § 1024.41(c)(2)(iii). The Bureau 

notes that proposed comment 

41(c)(2)(iii)–2 does not preclude a 

servicer from offering a longer-term 

repayment plan; it merely prohibits the 

servicer from doing so based upon an 

evaluation of an incomplete application. 

41(c)(2)(iv) Facially Complete 

Application 

The Bureau is proposing to revise 

§ 1024.41(c)(2)(iv). First, the Bureau is 

proposing a minor technical change to 

§ 1024.41(c)(2)(iv) to correct an 

erroneous reference to 

§ 1026.41(b)(2)(i)(B), which should 

instead be a reference to 

§ 1024.41(b)(2)(i)(B). Second, the Bureau 

is proposing to amend 

§ 1024.41(c)(2)(iv) to provide that an 

application is facially complete if a 

servicer is required under proposed 

§ 1024.41(c)(3) to send the borrower a 

notice of complete application. 

Currently, § 1024.41(c)(2)(iv) provides 

that, if a borrower submits all the 

missing documents and information as 

stated in the notice required pursuant to 

§ 1024.41(b)(2)(i)(B), or no additional 

information is requested in such notice, 

an application shall be considered 

facially complete. Section 

1024.41(c)(2)(iv) provides a series of 

protections that apply once an 

application is facially complete. First, if 

the servicer later discovers that 

additional information or corrections 

are required to complete the 

application, the servicer must promptly 


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167Sections 1024.41(d), (e), (f)(2), (g), and (h) 

respectively provide borrowers protections relating 

to a servicer’s denial of a loan modification, the 

amount of time a borrower will have to respond to 

an offer of a loss mitigation option, dual tracking, 

and the right to appeal. 

168Under § 1024.41(c) provides that a servicer’s 

evaluation of a complete application is subject to 

a specific timeline and various other requirements. 

request the missing information or 

corrected documents and treat the 

application as complete for purposes of 

the dual tracking protections under 

§ 1024.41(f)(2) and (g) until the borrower 

is given a reasonable opportunity to 

complete the application. If the 

borrower completes the application 

within this period, § 1024.41(c)(2)(iv) 

also requires a servicer to consider the 

application as complete as of the date it 

was facially complete for the purposes 

of § 1024.41(d), (e), (f)(2), (g), and (h),167

and as of the date the application was 

actually complete for the purposes of 

§ 1024.41(c).168

As explained in the section-by-section 

analysis of § 1024.41(c)(3), proposed 

§ 1024.41(c)(3)(i) requires a servicer to 

provide a written notice informing the 

borrower, among other things, that the 

application is complete, the date the 

application became complete, and that 

the servicer expects to complete its 

evaluation within 30 days of the date it 

received the complete application. The 

Bureau believes that this notice of 

complete application would ensure that 

borrowers are informed of the next steps 

in the loss mitigation evaluation process 

and enable borrowers to make betterinformed decisions about their finances. 

The Bureau also believes that this notice 

would limit confusion for both servicers 

and borrowers in determining which 

protections apply under § 1024.41, as 

many of those protections begin when 

the application becomes complete. 

However, the Bureau recognizes that, in 

certain circumstances, servicers might 

require additional documents or 

information from a borrower after 

sending a notice of complete application 

under proposed § 1024.41(c)(3)(i). For 

example, a servicer might require 

additional information after learning 

that a borrower has a source of income 

that the servicer first learned about 

while reviewing the complete 

application. To clarify the status of an 

application in this circumstance, the 

Bureau is proposing to provide 

expressly that the facially complete 

provision applies to an application for 

which a servicer has provided the notice 

of complete application under proposed 

§ 1024.41(c)(3)(i). 

Proposed § 1024.41(c)(2)(iv) states 

that a loss mitigation application shall 

be considered facially complete when a 

borrower submits all the missing 

documents and information as stated in 

the notice required under 

§ 1024.41(b)(2)(i)(B), no additional 

information is requested in such notice, 

or when the servicer is required under 

§ 1024.41(c)(3) to send the borrower a 

notice of complete application. 

Proposed § 1024.41(c)(iv) provides the 

identical protections as does current 

§ 1024.41(c)(2)(iv). However, if a 

borrower timely completes an 

application after a servicer requests 

additional information or corrections to 

a previously submitted document, 

proposed § 1024.41(c)(iv) requires the 

application be treated as complete as of 

as of the date it first became facially 

complete for the purposes of 

§ 1024.41(d), (e), (f)(2), (g), and (h), and 

as of the date the application was 

actually complete for the purposes of 

§ 1024.41(c). 

The Bureau believes that these 

proposed amendments would provide 

both borrowers and servicers with 

certainty about whether and when 

various protections apply under 

§ 1024.41 in the circumstance where a 

servicer requires additional information 

for an application that the borrower 

previously completed. The Bureau also 

believes that these proposed 

amendments are appropriate to make 

clear that a borrower who has been 

informed that the application is 

complete will not lose protections if the 

servicer subsequently determines that it 

needs additional information. Finally, 

the Bureau believes that ensuring that 

many of a borrower’s protections under 

§ 1024.41 continue to apply will 

encourage servicers to efficiently 

process loss mitigation applications, 

which will reduce unnecessary delay in 

completing the evaluation. 

41(c)(3) Notice of Complete 

Application 

The Bureau is proposing to require a 

servicer to provide a written notice of 

complete application under new 

§ 1024.41(c)(3). 

The Bureau has learned from 

consumer advocacy groups that, during 

the loss mitigation application process, 

borrowers are frequently uncertain 

about whether an application is 

complete. Consumer advocacy groups 

and servicers inform the Bureau that, 

after a borrower submits documents and 

information that a servicer requests to 

complete an application, servicers often 

require the borrower to submit 

additional information or corrected 

versions of previously submitted 

documents several times during the 

application process, both before and 

after an application becomes complete. 

However, § 1024.41 currently requires a 

servicer to notify a borrower that an 

application is complete only if this is 

the case when the servicer provides the 

notice acknowledging receipt of an 

application under § 1024.41(b)(2)(i)(B). 

The Bureau understands from outreach 

efforts that applications are rarely 

complete at this stage, so many 

borrowers who complete an application 

might not receive notice that they have 

done so. 

The Bureau is proposing to add 

§ 1024.41(c)(3)(i) to require a servicer to 

provide a borrower a written notice, 

including specific information, 

promptly upon receiving the borrower’s 

complete application. The notice must 

inform the borrower that the application 

is complete; the date the servicer 

received the complete application; 

whether a foreclosure sale was 

scheduled as of the date the servicer 

received the complete application and, 

if so, the date of that scheduled sale; 

and the date the borrower’s foreclosure 

protections began under § 1024.41(f)(2) 

and (g) as applicable, with a concise 

description of those protections. The 

notice must also include a statement 

that the servicer expects to complete its 

evaluation within 30 days of the date it 

received the complete application and a 

statement that, although the application 

is complete, the borrower may need to 

submit additional information at a later 

date if the servicer determines that it is 

necessary. Finally, the notice must 

inform the borrower, if applicable, that 

the borrower will have the opportunity 

to appeal the servicer’s determination to 

deny the borrower for any trial or 

permanent loan modification under 

§ 1024.41(h). 

Proposed § 1024.41(c)(3)(ii) provides 

that a servicer is not required to provide 

the notice of complete application in 

three circumstances: if the servicer has 

already notified the borrower under 

§ 1024.41(b)(2)(i)(B) that the application 

is complete and the servicer has not 

subsequently requested additional 

information or a corrected version of a 

previously submitted document from 

the borrower to complete the 

application; the application was not 

complete or facially complete more than 

37 days before a foreclosure sale; or the 

servicer has already provided a notice 

approving or denying the application 

under § 1024.41(c)(1)(ii). 

The Bureau is also proposing 

commentary to explain certain aspects 

of the notice requirement under 

proposed § 1024.41(c)(3). Proposed 

comment 41(c)(3)(i)–1 explains that, 

generally, a servicer complies with the 

requirement to provide a borrower with 

written notice promptly under 


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169See 77 FR 57199, 57204 (Sept. 17, 2012) 

(discussing servicer failures in the loss mitigation 

application process). 

§ 1024.41(c)(3)(i) by providing the 

written notice within five days of 

receiving a complete application from 

the borrower. Proposed comment 

41(c)(3)(i)–2 states that the date the 

borrower’s protections began under 

§ 1024.41(f)(2) and (g) must be the date 

on which the application became either 

complete or facially complete, as 

applicable. Finally, proposed comment 

41(c)(3)(i)–3 explains that 

§ 1024.41(c)(3)(i) requires a servicer to 

send a notification, subject to the 

exceptions under § 1024.41(c)(3)(ii), 

every time a loss mitigation application 

becomes complete. That proposed 

comment further clarifies that if, after 

providing a notice under 

§ 1024.41(c)(3)(i), a servicer requests 

additional information or corrections to 

a previously submitted document 

required to complete the application in 

accordance with § 1024.41(c)(2)(iv), the 

servicer might have to provide an 

additional notice under 

§ 1024.41(c)(3)(i) if the borrower 

submits the additional information or 

corrected documents to complete the 

application. 

The Bureau believes that requiring 

servicers to provide borrowers with the 

information in the notice of complete 

application under proposed 

§ 1024.41(c)(3)(i) would ensure that 

borrowers are informed of the next steps 

in the evaluation process. The Bureau 

believes that receiving notice of when to 

expect an offer or denial will permit the 

borrower to make better-informed 

decisions. Additionally, the Bureau 

believes requiring, as does proposed 

§ 1024.41(c)(3)(i)(B), that the notice of 

complete application indicate the date 

that the servicer received a complete 

application would limit confusion for 

both servicers and borrowers in 

determining which protections apply 

under § 1024.41. Many of those 

protections begin when an application 

becomes complete, and the Bureau 

believes that borrowers will better 

understand those protections if the 

notice provides the date of completion. 

The Bureau also believes that 

§ 1024.41(c)(3)(i)(F)’s requirement that 

the notice of complete application 

inform borrowers that they may need 

additional or updated information from 

the borrower after determining that the 

application was complete will reduce 

borrower confusion when and if the 

servicer requests such additional 

information. 

As noted above, proposed 

§ 1024.41(c)(3)(i) requires a servicer to 

provide the notice of complete 

application promptly upon receiving a 

complete application, and proposed 

comment 41(c)(3)(i)–1 explains that a 

servicer generally acts promptly by 

providing the written notice within five 

days of receiving a complete 

application. The Bureau believes that, 

generally, a servicer should be able to 

provide the notice required under 

proposed § 1024.41(c)(3)(i) within five 

days of receiving the complete loss 

mitigation application from the 

borrower. However, the Bureau 

recognizes that servicers might 

sometimes require more than five days 

to determine whether a loss mitigation 

application is complete. The Bureau 

believes that the proposed comment 

provides servicers with sufficient 

flexibility to make an accurate 

determination but prevents undue 

delay. The Bureau believes that this 

approach is preferable to a stricter 

requirement that the notice must be 

provided within a specific number of 

days, without exception. The Bureau 

seeks comment on whether proposed 

§ 1024.41(c)(3)(i) should provide such a 

stricter timing requirement and, if so, 

whether five days is an appropriate 

general standard of promptness for 

purposes of § 1024.41(c)(3)(i). 

Also as noted above, proposed 

comment 41(c)(3)(i)–3 clarifies that 

§ 1024.41(c)(3)(i) requires a servicer to 

send a notification every time a loss 

mitigation becomes complete during a 

single loss mitigation application 

process. The proposed comment 

includes an example describing a 

situation in which an application might 

become complete more than once 

because the servicer requests additional 

information or corrected documents 

after initially determining that the 

application was complete. Section 

1024.41(c)(2)(iv) requires a servicer who 

has received an application that the 

servicer must treat as facially complete, 

and later discovers that additional 

information or corrections to a 

previously submitted document are 

required to complete the application, to 

request this information promptly. The 

Bureau believes that requiring a servicer 

to send an additional notification when 

the borrower submits additional 

information or corrected documents 

requested by the servicer would help 

ensure that a borrower has accurate and 

current information about the status of 

the loan and when to expect a servicer 

to complete the evaluation, which will 

help the borrower plan for the future. 

The Bureau notes that 

§ 1024.41(c)(2)(iv) was intended to 

address a limited set of circumstances 

where a servicer, subsequent to 

receiving the facially complete 

application, discovers that it requires 

additional information that was not 

previously requested by the servicer or 

corrections to a previously submitted 

document. The Bureau believes that 

repeated requests for additional 

documents and information by servicers 

could hamper borrower understanding 

of the loss mitigation process and 

impede borrower protections under the 

rules. To determine whether further 

rulemaking or guidance is required in 

this area, the Bureau will continue to 

monitor the market to evaluate whether 

and to what extent servicers are 

complying with § 1024.41(c)(2)(iv) by 

requesting such additional information 

or corrected documents only when such 

information is required. 

The Bureau is aware that servicers 

may incur some costs in providing the 

notice required under proposed 

§ 1024.41(c)(3). However, the Bureau 

notes that several servicers informed the 

Bureau during outreach efforts that they 

already provide a similar notice 

informing the borrower that an 

application is complete. For these 

servicers, proposed § 1024.41(c)(3) 

would likely impose relatively little 

additional burden, limited to ensuring 

that the notices contain the requisite 

disclosures. For other servicers, the 

Bureau believes that the benefits to the 

borrower outweigh those costs 

associated with providing the notice, 

especially in light of the difficulty that 

borrowers have had in the past in 

obtaining useful information from 

servicers during the loss mitigation 

application process.169

Moreover, the Bureau notes that four 

of the disclosures required under 

proposed § 1024.41(c)(3)(i) would 

contain standardized language for every 

borrower, and servicers currently must 

be able to identify the information 

required in the remaining disclosures 

(the date the application is complete, 

that a foreclosure sale is scheduled, the 

date of that sale, and the date on which 

the borrower’s foreclosure protections 

began) in order to comply with various 

requirements under §§ 1024.40 and 

1024.41. The Bureau believes that 

servicers may already be tracking this 

information in order to monitor 

compliance with the Mortgage Servicing 

Rules. Thus, providing the notice 

should not significantly burden 

servicers. 

Finally, as described above, the 

exceptions under proposed 

§ 1024.41(c)(3)(ii) provide that a servicer 

is not required to provide the notice of 

complete application in three 

circumstances. These exceptions are as 

follows: if the servicer has already 


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170 12 CFR 1024.41(b)(1). 

171See comment 41(b)(1)–5. 

notified the borrower under 

§ 1024.41(b)(2)(i)(B) that the application 

is complete and the servicer has since 

requested no additional information or 

a corrected version of a previously 

submitted document from the borrower; 

if the application was not complete or 

facially complete more than 37 days 

before a foreclosure sale; or if the 

servicer has already provided a notice 

approving or denying the application 

under § 1024.41(c)(1)(ii). These 

exceptions are intended to avoid 

unnecessary burden on servicers and 

prevent borrower confusion due to the 

receipt of conflicting or redundant 

information. 

The Bureau seeks comment on 

whether the notice of complete 

application required under proposed 

§ 1024.41(c)(3) should include 

additional or different disclosures than 

those listed above. 

41(c)(4) Information Not in the 

Borrower’s Control 

The Bureau is proposing to amend 

§ 1024.41(c)(1) and add § 1024.41(c)(4) 

to address a servicer’s obligations with 

respect to information not in the 

borrower’s control that the servicer 

requires to determine which loss 

mitigation options, if any, it will offer a 

borrower. 

Under current § 1024.41(c)(1), if a 

servicer receives a complete loss 

mitigation application more than 37 

days before a foreclosure sale, the 

servicer shall, within 30 days of receipt, 

evaluate the borrower for all loss 

mitigation options available to the 

borrower and provide the notice 

required under § 1024.41(c)(1)(ii). A 

complete loss mitigation application 

includes all the information the servicer 

requires from a borrower in evaluating 

applications for the loss mitigation 

options available to the borrower.170

Thus, a loss mitigation application may 

be complete notwithstanding that 

additional information may be required 

by a servicer that is not in the control 

of the borrower.171

As noted in the section-by-section 

analysis of § 1024.38(b)(2)(vi), the 

Bureau has learned through outreach 

that servicers do not always obtain 

necessary information not in the 

borrower’s control in time to determine 

which loss mitigation options, if any, to 

offer a borrower within 30 days of 

receiving a complete loss mitigation 

application, as § 1024.41(c)(1) requires. 

For example, servicers are occasionally 

unable to obtain homeowner association 

payoff information or approval from the 

loan owner, investor, or mortgage 

insurance company within 30 days after 

of receiving a complete application. 

Servicers and Federal agencies have 

informed the Bureau that such delay 

sometimes results from the servicer’s 

failure to request the information 

promptly, and it sometimes results 

because the party with the information 

delays in providing it. 

Several servicers have expressed 

uncertainty about how to proceed in 

this circumstance. The Bureau 

understands that servicers have adopted 

different practices when this occurs. 

Some servicers have informed the 

Bureau that they exceed the 30-day 

evaluation timeframe in § 1024.41(c)(1) 

and wait to receive the third-party 

information before making any decision 

on the application and sending the 

notice required by § 1024.41(c)(1)(ii). 

One servicer informed the Bureau that 

it sends a denial notice to borrowers but 

also informs them that the servicer will 

reevaluate the application upon receipt 

of the third-party information. Although 

both of these solutions do not appear to 

preclude a borrower from receiving loss 

mitigation, neither provides the 

borrower with clear information about 

the status of the application or whether 

the servicer will offer any loss 

mitigation options to the borrower. 

The Bureau is concerned that the 

absence of clear information about the 

status of the loss mitigation application 

may cause borrowers to abandon their 

pursuit of loss mitigation, or to be 

confused about their loss mitigation 

options and how they may pursue their 

rights under § 1024.41. A delay in the 

evaluation of a borrower’s complete loss 

mitigation application may cause the 

borrower’s hardship to worsen and 

thereby reduce the likelihood that the 

servicer will offer the borrower a loss 

mitigation option, among other 

consumer harms. 

To address these concerns, the Bureau 

is proposing amendments to § 1024.41 

that would require servicers to exercise 

reasonable diligence to gather necessary 

information not in the borrower’s 

control and would provide guidance to 

servicers to address situations where 

another party’s delay in providing such 

information prevents a servicer from 

completing the loss mitigation 

evaluation within 30 days of receiving 

a complete application. 

First, the Bureau is proposing to 

amend § 1024.41(c)(1) to provide that 

proposed § 1024.41(c)(4)(ii) offers an 

exception to the general requirement 

that a servicer must evaluate a complete 

loss mitigation application received 

more than 37 days before a foreclosure 

sale within 30 days of receiving it from 

the borrower. 

Second, under proposed 

§ 1024.41(c)(4)(i), if a servicer requires 

documents or information not in the 

borrower’s control, a servicer must 

exercise reasonable diligence in 

obtaining such documents or 

information. Proposed 

§ 1024.41(c)(4)(ii)(A) prohibits a servicer 

from denying a borrower’s complete 

application solely because the servicer 

has not received documents or 

information not in the borrower’s 

control. In addition, proposed 

§ 1024.41(c)(ii)(B) requires that if, 30 

days after a complete loss mitigation 

application is received, a servicer is 

unable to determine which loss 

mitigation options, if any, it will offer 

the borrower because it lacks documents 

or information from a party other than 

the borrower or the servicer, the servicer 

must promptly provide the borrower a 

written notice stating the following: (1) 

That the servicer has not received 

documents or information not in the 

borrower’s control that the servicer 

requires to determine which loss 

mitigation options, if any, the servicer 

will offer on behalf of the owner or 

assignee of the mortgage; (2) the specific 

documents or information that the 

servicer lacks; (3) the date on which the 

servicer first requested that 

documentation or information during 

the current loss mitigation application 

process; and (4) that the servicer will 

complete its evaluation of the borrower 

for all available loss mitigation options 

promptly upon receiving the 

documentation or information. 

Finally, proposed 

§ 1024.41(c)(4)(ii)(C) requires that, if a 

servicer is unable to determine which 

loss mitigation options, if any, to offer 

a borrower within 30 days of receiving 

a complete application due to lack of 

documents or information from a party 

other than the borrower or the servicer, 

upon receiving such documents or 

information, the servicer must promptly 

provide the borrower written notice 

stating the servicer’s determination in 

accordance with § 1024.41(c)(1)(ii). 

Proposed comment 41(c)(4)(ii)(C)–1 

clarifies that, in this circumstance, the 

servicer should not provide the 

borrower a written notice stating the 

servicer’s determination until the 

servicer receives the documentation or 

information. 

The Bureau is also proposing 

comments to explain a servicer’s 

obligations under proposed 

§ 1024.41(c)(4)(i)’s reasonable diligence 

standard with respect to gathering 

information not in the borrower’s 

control. The proposed comments 

address a servicer’s reasonable diligence 

obligations both upon receipt of a 


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complete loss mitigation application 

and where a servicer has not received 

third-party information within 30 days 

of a complete application. First, 

proposed comment 41(c)(4)(i)–1 

explains that a servicer must act with 

reasonable diligence to collect 

information not in the borrower’s 

control that the servicer requires to 

determine which loss mitigation 

options, if any, it will offer the 

borrower. Proposed comments 

41(c)(4)(i)–1.i and ii explain that a 

servicer must request such information 

from the appropriate person, at a 

minimum and without limitation: 

promptly upon determining that the 

servicer requires the documents or 

information to determine which loss 

mitigation options, if any, to offer the 

borrower; and, to the extent practicable, 

by a date that will enable the servicer to 

complete the evaluation within 30 days 

of receiving a complete application as 

set forth under § 1024.41(c)(1). 

Second, proposed comment 

41(c)(4)(i)–2 explains that, if a servicer 

has not received documents or 

information not in the borrower’s 

control within 30 days of receiving a 

complete loss mitigation application, 

the servicer acts with reasonable 

diligence by attempting to obtain the 

documents or information from the 

appropriate person as quickly as 

possible. The Bureau notes that this 

standard might require a servicer to act 

with more immediate urgency to obtain 

the necessary third-party information 

than would the standard set forth in 

comment 41(c)(4)(ii)–1. The Bureau 

believes that this heightened standard is 

appropriate after the initial 30 days in 

order to keep the evaluation timeline as 

close as possible to the 30-day 

evaluation period under § 1024.41(c)(1). 

The Bureau believes that these proposed 

comments will result in shorter 

evaluation timelines by limiting servicer 

delay in the evaluation process. 

The Bureau believes that proposed 

§ 1024.41(c)(4)(ii)’s exception to the 30- 

day evaluation timeline should be 

narrowly tailored to avoid premature 

denials based solely on the absence of 

information not in the borrowers 

control, while requiring servicers to 

evaluate the complete application 

promptly upon receipt of such 

information. Proposed § 1024.41(c)(4)(ii) 

includes three provisions that would 

operate together to achieve these 

objectives. 

First, proposed § 1024.41(c)(4)(ii)(A) 

prohibits a servicer from denying a 

complete application solely because the 

servicer has not received documents or 

information not in the borrower’s 

control. The Bureau understands that 

third parties sometimes delay providing 

information that the servicer requires to 

determine which loss mitigation 

options, if any, to offer the borrower, 

notwithstanding a servicer’s reasonable 

diligence in obtaining such information. 

However, the Bureau believes that a 

borrower’s loss mitigation application 

should not be denied solely because a 

party other than the borrower or the 

servicer does not timely supply 

information that the servicer requires. 

Several servicers have informed the 

Bureau that they do not deny the 

borrower’s application under this 

circumstance, and at least one industry 

trade association has encouraged the 

Bureau to expressly sanction this 

practice. The Bureau agrees that this 

standard would be appropriate in order 

to prevent the borrower from losing the 

opportunity for loss mitigation due 

solely to third-party delay. 

Second, proposed 

§ 1024.41(c)(4)(ii)(B) provides that if, 30 

days after a complete application is 

received, the servicer is unable to make 

a determination as to which loss 

mitigation options, if any, it will offer to 

the borrower because the servicer lacks 

documents or information from a party 

other than the borrower or the servicer, 

the servicer must promptly provide a 

written notice to the borrower 

containing the disclosures listed above. 

The Bureau believes that the disclosures 

required by proposed 

§ 1024.41(c)(4)(ii)(B) would help avoid 

borrower confusion in many cases 

where the evaluation of a loss mitigation 

application is delayed under 

§ 1024.41(c)(4)(ii). For example, a 

borrower who had already received 

confirmation that the application was 

complete might be expecting a decision 

within 30 days, and without the notice 

required under proposed 

§ 1024.41(c)(4)(ii)(B), the borrower 

might not receive subsequent 

notification regarding the status of the 

application prior to the servicer’s 

decision on the application, even if 

there was significant delay due to the 

non-receipt of third-party information. 

The Bureau believes that requiring a 

servicer to provide the disclosures in 

proposed § 1024.41(c)(4)(ii)(B) would 

reduce the burden on servicers 

associated with responding to a 

borrower’s inquiries by providing 

greater clarity regarding the status of the 

application in this circumstance. The 

Bureau also believes that these 

disclosures would benefit both servicers 

and borrowers and promote compliance 

by making it easier for both parties to 

determine whether the servicer 

exercised reasonable diligence in 

obtaining third-party information as 

proposed § 1024.41(c)(4)(i) provides. 

Further, the Bureau intends for the 

disclosures to reduce the number of 

inquiries borrowers submit to servicers 

pertaining to application status. This 

would reduce servicer burden and 

improve communication between 

borrowers and servicers. 

Third, proposed § 1024.41(c)(4)(ii)(C) 

provides that if, due to a lack of 

documents or information from a party 

other than the borrower or the servicer, 

a servicer is unable to determine which 

loss mitigation options, if any, to offer 

a borrower within 30 days of receiving 

the complete application, upon 

receiving such documents or 

information, the servicer must promptly 

provide the borrower a written notice 

stating the servicer’s determination in 

accordance with § 1024.41(c)(1)(ii). The 

Bureau believes that requiring a servicer 

to determine promptly which loss 

mitigation options, if any, to offer the 

borrower upon receiving delayed 

documents or information from a party 

other than the borrower or the servicer 

and to provide the borrower written 

notice of the servicer’s determination 

promptly will reduce delay and is 

consistent with industry practice. 

Proposed comment 41(c)(4)(ii)–1 

would clarify that the servicer must 

complete all possible steps in the 

evaluation process—including by taking 

all steps mandated by third-parties like 

mortgage insurance companies, 

guarantors, owners, or assignees— 

within 30 days of receiving a complete 

application, notwithstanding delay in 

receiving information from any thirdparty. The proposed comment would 

include the following clarifying 

example: if a servicer can determine a 

borrower’s eligibility for all available 

loss mitigation options based upon the 

borrower’s complete application subject 

only to approval from the mortgage 

insurance company, it must do so 

within 30 days of receiving the 

complete application notwithstanding 

the need to obtain such approval before 

offering any loss mitigation options to 

the borrower. The proposed comment is 

intended to prohibit a servicer from 

unnecessarily delaying the evaluation 

process because of delayed third-party 

information. The Bureau is concerned 

that this type of servicer delay would 

increase the risk that the borrower’s 

documents would go stale, possibly 

delaying the evaluation further while 

the hardship worsens. 

The Bureau notes that, while 

proposed § 1024.41(c)(4)(i) and (ii)(A) 

refer to ‘‘information not in the 

borrower’s control,’’ proposed 

§ 1024.41(c)(4)(ii)(B) and (C) refer only 

to ‘‘information from a party other than 


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172See 78 FR 60381, 60406 (Oct. 1, 2013). 

173 If the servicer in this circumstance does not 

initiate foreclosure on the subordinate lien, the 

servicer may be deemed not to have joined the 

subordinate lienholder in the foreclosure action, 

causing the subordinate lien to remain on the 

property after foreclosure. See, e.g., Deutsche Bank 

Natl. Trust Co. v. Mark Dill Plumbing Co., 903 

NE.2d 166, 169 (Ind. Ct. App. 2009), aff’d on 

rehearing, 908 NE. 2d 1273 (Ind. Ct. App. 2009) 

(‘‘Foreclosure by a senior mortgagee does not affect 

the rights of a junior lienholder who was not made 

a party to the foreclosure action.’’); Portland Mort. 

Co. v. Creditors Protective Ass’n, 262 P.2d 918, 922 

(Or. 1953) (‘‘The omitted junior lienholder is in the 

same position as if no foreclosure had ever taken 

place, and he has the same rights, no more and no 

less, which he had before the foreclosure suit was 

commenced.’’). 

the borrower or the servicer.’’ The 

Bureau believes that this distinction is 

appropriate given the different 

requirements that the proposed 

provisions would impose on servicers. 

Proposed § 1024.41(c)(4)(i) and (ii)(A), 

respectively, require a servicer to 

exercise reasonable diligence in 

obtaining any non-borrower 

information, and not deny the borrower 

solely because the servicer has not 

received such information. The Bureau 

believes that these protections are 

appropriate regardless of whether the 

missing information is in the control of 

the servicer or in the control of a thirdparty in order to ensure fair and 

efficient evaluation. However, proposed 

§ 1024.41(c)(4)(ii)(B) and (C) offer an 

exception to the 30-day evaluation 

timeline provided under § 1024.41(c)(1). 

The Bureau believes that such an 

exception should exist only when the 

servicer itself lacks control over the 

information and must seek it from a 

third-party over which the servicer does 

not have control. The Bureau therefore 

proposes to limit the extension of the 

evaluation timeline to circumstances in 

which neither the servicer nor the 

borrower is in control of the necessary 

information. Since a servicer can 

generally access information in its own 

control at any time, the Bureau believes 

that it would be inappropriate to offer 

an exception to the 30-day evaluation 

timeline required under § 1024.41(c)(1) 

based upon a servicer’s delay in doing 

so. 

The Bureau seeks comment to better 

understand the cause of delay in 

servicers receiving non-borrower 

information necessary to determine 

which loss mitigation options, if any, to 

offer a borrower. Specifically, the 

Bureau seeks comment on how servicers 

and third-parties contribute to the delay, 

as well as which categories of nonborrower information most frequently 

result in delay. Finally, the Bureau 

seeks comment on whether to limit the 

amount of time that a servicer must 

exercise reasonable diligence in 

attempting to obtain information not in 

the borrower’s control. 

41(f) Prohibition on Foreclosure Referral 

41(f)(1) Pre-foreclosure Review Period 

The Bureau is proposing to amend 

§ 1024.41(f)(1)(iii) so that the 

prohibition on referral to foreclosure 

until after the 120th day of delinquency 

would not apply when a servicer is 

joining the foreclosure action of a senior 

lienholder. Although current 

§ 1024.41(f)(1) generally prohibits a 

servicer from making the first notice or 

filing required by applicable law to 

begin the foreclosure process unless a 

borrower’s mortgage loan obligation is 

more than 120 days delinquent, the rule 

includes an exemption allowing a 

servicer to make a first notice or filing 

when the servicer is joining the 

foreclosure action of a subordinate 

lienholder. The proposed amendment to 

§ 1024.41(f)(1)(iii) would similarly allow 

a servicer to make the first notice or 

filing before the loan obligation is 120 

days delinquent when the servicer is 

joining the foreclosure action of a senior 

lienholder. 

In the September 2013 Mortgage Final 

Rule, the Bureau decided that, if a 

borrower is current on a mortgage 

secured by a senior lien but is being 

foreclosed on by a subordinate 

lienholder, it would be appropriate for 

the servicer of the mortgage secured by 

the senior lien to join the foreclosure 

action, even though the borrower may 

not be delinquent on the mortgage 

secured by the senior lien, because the 

first notice or filing would not be based 

upon a borrower’s delinquency in this 

circumstance.172 The Bureau did not 

then consider the situation in which the 

servicer is joining the foreclosure action 

of a senior lienholder, and servicers 

have since asked the Bureau why the 

same rule does not apply in that 

situation. The Bureau believes that the 

same rationale makes it appropriate to 

expand the current exemption to 

circumstances in which the servicer is 

joining the foreclosure action of a senior 

lienholder. The Bureau believes that it 

would be appropriate for the servicer of 

the mortgage secured by the subordinate 

lien to join the foreclosure action, even 

though the borrower may not be 

delinquent on the mortgage secured by 

the subordinate lien, because the first 

notice or filing would not be based upon 

a borrower’s delinquency with respect 

to the serviced loan. Further, expanding 

the exemption seems to present only 

minimal borrower protection concerns 

because the borrower would already be 

facing a foreclosure action on the 

property. 

The Bureau believes that the proposed 

rule would be helpful to servicers by 

making clear that the servicer of a 

subordinate lien may participate in the 

existing foreclosure action on a senior 

lien. The servicer’s participation in the 

foreclosure action of a senior lienholder 

may allow the servicer to represent the 

servicer’s interests in the existing 

foreclosure action more fully under 

some circumstances. Additionally, it 

may sometimes be necessary, when the 

same servicer is responsible for both the 

senior and subordinate lien, for the 

servicer to initiate foreclosure on the 

subordinate lien as part of the 

foreclosure action on the senior lien, in 

order to clear title on the property for 

the subsequent owner.173

41(g) Prohibition on Foreclosure Sale 

The Bureau is proposing to revise 

comments 41(g)-1 and (g)-3 and add 

new comment 41(g)-5. Together these 

changes would clarify servicers’ 

obligations with respect to § 1024.41(g)’s 

prohibition against moving for 

foreclosure judgment or order of sale, or 

conducting a sale, during the evaluation 

of a complete loss mitigation 

application received more than 37 days 

before a foreclosure sale. The Bureau is 

also proposing to add commentary to 

clarify the requirements for policies and 

procedures under § 1024.38(b)(3)(iii) as 

the requirements relate to the 

prohibition under § 1024.41(g). 

Under § 1024.41(g), if a borrower 

submits a complete loss mitigation 

application after a servicer has made the 

first notice or filing, but more than 37 

days before a foreclosure sale, the 

servicer is prohibited from moving for 

foreclosure judgment or order of sale, or 

conducting a foreclosure sale, unless: (1) 

The servicer has sent the borrower a 

notice pursuant to § 1024.41(c)(1)(ii) 

that the borrower is not eligible for any 

loss mitigation option and the appeal 

process under § 1024.41(h) is not 

applicable, the borrower has not 

requested an appeal within 14 days, or 

the servicer has denied the borrower’s 

appeal; (2) the borrower rejects all loss 

mitigation options offered by the 

servicer; or (3) the borrower fails to 

perform under an agreement on a loss 

mitigation option. 

Current comment 41(g)-1 explains 

that the prohibition on a servicer 

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. The 


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174Comment 41(g)-4 explains that although a 

servicer is not required to comply with the 

requirements in § 1024.41 with respect to a loss 

mitigation application submitted 37 days or less 

before a foreclosure sale, a servicer is required 

separately, in accordance with policies and 

procedures maintained pursuant to 

§ 1024.38(b)(2)(v), to properly evaluate a borrower 

who submits an application for a loss mitigation 

option for all loss mitigation options for which the 

borrower may be eligible pursuant to any 

requirements established by the owner or assignee 

of the borrower’s mortgage loan. 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. 

175 77 FR 57199, 57203, 57266 (Sept. 17, 2012). 

176 Id. at 57249–50 (citing Press Release, Federal 

Reserve System, Office of the Comptroller of the 

Currency, and Office of Thrift Supervision, 

Interagency Review of Foreclosure Policies and 

Practices, at 5 (Apr. 2011), available at http://

www.occ.gov/news-issuances/news-releases/2011/

nr-occ-2011–47a.pdf.) 

177 Id. at 57203 (Sept. 17, 2012). 

178 Id. at 57271. 

179 78 FR 10695, 10698 (Feb. 14, 2013). 

180 Id. at 10834. 

181Many borrower protections under § 1024.41 

are determined as of the date a servicer receives a 

complete loss mitigation application from the 

borrower. See 12 CFR 1024.41(b)(3). Comment 

41(b)(3)-1 explains that if a foreclosure sale is not 

scheduled as of the date a complete loss mitigation 

application is received the application is 

considered to have been received 90 days before a 

foreclosure sale. Thus, a servicer that receives a 

complete loss mitigation application before a 

foreclosure sale date is scheduled must provide the 

full loss mitigation evaluation procedures under 

§ 1024.41, the various steps of which generally 

provide for a total possible timeline of 88 days to 

complete. 

182See, e.g., Alison Fitzgerald, Homeowners 

steamrolled as Florida courts clear foreclosure 

comment further explains that a servicer 

that has made a dispositive motion 

before receiving a complete loss 

mitigation application has not moved 

for a foreclosure judgment or order of 

sale if the servicer takes reasonable 

steps to avoid a ruling on such motion 

or issuance of such order prior to 

completing the procedures required by 

§ 1024.41, notwithstanding whether any 

such step successfully avoids a ruling 

on a dispositive motion or issuance of 

an order of sale. Comment 41(g)-2 

provides that § 1024.41(g) does not 

prevent a servicer from proceeding with 

any steps in the foreclosure process, so 

long as any such steps 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 § 1024.41. Comment 41(g)-3 

explains that a servicer is responsible 

for promptly instructing foreclosure 

counsel retained by the servicer not to 

proceed with filing for foreclosure 

judgment or order of sale, or to conduct 

a foreclosure sale, in violation of 

§ 1024.41(g), when a servicer has a 

received a complete loss mitigation 

application. Such instructions may 

include instructing counsel to move for 

continuance with respect to the 

deadline for filing a dispositive 

motion.174

Section 1024.41(g)’s prohibition 

applies to two distinct types of steps in 

the foreclosure process: moving for 

judgment or an order of sale and 

conducting a foreclosure sale. A 

servicer’s obligations under § 1024.41(g) 

will vary depending on whether the 

foreclosure is judicial or non-judicial. If 

the applicable foreclosure procedure is 

non-judicial and does not require any 

court proceeding or order, then there is 

only one step in the foreclosure process 

addressed by § 1024.41(g)—conducting 

the sale during a pending loss 

mitigation evaluation. However, in a 

judicial foreclosure proceeding, a 

servicer must comply with both the 

prohibition against making or 

proceeding on a dispositive motion and 

the prohibition against conducting the 

foreclosure sale. 

The Bureau proposed § 1024.41(g) in 

the 2012 RESPA Servicing Proposal, 

after the mortgage crisis had revealed 

that servicers often ‘‘were ill-equipped 

to handle the high volumes of 

delinquent mortgages, loan modification 

requests, and foreclosures they were 

required to process.’’175 The Bureau 

noted that evaluations of mortgage 

servicer practices had found that 

servicers failed to properly structure 

and manage third-party vendor 

relationships and noted that the failures 

had ‘‘manifested in significant harms for 

borrowers, including imposing 

unwarranted fees on borrowers and 

harms relating to so-called ‘dual 

tracking’ from miscommunications 

between service providers and servicer 

loss mitigation personnel.’’176 The 

Bureau also noted that, even before the 

mortgage crisis, servicers may have had 

‘‘financial incentives to foreclose rather 

than engage in loss mitigation.’’177 The 

Bureau stated that one of the main goals 

in proposing § 1024.41 was prohibiting 

completion of the foreclosure process 

during a pending evaluation of a 

borrower’s loss mitigation application 

and that the prohibition would 

‘‘eliminate the clearest harms on 

borrowers resulting from servicers 

pursuing loss mitigation and foreclosure 

proceedings concurrently.’’178

In adopting § 1024.41(g) in the 2013 

RESPA Servicing Final Rule, the Bureau 

included moving for judgment or order 

of sale in the foreclosure prohibition. 

The Bureau explained that the rule 

restricted ‘‘‘dual tracking,’ where a 

servicer is simultaneously evaluating a 

consumer for loan modifications or 

other alternatives at the same time that 

it prepares to foreclose on the 

property.’’179 The Bureau did not 

believe that § 1024.41(g) would have a 

substantial impact on expected 

foreclosure timelines separate and apart 

from current market practices. However, 

the Bureau also believed that preventing 

the worst harms of dual-tracking would 

justify some disruption of foreclosure 

timelines.180

Since the Mortgage Servicing Rules 

went into effect, however, consumers 

have not always received the 

protections intended by § 1024.41(g). 

For instance, the Bureau has received 

reports that counsel retained by 

servicers to conduct the foreclosure 

proceeding lack current and accurate 

information about the completion of 

borrowers’ loss mitigation applications. 

As a result, foreclosure counsel may not 

take adequate steps to avoid a judgment 

or order of sale and may fail to seek the 

delay or continuance of a sale when 

necessary to provide adequate time for 

the servicer to evaluate the loss 

mitigation application. In extreme cases, 

the Bureau has heard, foreclosure 

counsel may not represent accurately to 

the court the status of the loss 

mitigation application. Further, the 

Bureau has received reports that, even 

when servicers’ foreclosure counsel take 

some steps to avoid a judgment or sale, 

they may fail to impress upon courts the 

significance of § 1024.41(g)’s 

prohibition. All of these failures to act 

in accordance with § 1024.41(g)’s 

requirements may result in the 

completion of foreclosure sales while 

the servicer is evaluating a borrower’s 

complete loss mitigation application. 

The Bureau has received inquiries 

concerning what steps a servicer must 

take to comply with § 1024.41(g) where 

a court orders a foreclosure sale date 

that does not afford sufficient time for 

the servicer to complete the evaluation 

process required by § 1024.41.181 The 

Bureau has learned that some courts are 

ruling on a pending dispositive motion 

and setting a date for the foreclosure 

sale, despite the servicer’s attempts 

through counsel to delay the ruling or 

order. In many cases, the initially 

scheduled sale date may not provide the 

servicer adequate time to complete the 

loss mitigation evaluation and appeals 

process. Servicers indicate that in some 

instances courts are requiring that the 

foreclosure continue to a completed sale 

even when review of a complete loss 

mitigation application is underway. 

Media accounts as well as reports from 

consumer advocacy groups confirm that 

some courts may be refusing to continue 

cases when confronted with a motion to 

do so.182


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backlog, The Ctr. for Pub. Integrity, Sept. 10, 2014, 

available at http://www.publicintegrity.org/2014/

09/10/15463/homeowners-steamrolled-floridacourts-clear-foreclosure-backlog. 

183 78 FR 10695, 10834 (Feb. 14, 2013). 

Current comment 41(g)-1 explains 

that a servicer does not violate 

§ 1024.41(g) where the servicer takes 

‘‘reasonable steps to avoid’’ issuance of 

an order or ruling on a dispositive 

motion filed prior to receipt of the 

complete loss mitigation application 

from the borrower. However, there is no 

similar commentary explaining what, if 

any, ‘‘reasonable steps’’ a servicer must 

take to avoid a violation of the 

prohibition under § 1024.41(g) against 

conducting a sale after the servicer 

receives a complete loss mitigation 

application. 

As the Bureau noted in the 2013 

RESPA Servicing Final Rule, 

§ 1024.41(g) ‘‘prohibit[s] a servicer from 

completing the foreclosure process if a 

borrower has submitted a timely and 

complete loss mitigation application 

. . . until the servicer has completed 

the evaluation of the borrower 

. . . .’’ 183 The Bureau believes that, 

regardless of the applicable foreclosure 

procedures, § 1024.41(g) does not permit 

a servicer to stand by while a sale goes 

forward unless the servicer can satisfy 

one of the three conditions listed under 

§ 1024.41(g)(1) through (3). Based upon 

the reports and information received, 

the Bureau is concerned that the 

absence of express commentary 

requiring a servicer to take affirmative 

steps to delay the sale may have 

encouraged some servicers to fail to 

instruct foreclosure counsel 

appropriately and, further, may lead 

courts to discount servicer obligations 

under the rule, depriving borrowers of 

the important consumer protections 

against dual tracking that are provided 

under § 1024.41. 

Therefore, the Bureau is proposing to 

revise and add commentary to clarify 

the operation of § 1024.41(g) in these 

situations. As revised, proposed 

comment 41(g)–1 clarifies that if, upon 

receipt of a complete loss mitigation 

application, a servicer or its foreclosure 

counsel fails to take reasonable steps to 

avoid a ruling on a pending motion for 

judgment or the issuance of an order of 

sale, the servicer must dismiss the 

foreclosure proceeding if necessary to 

avoid the sale. Proposed comment 

41(g)–5 would clarify that § 1024.41(g) 

prohibits a servicer from conducting a 

foreclosure sale, even if a person other 

than the servicer administers or 

conducts the foreclosure sale 

proceedings, and that servicers must 

take reasonable steps to delay the sale 

until one of the conditions under 

§ 1024.41(g)(1) through (3) is met. 

The Bureau is also proposing to revise 

comment 41(g)–3 to clarify servicers’ 

obligations under § 1024.41(g) when 

acting through foreclosure counsel. 

Similarly, the Bureau is proposing 

comment 38(b)(3)(iii)–1 to clarify that 

policies and procedures required under 

§ 1024.38(b)(3)(iii) to facilitate sharing 

of information with service provider 

personnel responsible for handling 

foreclosure proceedings must be 

reasonably designed to ensure that 

servicer personnel promptly inform 

service provider personnel handling 

foreclosure proceedings that the servicer 

has received a complete loss mitigation 

application. 

The proposed comments, taken 

together, would clarify that, once a 

servicer receives a complete loss 

mitigation application, a servicer must 

take reasonable steps to avoid a ruling 

on a dispositive motion or issuance of 

a judgment or an order of sale, and also 

must take reasonable steps to delay a 

foreclosure sale until after the servicer 

has completed the loss mitigation 

evaluation procedures required by 

§ 1024.41. Where a servicer fails to take 

reasonable steps to avoid a ruling on a 

dispositive motion, to avoid issuance of 

a judgment or an order of sale, or to 

delay the foreclosure sale, or where the 

servicer’s foreclosure counsel fails to 

take such steps, the servicer would have 

to dismiss the foreclosure proceeding, if 

dismissal is necessary to avoid 

completing the foreclosure during the 

pendency of the loss mitigation 

evaluation. 

The Bureau believes that the proposed 

revisions to the commentary will aid 

servicers in complying with 

§ 1024.41(g)’s prohibition and assist 

courts in applying the prohibition in 

foreclosure proceedings. The Bureau 

also believes that clarifying that a 

servicer must take affirmative 

reasonable steps, not only to delay 

issuance of a judgment or order, but also 

to delay the sale, will ensure that 

borrowers are protected from 

foreclosure during pending evaluations 

of complete loss mitigation applications. 

Further, the Bureau believes that it is 

appropriate to require a servicer to 

dismiss a foreclosure if necessary to 

permit completion of the loss mitigation 

evaluation procedures where the 

servicer or its foreclosure counsel has 

failed to take such reasonable steps. The 

Bureau believes that clarifying that 

dismissal is required if a servicer has 

failed to take reasonable steps on its 

own or through foreclosure counsel to 

avoid a ruling or to delay a foreclosure 

sale during a pending loss mitigation 

evaluation will incentivize servicers to 

develop more effective procedures to 

carry out the requirements of 

§ 1024.41(g). The Bureau believes that 

dismissal should rarely be necessary, 

given that servicers have it within their 

power to take all such reasonable steps 

to avoid a ruling on a dispositive 

motion, issuance of a judgment or an 

order of sale, or the conduct of a 

foreclosure sale. 

Under current comment 41(g)–1, a 

servicer that fails to take reasonable 

steps to avoid a ruling on a motion 

pending at the time the servicer receives 

a complete loss mitigation application 

violates § 1024.41(g)’s first prohibition 

against moving for judgment or order of 

sale. The Bureau believes that where a 

servicer fails to take reasonable steps to 

avoid a ruling on or issuance resulting 

from a dispositive motion, as postulated 

in current comment 41(g)–1, the servicer 

must still comply with the prohibition 

against conducting a sale. The 

completion of a foreclosure sale during 

the evaluation of a borrower’s complete 

loss mitigation application is precisely 

the harm that the Bureau crafted 

§ 1024.41(g) to avoid. The Bureau 

believes that a servicer’s failure to 

comply with one element of 

§ 1024.41(g), the prohibition against 

proceeding on a dispositive motion, 

does not justify disregard for the 

prohibition against conducting a sale. 

Consequently, to emphasize the 

necessity of a servicer’s taking 

reasonable steps to avoid a ruling or 

issuance of an order for sale when there 

is a pending loss mitigation evaluation, 

the Bureau is proposing to revise 

comment 41(g)–1 to provide explicitly 

that failure to take such steps requires 

dismissal if necessary to avoid the 

foreclosure sale. 

Proposed comment 41(g)–5 also 

clarifies that a servicer must seek to 

delay a foreclosure sale, 

notwithstanding the fact that a thirdparty, such as a sheriff, trustee, or other 

public official, administers or conducts 

the sale proceedings, as is the case 

under foreclosure procedure in many 

States. The Bureau believes that any 

interpretation of § 1024.41(g)’s 

prohibition against conducting a 

foreclosure sale that relieves servicers of 

a responsibility to act to prevent a 

foreclosure simply because the 

foreclosure procedure does not require 

the servicer itself to conduct or 

administer the sale is inconsistent with 

the purpose of § 1024.41(g). The Bureau 

believes servicers already have an 

obligation to prevent a foreclosure sale 

under § 1024.41(g)’s prohibition against 

the conduct of a foreclosure sale. The 

Bureau is proposing comment 41(g)–5 to 


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184As noted above, the maximum timeline for 

loss mitigation evaluations required by § 1024.41 is 

88 days. See note 179, supra. The Bureau believes 

that in most judicial foreclosure procedures, a delay 

of a foreclosure sale often will not require a 

substantial elongation of the typical time period 

between an order and a sale. 

185Consumer Fin. Prot. Bureau, CFPB Bulletin 

2012–03, Service Providers (Apr. 13, 2012), 

available at http://files.consumerfinance.gov/f/

201204_cfpb_bulletin_service-providers.pdf. 

186The Bureau notes that § 1024.38(b)(1)(v) 

already requires servicers maintain policies and 

procedures reasonably designed to ensure that the 

servicer can submit documents or filings required 

for a foreclosure process, including documents or 

filings required by a court of competent 

jurisdiction, that reflect accurate and current 

information and that comply with applicable law. 

clarify a servicer’s obligations under the 

prohibition, but is not adding a new 

requirement or interpretation. 

The Bureau recognizes that in some 

jurisdictions, it may be difficult for a 

servicer to delay a foreclosure sale after 

entry of foreclosure judgment or 

issuance of an order of sale. The Bureau 

also understands that courts may be 

reluctant to delay foreclosure 

proceedings when lengthy backlogs of 

foreclosure matters create added 

pressure to expedite dockets. The 

Bureau believes that, even in these 

situations, reasonable steps to delay the 

sale are available to servicers and to 

courts administering foreclosure 

proceedings. Proposed comment 41(g)– 

5 provides a non-exclusive explanation 

of what reasonable steps might include. 

For instance, the Bureau believes that in 

judicial foreclosure proceedings, a 

servicer, through its counsel, may make 

a motion to continue the sale, remove it 

from the docket, or place the proceeding 

in any administrative status that stays 

the sale.184 In non-judicial proceedings, 

the Bureau believes that servicers may 

have more control over the conduct of 

the sale and that analogous steps to 

those listed in proposed comment 

41(g)–5 may apply. The Bureau seeks 

comment on what reasonable steps may 

be available to servicers to delay the 

conduct of a foreclosure sale under 

different foreclosure procedures. 

Proposed comment 41(g)–3 explains 

that § 1024.41(g)’s prohibitions on 

moving for judgment or order of sale or 

conducting a sale may require a servicer 

to take steps through foreclosure 

counsel, and that a servicer is not 

relieved of its obligations because the 

foreclosure counsel’s actions or inaction 

cause a violation. The proposed 

revisions to comment 41(g)–3 are 

consistent with the Bureau’s 

understanding of servicer’s 

responsibilities under the Mortgage 

Servicing Rules whenever service 

providers are involved, including the 

policies and procedures requirements 

under § 1024.38(b)(3). While the action 

or inaction of vendors or service 

providers may cause the violation in the 

first instance, the action or inaction of 

vendors or service providers does not 

change the servicer’s responsibility for 

ensuring its compliance with the 

Mortgage Servicing Rules, whether 

directly or through service providers. 

Proposed comment 41(g)–3 further 

explains that if a servicer has received 

a complete loss mitigation application, 

the servicer must promptly instruct 

counsel not to make a dispositive 

motion for foreclosure judgment or 

order of sale; to take reasonable steps, 

where such a dispositive motion is 

pending, to avoid a ruling on the motion 

or issuance of an order of sale; and to 

take reasonable steps to delay the 

conduct of a foreclosure sale until the 

servicer satisfies one of the conditions 

in § 1024.41(g)(1) through (3). The 

instructions to counsel may include 

instructing counsel to move for a 

continuance with respect to the 

deadline for filing a dispositive motion 

or to move for or request that the 

foreclosure sale be stayed, otherwise 

delayed, or removed from the docket, or 

that the foreclosure proceeding be 

placed in any administrative status that 

stays the sale. This list is not meant to 

be exhaustive, and the Bureau seeks 

comments on whether there are other 

helpful illustrative examples. 

The Bureau believes that the proposed 

revisions to comment 41(g)–3 provide 

servicers, their foreclosure counsel, and 

courts with greater clarity with respect 

to the operation of § 1024.41(g)’s 

prohibition. As the Bureau noted in its 

earlier guidance regarding service 

providers, the fact that an entity enters 

into a business relationship with a 

service provider does not absolve the 

entity of responsibility for complying 

with Federal consumer financial law to 

avoid consumer harm.185 The Bureau 

believes that codifying this principal in 

comment 41(g)–3 would ensure that 

servicers understand their obligations 

with respect to instructing foreclosure 

counsel promptly to take steps required 

by § 1024.41(g). The Bureau 

understands that when a servicer 

receives an application shortly before a 

court hearing or while a dispositive 

motion is pending, timely 

communication with foreclosure 

counsel may necessitate expedited 

procedures. However, the Bureau 

believes that timely communication in 

such situations presents neither a novel 

challenge to lawyers and their clients, 

nor an insurmountable one, given 

modern communication technology. 

Proposed comment 38(b)(3)(iii)–1 

explains that the policies and 

procedures must be reasonably designed 

to ensure that servicer personnel 

promptly instruct foreclosure counsel to 

take any step required by § 1024.41(g) 

sufficiently timely to avoid violating the 

prohibition against moving for judgment 

or order of sale or conducting a 

foreclosure sale. The Bureau believes 

that proposed comment 38(b)(3)(iii)–1 

will help to ensure that counsel are 

timely informed of the status of loss 

mitigation applications and can more 

effectively seek delay from a court of the 

issuance of an order or a foreclosure 

sale. Having policies and procedures to 

timely instruct counsel to take the 

actions required by § 1024.41(g) will 

help servicers efficiently handle 

communication with a servicer’s 

foreclosure counsel and ensure that the 

counsel accurately represents the status 

of loss mitigation applications and the 

obligations of servicers under 

§ 1024.41(g) to courts handling 

foreclosure proceedings.186

Though the proposed commentary 

clarifications do not alter existing 

requirements under § 1024.41(g), the 

Bureau has considered the potential 

burdens for servicers in dismissing a 

foreclosure proceeding. In jurisdictions 

where significant foreclosure backlogs 

exist, dismissal may significantly delay 

completion of the foreclosure process 

(assuming no loss mitigation agreement 

is reached between the borrower and the 

servicer). In addition, in some 

jurisdictions a subsequent foreclosure 

brought by a servicer may encounter 

procedural challenges or defenses as a 

result of the dismissal. Nonetheless, the 

Bureau believes that dismissal is 

appropriate in the limited 

circumstances where a servicer fails to 

take reasonable steps to avoid a ruling 

or issuance of an order or delay the sale 

to protect borrowers from the dualtracking harms § 1024.41(g) aims to 

prevent. Moreover, the Bureau notes 

that dismissal is required only to avoid 

a violation of § 1024.41(g) or to mitigate 

the harm to the consumer arising from 

the servicer’s prior violation of 

§ 1024.41(g) in failing to take reasonable 

steps to delay a foreclosure sale. Thus, 

only those servicers that fail to act to 

delay issuance of the order or judgment 

would incur any costs related to 

dismissal. The Bureau believes that 

expressly clarifying that dismissal may 

be required would ensure that servicers 

take reasonable steps to avoid 

foreclosure sales. The Bureau seeks 

comment on whether the clarification is 

adequate or whether additional 


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187See 78 FR 10695, 10836 (Feb. 14, 2013). 

188 Id. 

189 Id. 

clarification is necessary to protect 

borrowers from foreclosure. 

The Bureau requests comment on 

whether all of the proposed commentary 

clarifications are appropriate and 

whether the commentary provides 

sufficient clarity to ensure that the 

prohibition under § 1024.41(g) will 

effectively prevent foreclosures during a 

pending loss mitigation evaluation. In 

addition, the Bureau requests comment 

on whether there are any specific 

reasonable steps to comply with 

§ 1024.41(g) that servicers should take, 

beyond re-scheduling or delaying the 

sale, removing the sale from the docket, 

or placing the foreclosure proceeding in 

any administrative status that stays the 

sale, where a court has ruled upon a 

dispositive motion. Finally, the Bureau 

requests comment on whether there are 

situations in which a servicer should 

dismiss a foreclosure proceeding to stop 

a sale even where the servicer has taken 

the reasonable steps outlined in 

§ 1024.41(g). 

The Bureau requests comment on 

whether the incorporation into the 

regulation text of any elements of the 

proposed commentary would aid 

servicers in complying with 

§ 1024.41(g). The Bureau believes that 

the proposed commentary would 

provide help in interpreting and 

complying with § 1024.41(g). However, 

the Bureau also recognizes that 

incorporation in the regulation text 

itself may aid servicers, consumers, and 

courts in applying the prohibition. 

41(i) Duplicative Requests 

Currently, § 1024.41(i) requires a 

servicer to comply with the 

requirements of § 1024.41 for only a 

single complete loss mitigation 

application for a borrower’s mortgage 

loan account. Section 1024.38(b)(2)(v) 

requires a servicer to maintain policies 

and procedures designed to ensure that 

the servicer can properly evaluate a 

borrower for all loss mitigation options 

‘‘for which the borrower may be eligible 

pursuant to any requirements 

established by the owner or assignee of 

the borrower’s mortgage loan[.]’’ In 

effect, therefore, unless investor 

guidelines require them to do so, 

servicers are not required to comply 

with the loss mitigation provisions in 

§ 1024.41 if they previously complied 

with those requirements with respect to 

the same borrower’s prior complete loss 

mitigation application. 

The Bureau is now proposing to 

revise § 1024.41(i) to provide that 

servicers are required to comply with 

the requirements of § 1024.41 unless the 

servicer has previously complied with 

§ 1024.41 for a borrower’s complete loss 

mitigation application and the borrower 

has been delinquent at all times since 

the borrower submitted that complete 

application. As further explained below, 

the Bureau believes that requiring 

servicers to comply with § 1024.41 again 

in these circumstances may serve an 

important consumer protection purpose 

by extending the protections of 

§ 1024.41 and promoting the use of 

uniform loss mitigation procedures for 

all borrowers. At the same time, the 

Bureau believes the proposed revision 

preserves servicer and borrower 

incentives to dedicate appropriate 

resources to an initial loss mitigation 

application. 

When the Bureau first proposed 

§ 1024.41 in the 2012 RESPA Servicing 

Proposal, it sought comment on whether 

a borrower should be entitled to a 

renewed evaluation for a loss mitigation 

option if an appropriate time period had 

passed since the initial evaluation or if 

there had been a material change in the 

borrower’s financial circumstances. 

Industry commenters generally 

supported the Bureau’s proposal to limit 

a servicer’s obligation to comply with 

§ 1024.41 to one time over the life of a 

borrower’s loan. Consumer advocacy 

groups, however, argued that the Bureau 

should require servicers to review a 

subsequent loss mitigation submission 

when a borrower has demonstrated a 

material change in the borrower’s 

financial circumstances.187

In the 2013 RESPA Servicing Final 

Rule, the Bureau stated that it agreed 

with consumer advocacy groups that 

there are circumstances in which it is 

appropriate to reevaluate borrowers in 

light of a material change in financial 

circumstances. Further, it acknowledged 

that many owners or assignees of 

mortgage loans already require servicers 

to consider material changes in a 

borrower’s financial circumstances.188

However, the Bureau noted that 

‘‘significant challenges exist to 

determine whether a material change in 

financial circumstances has occurred[,]’’ 

and that, in contrast with investor or 

GSE guidelines, § 1024.41 gives 

borrowers a private right of action to 

enforce its procedures.189 In addition, 

the Bureau stated its belief that limiting 

the loss mitigation procedures of 

§ 1024.41 to a single complete loss 

mitigation application provides 

borrowers with appropriate incentives 

to submit all relevant information up 

front and allows servicers to dedicate 

resources to those applications most 

likely to qualify for loss mitigation 

options. Accordingly, the Bureau 

adopted § 1024.41(i) as proposed and 

required servicers to comply with the 

loss mitigation procedures in § 1024.41 

only once over the life of a mortgage 

loan. 

Since the publication of the 2013 

RESPA Servicing Final Rule, the Bureau 

has received numerous requests to 

revise § 1024.41(i) to require servicers to 

reevaluate borrowers who have 

experienced a change in financial 

circumstances and might therefore 

benefit from subsequent review of a new 

loss mitigation application under the 

requirements of § 1024.41. The Bureau 

continues to have concerns with 

requiring reevaluations under the 

Mortgage Servicing Rules when there 

has been a ‘‘material change in financial 

circumstances,’’ so is not proposing to 

do so in this rulemaking. However, 

continued industry monitoring efforts, 

outreach to stakeholders, and continued 

reports from consumers and consumer 

advocacy groups suggests that current 

§ 1024.41(i) may unfairly disadvantage a 

borrower who experiences multiple 

hardships over the life of a loan. The 

Bureau believes that a borrower may 

greatly benefit from the protections of 

§ 1024.41 for loss mitigation 

applications submitted in connection 

with each subsequent hardship. 

Moreover, the Bureau believes that 

revising § 1024.41(i) to require servicers 

to reevaluate borrowers in certain 

circumstances under the requirements 

of § 1024.41 would not place a 

significant additional burden on 

servicers because many servicers 

already reevaluate borrowers who 

reapply for loss mitigation using the 

procedures set forth in § 1024.41. 

Based on this analysis, the Bureau is 

proposing to revise the current rule to 

require servicers to reevaluate borrowers 

under § 1024.41 in certain 

circumstances. However, as the Bureau 

explained in the 2013 RESPA Servicing 

Final Rule, the Bureau believes that a 

servicer’s obligation to reevaluate 

borrowers under § 1024.41 should be 

limited in scope. Accordingly, proposed 

§ 1024.41(i) provides that servicers are 

required to comply with § 1024.41 

unless the servicer has previously 

complied with § 1024.41 for a 

borrower’s complete loss mitigation 

application and the borrower has been 

delinquent at all times since the 

borrower submitted that complete 

application. That is, under proposed 

§ 1024.41(i), a servicer would be 

required to comply with § 1024.41, even 

if it had previously complied with 

§ 1024.41 for a borrower’s complete loss 

mitigation application, for a borrower 

who has been current on payments at 


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190 78 FR 10695, 10837 (Feb. 14, 2013). 

any time between the borrower’s prior 

complete loss mitigation application 

and a subsequent loss mitigation 

application. This revision is intended to 

preserve borrower and servicer 

incentives to reach a timely, efficient, 

and effective resolution to a borrower’s 

hardship the first time a borrower 

applies for loss mitigation. 

In addition, the Bureau believes that 

proposed § 1024.41(i) bases a servicer’s 

obligation to reevaluate a borrower 

under § 1024.41 on an objective, brightline test. One of the Bureau’s concerns 

about the suggestions to require 

reevaluations under the Mortgage 

Servicing Rules when there has been a 

‘‘material change in financial 

circumstances’’ is that the standard 

would be dependent upon a servicer’s 

subjective determination. The Bureau 

believes that the challenges in 

implementing and enforcing such a 

standard would outweigh any intended 

benefit to borrowers. However, an easyto-administer standard such as the one 

proposed may promote servicer 

compliance and reduce confusion for 

both servicers and borrowers. The 

Bureau also believes that this proposal 

may encourage consistent 

implementation of the Mortgage 

Servicing Rules by discouraging 

servicers from applying different loss 

mitigation procedures depending on 

whether a borrower has been previously 

evaluated under § 1024.41. 

For purposes of this proposal, the 

Bureau assumes that a permanent 

modification of a borrower’s mortgage 

loan obligation effectively cures the 

borrower’s pre-modification 

delinquency. In other words, the Bureau 

assumes that a borrower who is 

performing under a permanent 

modification does not meet the 

definition of delinquency that the 

Bureau is proposing to add to § 1024.31. 

The Bureau seeks comment on whether 

there are types of permanent loan 

modifications or other circumstances for 

which this assumption would be 

inaccurate. 

Finally, the Bureau is revising the 

current commentary to § 1024.41(i), 

which addresses servicers’ obligations 

following the transfer of servicing rights, 

to accommodate proposed § 1024.41(k). 

Specifically, the Bureau is preserving 

the portion of comment 41(i)–1 that 

obligates a transferee servicer to comply 

with § 1024.41 regardless of whether a 

transferor servicer previously evaluated 

a borrower’s complete loss mitigation 

application. As set forth in the sectionby-section analysis of § 1024.41(k) 

below, the Bureau is proposing to move 

the balance of comment 41(i)–1, as 

revised, as well as comment 41(i)–2, as 

revised, into proposed § 1024.41(k) and 

proposed new commentary. 

The Bureau seeks comment on the 

proposed revision to § 1024.41(i) 

generally. The Bureau specifically seeks 

comment on whether the borrower’s 

right to a reevaluation should be 

contingent upon whether the borrower 

was current for a minimum period of 

time since the borrower’s last-submitted 

complete loss mitigation application. 

41(k) Servicing Transfers 

The Bureau is proposing § 1024.41(k) 

to address the requirements applicable 

to loss mitigation applications pending 

at the time of a servicing transfer. 

Proposed § 1024.41(k) provides that, 

subject to certain exceptions, a 

transferee servicer must comply with 

§ 1024.41’s requirements within the 

same timeframes that were applicable to 

the transferor servicer. The proposed 

exceptions include a five-day extension 

of time for a transferee servicer to 

provide the written notification required 

by § 1024.41(b)(2)(i)(B), and a provision 

ensuring that a transferee servicer that 

acquires servicing through an 

involuntary transfer has at least 15 days 

after the transfer date to evaluate a 

borrower’s pending complete loss 

mitigation application. The proposal 

also provides that if a borrower’s appeal 

under § 1024.41(h) is pending as of the 

transfer date, a transferee servicer must 

evaluate the appeal pursuant to 

§ 1024.41(h) if it is able to determine 

whether it should offer the borrower the 

loan modification options subject to the 

appeal; a transferee servicer that is 

unable to evaluate an appeal must treat 

the appeal as a complete loss mitigation 

application and evaluate the borrower 

for all loss mitigation options available 

to the borrower from the transferee 

servicer. 

Currently, § 1024.41 addresses 

transfers through the commentary. 

Comment 41(i)–1 provides that, among 

other things, documents and 

information transferred to a transferee 

servicer may constitute a loss mitigation 

application to the transferee servicer 

and may cause the transferee servicer to 

be required to comply with § 1024.41 

with respect to a borrower’s mortgage 

loan account. Comment 41(i)–2 states 

that a transferee servicer must obtain 

documents and information a borrower 

submitted in connection with a loss 

mitigation application, and that a 

transferee servicer should continue the 

evaluation of a complete loss mitigation 

application to the extent practicable. 

Finally, comment 41(i)–2 also states 

that, for purposes of specific subsections 

in § 1024.41, if a loss mitigation 

application is complete as to a 

transferee servicer, the transferee 

servicer is considered to have received 

the documents and information 

constituting the complete application as 

of the date the transferor servicer 

received the documents and 

information. The purpose of comment 

41(i)–2 is to ensure that a servicing 

transfer does not deprive a borrower of 

protections to which a borrower was 

entitled from the transferor servicer.190

The Bureau interprets § 1024.41 and 

comments 41(i)–1 and 2 as generally 

requiring a transferee servicer to stand 

in the shoes of the transferor servicer 

with respect to a loss mitigation 

application pending at transfer. A 

transferee servicer that receives a loss 

mitigation application as a result of a 

transfer should comply with § 1024.41 

within the timeframes that were 

applicable to the transferor servicer, 

and, as comment 41(i)–2 states, a 

borrower’s protections are based upon 

when the transferor servicer received 

documents and information constituting 

a complete application. Nonetheless, by 

stating that the transferee should 

continue the review to the extent 

practicable, comment 41(i)–2 implies 

that there are times when a transferee 

servicer may not be able to continue the 

evaluation of a complete application. 

The Bureau is concerned that current 

§ 1024.41 and comments 41(i)–1 and 2 

may not provide sufficient clarity to 

servicers and borrowers regarding a 

transferee servicer’s duties under 

§ 1024.41 in certain circumstances. The 

Bureau has received questions about the 

timeframes in which a transferee 

servicer must act and whether a 

transferee servicer must provide notices 

to a borrower if the transferor servicer 

already provided the same notices. The 

Bureau has also received questions 

about a transferee servicer’s 

responsibilities in the event that 

continuing the evaluation of a complete 

loss mitigation application is not 

practicable. Finally, through outreach 

and industry monitoring efforts, the 

Bureau has learned from servicers that 

complying with certain of § 1024.41’s 

requirements, such as the requirement 

in § 1024.41(b)(2)(i)(B) to provide 

written notification to a borrower within 

five days after receiving a loss 

mitigation application, can be especially 

difficult in the transfer context. 

The Bureau believes that servicers 

and borrowers will benefit from greater 

clarity regarding a transferee servicer’s 

obligations and a borrower’s protections 

under § 1024.41, including with respect 

to certain situations not currently 

discussed in § 1024.41 and comments 


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191See 79 FR 63295, 63296 (Oct. 23, 2014). 

41(i)–1 and 2. For example, the Bureau 

wishes to provide greater clarity 

regarding how transferee servicers 

should handle a pending appeal of a 

denial of a loan modification option, a 

pending offer of a loss mitigation 

option, and pending applications that 

are facially complete or become 

complete as of the transfer date. The 

Bureau also believes that under certain 

circumstances, it may be appropriate to 

provide a transferee servicer with an 

extension of time or flexibility in 

complying with § 1024.41. 

The Bureau is therefore proposing 

§ 1024.41(k) to address the requirements 

applicable to a transferee servicer with 

respect to a loss mitigation application 

pending as of the transfer date. As 

explained below, proposed § 1024.41(k) 

provides that, subject to certain 

exceptions, a transferee servicer must 

comply with § 1024.41’s requirements 

within the same timeframes that were 

applicable to the transferor servicer. The 

proposal also provides that if a 

borrower’s appeal under § 1024.41(h) is 

pending as of the transfer date, a 

transferee servicer must evaluate the 

appeal in accordance with § 1024.41(h) 

if it is able to determine whether it 

should offer the borrower the loan 

modification options subject to the 

appeal; a transferee servicer that is 

unable to evaluate an appeal must treat 

the appeal as a complete loss mitigation 

application and evaluate the borrower 

for all loss mitigation options available 

to the borrower from the transferee 

servicer. 

Proposed comment 41(k)-1 provides 

that a loss mitigation application is 

considered pending if it was subject to 

§ 1024.41 and had not been fully 

resolved before the transfer date. The 

comment also clarifies that a pending 

application is considered pending 

complete application if, as of the 

transfer date, the application was 

complete under the transferor servicer’s 

criteria. Thus, proposed comment 41(k)- 

1 is intended to avoid ambiguity about 

whether a loss mitigation application 

that was fully resolved by a transferor 

servicer would cause a transferee 

servicer to be required to comply with 

§ 1024.41. 

While proposed § 1024.41(k) specifies 

the timeframes in which a transferee 

servicer must comply with § 1024.41’s 

loss mitigation procedural requirements 

following a transfer, the Bureau expects 

that transferor servicers with policies 

and procedures adopted pursuant to 

§ 1024.38 will help enable transferee 

servicers’ compliance with § 1024.41. 

Section 1024.38(b)(4) requires a 

transferor servicer to have policies and 

procedures reasonably designed to 

ensure that it can timely transfer all 

information and documents in its 

possession or control related to a 

transferred mortgage loan to a transferee 

servicer in a form and manner that 

ensures the accuracy of the information 

and documents transferred. Section 

1024.38(b)(4) further specifies that a 

transferor servicer’s policies and 

procedures must be reasonably designed 

to ensure that the documents and 

information are transferred in a form 

and manner that ‘‘enables a transferee 

servicer to comply with . . . applicable 

law.’’ The Bureau therefore believes that 

a transferor servicer shares 

responsibility for enabling a transferee 

servicer to comply with § 1024.41(k)’s 

requirements and ensuring that 

borrowers will not be adversely 

impacted by a servicing transfer. 

Accordingly, the Bureau at this time 

does not believe it is necessary to 

impose any specific requirements in 

§ 1024.41(k) with respect to transferor 

servicers. The Bureau will continue to 

monitor whether transferor servicers’ 

practices raise consumer protection 

concerns that should be addressed 

through formal guidance or rulemaking. 

41(k)(1) In General 

Proposed § 1024.41(k)(1)(i) largely 

incorporates and clarifies existing 

comments 41(i)-1 and 2. It provides that 

a transferee servicer that acquires the 

servicing of a mortgage loan for which 

a loss mitigation application is pending 

as of the transfer date must comply with 

§ 1024.41’s requirements for that 

application. Proposed § 1024.41(k)(1)(i) 

further states that subject to the 

exemptions set forth in § 1024.41(k)(2) 

through (4), a transferee servicer must 

comply with § 1024.41’s requirements 

within the timeframes that were 

applicable to the transferor servicer. 

Finally, proposed § 1024.41(k)(1)(i) 

states that any protections under 

§ 1024.41(e) through (h), such as 

prohibitions on commencing foreclosure 

or conducting a foreclosure sale, that 

applied to a borrower before a transfer 

continue to apply notwithstanding the 

transfer. 

The purpose of proposed 

§ 1024.41(k)(1)(i) is to ensure that a 

transfer does not adversely affect a 

borrower who is pursuing loss 

mitigation options. A borrower 

generally has no control over whether 

and when a mortgage loan is transferred 

to another servicer. As the Bureau has 

previously observed, there is heightened 

risk inherent in transferring mortgage 

loans in loss mitigation.191 The Bureau 

believes that generally holding a 

transferee servicer to the same standards 

and timelines as a transferor servicer 

helps mitigate the risk of consumer 

harm. 

Proposed comment 41(k)(1)(i)-1.i 

incorporates a portion of existing 

comment 41(i)-2, stating that a 

transferee servicer must obtain from the 

transferor servicer documents and 

information a borrower submitted to a 

transferor servicer in connection with a 

loss mitigation application, consistent 

with policies and procedures adopted 

pursuant to § 1024.38. The proposed 

comment also provides that a transferee 

must comply with the applicable 

requirements of § 1024.41 with respect 

to a loss mitigation application received 

as a result of transfer, even if the 

transferor servicer was not required to 

comply with § 1024.41 (because, for 

example, the transferor servicer was a 

small servicer or the application was a 

duplicative request under § 1024.41(i) 

for the transferor servicer). 

Proposed comment 41(k)(1)(i)-1.ii 

states that a transferee servicer must, in 

accordance with § 1024.41(b), exercise 

reasonable diligence to complete a loss 

mitigation application received as a 

result of a transfer. The proposed 

comment further explains that in the 

transfer context, reasonable diligence 

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, 

as well as ensuring that the borrower is 

informed about which documents and 

information are necessary to complete 

the application. Proposed comments 

41(k)(1)(i)-1.i and ii are intended to 

avoid any ambiguity about whether a 

transferee servicer is required to comply 

with § 1024.41 with respect to loss 

mitigation applications received as a 

result of a transfer. 

Proposed comment 41(k)(1)(i)-2 

mirrors the last sentence of current 

comment 41(i)-2, stating that for 

purposes of § 1024.41(e) (borrower 

response), (f) and (g) (foreclosure 

protections), and (h) (appeal process), a 

transferee servicer must consider 

documents and information that 

constitute a complete application to 

have been received as of the date the 

transferor servicer received the 

documents and information. Proposed 

comment 41(k)(1)-2 further clarifies that 

an application that was facially 

complete with respect to a transferor 

servicer remains facially complete 

under § 1024.41(c)(2)(iv) with respect to 

the transferee servicer as of the date it 

was facially complete with respect to 

the transferor servicer. It also clarifies 


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192Section 1024.33(b)(4)(iv) requires the notice of 

transfer to include ‘‘The date on which the 

transferor servicer will cease to accept payments 

relating to the loan and the date on which the 

transferee servicer will begin to accept such 

payments. These dates shall either be the same or 

consecutive days.’’ 

193See Fannie Mae, Servicing Guide 

Announcement SVC–2014–06, at 1 (May 9, 2014), 

available at https://www.fanniemae.com/content/

announcement/svc1406.pdf. 

that if an application was complete with 

respect to the transferor servicer but is 

not complete with respect to the 

transferee servicer, the transferee 

servicer must treat the application as 

facially complete as of the date the 

application was complete with respect 

to the transferor servicer. The purpose 

of this comment is to ensure that a 

transfer does not affect the protections 

to which a borrower is entitled under 

§ 1024.41. 

Finally, proposed comment 

41(k)(1)(i)-3 provides that a transferee 

servicer is not required to provide any 

notice required by § 1024.41 with 

respect to a particular loss mitigation 

application if the transferor servicer 

provided the notice to a borrower before 

the transfer. This comment is intended 

to address questions about whether a 

transferee servicer must resend a notice 

already provided by the transferor 

servicer as to a particular application. 

Proposed § 1024.41(k)(1)(ii) provides 

that for purposes of § 1024.41(k), the 

transfer date is the date on which the 

transfer of servicing responsibilities 

from the transferor servicer to the 

transferee servicer occurs. Proposed 

comment 41(k)(1)(ii)-1provides that the 

transfer date corresponds to the date 

transferee servicer will begin accepting 

payments relating to the mortgage loan, 

which already must be disclosed on the 

notice of transfer of loan servicing 

pursuant to § 1024.33(b)(4)(iv).192

Proposed comment 41(k)(1)(ii)-1 further 

clarifies that the transfer date is not 

necessarily the sale date for the 

transaction. As a result, the Bureau 

believes the proposed definition is 

consistent with the definition Fannie 

Mae employs in its servicing guide,193

and the Bureau believes that it reflects 

the industry’s common understanding 

of the term. 

The Bureau solicits comment on the 

treatment of loss mitigation applications 

pending at transfer and whether it is 

appropriate to require a transferee 

servicer to comply with § 1024.41 

within the timeframes that were 

applicable to the transferor servicer. 

Additionally, the Bureau solicits 

comment on whether, following a 

transfer, a transferee servicer should be 

required to provide a borrower a written 

notice of what documents and 

information the transferee servicer 

needs to complete the application, 

regardless of whether the transferor 

servicer has provided such a notice. 

41(k)(2) Acknowledgement Notices 

Proposed § 1024.41(k)(2) provides that 

if a transferee servicer acquires the 

servicing of a mortgage loan for which 

the period to provide the notice 

required by § 1024.41(b)(2)(i)(B) has not 

expired as of the transfer date, the 

transferee servicer must provide the 

notice within 10 days (excluding legal 

public holidays, Saturdays, or Sundays) 

after the date the transferor servicer 

received the application. 

Section 1024.41(b)(2)(i)(B) states that 

if a servicer receives a loss mitigation 

application 45 days or more before a 

foreclosure sale, a servicer must notify 

the borrower in writing within five days 

(excluding legal public holidays, 

Saturdays, or Sundays) that the servicer 

acknowledges receipt of the application 

and the servicer has determined that the 

application is complete or incomplete. If 

the application is incomplete, the notice 

must, among other things, identify the 

documents or information necessary to 

complete the application. 

The Bureau is concerned about a 

transferee servicer’s ability to comply 

with § 1024.41(b)(2)(i)(B) in the scenario 

where a transferor servicer receives a 

loss mitigation application and, before 

the time period in which to provide the 

notice required by § 1024.41(b)(2)(i)(B) 

expires, it transfers the mortgage loan to 

the transferee servicer, without 

providing the notice. In that situation, a 

transferee servicer would be required to 

provide the notice within five days 

(excluding legal public holidays, 

Saturdays, or Sundays) of when the 

transferor servicer received the 

application. Depending on the timing of 

the transfer, a transferee servicer might 

have as little as one day after the 

transfer date to provide this notice. 

Information the Bureau has gathered 

through its outreach and industry 

monitoring efforts confirms that a 

transferee servicer often has difficulty 

providing the notice required by 

§ 1024.41(b)(2)(i)(B) within five days 

after the transferor servicer received a 

loss mitigation application. The Bureau 

understands that a transferee servicer 

typically requires several days to 

transition a mortgage loan file and 

related information onto its systems. A 

transferee servicer may be unable to 

transition this information and 

accurately review a loss mitigation 

application within the five-day time 

period specified in § 1024.41(b)(2)(i)(B), 

particularly for applications received 

within a few days before transfer. As a 

result, the Bureau believes that in this 

situation, a transferee servicer acting 

diligently and in good faith may still be 

unable to timely comply with the 

requirements of § 1024.41(b)(2)(i)(B). 

The Bureau is therefore proposing to 

allow transferee servicers up to an 

additional five days to comply with 

§ 1024.41(b)(2)(i)(B) with respect to 

applications pending as of the transfer 

date. Specifically, proposed 

§ 1024.41(k)(2) requires a transferee 

servicer to provide the notice required 

by § 1024.41(b)(2)(i)(B) within 10 days 

(excluding legal public holidays, 

Saturdays, or Sundays) after the date the 

transferor servicer received a borrower’s 

application. 

The Bureau believes that establishing 

a specific deadline for the transferee 

servicer to provide the notice required 

by § 1024.41(b)(2)(i)(B) may encourage 

transferor and transferee servicers to 

work together to streamline the transfer 

of documents. In particular, a specific 

deadline underscores the importance of 

§ 1024.38(b)(4)(i), which requires a 

transferor servicer to have policies and 

procedures reasonably designed to 

ensure that it can timely transfer all 

information and documents in its 

possession or control relating to a 

transferred mortgage loan to a transferee 

servicer in a form and manner that 

ensures the accuracy of the information 

and documents transferred. Thus, the 

Bureau expects transferor servicers to 

timely and accurately identify and 

transfer all loss mitigation applications 

to transferee servicers. Further, the 

Bureau believes a firm compliance 

deadline may avoid unnecessary delays 

in the loss mitigation application 

process, while at the same time 

affording transferee servicers additional 

time to properly respond to a borrower’s 

application. 

The Bureau also believes that this 

proposed extension would facilitate 

transferee servicers’ compliance with 

§ 1024.41(b)(2)(i)(B) while not 

materially affecting most borrowers. A 

borrower’s protections under 

§ 1024.41(e) through (h) are determined 

by the date on which a servicer receives 

a borrower’s complete application; 

extending the time for a transferee 

servicer to comply with 

§ 1024.41(b)(2)(i)(B) therefore could 

delay, but in most cases would not 

prevent, a borrower from obtaining 

those protections. Moreover, the 

proposed extension is for a relatively 

brief period of time, and the Bureau 

does not believe that a short delay in 

providing the § 1024.41(b)(2)(i)(B) 

notice would significantly lengthen the 

loss mitigation application process. 

Finally, the Bureau believes that 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74231 

194See comment 41(b)(2)(ii)-1. 

allowing a transferee servicer some 

additional time to review a borrower’s 

initial loss mitigation application may 

result in more accurate determinations 

regarding the documents and 

information needed to complete an 

application, which would ultimately 

benefit borrowers. 

Nonetheless, the Bureau recognizes 

that a delay in providing the 

§ 1024.41(b)(2)(i)(B) notice could impact 

a borrower in certain circumstances, 

such as when a servicer receives an 

incomplete loss mitigation application 

shortly before the 90th or 38th day 

before a foreclosure sale. In that 

instance, a borrower has an interest in 

completing the application as soon as 

possible to preserve the maximum 

protections available under § 1024.41(e) 

through (h). Allowing a transferee 

servicer additional time to provide a 

borrower with a written notification of 

the documents and information required 

to complete an application could result 

in a borrower being asked to obtain and 

submit the documents in a just a few 

days, which generally would be 

considered impracticable.194

The Bureau requests comment on 

whether borrowers currently have 

difficulty in obtaining and submitting 

required documents and information to 

complete an application that the 

servicer received shortly before the 90th 

or 38th day before a foreclosure sale, 

and whether the extension in proposed 

§ 1024.41(k)(2) would exacerbate such 

difficulties. The Bureau further requests 

comment on whether a transferee 

servicer that avails itself of the 

extension in proposed § 1024.41(k)(2) 

should be required to give a borrower 

additional time to complete an 

application, such that the extension 

under § 1024.41(k)(2) would also give 

the a borrower additional time past the 

90th or 38th day before a foreclosure 

sale to submit a complete application 

and obtain the applicable protections 

under § 1024.41(e) through (h). 

The Bureau further requests comment 

on whether it is reasonable to require a 

transferee servicer to provide the 

written notification required by 

§ 1024.41(b)(2)(i)(B) within 10 days 

(excluding legal public holidays, 

Saturdays, or Sundays) from the date a 

transferor servicer received a loss 

mitigation application, or whether a 

shorter or longer period is more 

appropriate. Finally, if a longer period 

were appropriate, the Bureau requests 

comment on whether a transferee 

servicer that avails itself of such a 

longer extension should be required to 

give a borrower additional time to 

complete an application, such that an 

extension would also give the a 

borrower additional time past the 90th 

or 38th day before a foreclosure sale to 

submit a complete application and 

obtain the applicable protections under 

§ 1024.41(e) through (h). 

41(k)(3) Complete Loss Mitigation 

Applications Pending at Transfer 

Proposed § 1024.41(k)(3)(i) provides 

that, with two exceptions, a transferee 

servicer that acquires the servicing of a 

mortgage loan for which a complete loss 

mitigation application is pending as of 

the transfer date must comply with the 

applicable requirements of 

§ 1024.41(c)(1) and (4) within 30 days of 

the date the transferor servicer received 

the complete application. Thus, unless 

an exception applies, a transfer does not 

affect the time in which a borrower 

should receive a notice of which loss 

mitigation options, if any, a servicer will 

offer to the borrower. The Bureau 

believes that this proposed requirement 

may be necessary to ensure that a 

transfer does not adversely affect a 

borrower. 

Proposed comment 41(k)(3)(i)-1 

clarifies a transferee servicer’s 

obligations regarding an application that 

was complete with respect to the 

transferor servicer but for which the 

transferee servicer needs additional 

documentation or corrections to a 

previously submitted document to 

evaluate the borrower for all loss 

mitigation options based upon the 

transferee servicer’s criteria. 

Specifically, the proposed comment 

clarifies that in this scenario and 

consistent with proposed 

§ 1024.41(c)(2)(iv), the application is 

facially complete as of the date it was 

first facially complete or complete, as 

applicable, with respect to the transferor 

servicer, and the borrower is entitled to 

all of the protections under 

§ 1024.41(c)(2)(iv). Additionally, once 

the transferee servicer receives the 

information or corrections necessary to 

complete the application, 

§ 1024.41(c)(3) requires the transferee 

servicer to provide a notice of complete 

application. Finally, the proposed 

comment clarifies that an application 

that was complete with respect to the 

transferor servicer remains complete 

even if the transferee servicer requests 

that a borrower resubmit the same 

information in the transferee servicer’s 

specified format or make clerical 

corrections to the application. The 

comment further clarifies that a 

borrower’s failure to resubmit such 

information or make such clerical 

corrections does not extend the time in 

which the transferee servicer must 

complete the evaluation of the 

borrower’s complete application. The 

purpose of this comment is to clarify 

that a borrower does not lose 

protections under § 1024.41, including 

foreclosure protections, if a transferee 

servicer determines that it needs 

additional documentation or corrections 

to a previously submitted document, 

and that a request to resubmit 

documents in a different format will not 

extend the time by which a borrower 

will receive a determination of which 

loss mitigation options the servicer will 

offer. 

Proposed comment 41(k)(3)(i)-2 

addresses the reverse situation in which 

a borrower’s loss mitigation application 

was incomplete based upon the 

transferor servicer’s criteria prior to 

transfer but the transferee servicer 

determines that the application is 

complete based upon its own criteria. In 

that case, the proposed comment 

clarifies that the application is 

considered a pending loss mitigation 

application complete as of the transfer 

date for purposes of § 1024.41(k)(3), but 

complete as of the date the transferor 

servicer received the documents and 

information constituting the complete 

application for purposes of § 1024.41(e) 

through (h). This comment is intended 

to avoid confusion about the timeframe 

in which the transferee servicer must 

evaluate a complete application and the 

date on which the borrower obtained 

protections under § 1024.41. 

Proposed § 1024.41(k)(3)(ii)(A) sets 

forth the first proposed exception to the 

requirement to comply with 

§ 1024.41(c)(1) and (4) within 30 days of 

the date the transferor servicer received 

the complete application. This proposed 

exception concerns involuntary 

transfers of servicing. The Bureau 

understands that a servicer that acquires 

servicing as a result of an involuntary 

transfer is less likely to be able to plan 

properly for a transfer, such as by 

engaging in pre-transfer due diligence, 

coordinating the delivery and 

onboarding of documents and 

information, or potentially negotiating 

contractual provisions requiring the 

transferor servicer to identify mortgage 

loans that are in active or pending loss 

mitigation. Additionally, involuntary 

transferee servicers may be more likely 

to receive loans from a failing or 

bankrupt servicer, which in turn may be 

more likely to have failed to maintain 

adequate records regarding borrowers’ 

mortgage loans. As a result, an 

involuntary transferee servicer may be 

unable to complete the evaluation 

within 30 days of when the transferor 

servicer received the complete 

application. 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74232 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

195See Dep’t of Treasury, Supplemental Directive 

11–2, Making Home Affordable Program—Servicing 

Transfers (Dec. 27, 2011), available at https://

www.hmpadmin.com/portal/programs/docs/hamp_

servicer/sd1112.pdf. 196 78 FR 10695, 10835 (Feb. 14, 2013). 

Therefore, proposed 

§ 1024.41(k)(3)(ii)(A) would allow a 

servicer that acquires servicing as a 

result of an involuntary transfer to 

comply with the applicable 

requirements of § 1024.41(c)(1) and (4) 

within 30 days of the date the transferor 

received a complete loss mitigation 

application, or within 15 days of the 

transfer date, whichever is later. The 

Bureau believes that allowing an 

involuntary transferee servicer at least 

15 days from the transfer date to comply 

would give the transferee servicer 

sufficient opportunity to obtain 

documents and information from a 

transferor servicer and complete the 

evaluation of a borrower’s application. 

The Bureau also believes that this 

relatively brief proposed extension of 

time, when applicable, would impose 

only limited costs on borrowers. A 

borrower’s protections under 

§ 1024.41(e) through (h) are established 

as of the date a servicer receives a 

complete application, and extending the 

time to evaluate the complete 

application would not alter those 

protections. Furthermore, allowing an 

involuntary transferee servicer a 

minimum of 15 days after the transfer 

date to review a complete loss 

mitigation application may result in a 

more accurate evaluation, ultimately 

benefitting a borrower. 

Proposed § 1024.41(k)(3)(ii)(B) 

provides that a transfer is involuntary 

when an unaffiliated investor or a court 

or regulator with jurisdiction requires, 

with less than 30 days advance notice, 

the transferor servicer to transfer 

servicing to another servicer and the 

transferor servicer is in breach of, or 

default under, its servicing agreement 

for loss mitigation related-servicing 

performance deficiencies or is in 

receivership or bankruptcy. This 

proposed definition builds on the 

definition of involuntary transfer used 

in the Department of the Treasury’s 

HAMP directives, which encompasses 

transfers that are required by a court or 

regulator with jurisdiction.195 The 

Bureau believes, however, that 

including every investor-required 

transfer within the definition of 

involuntary transfer may be too broad 

for § 1024.41’s purposes, as it could be 

interpreted as including all investor 

flow agreements, which could cover 

transfers for which the transferee 

servicer is able to plan and conduct 

reasonable preparation. Accordingly, 

with respect to investor-required 

transfers, the Bureau is proposing to 

limit the definition of involuntary 

transfer to those transfers that occur 

while the transferor servicer is in breach 

of, or in default under, its servicing 

agreement for loss mitigation relatedservicing performance deficiencies. 

Further, the transferor servicer must 

have received the direction to transfer 

the loan thirty days or less before the 

transfer date. The Bureau believes that 

this definition will appropriately 

capture those transfers for which a 

transferee servicer may have difficulty 

timely complying with § 1024.41(c)’s 

loss mitigation requirements. 

The second proposed exception 

concerns instances where a transferee 

servicer’s completion of the evaluation 

within the timeframes set forth in 

proposed § 1024.41(k)(3)(i) or (ii)(A), as 

applicable, is impracticable under the 

circumstances. The Bureau understands 

that due to the unique circumstances 

and complications that may arise in 

connection with a transfer, there may be 

times when, despite the transferee 

servicer’s good faith efforts, it may be 

impracticable to comply with the timing 

requirements of § 1024.41(k)(3)(i) or 

(ii)(A). In that situation, proposed 

§ 1024.41(k)(3)(iii) requires a transferee 

servicer to comply with the applicable 

requirements of § 1024.41(c)(1) and (4) 

within a reasonably prompt time after 

expiration of the applicable time period 

in § 1024.41(k)(3)(i) or (ii)(A). The 

Bureau expects that in most 

circumstances, it will be practicable for 

a transferee servicer to evaluate a 

complete application within the 

prescribed timeframes and that an 

extension will not be necessary or 

appropriate. 

The Bureau is also proposing 

comment 41(k)(3)(iii)-1, which clarifies 

that for purposes of § 1024.41(k)(3)(iii), 

a servicer that complies with the 

applicable requirements of 

§ 1024.41(c)(1) and (4) within five days 

after the expiration of the applicable 

timeframe in proposed § 1024.41(k)(3)(i) 

or (ii)(A) would generally be considered 

to have acted within a ‘‘reasonably 

prompt time.’’ As discussed in the 

section-by-section analysis of 

§ 1024.41(k)(2), servicing transfers can 

raise unique circumstances. The Bureau 

therefore believes that when it is 

impracticable for a transferee servicer to 

timely complete the evaluation of a 

borrower’s pending complete loss 

mitigation application due to 

unforeseen complications arising from a 

transfer, a transferee servicer should be 

afforded additional time to complete the 

evaluation. 

The Bureau seeks comment on the 

treatment of complete applications 

pending at transfer. In particular, the 

Bureau seeks comment on whether it is 

ever necessary or appropriate to give 

transferee servicers an extension of time 

to evaluate complete applications. If an 

extension is necessary or appropriate, 

the Bureau seeks comment on which 

factors and circumstances, including but 

not limited to involuntary transfers, may 

require an extension, the appropriate 

length of any extension, and the burden 

transferee servicers should have to carry 

to demonstrate a need for the extension. 

The Bureau also seeks comment on 

what obstacles transferee servicers 

currently face in obtaining and 

evaluating pending loss mitigation 

applications and the problems faced by 

borrower who have applications 

pending at the time of a servicing 

transfer, as well as whether an extension 

of time to comply with § 1024.41 

following a transfer would ameliorate or 

exacerbate those problems. 

41(k)(4) Applications Subject to Appeal 

Process 

Proposed § 1024.41(k)(4) provides that 

if a borrower timely appeals a transferor 

servicer’s denial of a loan modification 

option under § 1024.41(h), a transferee 

servicer must evaluate the appeal if it is 

able to determine whether it should 

offer the borrower the loan modification 

options subject to the appeal. A 

transferee servicer that is unable to 

evaluate an appeal must treat the 

borrower’s appeal as a pending 

complete loss mitigation application 

and comply with the requirements of 

§ 1024.41 for such application. Proposed 

§ 1024.41(k)(4) would apply if a 

borrower made an appeal before the 

transfer date and the appeal remains 

pending as of the transfer date, or if the 

period for making an appeal under 

§ 1024.41(h) had not expired as of the 

transfer date and a borrower 

subsequently made a timely appeal. 

The Bureau believes that a transfer 

should not deprive a borrower of the 

right to appeal a servicer’s denial of a 

loan modification option. As discussed 

in the 2013 RESPA Servicing Final Rule, 

borrowers and consumer advocacy 

groups dispute in many cases whether 

servicers have properly applied the 

requirements of loan modification 

programs.196 The terms of loan 

modification programs are complex, and 

the Bureau continues to believe that, as 

with any complex and unique process, 

servicers may make mistakes in 

evaluating borrowers’ complete 

applications. Moreover, investors or 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
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197 12 CFR 1024.41(i); comment 41(i)–1. 

guarantors may be motivated to transfer 

servicing to a new servicer based on a 

determination that the new servicer is 

better able to evaluate borrowers for loss 

mitigation options. In that case, the 

Bureau believes that both a borrower 

and an investor or guarantor may benefit 

from the new servicer attempting to 

determine whether the transferor 

servicer mistakenly denied the borrower 

for a loan modification option. 

Therefore, proposed § 1024.41(k)(4) 

provides that if a transferee servicer that 

acquires the servicing of a mortgage loan 

for which, as of the transfer date, a 

borrower’s appeal under § 1024.41(h) is 

pending or a borrower’s time period to 

appeal under § 1024.41(h) has not 

expired, the transferee servicer must 

evaluate the appeal if it is able to 

determine whether it should offer the 

borrower the loan modification options 

subject to the appeal. Proposed 

§ 1024.41(k)(4)(i) further provides that, 

if a servicer is able to evaluate an appeal 

but it is not practicable under the 

circumstances to complete the 

determination within 30 days of when 

the borrower made the appeal, the 

transferee servicer must complete the 

evaluation of the borrower’s appeal and 

provide the notice required by 

§ 1024.41(h)(4) within a reasonably 

prompt time. Proposed comment 

41(k)(4)-2 clarifies that in general, a 

reasonably prompt time would be 

within an additional five days after the 

expiration of the original 30-day 

evaluation window. Proposed 

§ 1024.41(k)(4)(i) thus imposes the same 

requirements on a transferee servicer to 

evaluate a pending appeal as a pending 

complete loss mitigation application. 

For the reasons discussed above, the 

Bureau believes that in some 

circumstances, a transferee servicer may 

need to exceed the 30-day evaluation 

window to complete the evaluation. 

The Bureau recognizes, however, that 

a transferee servicer may not always be 

able to determine whether a transferor 

servicer incorrectly denied the borrower 

for a loan modification option. For 

example, the transferee servicer may not 

have sufficient information about the 

evaluation criteria used by the transferor 

servicer, in particular when the 

transferor servicer denied a borrower for 

a loan modification option that the 

transferee servicer does not offer, or 

when the transferee servicer receives the 

mortgage loan file through an 

involuntary transfer and the transferor 

servicer failed to maintain proper 

records such that the transferee servicer 

does not have sufficient information to 

evaluate the appeal. The Bureau 

believes that such circumstances will be 

rare, that transferee servicers will 

generally be able to evaluate borrowers’ 

appeals, and that borrowers will not be 

disadvantaged as a result of transfers. In 

those limited circumstances, however, 

proposed § 1024.41(k)(4)(ii) requires the 

transferee servicer to treat the appeal as 

a pending complete loss mitigation 

application and evaluate the borrower 

for all options available to the borrower 

from the transferee servicer. For 

purposes of § 1024.41(c) or (k)(2), as 

applicable, such a pending complete 

loss mitigation application would be 

considered received as of the date the 

appeal was received. For purposes of 

§ 1024.41(e) through (h), such a pending 

complete loss mitigation application 

would be considered facially complete 

as of the date the application was 

facially complete with respect to the 

transferor servicer. 

The Bureau believes that, in cases 

where the transferee servicer cannot 

evaluate the appeal, requiring the 

transferee servicer to reevaluate the 

borrower for all loss mitigation options 

that may be available to the borrower 

preserves the benefits of the appeal 

process for borrowers. Furthermore, the 

Bureau believes that the proposed 

requirement would not impose 

substantial burdens on transferee 

servicers because a transferee servicer is 

already required to comply with the 

requirements of § 1024.41 regardless of 

whether the borrower received an 

evaluation of a complete loss mitigation 

application from the transferor 

servicer.197

Proposed comment 41(k)(4)-1 notes 

that a transferee servicer may be unable 

to evaluate an appeal when, for 

example, the transferor servicer denied 

a borrower for a loan modification 

option that the transferee servicer does 

not offer or when the transferee servicer 

receives the mortgage loan file through 

an involuntary transfer and the 

transferor servicer failed to maintain 

proper records such that the transferee 

servicer lacks sufficient information to 

evaluate the appeal. The proposed 

comment also clarifies that if a 

transferee servicer is required to treat 

the appeal as a pending complete 

application, the transferee servicer must 

permit the borrower to accept or reject 

any loss mitigation options offered by 

the transferor servicer, in addition to the 

loss mitigation options, if any, that the 

transferee servicer determines to offer 

the borrower based on its own 

evaluation of the borrower’s complete 

loss mitigation application. This 

proposed comment is intended to 

ensure that a transfer does not have the 

result of depriving a borrower of any 

loss mitigation options that were offered 

by the transferor servicer, and it is 

consistent with the treatment of pending 

loss mitigation offers in proposed 

§ 1024.41(k)(5). 

The Bureau requests comment on the 

treatment of appeals pending at transfer, 

including whether transferee servicers 

may need additional time to evaluate 

pending appeals, the extent to which 

transferee servicers are able to evaluate 

appeals of a transferor servicer’s denial 

of a loan modification option, and 

whether a pending appeal should ever 

or always be treated as a new loss 

mitigation application such that a 

transferee servicer must evaluate the 

borrower for all available loss mitigation 

options. Additionally, the Bureau is 

concerned about the appropriate 

recourse when, if ever, a transferee 

servicer is unable to evaluate a 

borrower’s appeal. The Bureau believes 

that treating the appeal as a pending 

complete application would provide 

benefits to borrowers, but the Bureau 

requests comment on whether such 

treatment would be in the borrower’s 

best interests where, for example, the 

borrower’s application documents may 

have gone stale or the borrower has little 

hope of being offered any loss 

mitigation option, and whether such 

treatment is inconsistent with 

applicable investor requirements. 

41(k)(5) Pending Loss Mitigation Offers 

Proposed § 1024.41(k)(5) provides that 

a transfer does not affect the borrower’s 

ability to accept or reject a loss 

mitigation option offered under 

§ 1024.41(c) or (h). Specifically, the 

proposal states that if a transferor 

servicer offered the borrower a loss 

mitigation option and the borrower’s 

time to accept or reject the offer had not 

expired as of the transfer date, a 

transferee servicer must allow the 

borrower to accept or reject the offer. 

Proposed comment 41(k)(5)-1 clarifies 

that a transferee servicer should expect 

that some borrowers will provide their 

acceptances to the transferor servicer 

and, pursuant to the policies and 

procedures maintained under 

§ 1024.38(b)(4), a transferee servicer 

should obtain those acceptances from 

the transferor servicer. For example, a 

borrower may be able to accept a trial 

modification agreement by making an 

initial payment of the modified amount. 

A borrower may timely send this 

payment to the transferor servicer 

instead of to the transferee servicer. In 

this situation, the Bureau believes that 

the transferee servicer must honor an 

acceptance that the borrower timely sent 

to the transferor servicer. 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74234 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

198See section-by-section analysis of § 1024.30(d), 

supra. 

Legal Authority 

The Bureau proposes to rely on its 

authority under sections 6(j)(3), 

6(k)(1)(C), 6(k)(1)(E) and 19(a) of RESPA 

to propose these amendments to 

§ 1024.41. The proposed loss mitigation 

procedures are necessary and 

appropriate to achieve the consumer 

protection purposes of RESPA, 

including by requiring servicers to 

provide borrowers with timely access to 

accurate and necessary information 

regarding an evaluation for a foreclosure 

avoidance option and to facilitate the 

evaluation of borrowers for foreclosure 

avoidance options. Further, the 

proposed loss mitigation procedures 

implement, in part, a servicer’s 

obligation to take timely action to 

correct errors relating to avoiding 

foreclosure under section 6(k)(1)(C) of 

RESPA by establishing servicer duties 

and procedures that must be followed 

where appropriate to avoid errors with 

respect to foreclosure. 

In addition, the Bureau relies on its 

authority pursuant to section 1022(b) of 

the Dodd-Frank Act to prescribe 

regulations necessary or appropriate to 

carry out the purposes and objectives of 

Federal consumer financial law, 

including the purposes and objectives of 

title X of the Dodd-Frank Act. 

Specifically, the Bureau believes that 

the proposed amendments to § 1024.41 

are necessary and appropriate to carry 

out the purpose under section 1021(a) of 

the Dodd-Frank Act of ensuring that 

markets for consumer financial products 

and services are fair, transparent, and 

competitive, and the objective under 

section 1021(b) of the Dodd-Frank Act 

of ensuring that markets for consumer 

financial products and services operate 

transparently and efficiently to facilitate 

access and innovation. The Bureau 

additionally relies on its authority 

under section 1032(a) of the Dodd-Frank 

Act, which authorizes the Bureau to 

prescribe rules to ensure that features of 

any consumer financial product or 

service, both initially and over the terms 

of the product or service, are fully, 

accurately, and effectively disclosed to 

consumers in a manner that permits 

consumers to understand the costs, 

benefits, and risks associated with the 

product or service, in light of the facts 

and circumstances. 

Appendix MS 

Appendix MS–3(A) through (D)—Model 

Forms for Force-Placed Insurance 

Notices 

The Bureau is proposing three sets of 

changes to the model forms for forceplaced insurance notices, located at 

appendix MS–3(A) through (D). First, 

the Bureau proposes to amend MS–3(A) 

and (B) to align the model forms to the 

proposed amendments to 

§ 1024.37(c)(2)(v). As discussed in the 

section-by-section analysis of 

§ 1024.37(c)(2)(v), the Bureau is 

proposing to amend that provision to 

require the force-placed insurance 

notice to state, as applicable, that the 

borrower’s hazard insurance provides 

insufficient coverage and that the 

servicer does not have evidence that the 

borrower has hazard insurance that 

provides sufficient coverage. The 

Bureau is therefore proposing to make a 

corresponding change to the language in 

model forms MS–3(A) and (B), so that 

the forms include the statement ‘‘your 

[hazard] [Insurance Type] insurance [is 

expiring] [expired] [provides 

insufficient coverage], and we do not 

have evidence that you have obtained 

new coverage.’’ 

Second, the Bureau is proposing a 

technical change to align the model 

forms with the requirements of 

§ 1024.37(c)(2)(ix)(A) and (e)(2)(viii)(A). 

Those provisions require the forceplaced insurance initial, reminder, and 

renewal notices to include a statement 

that the insurance the servicer has 

purchased or purchases ‘‘may cost 

significantly more than hazard 

insurance purchased by the borrower.’’ 

Current model forms MS–3(A) through 

(D) omit the word ‘‘significantly.’’ The 

Bureau is proposing to amend model 

forms MS–3(A) through (D) to add the 

word significantly, such that each 

model form would track the language of 

§ 1024.37(c)(2)(ix)(A) and (e)(2)(viii)(A). 

Third, the Bureau is proposing a 

technical change to MS–3(D) to align the 

model form with the requirements of 

§ 1024.37(e)(3), which requires servicers 

to provide certain information on the 

form in bold text. 

Legal Authority 

The Bureau is proposing to exercise 

its authority under section 6(k)(1)(E) of 

RESPA to amend the model forms in 

appendix MS–3(A) through (D) to Part 

1024 of Regulation X. For the reasons 

given above, the Bureau believes that 

the amendments to the model forms for 

the force-placed insurance notices are 

appropriate to align the text of the 

model forms with the disclosures 

required by § 1024.37. 

Appendix MS–4—Model Clause for the 

Written Early Intervention Notice 

Proposed model clause MS–4(D) in 

appendix MS–4 illustrates the 

disclosures required under proposed 

§ 1024.39(d)(2)(iii)(A). The Bureau has 

developed proposed model clause MS– 

4(D) to assist servicers that are subject 

to the FDCPA with respect to a borrower 

who has invoked the FDCPA’s cease 

communication protections in 

complying with the modified written 

early intervention notice required by 

§ 1024.39(d)(2)(iii). As discussed in the 

section-by-section analysis of 

§ 1024.39(d)(2), proposed 

§ 1024.39(d)(2)(iii) requires that the 

written early intervention notice 

include a statement that the servicer 

may or intends to invoke its specified 

remedy of foreclosure pursuant to 

section 805(c)(2) or (3) of the FDCPA. 

Proposed model clause MS–4(D) may be 

used to comply with this requirement. 

Specifically, proposed model clause 

MS–4(D) states, ‘‘This is a legally 

required notice sent to borrowers who 

are at least 45 days delinquent. We have 

a right to invoke foreclosure. Loss 

mitigation or other alternatives may be 

available to help you avoid losing your 

home.’’ The Bureau seeks comment on 

whether proposed model clause MS– 

4(D) is appropriate, and whether 

alternate or additional model clauses 

would be helpful to borrowers and 

servicers in this context. 

Legal Authority 

The Bureau is proposing to exercise 

its authority under section 6(k)(1)(E) of 

RESPA and section 814(d) of the FDCPA 

to add new model clause MS–4(D) in 

appendix MS–4 to Part 1024 of 

Regulation X. For the reasons discussed 

in the section-by-section analysis of 

§ 1024.39(d)(2), the Bureau believes that 

requiring a servicer to provide the 

modified written early intervention 

notice if loss mitigation options are 

available is a reasonable interpretation 

of the exceptions under section 

805(c)(2) and (3) of the FDCPA, which 

permit a debt collector to communicate 

with a consumer who has invoked the 

cease communication protections to 

notify the consumer that the debt 

collector or creditor may invoke 

specified remedies which are ordinarily 

invoked or intends to invoke a specified 

remedy. 

C. Regulation Z 

Section 1026.2 Definitions and Rules of 

Construction 

Paragraph (a)(11) 

As noted in part V.A., the Bureau is 

proposing that all of the Mortgage 

Servicing Rules apply to confirmed 

successors in interest. Accordingly, 

similar to proposed § 1024.30(d) with 

respect to Regulation X’s mortgage 

servicing rules,198 proposed 


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199As indicated in part V.A., supra, the Bureau 

understands that whether a successor in interest has 

assumed a mortgage loan obligation (i.e., legal 

liability for the mortgage debt) under State law is 

a fact-specific question. 

200Section 1026.20(e) will become effective on 

August 1, 2015. See Integrated Mortgage Disclosures 

Under the Real Estate Settlement Procedures Act 

(Regulation X) and the Truth In Lending Act 

(Regulation Z), 78 FR 79730, 79732, 80328–29 (Dec. 

31, 2013). Section 1026.20(c) and (d) apply with 

respect to ‘‘a closed-end consumer credit 

transaction secured by the consumer’s principal 

dwelling,’’ and § 1026.20(e) applies with respect to 

‘‘a closed-end consumer credit transaction secured 

by a first lien on real property or a dwelling.’’ 

Accordingly, with respect to successors in interest 

under proposed § 1026.2(a)(11), § 1026.20(c) and (d) 

would apply with respect to a mortgage loan 

secured by the successor in interest’s principal 

dwelling, and § 1026.20(e) would apply in 

connection with a mortgage loan secured by a first 

lien on real property or a dwelling. 

201Section 1026.36(c)(1) and (2) apply in 

connection with ‘‘a consumer credit transaction 

secured by a consumer’s principal dwelling,’’ and 

§ 1026.36(c)(3) applies in connection with ‘‘a 

consumer credit transaction secured by a 

consumer’s dwelling.’’ Accordingly, with respect to 

successors in interest under proposed 

§ 1026.2(a)(11), § 1026.36(c)(1) and (2) would apply 

in connection with a mortgage loan secured by a 

consumer’s principal dwelling, and § 1026.36(c)(3) 

would apply in connection with a mortgage loan 

secured by a consumer’s dwelling. 

202For the reasons discussed in the section-bysection analysis of § 1024.30(d), supra, the Bureau 

believes that providing confirmed successors in 

interest with payoff balances does not present 

privacy concerns. 

203 78 FR 10901, 10914 (Feb. 14, 2013) (quoting 

15 U.S. C. 1601(a)). 

§ 1026.2(a)(11) defines the term 

consumer to include a successor in 

interest once a servicer confirms the 

successor in interest’s identity and 

ownership interest in the dwelling for 

the purposes of Regulation Z’s mortgage 

servicing rules—§§ 1026.20(c) through 

(e), 1026.36(c), and 1026.41. Confirmed 

successors in interest covered by 

proposed § 1026.2(a)(11) would not 

necessarily have assumed the mortgage 

loan obligation (i.e., legal liability for 

the mortgage debt) under State law.199

As described in part V.A., the Bureau 

is proposing this change because the 

Bureau believes, based on repeated 

reports from consumers, consumer 

advocacy groups, and other 

stakeholders, that successors in interest 

face many of the challenges that 

Regulation Z’s mortgage servicing rules 

were designed to prevent. Because a 

successor in interest is a homeowner 

whose dwelling is subject to foreclosure 

if the mortgage loan obligation is not 

satisfied, the Bureau believes that the 

same reasons supporting the Bureau’s 

adoption of the 2013 TILA Servicing 

Final Rule support proposed 

§ 1026.2(a)(11). 

The Bureau believes that it is 

appropriate to limit the application of 

this portion of the proposed rule to 

successors in interest whom servicers 

have confirmed have an ownership 

interest in the dwelling. Because some 

people representing themselves as 

successors in interest may not actually 

have an ownership interest in the 

dwelling, the Bureau believes that 

requiring servicers to apply Regulation 

Z’s mortgage servicing rules’ 

communication and disclosure 

requirements to successors in interest 

before servicers have confirmed the 

successor in interest’s identity and 

ownership interest in the dwelling may 

present privacy and other concerns. For 

the same reason, the Bureau also 

believes it is inappropriate to require 

servicers to incur substantial costs 

before confirming the successor in 

interest’s identity and ownership 

interest in the dwelling. 

The Bureau has considered each of 

Regulation Z’s mortgage servicing rules 

and believes that each portion should 

apply to confirmed successors in 

interest. The Bureau also generally 

believes that it would add unnecessary 

complexity to the rules to require 

servicers to apply some but not all of 

Regulation Z’s mortgage servicing rules 

to confirmed successors in interest. The 

Bureau believes it is preferable to apply 

all of Regulation Z’s mortgage servicing 

rules to confirmed successors in 

interest, unless there is a compelling 

reason not to apply a particular rule. 

With respect to § 1026.20(c) through 

(e), under proposed § 1026.2(a)(11), 

once a servicer confirms a successor in 

interest’s identity and ownership 

interest in the dwelling, the servicer 

would be required to provide successors 

in interest with ARM disclosures under 

§ 1026.20(c) and (d) and with escrow 

account cancellation notices under 

§ 1026.20(e).200 The Bureau believes 

that the disclosures required by 

§ 1026.20(c) through (e) would provide 

successors in interest with important 

information to allow the successor in 

interest to keep the mortgage loan 

current, which in turn will help the 

successor in interest avoid foreclosure. 

Further, because servicers are already 

required to comply with § 1026.20(c) 

through (e) with respect to prior 

consumers, any additional cost to 

servicers to apply these requirements to 

successors in interest would be 

minimal. The Bureau believes that the 

cost would be limited to updating 

servicer systems initially, adding 

individual successors in interest to the 

system on an ongoing basis, and 

printing and mailing costs, if any. The 

Bureau believes that the resulting 

consumer protection of this vulnerable 

group justifies the additional cost to 

servicers. 

The Bureau solicits comment on 

whether § 1026.20(c) through (e) should 

not apply with respect to successors in 

interest. The Bureau also solicits 

comment on whether, in the case of 

consumer death, the servicer should 

continue providing disclosures to the 

consumer’s estate until a successor in 

interest’s status has been confirmed. 

With respect to § 1026.36(c), under 

proposed § 1026.2(a)(11), once a servicer 

confirms a successor in interest’s 

identity and ownership interest in the 

dwelling, the servicer would be required 

to comply with § 1026.36(c)’s 

requirements regarding payment 

processing, the prohibition on 

pyramiding of late fees, and payoff 

statements with respect to the successor 

in interest.201 The Bureau believes that 

§ 1026.36(c)’s protections would help 

successors in interest maintain 

ownership of their homes; successors in 

interest, as owners of a dwelling 

securing a mortgage loan, may be 

required to make payments on the loan 

to avoid foreclosure. As noted in part 

V.A., the Bureau has heard from 

consumers and consumer advocacy 

groups that some servicers have refused 

to accept payments from successors in 

interest, which in turn may lead to 

delinquency on the mortgage loan and, 

eventually, foreclosure. The Bureau 

believes that applying § 1026.36(c)’s 

prompt crediting requirements to 

confirmed successors in interest would 

alleviate this problem. The Bureau also 

believes that providing successors in 

interest with access to the loan’s payoff 

balance would serve to keep successors 

in interest informed about the mortgage 

loan secured by the dwelling and would 

help prevent unnecessary foreclosure, as 

the payoff balance is the amount that 

ultimately must be paid to prevent the 

servicer from foreclosing on the 

dwelling.202 The Bureau also believes 

that because successors in interest, as 

owners of a dwelling securing a 

mortgage loan, may be required to make 

payments on the loan to avoid 

foreclosure, the prohibition on 

pyramiding of late fees would serve 

TILA’s purpose of ‘‘protect[ing] 

consumers against inaccurate and unfair 

credit billing practices.’’ 203

Additionally, because § 1026.36(c) 

already requires servicers to comply 

with these requirements with respect to 

prior consumers, the Bureau believes 

that the additional cost to servicers to 

apply these requirements to successors 

in interest will be relatively minimal. In 

any event, the Bureau believes that 

providing these consumer protections to 


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204Section 1026.41 applies with respect to ‘‘a 

closed-end consumer credit transaction secured by 

a dwelling.’’ Accordingly, with respect to 

successors in interest under proposed 

§ 1026.2(a)(11), § 1026.41 would apply with respect 

to a mortgage loan secured by a dwelling. 

205 78 FR 10901, 10959 (Feb. 14, 2013). 

this vulnerable group justifies the 

additional cost to servicers. 

The Bureau solicits comment on 

whether certain parts of § 1026.36(c) 

should apply with respect to successors 

in interest even if the servicer has not 

confirmed the successor in interest’s 

identity and ownership interest in the 

dwelling. Further, the Bureau solicits 

comment on whether certain parts of 

§ 1026.36(c) should not apply with 

respect to confirmed successors in 

interest. 

With respect to § 1026.41, under 

proposed § 1026.2(a)(11), once a servicer 

confirms a successor in interest’s 

identity and ownership interest in the 

dwelling, the servicer would be required 

to provide the successor in interest with 

ongoing periodic statements required 

under § 1026.41.204 As described in part 

V.A, the Bureau is proposing this 

change because the Bureau has received 

repeated reports from consumers and 

consumer advocacy groups that 

successors in interest face many of the 

challenges that Regulation Z’s mortgage 

servicing rules were designed to 

prevent. Specifically, when the Bureau 

issued the periodic statement 

requirement in the 2013 TILA Servicing 

Final Rule, the Bureau stated that the 

periodic statement ‘‘serve[s] a variety of 

important purposes, including 

informing consumers of their payment 

obligations, providing information about 

the mortgage loan, creating a record of 

transactions that increase or decrease 

the outstanding balance, providing 

information needed to identify and 

assert errors, and providing information 

when consumers are delinquent.’’ 205

The Bureau believes that receiving 

periodic statements would serve these 

same purposes for successors in interest, 

who as homeowners of a dwelling 

securing a mortgage loan may be 

required to make payments on the loan 

to avoid foreclosure. 

Further, because § 1026.41 already 

requires servicers to send periodic 

statements to the prior consumer, the 

Bureau believes that the additional cost 

to servicers to apply these requirements 

to successors in interest will be 

minimal. The Bureau believes that the 

cost would be limited to updating 

servicer systems initially, adding 

individual successors in interest to the 

system on an ongoing basis, and 

printing and mailing costs, if any. In any 

event, the Bureau believes that 

providing consumers who have an 

ownership interest in a property with 

detailed information about the status of 

the loan secured by the property 

justifies the additional cost. 

The Bureau solicits comment on 

whether § 1026.41 should provide that, 

in the case of consumer death, the 

servicer should continue providing 

periodic statements to the consumer’s 

estate until a successor in interest’s 

status has been confirmed. 

Proposed commentary. Proposed 

comment 2(a)(11)–1 provides that, even 

after a servicer confirms a successor in 

interest’s status, the servicer is still 

generally required to comply with the 

requirements of §§ 1026.20(c) through 

(e), 1026.36(c), and 1026.41 with respect 

to the prior consumer. The proposed 

comment indicates, however, that a 

servicer is not required to comply with 

the requirements of §§ 1026.20(c) 

through (e) and 1026.41 if the prior 

consumer also has either died or has 

been released from the obligation on the 

mortgage loan, and a servicer is not 

required to comply with the 

requirements of § 1026.36(c) if the prior 

consumer also has been released from 

the obligation on the mortgage loan. The 

proposed comment also provides that 

the prior consumer retains any rights 

under §§ 1026.20(c) through (e), 

1026.36(c), and 1026.41 that accrued 

prior to the confirmation of the 

successor in interest to the extent these 

rights would otherwise survive the prior 

consumer’s death or release from the 

obligation. 

The Bureau is proposing this 

comment because the Bureau believes 

that §§ 1026.20(c) through (e), 

1026.36(c), and 1026.41 would still 

provide valuable information and 

protections to prior consumers even 

after confirmation of a successor in 

interest. In particular, because the prior 

consumer may remain liable on the 

mortgage loan even after a successor in 

interest is confirmed and so still has 

significant legal interests at stake, the 

Bureau believes that it would be 

appropriate for the prior consumer to 

continue receiving the information and 

protections of §§ 1026.20(c) through (e), 

1026.36(c), and 1026.41. 

The Bureau acknowledges that, under 

this proposed comment, servicers will 

sometimes be required to comply with 

Regulation Z’s mortgage servicing rules 

with respect to more than one person— 

both the prior consumer and the 

successor in interest, as well as, in some 

cases, multiple successors in interest 

who each acquire an ownership interest 

in a dwelling. The Bureau notes that, 

under the Mortgage Servicing Rules, it 

is already the case that the rules may 

apply with respect to more than one 

consumer for a particular mortgage loan. 

It is quite common for more than one 

consumer (for example, spouses) to be 

obligated on the mortgage note, and the 

Mortgage Servicing Rules apply with 

respect to each consumer in such cases. 

Accordingly, the Bureau does not 

believe that applying Regulation Z’s 

mortgage servicing rules to successors in 

interest presents novel challenges for 

servicers in this regard. 

On the other hand, with respect to 

§§ 1026.20(c) through (e) and 1026.41, 

the Bureau believes that it would not 

often be useful to the prior consumer’s 

estate to continue receiving ARM 

disclosures, escrow account 

cancellation notices, and periodic 

statements once a servicer confirms a 

successor in interest’s status and the 

prior consumer has died. When a 

successor in interest’s status has been 

confirmed and the prior consumer has 

died, the estate of the prior consumer 

would have at most a relatively narrow 

interest in the mortgage loan. 

Accordingly, the Bureau believes that 

prior consumers should not receive 

ARM disclosures, escrow account 

cancellation notices, or periodic 

statements after the successor in interest 

has been confirmed and the prior 

consumer has died. By contrast, with 

respect to § 1026.36(c), the Bureau 

believes that it would not reduce much 

burden on servicers to relieve them of 

the prompt crediting, prohibition on 

pyramiding of late fees, and payoff 

balance requirements after the successor 

in interest has been confirmed and the 

prior consumer has died. The Bureau 

also believes there may be some 

circumstances in which, for example, 

prompt crediting of payments from a 

deceased consumer’s estate would help 

to prevent foreclosure. Accordingly, the 

Bureau believes that § 1026.36(c) should 

still apply to the prior consumer even 

after the successor in interest has been 

confirmed and the prior consumer has 

died. In the alternative, however, the 

Bureau is considering providing that 

§ 1026.36(c) does not apply to the prior 

consumer when the servicer has 

confirmed a successor in interest’s 

status and the prior consumer has died. 

Once a successor in interest has been 

confirmed and the prior consumer has 

been released from the obligation on the 

mortgage loan, the prior consumer may 

have legal interests relating to loan 

activity prior to the release of the 

obligation, but would have little or no 

legal interest in subsequent loan 

activity. Accordingly, the Bureau 

believes that servicers should not be 

required to comply with the 

requirements of §§ 1026.20(c) through 


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206 12 U.S.C. 1701j–3(d). 207 78 FR 10901, 10954 (Feb. 14, 2013). 

(e), 1026.36(c), and 1026.41 once a 

successor in interest has been confirmed 

and the prior consumer has been 

released from the obligation on the 

mortgage loan. 

The Bureau solicits comment on 

whether a servicer should not be 

required to comply with §§ 1026.20(c) 

through (e), 1026.36(c), and 1026.41 

with respect to prior consumers after a 

successor in interest is confirmed. The 

Bureau also solicits comment on 

whether other circumstances exist, 

beyond death and relief of the obligation 

on the mortgage loan, in which some or 

all of the requirements of §§ 1026.20(c) 

through (e), 1026.36(c), and 1026.41 

should not apply with respect to the 

prior consumer after a successor in 

interest is confirmed. 

Paragraph (a)(27) 

As described in part V.A., the Bureau 

believes that, to the extent that the 

Mortgage Servicing Rules apply to 

successors in interest, the proposed rule 

should apply with respect to all 

categories of successors in interest who 

acquired an ownership interest in the 

dwelling securing a mortgage loan in a 

transfer protected by the Garn-St 

Germain Act.206 Accordingly, the 

Bureau is proposing to define successor 

in interest in § 1026.2(a)(27) to cover all 

categories of successors in interest who 

acquired an ownership interest in the 

dwelling securing a mortgage loan in a 

transfer protected by the Garn-St 

Germain Act. (As discussed in the 

section-by-section analysis of § 1024.31, 

the Bureau is proposing to add a similar 

definition to Regulation X.) 

The proposed definition states that a 

successor in interest is a person to 

whom an ownership interest in a 

dwelling securing a mortgage loan is 

transferred from a prior consumer, 

provided that the transfer falls under an 

exemption specified in the appropriate 

section of the Garn-St Germain Act. The 

Bureau intends the proposed definition 

to apply throughout the proposed rule 

and commentary. 

The Bureau solicits comment on 

whether certain categories of successors 

in interest protected by the Garn-St 

Germain Act should not be covered by 

the Bureau’s definition of successor in 

interest. The Bureau also solicits 

comment on whether additional 

categories of successors in interest, 

beyond those protected by the Garn-St 

Germain Act, should be covered by the 

Bureau’s definition of successor in 

interest. 

Section 1026.36 Prohibited Acts or 

Practices and Certain Requirements for 

Credit Secured by a Dwelling 

36(c) Servicing Practices 

36(c)(1) Payment Processing 

The Bureau is proposing commentary 

to § 1026.36(c)(1) to clarify how 

servicers must treat periodic payments 

made by consumers who are performing 

under either temporary loss mitigation 

programs or permanent loan 

modifications. (As described in the 

section-by-section analysis of 

§ 1026.41(d), the Bureau is also 

proposing commentary to § 1026.41 

clarifying certain periodic statement 

disclosures relating to temporary loss 

mitigation programs and permanent 

loan modifications.) Proposed comment 

36(c)(1)(i)-4 provides that if the loan 

contract has not been permanently 

modified but the consumer has agreed 

to a temporary loss mitigation program, 

a periodic payment under 

§ 1026.36(c)(1)(i) remains an amount 

sufficient to cover principal, interest, 

and escrow (if applicable) for a given 

billing cycle under the loan contract, 

irrespective of the payment due under 

the temporary loss mitigation program. 

Accordingly, if a consumer submits a 

payment under a temporary loss 

mitigation program that is less than an 

amount sufficient to cover principal, 

interest, and escrow (if applicable) for a 

given billing cycle under the loan 

contract, the servicer should generally 

treat the payment as a partial payment 

under § 1026.36(c)(1)(i), even though the 

consumer may have made the payment 

due under the temporary loss mitigation 

program. 

The Bureau is proposing this 

comment in response to several 

inquiries regarding payment processing 

for payments due under temporary loss 

mitigation programs, which are quite 

common and not addressed by the 

Bureau’s existing rules or commentary. 

The Bureau acknowledges that in the 

2013 TILA Final Servicing Rule, it 

stated that ‘‘if a consumer makes a 

payment sufficient to cover the 

principal, interest and escrow due 

under a trial modification plan, these 

funds should be applied.’’ 207 This 

statement may have suggested that a 

periodic payment under a temporary 

loss mitigation program is the payment 

due under the temporary loss mitigation 

program, rather than the amount 

sufficient to cover principal, interest, 

and escrow (if applicable) for a given 

billing cycle under the loan contract. 

However, the Bureau believes that this 

suggestion, which was not accompanied 

by any further explanation, is 

inaccurate. A temporary loss mitigation 

program is only a temporary or trial 

program, during which the consumer 

may be accumulating a delinquency 

according to the loan contract. The 

Bureau believes that it is appropriate to 

require servicers to credit payments in 

a way that reflects the continuing 

contractual obligation between the 

parties and that reflects any 

delinquency accumulating during the 

program. Further, if a consumer fails to 

comply with the terms of a temporary 

loss mitigation program, the servicer 

and consumer will typically revert back 

to the terms of the loan contract, treating 

payments submitted during the 

temporary loss mitigation program as if 

the program had not existed. 

Accordingly, the Bureau believes that it 

would be unnecessarily burdensome for 

servicers to treat the payment due under 

a temporary loss mitigation program as 

a periodic payment, and then to have to 

undo that treatment if the consumer 

later fails to comply with the terms of 

the temporary loss mitigation program. 

The Bureau also understands that 

consumers are not assessed a late fee for 

such payments so long as the payment 

is the payment due under the temporary 

loss mitigation program. Accordingly, 

the Bureau does not believe that 

consumers would be harmed by treating 

payments that are less than the amount 

due under the loan contract, but that are 

the payments due under a temporary 

loss mitigation program, as partial 

payments. 

By contrast, proposed comment 

36(c)(1)(i)–5 provides that if the loan 

contract has been permanently 

modified, a periodic payment under 

§ 1026.36(c)(1)(i) is an amount sufficient 

to cover principal, interest, and escrow 

(if applicable) for a given billing cycle 

under the modified loan contract. 

The Bureau believes that if the loan 

contract has been permanently 

modified, it is appropriate for the 

periodic payment to be an amount 

sufficient to cover principal, interest, 

and escrow (if applicable) for a given 

billing cycle under the modified loan 

contract. The Bureau believes that once 

a loan has been permanently modified, 

the obligation under the previous loan 

contract is not relevant to the periodic 

payment because only the modified loan 

contract, and not the original contract, 

now binds the consumer and the 

servicer. 

The Bureau is also proposing a 

technical change to § 1026.36(c)(1). 

Section 1026.36(b) provides that 

§ 1026.36(c)(1) applies to closed-end 

consumer credit transactions secured by 


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a consumer’s principal dwelling. 

However, current § 1026.36(c)(1) refers 

to consumer credit transactions secured 

by a consumer’s principal dwelling, 

without referring to closed-end 

transactions. Consistent with 

§ 1026.36(b), proposed § 1026.36(c)(1) 

modifies the existing language to refer 

directly to closed-end consumer credit 

transactions secured by a consumer’s 

principal dwelling. 

36(c)(2) No Pyramiding of Late Fees 

The Bureau is also proposing a 

technical change to § 1026.36(c)(2). 

Section 1026.36(b) provides that 

§ 1026.36(c)(2) applies to closed-end 

consumer credit transactions secured by 

a consumer’s principal dwelling. 

However, current § 1026.36(c)(2) refers 

to consumer credit transactions secured 

by a consumer’s principal dwelling, 

without referring to closed-end 

transactions. Consistent with 

§ 1026.36(b), proposed § 1026.36(c)(2) 

modifies the existing language to refer 

directly to closed-end consumer credit 

transactions secured by a consumer’s 

principal dwelling. 

Section 1026.41 Periodic Statements for 

Residential Mortgage Loans 

41(a) In General 

As described above, proposed 

§ 1026.2(a)(11) provides that a successor 

in interest is a consumer for purposes of 

§ 1026.41 once a servicer confirms the 

successor in interest’s status. 

Accordingly, the servicer would be 

required to provide the confirmed 

successor in interest with ongoing 

periodic statements. 

Proposed comment 41(a)(1)–5.i. 

reiterates for clarity that a servicer must 

provide a confirmed successor in 

interest with a periodic statement 

meeting the requirements of § 1026.41. 

The Bureau is proposing this comment 

to ensure that the effect of proposed 

§ 1026.2(a)(11) with respect to providing 

periodic statements to confirmed 

successors in interest is clear. 

Proposed comment 41(a)(1)–5.ii 

provides that if a servicer sends a 

periodic statement meeting the 

requirements of § 1026.41 to another 

consumer, the servicer need not also 

send a periodic statement to a successor 

in interest; a single statement may be 

sent. The proposed comment also 

provides that if a servicer confirms more 

than one successor in interest’s identity 

and ownership interest in the dwelling, 

the servicer need not send periodic 

statements to more than one of the 

confirmed successors in interest. This 

proposed comment is consistent with 

current comment 41(a)(1)–1, which 

provides that, when two consumers are 

joint obligors with primary liability on 

a closed-end consumer credit 

transaction secured by a dwelling, the 

periodic statement may be sent to either 

one of them. The Bureau is proposing 

comment 41(a)(1)–5.ii because the 

Bureau believes that it is appropriate to 

treat periodic statements sent to 

successors in interest consistently with 

how periodic statements for multiple 

obligors are treated. Servicers should 

not be required to send more than one 

periodic statement with respect to a 

mortgage loan. Alternatively, the Bureau 

is also considering the contrary rule that 

each successor in interest must receive 

a periodic statement. 

The Bureau solicits comment on 

whether only one successor in interest 

should receive a periodic statement or 

whether instead each successor in 

interest should receive a periodic 

statement. The Bureau also solicits 

comment on whether other 

circumstances exist, beyond death 

orrelief of the obligation on the 

mortgage loan, in which the 

requirement to send periodic statements 

should not apply with respect to the 

prior consumer. 

41(d) Content and Layout of the 

Periodic Statement 

The Bureau is proposing to amend 

comment 41(d)–1, which addresses the 

requirement in § 1026.41(d) that several 

disclosures on the periodic statement be 

provided in close proximity to one 

another. Current comment 41(d)–1 

states that items in close proximity may 

not have any intervening text between 

them. The close proximity standard is 

found in other parts of Regulation Z, 

including §§ 1026.24(b) and 1026.48. 

The proposed amendment would relax 

this requirement for purposes of 

§ 1026.41(d) and instead provide that 

items in close proximity may not have 

any unrelated text between them. This 

proposal mirrors the standard for openend credit plans secured by a 

consumer’s dwelling found in 

§ 1026.40(a) and its corresponding 

comment 40(a)(1)–3, which explain that 

while most of the disclosures required 

by § 1026.40(d) must be grouped 

together and segregated from all 

unrelated information, a creditor is 

permitted to include information that 

explains or expands upon the required 

disclosures. 

Specifically, the proposed 

amendment to comment 41(d)–1 

provides that items in close proximity 

may not have any unrelated text 

between them and explains that text is 

unrelated if it does not explain or 

expand upon the required disclosures. 

Text that explains or expands upon the 

required disclosures may include, for 

example, an additional explanation of 

the amount due when: a fee has been 

charged to the consumer but will not be 

collected until payoff (e.g., attorney’s 

fees); the consumer has agreed to a 

temporary loss mitigation program (as 

discussed further in the section-bysection analysis of § 1026.41(d)(2)); the 

consumer makes an advance payment; 

or the servicer reverses a fee. The 

Bureau believes that the proposed 

amendment to comment 41(d)-1 may 

provide servicers with additional 

flexibility to clarify or explain 

information on the periodic statement 

and may enable servicers to address 

circumstances not expressly provided 

for in § 1026.41(d). The Bureau seeks 

comment generally on this proposal to 

amend comment 41(d)–1 to relax the 

prohibition on intervening text to 

include only related text that explains 

or expands upon the required 

disclosures. 

The Bureau is proposing additional 

commentary to § 1026.41(d) clarifying 

certain periodic statement disclosure 

requirements relating to temporary loss 

mitigation programs. (As described in 

the section-by-section analysis of 

§ 1026.36(c), the Bureau is also 

proposing commentary to § 1026.36(c) 

relating to the periodic payment under 

temporary loss mitigation programs.) 

Proposed comment 41(d)–4 provides 

that, if the consumer has agreed to a 

temporary loss mitigation program, the 

disclosures required by § 1026.41(d)(2), 

(3), and (5) regarding how payments 

will be and were applied should 

nonetheless identify how payments are 

applied according to the loan contract, 

irrespective of the payment due under 

the temporary loss mitigation program. 

The Bureau is proposing this 

commentary in response to several 

inquiries regarding how temporary loss 

mitigation programs affect certain 

disclosures on the periodic statement. 

Currently, the Bureau’s rules and 

commentary do not address this issue. 

As described in the section-by-section 

analysis of § 1024.36(c)(1), proposed 

comment 36(c)(1)(i)–4 provides that if 

the consumer has agreed to a temporary 

loss mitigation program, a periodic 

payment under § 1026.36(c)(1)(i) 

remains an amount sufficient to cover 

principal, interest, and escrow (if 

applicable) for a given billing cycle 

under the loan contract, irrespective of 

the payment due under the temporary 

loss mitigation program. Accordingly, 

the Bureau believes that it is appropriate 

for the disclosures on the periodic 

statement required by § 1026.41(d)(2), 

(3), and (5) to identify how payments 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74239 

208 78 FR 10901, 10973 (Feb. 14, 2013). 

209 Id. at 10975. 

210 Id. at 10966. 

will be and are applied according to the 

loan contract, irrespective of the 

payment due under the temporary loss 

mitigation program, because this is how 

servicers would actually be applying the 

payments under proposed comment 

36(c)(1)(i)–4. The Bureau believes that 

the periodic statement should reflect 

how payments are actually being 

applied. The Bureau believes that this 

treatment is appropriate so that the 

consumer is kept apprised of how 

payments are being applied, including 

being notified of any delinquency that 

may be accumulating during a 

temporary loss mitigation program. 

The Bureau is also proposing 

comment 41(d)–5 to address the 

disclosures that servicers must make on 

the first periodic statement provided to 

a consumer after an exemption under 

§ 1026.41(e) terminates. The proposal 

clarifies that the first post-exemption 

periodic statement may be limited to 

disclosing the fees and charges imposed, 

payments received and applied, and 

transaction activity since the last 

payment due date that occurred while 

the exemption was in effect. 

Section 1026.41(d) requires that a 

periodic statement include three 

disclosures concerning account activity 

that occurred ‘‘since the last statement.’’ 

First, § 1026.41(d)(2)(ii) requires the 

explanation of amount due to identify 

‘‘[t]he total sum of any fees or charges 

imposed since the last statement.’’ 

Second, § 1026.41(d)(3)(i) requires the 

past payment breakdown to disclose 

‘‘all payments received since the last 

statement, including a breakdown 

showing the amount, if any, that was 

applied to principal, interest, escrow, 

fees and charges, and the amount, if 

any, sent to any suspense or unapplied 

funds account.’’ Finally, § 1026.41(d)(4) 

requires the transaction activity to 

include ‘‘[a] list of all transaction 

activity that occurred since the last 

statement.’’ 

The Bureau has received inquiries 

regarding a servicer’s disclosure 

obligations under § 1026.41(d)(2)(ii), 

(3)(i), and (4) for purposes of the first 

periodic statement provided after an 

exemption under § 1026.41(e) 

terminates. The Bureau understands 

that such circumstances may arise when 

a servicer provided periodic statements, 

became exempt from the requirements 

for one of the reasons under 

§ 1026.41(e), and the exemption 

subsequently terminated, thereby 

requiring the servicer to resume 

providing statements. For example, a 

servicer may have been exempt from 

providing periodic statements for the 

duration of a consumer’s bankruptcy 

case, may have provided coupon books 

but has now decided to begin providing 

periodic statements, or may have been 

exempt from the periodic statement 

requirement as a small servicer but no 

longer qualifies for that exemption. 

Alternatively, a mortgage loan might be 

transferred from a servicer that provides 

coupon books or was an exempt small 

servicer to a servicer that provides 

periodic statements. 

Sections 1026.41(d)(2)(ii), (3)(i), and 

(4) could be interpreted as requiring the 

periodic statement to include 

information about account activity for 

the duration of the exemption period— 

literally ‘‘since the last statement.’’ 

However, the § 1026.41(d)(2)(ii), (3)(i), 

and (4) disclosures generally cover a 

time period equivalent to a billing cycle 

and the first post-exemption periodic 

statement should arguably cover a 

similar time period. Accordingly, the 

Bureau believes that it may be necessary 

to clarify the requirements of 

§ 1026.41(d)(2)(ii), (3)(i), and (4) with 

respect to the first post-exemption 

periodic statement. 

The Bureau recognizes that there may 

be benefits to providing a consumer 

with information regarding all fees and 

charges imposed, all payments received 

and applied, and all transaction activity 

that occurred during the exemption 

period. A consumer could review this 

information to determine if a servicer 

imposed any erroneous fees, failed to 

properly credit payments, or made other 

mistakes with respect to the consumer’s 

mortgage loan while the exemption 

applied. 

Nonetheless, the Bureau believes that 

consumers and servicers may be better 

served if the first post-exemption 

periodic statement includes account 

activity only since the final payment 

due date that occurred while the 

exemption was in effect. First, requiring 

the disclosure of all fees and charges 

imposed, payments received, and 

transaction activity during an 

exemption period—which could have 

spanned several months or years—may 

place an undue burden on servicers. 

The Bureau understands that servicers’ 

systems are generally not equipped to 

provide months’ or years’ worth of 

account activity on a single periodic 

statement. The Bureau does not believe 

that servicers should incur the costs 

associated with providing a potentially 

lengthy first post-exemption periodic 

statement. 

Second, including account activity for 

the duration of the exemption period, 

such as the total of all fees and charges 

imposed, could overwhelm or mislead 

consumers to believe that those fees and 

charges are presently due, even though 

the consumer may have previously paid 

many or all of them. 

Third, including account activity for 

the duration of the exemption period 

undermines, in part, the rationale for 

the exemptions. For example, 

§ 1026.41(e)(3) recognizes the value of a 

coupon book as striking a balance 

between ensuring consumers receive 

important information, and providing a 

low-burden method for servicers to 

comply with the periodic statement 

requirements.208 Requiring the first 

post-exemption periodic statement to 

include the disclosures required under 

§ 1026.41(d)(2)(ii), (3)(i), and (4) for the 

duration of the exemption arguably 

upsets the balance struck by the coupon 

book exemption. Similarly, the Bureau 

has recognized that servicers qualifying 

for the small servicer exemption have 

incentives to maintain ‘‘high-touch,’’ 

customer-centric customer servicer 

models and that consumers generally 

have easy access to these small, 

community-based servicers to obtain 

any information they desire.209 In light 

of this ability to access information, in 

the circumstance in which a servicer 

begins sending periodic statements 

because it was previously but is no 

longer a small servicer, it may be 

unnecessary for the first post-exemption 

periodic statement to include 

disclosures related to the entire duration 

of the exemption period. 

Finally, consumers will receive, or 

have alternative methods of obtaining, 

much of the account information that 

under this proposal would not be 

included in the first post-exemption 

periodic statement. Consumers who 

receive coupon books have a right to 

request the information set forth in 

§ 1026.41(d)(2)(ii), (3)(i), and (4). 

Similarly, for servicers subject to 

Regulation X’s servicing requirements, a 

consumer may obtain this information 

by submitting a written information 

request. In addition, even if the first 

post-exemption periodic statement does 

not include the past payment 

breakdown since the last pre-exemption 

periodic statement, § 1026.41(d) 

requires the statement to identify ‘‘[t]he 

total of all payments received since the 

beginning of the current calendar year 

. . ..’’ This year-to-date information, 

while not covering the entire exemption 

period, provides consumers with a 

broad overview of the costs of their 

mortgage loan and how their payments 

are being allocated to interest or fees as 

opposed to principal.210


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74240 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

Accordingly, the Bureau is proposing 

comment 41(d)–5, which provides that 

for purposes of the first periodic 

statement following termination of an 

exemption under § 1026.41(e), the 

disclosures required by 

§ 1026.41(d)(2)(ii), (d)(3)(i), and (d)(4) 

may be limited to the period since the 

final payment due date that occurred 

while the exemption was in effect. 

Proposed comment 41(d)–5 provides the 

following example: if a borrower’s 

payments are due on the first of each 

month and a servicer’s exemption under 

§ 1026.41(e) terminated on January 15, 

the first statement provided to the 

consumer after January 15 may be 

limited to the total sum of any fees or 

charges imposed, the total of all 

payments received, and a list of all 

transaction activity only since January 

1. 

The Bureau seeks comment on 

proposed comment 41(d)–5, including 

whether to disclose account activity 

since a date other than the final 

payment due date that occurred while 

the exemption was in effect. 

41(d)(1) 

The Bureau is proposing commentary 

to § 1026.41(d)(1) clarifying certain 

periodic statement disclosure 

requirements relating to acceleration, 

temporary loss mitigation programs, and 

permanent loan modifications. The 

Bureau is proposing this commentary in 

response to several inquiries regarding 

how acceleration, temporary loss 

mitigation programs, and permanent 

loan modification affect disclosure of 

the amount due on the periodic 

statement. Currently, the Bureau’s rules 

and commentary do not address this 

issue. 

Section 1026.41(d)(1)(iii) provides 

that the periodic statement required by 

§ 1026.41(d) must include the amount 

due, shown more prominently than 

other disclosures on the page. Proposed 

comment 41(d)(1)–1 provides that if the 

balance of a mortgage loan has been 

accelerated but the servicer will accept 

a lesser amount to reinstate the loan, the 

amount due disclosed on the periodic 

statement under § 1026.41(d)(1) should 

identify only the lesser amount that will 

be accepted to reinstate the loan, not the 

entire accelerated balance. 

The Bureau is aware that after 

accelerating a mortgage loan, a servicer 

may be willing to accept a lesser amount 

to reinstate the loan, sometimes because 

doing so may be required by State law. 

The Bureau believes that it would be 

counterproductive in these 

circumstances for the borrower to 

receive a periodic statement disclosing 

the amount due as the full accelerated 

balance, which may be quite large. 

Because the borrower is much more 

likely to be able to pay a reinstatement 

amount than the full accelerated 

balance, the Bureau believes that 

receiving a periodic statement 

indicating that the amount due is the 

reinstatement amount would make the 

borrower more likely to actually pay the 

reinstatement amount, thereby possibly 

preventing foreclosure. The Bureau also 

believes it may confuse borrowers to 

receive a periodic statement indicating 

that the amount due is the full 

accelerated balanced when, in fact, the 

borrower is informed elsewhere that the 

borrower may pay only the 

reinstatement amount. Furthermore, the 

borrower may be deterred from reading 

other disclosures or documents if the 

borrower sees the full accelerated 

balance as the amount due, so the 

borrower may not actually become 

aware that reinstatement is possible, 

possibly leading to unnecessary 

foreclosure. 

Proposed comment 41(d)(1)–2 

provides that if the consumer has agreed 

to a temporary loss mitigation program, 

the amount due under § 1026.41(d)(1) 

may identify either the payment due 

under the temporary loss mitigation 

program or the amount due according to 

the loan contract. The Bureau believes 

that it may be confusing for borrowers 

who have agreed to a loss mitigation 

program to receive a periodic statement 

identifying the amount due under the 

loan contract when that amount is 

different from the payment due under 

the temporary loss mitigation program. 

Accordingly, the Bureau is proposing 

that servicers may, but are not required 

to, identify the payment due under the 

temporary loss mitigation program, 

instead of the amount due according to 

the loan contract. 

The Bureau is not proposing to 

require that the payment due under the 

temporary loss mitigation program must 

be identified as the amount due because 

the Bureau is concerned about the 

consequences of requiring servicers to 

modify periodic statements whenever a 

borrower agrees to a temporary loss 

mitigation program. The Bureau 

understands that temporary loss 

mitigation programs are common and 

may be entered into for very short 

durations, so requiring servicers to 

modify periodic statements whenever a 

borrower agrees to a temporary loss 

mitigation program may be unduly 

burdensome for servicers. Furthermore, 

the Bureau is concerned that imposing 

additional requirements on servicers 

when a borrower agrees to a temporary 

loss mitigation program may deter 

servicers from offering temporary loss 

mitigation programs. In the alternative, 

however, the Bureau is considering 

requiring that if the consumer has 

agreed to a temporary loss mitigation 

program, the amount due under 

§ 1026.41(d)(1) must identify the 

amount that the consumer has agreed to 

pay under the temporary loss mitigation 

program, rather than the amount due 

according to the loan contract. 

The Bureau solicits comment on 

whether, if the consumer has agreed to 

a temporary loss mitigation program, 

servicers should be required, rather than 

permitted, to identify the amount due 

under § 1026.41(d)(1) as the payment 

due under the temporary loss mitigation 

program, rather than the amount due 

according to the loan contract. 

Proposed comment 41(d)(1)–3 

provides that if the loan contract has 

been permanently modified, the amount 

due under § 1026.41(d)(1) should 

identify only the amount due under the 

modified loan contract. The Bureau 

believes that once a loan has been 

permanently modified, the obligation 

under the previous loan contract is not 

relevant to the periodic statement 

because only the modified loan contract, 

and not the original contract, now binds 

the consumer and the servicer. 

41(d)(2) 

The Bureau is proposing commentary 

to § 1026.41(d)(2) clarifying certain 

periodic statement disclosure 

requirements relating to acceleration 

and temporary loss mitigation programs. 

The Bureau is proposing this 

commentary because, as noted in the 

section-by-section analysis of 

§ 1026.41(d), the Bureau has received 

several inquiries regarding how 

acceleration and temporary loss 

mitigation programs affect disclosure of 

the explanation of amount due on the 

periodic statement and the Bureau’s 

rules and commentary do not currently 

address this issue. 

Section 1026.41(d)(2)(i) provides that 

the explanation of amount due on 

periodic statements required by 

§ 1026.41 must include the monthly 

payment amount, including a 

breakdown showing how much, if any, 

will be applied to principal, interest, 

and escrow (if applicable) and, if a 

mortgage loan has multiple payment 

options, a breakdown of each of the 

payment options along with information 

on whether the principal balance will 

increase, decrease, or stay the same for 

each option listed. Proposed comment 

41(d)(2)–1 provides that if the balance of 

a mortgage loan has been accelerated 

but the servicer will accept a lesser 

amount to reinstate the loan, the 

explanation of amount due under 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74241 

211 12 CFR 1026.41(d)(8). 

§ 1026.41(d)(2) should omit the monthly 

payment amount that would generally 

be required under § 1026.41(d)(2)(i) and 

should include both the reinstatement 

amount and the accelerated amount. 

The proposed comment provides that 

the statement must also include an 

explanation that the reinstatement 

amount will be accepted to reinstate the 

loan. The proposed comment provides 

that this explanation should be on the 

front page of the statement or, 

alternatively, may be included on a 

separate page enclosed with the 

periodic statement or in a separate 

letter. 

The Bureau is proposing this 

comment in conjunction with proposed 

comment 41(d)(1)–1 (discussed in the 

section-by-section analysis of 

§ 1026.41(d)(1)), which provides that if 

the balance of a mortgage loan has been 

accelerated but the servicer will accept 

a lesser amount to reinstate the loan, the 

amount due disclosed on the periodic 

statement under § 1026.41(d)(1) should 

identify only the lesser amount that will 

be accepted to reinstate the loan. The 

Bureau is proposing comment 41(d)(2)– 

1 because, given that the amount due 

will reflect the reinstatement amount, 

the Bureau believes that the periodic 

statement should elsewhere identify the 

accelerated balance, which is the 

amount that the borrower technically 

owes under the loan contract and is 

significant information that the 

borrower should have. The Bureau 

believes that the explanation of amount 

due is where this disclosure is most 

appropriate. The Bureau is proposing 

that the monthly payment amount be 

omitted from the explanation of amount 

due after acceleration because the 

Bureau believes that once a loan has 

been accelerated, the monthly payment 

obligation is not relevant to the 

borrower, as the servicer will no longer 

accept this amount. 

Because identification of both the 

reinstatement amount and the 

accelerated amount in the explanation 

of amount due may present some 

possibility of borrower confusion, the 

Bureau believes that the periodic 

statement should also include an 

explanation indicating that the 

reinstatement amount will be accepted 

to reinstate the loan. Consistent with the 

requirement under § 1026.41(d)(5) that 

partial payment information must be on 

the front page of the periodic statement 

or, alternatively, may be included on a 

separate page enclosed with the 

statement or in a separate letter, the 

Bureau believes it is appropriate that 

this explanation should be on the front 

page of the periodic statement or, 

alternatively, may be included on a 

separate page enclosed with the 

statement or in a separate letter. 

Proposed comment 41(d)(2)–2 

provides that if the consumer has agreed 

to a temporary loss mitigation program 

and the amount due on the periodic 

statement identifies the payment due 

under the temporary loss mitigation 

program, the explanation of amount due 

under § 1026.41(d)(2) should include 

both the amount due according to the 

loan contract and the payment due 

under the temporary loss mitigation 

program. The proposed comment 

provides that the statement should also 

include an explanation that the amount 

due is being disclosed as a different 

amount because of the temporary loss 

mitigation program. The proposed 

comment provides that this explanation 

should be on the front page of the 

statement or, alternatively, may be 

included on a separate page enclosed 

with the periodic statement or in a 

separate letter. 

The Bureau is proposing this 

comment in conjunction with proposed 

comment 41(d)(1)–2 regarding amount 

due, which provides that if the 

consumer has agreed to a temporary loss 

mitigation program, the amount due 

under § 1026.41(d)(1) may identify 

either the payment due under the 

temporary loss mitigation program or 

the amount due according to the loan 

contract. The Bureau believes that when 

the amount due is disclosed on the 

periodic statement as the payment due 

under the temporary loss mitigation 

program, the periodic statement should 

elsewhere identify the amount due 

according to the loan contract, as this 

amount is significant information that 

the borrower should have. For example, 

under proposed comment 36(c)(1)(i)–4, 

the amount due according to the loan 

contract would be the amount promptly 

credited by the servicer. The Bureau 

believes that the explanation of amount 

due under § 1026.41(d)(2) is where this 

disclosure is most appropriate. 

Because identification of both the 

payment due under the temporary loss 

mitigation program and the amount due 

according to the loan contract may 

present some possibility of borrower 

confusion, the Bureau believes that the 

statement should also include an 

explanation indicating that the amount 

due is being disclosed as a different 

amount than the amount due under the 

loan contract because of the temporary 

loss mitigation program. Consistent with 

the requirement under § 1026.41(d)(5) 

that partial payment information must 

be on the front page of the statement or, 

alternatively, may be included on a 

separate page enclosed with the 

periodic statement or in a separate 

letter, the Bureau believes it is 

appropriate that this explanation should 

be on the front page of the statement or, 

alternatively, may be included on a 

separate page enclosed with the 

periodic statement or in a separate 

letter. 

41(d)(8) 

Section 1026.41(d)(8) requires a 

servicer to include a so-called 

‘‘delinquency box’’ containing certain 

prescribed information in periodic 

statements sent to consumers who are 

more than 45 days delinquent.211 The 

Bureau is proposing certain revisions to 

§ 1026.41(d)(8) to align the requirements 

of that section with the proposed 

definition of delinquency under 

Regulation X § 1024.31. Specifically, the 

Bureau is proposing to revise 

§ 1026.41(d)(8) and add commentary to 

mirror the language in proposed 

§ 1024.31 (Delinquency) and its related 

comments. 

Current § 1026.41(d)(8) requires a 

servicer to include in each periodic 

statement certain information about a 

consumer’s delinquency when the 

consumer is more than 45 days 

delinquent, including the date on which 

the consumer became delinquent. 

However, Regulation Z does not include 

an explanation of how a servicer must 

determine the length of a consumer’s 

delinquency. The Bureau believes that it 

may confuse consumers if a servicer 

calculates the length of delinquency 

pursuant to § 1026.41(d)(8)(i) differently 

from the length of delinquency for 

purposes of the servicing requirements 

in subpart C of Regulation X. As such, 

the Bureau is proposing Regulation Z 

comment 41(d)(8)–1, which mirrors the 

proposed Regulation X definition of 

delinquency and accompanying 

comment 31 (Delinquency)-1. 

Specifically, proposed Regulation Z 

comment 41(d)(8)–1 clarifies that 

delinquency begins on the date a 

consumer misses a payment of 

principal, interest, and escrow (if 

applicable), notwithstanding any grace 

period the servicer affords the 

consumer. 

In addition, the Bureau is proposing 

to add comment 41(d)(8)–2 to address 

how a creditor should disclose the 

length of a consumer’s delinquency as 

required by § 1026.41(d)(8) if a servicer 

applies a borrower’s payment to the 

oldest outstanding delinquency first. As 

discussed in the section-by-section 

analysis of § 1024.31, the Bureau is 

proposing a comment to the definition 

of delinquency to clarify that, if a 

servicer applies a consumer’s payment 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74242 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

212 12 CFR 1026.41(e) (requiring delivery each 

billing cycle of a periodic statement, with specific 

content and form). For loans serviced by a small 

servicer, a creditor or assignee is also exempt from 

the Regulation Z periodic statement requirements. 

See 12 CFR 1026.41(e)(4)(i). 

213 12 CFR 1024.17(k)(5) (prohibiting purchase of 

force-placed insurance in certain circumstances). 

214 12 CFR 1024.30(b)(1) (exempting small 

servicers from §§ 1024.38 through 41, except as 

otherwise provided under § 1024.41(j), as discussed 

in note 215, infra). Sections 1024.38 through 40 

respectively impose general servicing policies, 

procedures, and requirements; early intervention 

requirements for delinquent borrowers; and policies 

and procedures to maintain continuity of contact 

with delinquent borrowers. 

215See 12 CFR 1024.41 (loss mitigation 

procedures). Though exempt from most of the rule, 

small servicers are subject to the prohibition of 

foreclosure referral before the loan obligation is 

more than 120 days delinquent and may not make 

the first notice or filing for foreclosure if a borrower 

is performing pursuant to the terms of an agreement 

on a loss mitigation option. 12 CFR 1024.41(j). 

216 ‘‘Affiliate’’ is defined in § 1026.32(b)(5) as any 

company that controls, is controlled by, or is under 

common control with another company, as set forth 

in the Bank Holding Company Act of 1956, 12 

U.S.C. 1841 et seq. (BHCA). Under the BHCA, a 

company has ‘‘control’’ over another company if it 

(i) ‘‘directly or indirectly . . . owns, controls, or has 

power to vote 25 per centum or more of any class 

of voting securities’’ of the other company; (ii) 

‘‘controls . . . the election of a majority of the 

directors or trustees’’ of the other company; or (iii) 

‘‘directly or indirectly exercises a controlling 

influence over the management or policies’’ of the 

other company (based on a determination by the 

Board). 12 U.S.C. 1841(a)(2). 

217 78 FR 25638, 25644 (May 2, 2013). 

218 Id. 

219 78 FR 44685, 44697 (July 24, 2013). Since that 

time, the Bureau has finalized its proposal to add 

an alternative definition of small servicer that 

applies to certain nonprofit entities that service, for 

a fee, only loans for which the servicer or an 

associated nonprofit entity is the creditor. 79 FR 

65300, 65304 (Nov. 3, 2014). 

220 78 FR 44685, 44697 (July 24, 2013). 

to the oldest outstanding delinquency, 

the servicer must advance the date of 

the consumer’s delinquency for 

purposes of calculating the length of a 

borrower’s delinquency under the 

various applicable provisions of 

Regulation X’s mortgage servicing rules. 

To ensure that a servicer’s method of 

calculating the length of the consumer’s 

delinquency for purposes of Regulation 

Z § 1026.41(d)(8)(i) is consistent with 

the method for doing the same under 

the proposed definition of delinquency 

in Regulation X, the Bureau proposes to 

include the same commentary in 

proposed Regulation Z comment 

41(d)(8)–2. 

Finally, the Bureau is proposing to 

revise § 1026.41(d)(8)(i) to harmonize its 

language with the notion that the date 

a borrower’s delinquency begins 

advances as payments are applied to the 

oldest outstanding delinquency. Section 

1026.41(d)(8)(i) requires servicers to 

include ‘‘[t]he date on which the 

consumer became delinquent’’ on a 

delinquent consumer’s periodic 

statement. If comment 41(d)(8)-2 is 

adopted as proposed, ‘‘the date on 

which a consumer became delinquent’’ 

would advance as the consumer’s 

payments are applied to prior missed 

payments, which may confuse 

consumers. Accordingly, the Bureau is 

proposing to revise § 1026.41(d)(8)(i) to 

require servicers to disclose the length 

of a consumer’s delinquency as of the 

date of the periodic statement. 

Legal Authority 

The proposed amendments to 

§ 1026.41(d) implement section 

128(f)(1)(H) of TILA, which requires 

inclusion in periodic statements of any 

information that the Bureau may 

prescribe by regulation. 

41(e) Exemptions 

41(e)(4) Small Servicers 

41(e)(4)(iii) Small Servicer 

Determination 

41(e)(4)(iii)(A) 

The Bureau is proposing to amend 

certain criteria for determining whether 

a servicer qualifies for the small servicer 

exemption under § 1026.41(e)(4). In 

determining whether a servicer qualifies 

for the small servicer exemption, 

§ 1026.41(e)(4)(iii)(A) currently excludes 

from consideration mortgage loans 

voluntarily serviced by a servicer for a 

creditor or assignee that is not an 

affiliate of the servicer and for which 

the servicer does not receive any 

compensation or fees. The proposed 

amendment would remove the 

requirement that the non-affiliate must 

be a creditor or assignee, while 

continuing to exclude from 

consideration mortgage loans 

voluntarily serviced by a servicer for a 

non-affiliate for which the servicer does 

not receive any compensation or fees. 

The Bureau’s Mortgage Servicing 

Rules exempt small servicers from 

certain mortgage servicing requirements. 

Specifically, Regulation Z exempts 

small servicers, defined in 

§ 1026.41(e)(4)(ii), from the requirement 

to provide periodic statements for 

residential mortgage loans.212

Regulation X incorporates this same 

definition by reference to § 1026.41(e)(4) 

and thereby exempts small servicers 

from: (1) certain requirements relating to 

obtaining force-placed insurance,213 (2) 

the general servicing policies, 

procedures, and requirements,214 and 

(3) certain requirements and restrictions 

relating to communicating with 

borrowers about, and evaluation of 

applications for, loss mitigation 

options.215

Section 1026.41(e)(4)(ii) defines the 

term ‘‘small servicer’’ as a servicer that: 

(1) services, together with any 

affiliates,216 5,000 or fewer mortgage 

loans, for all of which the servicer (or 

an affiliate) is the creditor or assignee; 

(2) is a Housing Finance Agency, as 

defined in 24 CFR 266.5; or (3) is a 

nonprofit entity that services 5,000 or 

fewer mortgage loans, including any 

mortgage loans serviced on behalf of 

associated nonprofit entities, for all of 

which the servicer or an associated 

nonprofit entity is the creditor. 

Generally, under § 1026.41(e)(4)(ii)(A), a 

servicer cannot be a small servicer if it 

services any loan for which the servicer 

or its affiliate is not the creditor or 

assignee. 

However, current § 1026.41(e)(4)(iii) 

excludes from consideration certain 

types of mortgage loans for purposes of 

determining whether a servicer qualifies 

as a small servicer: (1) mortgage loans 

voluntarily serviced by the servicer for 

a creditor or assignee that is not an 

affiliate of the servicer and for which 

the servicer does not receive any 

compensation or fees; (2) reverse 

mortgage transactions; and (3) mortgage 

loans secured by consumers’ interests in 

timeshare plans. 

In the May 2013 Mortgage Servicing 

Proposal, the Bureau proposed the 

exclusion for voluntarily serviced 

mortgage loans codified at current 

§ 1026.41(e)(4)(iii)(A).217 At that time, 

the Bureau had received feedback that 

certain servicers that would otherwise 

be considered small servicers 

voluntarily service mortgage loans for 

unaffiliated non-profit entities for 

charitable purposes and do not receive 

compensation or fees from engaging in 

that servicing.218 Except for one 

comment received from a national trade 

association, see section-by-section 

analysis of § 1026.41(e)(4)(iii)(D), the 

Bureau received comments with respect 

to the voluntarily serviced proposal that 

focused only on charitable servicing for 

nonprofit organizations.219 The 

language of current 

§ 1026.41(e)(4)(iii)(A), however, does 

not require that the mortgage loan must 

have been made by a nonprofit 

organization to qualify for the 

voluntarily serviced exception. And as 

the Bureau explained, ‘‘volunteer 

servicing is not limited to the servicing 

of mortgage loans owned or originated 

by nonprofit organizations . . . .’’220

Current § 1026.41(e)(4)(iii)(A) applies to 

any mortgage loan voluntarily serviced 

by a servicer for a non-affiliate creditor 

or assignee and for which the servicer 

does not receive any compensation or 

fees. 


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221Seller financer is a defined term under 

§ 1026.36(a)(5). This analysis generally refers to the 

practice of seller-financed sales of residential real 

estate unless specifically referring to the defined 

term. 

222See 12 U.S.C. 2605(i)(3) (definition of 

servicing applicable to TILA, as amended by section 

1401 of the Dodd-Frank Act). 

223See 12 CFR 1026.2(a)(17). 

The Bureau has learned that certain 

depository institutions, which may 

qualify for the small servicer exemption, 

service for their depository customers 

seller-financed sales of residential real 

estate.221 The Bureau understands that 

typically under these arrangements, the 

depository institution receives 

scheduled periodic payments from the 

purchaser of the property pursuant to 

the terms of the sale and deposits into 

the account of the seller (the depository 

institution’s customer) the payments of 

principal and interest and such other 

payments with respect to the amounts 

received from the purchaser as may be 

required pursuant to the terms of the 

sale.222 The Bureau understands that in 

some cases, the depository institution 

may elect to voluntarily service sellerfinanced sales of residential real estate 

on behalf of its depository customers 

without receiving any compensation or 

fees. The Bureau further understands 

that under these arrangements, although 

the depository customer is not an 

affiliate of the servicer, typically, the 

customer is neither a creditor223 nor an 

assignee as required by current 

§ 1026.41(e)(4)(iii)(A). Therefore, a 

depository institution that would 

otherwise qualify for the small servicer 

exemption and that voluntarily services 

seller-financed sales of residential real 

estate without receiving any 

compensation or fees would likely no 

longer qualify for the small servicer 

exemption. 

The Bureau understands that certain 

depository institutions engage in this 

practice to provide their depository 

customers this service when, 

particularly in small or remote 

communities, there may not be an 

alternative service provider in the state. 

The Bureau believes that such sellerfinanced sales of residential real estate 

generally are limited and not 

widespread. For the reasons discussed 

in this section, the Bureau believes that, 

to the extent servicing cost savings are 

passed on to consumers, it may be 

beneficial to consumers for a depository 

institution that otherwise qualifies for 

the small servicer exemption to be able 

to voluntarily service transactions for a 

non-affiliate, who is neither a creditor 

nor an assignee, without losing its small 

servicer status, and that these benefits 

may outweigh the consumer protections 

provided by the servicing rules. 

Accordingly, the Bureau is proposing 

to amend the voluntarily serviced 

exception under current 

§ 1026.41(e)(4)(iii)(A) to exclude 

mortgage loans voluntarily serviced by a 

servicer for a non-affiliate of the servicer 

and for which the servicer does not 

receive any compensation or fees from 

consideration in determining whether a 

servicer qualifies as a small servicer, 

while no longer requiring that the nonaffiliate be a creditor or assignee. 

Specifically, proposed 

§ 1026.41(e)(4)(iii)(A) provides that 

mortgage loans voluntarily serviced by 

the servicer for a non-affiliate of the 

servicer and for which the servicer does 

not receive any compensation or fees 

would not be considered in determining 

whether a servicer qualifies as a small 

servicer. 

Under the existing rule, mortgage 

loans voluntarily serviced by the 

servicer for a creditor or assignee that is 

not an affiliate of the servicer and for 

which the servicer does not receive any 

compensation or fees are not considered 

in determining whether a servicer 

qualifies as a small servicer. Because 

depository customers who seller-finance 

sales of residential real estate typically 

are neither creditors nor assignees, a 

depository institution that voluntarily 

services even a single such transaction 

likely would not qualify as a small 

servicer under the current rule. The 

Bureau is proposing to amend the 

current voluntarily serviced exception 

to exclude from consideration mortgage 

loans voluntarily serviced by a servicer 

for a non-affiliate for which the servicer 

does not receive any compensation or 

fees, while removing the requirement 

that the non-affiliate be a creditor or 

assignee. The Bureau is concerned that 

if a depository institution that would 

otherwise qualify for the small servicer 

exemption voluntarily services even a 

single transaction for which the nonaffiliate is neither a creditor nor an 

assignee and does not receive any 

compensation or fees, it would be 

subject to all of the servicing rules for 

all of the mortgage loans that it services, 

including those that would otherwise be 

exempt for being owned or originated by 

the servicer. Although the Bureau 

believes the servicing rules provide 

important protections for consumers, 

the Bureau is concerned that these 

protections may not outweigh the 

potential for increased costs to 

consumers served by depository 

institutions that qualify for the small 

servicer exemption. 

The Bureau has narrowly tailored the 

proposed amendment to the voluntarily 

serviced exception. The Bureau believes 

that continuing to limit the voluntarily 

serviced exception to mortgage loans 

voluntarily serviced by a servicer and 

for which the servicer does not receive 

any compensation or fees reduces the 

risk that the proposed amendment to 

§ 1026.41(e)(4)(iii)(A) will be used to 

circumvent the servicing rules. The 

Bureau also believes that removing the 

requirement that the non-affiliate be a 

creditor or assignee does not unduly 

expand the existing exception. Rather, 

the Bureau believes that the rationale for 

the exception applies equally well to 

those non-affiliates who seller-finance 

sales of residential real estate and do not 

meet the definition of creditor under 

§ 1026.2(a)(17) because they extend five 

or fewer mortgage loans in a year. The 

Bureau seeks comment on whether 

amending the voluntarily serviced 

exception to exclude from consideration 

mortgage loans voluntarily serviced by 

the servicer for a non-affiliate, without 

requiring that the non-affiliate be a 

creditor or assignee, is appropriate. The 

Bureau also seeks comment on whether 

it should grandfather existing mortgage 

loans voluntarily serviced by the 

servicer for a servicer’s non-affiliate, 

which is not a creditor or assignee, and 

for which the servicer does not receive 

any compensation or fees. 

Legal Authority 

The Bureau is proposing to amend the 

voluntarily serviced exception under 

current § 1026.41(e)(4)(iii)(A) and 

exempt mortgage loans voluntarily 

serviced by a servicer for a non-affiliate 

of the servicer and for which the 

servicer does not receive any 

compensation or fees from the periodic 

statement requirement under section 

128(f) of TILA pursuant to its authority 

under section 105(a) and (f) of TILA and 

section 1405(b) of the Dodd-Frank Act. 

For the reasons discussed above, the 

Bureau believes that the proposed 

amendment is necessary and proper 

under section 105(a) of TILA to facilitate 

TILA compliance. As discussed above, 

the Bureau believes that if a depository 

institution that would otherwise qualify 

for the small servicer exemption 

voluntarily services a transaction for a 

non-affiliate that does not meet the 

definition of creditor or assignee, it 

would likely no longer qualify for the 

small servicer exemption. Accordingly, 

the current rule may result in depository 

institutions that would otherwise 

qualify for the small servicer exemption 

being unable to provide high-contact 

servicing or to comply with other 

applicable regulatory requirements due 

to the costs that would be imposed to 

comply with all of the servicing rules 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74244 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

224 78 FR 25638, 25644 (May 2, 2013). 

225 78 FR 44685, 44697–98 (July 24, 2013). 

226The Bureau further understands that, in some 

cases, the depository institution provides periodic 

payment receipts as well as annual tax reporting 

(for example, Internal Revenue Service Form 1098) 

and may assess late fees to the purchaser when the 

payment is late. 

for all of the mortgage loans they 

service, including those mortgage loans 

that would otherwise be exempt for 

being owned or originated by the 

servicer. Accordingly, the Bureau 

believes that the proposal to amend the 

voluntarily serviced exception to no 

longer require that the non-affiliate be a 

creditor or assignee facilitates 

compliance with TILA by allowing 

depository institutions to voluntarily 

service seller-financed sales of 

residential real estate, without losing 

status as a small servicer, in order to 

cost-effectively service loans in 

compliance with applicable regulatory 

requirements. 

In addition, consistent with section 

105(f) of TILA and in light of the factors 

in that provision, for servicers that 

voluntarily service mortgage loans for a 

non-affiliate and for which the servicer 

does not receive any compensation or 

fees, the Bureau believes that requiring 

them to comply with the periodic 

statement requirement in section 128(f) 

of TILA would not provide a meaningful 

benefit to consumers in the form of 

useful information or protection. The 

Bureau believes, as noted above, that 

requiring provision of periodic 

statements would impose significant 

costs and burden. Specifically, the 

Bureau believes that the proposal will 

not complicate, hinder, or make more 

expensive the credit process. In 

addition, consistent with section 

1405(b) of the Dodd-Frank Act, for the 

reasons discussed above, the Bureau 

believes that exempting transactions 

voluntarily serviced by a servicer for a 

non-affiliate, without requiring the nonaffiliate to be a creditor or assignee, 

from the requirements of section 128(f) 

of TILA would be in the interest of 

consumers and in the public interest. 

In addition, the Bureau relies on its 

authority pursuant to section 1022(b) of 

the Dodd-Frank Act to prescribe 

regulations necessary or appropriate to 

carry out the purposes and objectives of 

Federal consumer financial law, 

including the purposes and objectives of 

Title X of the Dodd-Frank Act. 

Specifically, the Bureau believes that 

the proposed rule is necessary and 

appropriate to carry out the purpose 

under section 1021(a) of the Dodd-Frank 

Act of ensuring that all consumers have 

access to markets for consumer financial 

products and services that are fair, 

transparent, and competitive, and the 

objective under section 1021(b) of the 

Dodd-Frank Act of ensuring that 

markets for consumer financial products 

and services operate transparently and 

efficiently to facilitate access and 

innovation. 

41(e)(4)(iii)(D) 

The Bureau is proposing to amend 

certain criteria for determining whether 

a servicer qualifies for the small servicer 

exemption set forth under 

§ 1026.41(e)(4). The proposal adds a 

new category of transactions that would 

not be considered in determining 

whether a servicer qualifies as a small 

servicer. Specifically, the proposal 

excludes transactions serviced by the 

servicer for a seller financer that meet 

all of the criteria identified in 

§ 1026.36(a)(5). 

As explained in the section-by-section 

analysis of § 1026.41(e)(4)(iii)(A), the 

Bureau’s Mortgage Servicing Rules 

exempt small servicers from certain 

mortgage servicing requirements. In 

May 2013, along with other proposed 

amendments to Regulations X and Z, the 

Bureau proposed the exclusion for 

voluntarily serviced mortgage loans and 

requested comment on whether other 

mortgage loans serviced through similar 

limited arrangements should not be 

considered in determining whether a 

servicer is a small servicer.224 The 

Bureau did not receive comments 

recommending that any other servicing 

arrangements be excluded from 

consideration for purposes of 

determining small servicer status. The 

Bureau received one comment from a 

national trade association requesting 

guidance regarding certain depository 

services some of its bank members 

provide for depositors who ‘‘ownerfinance’’ the sale of residential real 

estate. The Bureau determined in the 

July 2013 Mortgage Final Rule that the 

comment was outside the scope of the 

proposal and that the commenter did 

not provide sufficient information about 

the service described for the Bureau to 

be able to provide guidance at that 

time.225

Since that time, the Bureau has 

learned more about the depository 

service described in the national trade 

association’s comments. Specifically, 

the Bureau understands that certain 

depository institutions that may 

otherwise qualify for the small servicer 

exemption service, for a fee, sellerfinanced sales of residential real estate 

for their depository customers. 

However, because the depository 

institution is neither the creditor nor the 

assignee, the depository institution that 

engages in this practice likely would not 

qualify for the small servicer exemption 

because it is servicing, for a fee, a 

mortgage loan it does not own or did not 

originate.226

As explained in the section-by-section 

analysis of § 1026.41(e)(4)(iii)(A), the 

Bureau understands that certain 

depository institutions engage in this 

practice to provide their depository 

customers this service when, 

particularly in small or remote 

communities, there may not be an 

alternative service provider in the state. 

The Bureau believes that such sellerfinanced sales of residential real estate 

generally are limited and not 

widespread. The Bureau further 

understands that purchasers of sellerfinanced residential real estate, who 

may be unable to secure credit through 

traditional means, may benefit from a 

depository institution receiving their 

scheduled periodic payments and 

providing an independent accounting as 

a third party to the transaction. The 

Bureau believes that the Dodd-Frank 

Act and Mortgage Servicing Rules were 

intended to address systemic problems 

in the mortgage servicing industry and 

may not have contemplated the practice 

described here. For the reasons 

discussed in this section, the Bureau 

believes that, to the extent servicing cost 

savings are passed on to consumers, it 

may be beneficial to consumers for a 

depository institution that otherwise 

qualifies for the small servicer 

exemption to be able to service 

transactions for a seller financer that 

meet all of the criteria identified in 

§ 1026.36(a)(5), without losing its small 

servicer status, and that these benefits 

may outweigh the consumer protections 

provided by the servicing rules. 

Accordingly, the Bureau is proposing 

to add a new category of transactions 

that would not be considered in 

determining whether a servicer qualifies 

as a small servicer for transactions 

serviced by the servicer for a seller 

financer. Specifically, proposed 

§ 1026.41(e)(4)(iii)(D) provides that 

transactions serviced by the servicer for 

a seller financer that meet all of the 

criteria identified in § 1026.36(a)(5) are 

not considered in determining whether 

a servicer qualifies as a small servicer. 

Section 1026.36(a)(5) identifies a seller 

financer as 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 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74245 

227 12 CFR 1026.36(a)(5)(i). 

228 12 CFR 1026.36(a)(5)(ii). 

229 12 CFR 1026.36(a)(5)(iii). 

230 12 CFR 1024.2(b) (definition of federally 

related mortgage loan requires that the loan be 

made in whole or in part by a creditor, as defined 

in 15 U.S.C. 1602(g), that makes or invests in 

residential real estate loans aggregating more than 

$1,000,000 per year). 

231 12 CFR 1024.5(a). 

security for the financing.227 The 

natural person, estate, or trust cannot 

have constructed, or acted as a 

contractor for the construction of, a 

residence on the property in its ordinary 

course of business.228 The financing 

must have a repayment schedule that 

does not result in negative amortization 

and must have a fixed rate or an 

adjustable rate that is adjustable after 

five or more years, subject to reasonable 

annual and lifetime limitations on 

interest rate increases. If the financing 

agreement has an adjustable rate, the 

rate is determined by the addition of a 

margin to an index rate and is subject 

to reasonable rate adjustment 

limitations. The index the adjustable 

rate is based on is a widely available 

index such as indices for U.S. Treasury 

securities or the London Interbank 

Offered Rate (LIBOR).229

The Bureau has narrowly tailored the 

proposed new category of transactions 

that are not considered in determining 

whether a servicer qualifies as a small 

servicer. For example, the proposal 

relates only to transactions serviced by 

the servicer for a seller financer that 

meet all of the criteria identified in 

§ 1026.36(a)(5). In contrast to the seller 

financer criteria identified in 

§ 1026.36(a)(4), which permits seller 

financing for the sale of up to three 

properties in any 12-month period, the 

seller financer criteria identified in 

§ 1026.36(a)(5) permits seller financing 

for the sale of only one property in any 

12-month period. The Bureau believes 

that limiting the seller financer criteria 

to the sale of only one property in any 

12-month period reduces the risk that 

this proposed new category of 

transactions not considered in 

determining whether a servicer qualifies 

as a small servicer will be used to 

circumvent the servicing rules. 

Under the existing rule, a servicer 

qualifies for the small servicer 

exemption if it services, together with 

any affiliates, 5,000 or fewer mortgage 

loans, for all of which the servicer (or 

an affiliate) is the creditor or assignee. 

Because seller-financed transactions are 

not typically structured to meet this 

definition, a depository institution that 

services, for a fee, even a single sellerfinanced transaction likely would not 

qualify as a small servicer under the 

current rule. The Bureau is proposing to 

add a new category of transactions that 

would be excluded from consideration 

in determining whether a servicer 

qualifies as a small servicer to permit a 

depository institution that would 

otherwise qualify for the small servicer 

exemption to enter into servicing 

arrangements for seller-financed 

transactions without losing its small 

servicer status. The Bureau understands 

that, in some cases, the seller financer 

is not a ‘‘creditor’’ under the relevant 

definition230 and that such sellerfinanced transactions are therefore not 

federally related mortgage loans, and 

likely would not be subject to 

Regulation X.231 The Bureau is 

concerned that if a depository 

institution that would otherwise qualify 

for the small servicer exemption 

services even a single seller-financed 

transaction, it would be subject to all of 

the servicing rules for all of the 

mortgage loans that it services, 

including those that would otherwise be 

exempt for being owned or originated by 

the servicer. Although the Bureau 

believes that the servicing rules provide 

important protections for consumers, 

the Bureau is concerned that these 

protections may not outweigh the 

potential for increased costs to 

consumers served by depository 

institutions that would otherwise 

qualify for the small servicer exemption. 

The Bureau seeks comment on 

whether excluding transactions serviced 

by a servicer for a seller financer that 

meet all of the criteria identified in 

§ 1026.36(a)(5) in determining small 

servicer status is appropriate. The 

Bureau also seeks comment on whether 

it should grandfather existing 

transactions serviced by a servicer for a 

seller financer that meet all of the 

criteria identified in § 1026.36(a)(5). 

Legal Authority 

The Bureau is proposing to exempt 

transactions serviced by a servicer for a 

seller financer that meet all of the 

criteria identified in § 1026.36(a)(5) 

from the periodic statement requirement 

under section 128(f) of TILA pursuant to 

its authority under section 105(a) and (f) 

of TILA and section 1405(b) of the 

Dodd-Frank Act. 

For the reasons discussed above, the 

Bureau believes that the proposed 

exemption is necessary and proper 

under section 105(a) of TILA to facilitate 

TILA compliance. As discussed above, 

the Bureau believes that if a depository 

institution that would otherwise qualify 

for the small servicer exemption 

services a transaction for a seller 

financer, it would likely no longer 

qualify for the small servicer exemption. 

Accordingly, the current rule may result 

in depository institutions that would 

otherwise qualify for the small servicer 

exemption being unable to provide 

high-contact servicing or to comply with 

other applicable regulatory 

requirements due to the costs that 

would be imposed to comply with all of 

the servicing rules for all of the 

mortgage loans they service, including 

those mortgage loans that would 

otherwise be exempt for being owned or 

originated by the servicer. Accordingly, 

the Bureau believes that the proposal to 

exempt transactions serviced by a 

servicer for a seller financer that meet 

all of the criteria identified in 

§ 1026.36(a)(5) facilitates compliance 

with TILA by allowing depository 

institutions to service seller-financed 

transactions, without losing status as a 

small servicer, in order to costeffectively service loans in compliance 

with applicable regulatory 

requirements. 

In addition, consistent with section 

105(f) of TILA and in light of the factors 

in that provision, for small servicers that 

service transactions for a seller financer 

that meet all of the criteria identified in 

§ 1026.36(a)(5), the Bureau believes that 

requiring them to comply with the 

periodic statement requirement in 

section 128(f) of TILA would not 

provide a meaningful benefit to 

consumers in the form of useful 

information or protection. The Bureau 

believes, as noted above, that requiring 

provision of periodic statements would 

impose significant costs and burden. 

Specifically, the Bureau believes that 

the proposal will not complicate, 

hinder, or make more expensive the 

credit process. In addition, consistent 

with section 1405(b) of the Dodd-Frank 

Act, for the reasons discussed above, the 

Bureau believes that exempting 

transactions serviced by a servicer for a 

seller financer that meet all of the 

criteria identified in § 1026.36(a)(5) 

from the requirements of section 128(f) 

of TILA would be in the interest of 

consumers and in the public interest. 

In addition, the Bureau relies on its 

authority pursuant to section 1022(b) of 

the Dodd-Frank Act to prescribe 

regulations necessary or appropriate to 

carry out the purposes and objectives of 

Federal consumer financial law, 

including the purposes and objectives of 

Title X of the Dodd-Frank Act. 

Specifically, the Bureau believes that 

the proposed rule is necessary and 

appropriate to carry out the purpose 

under section 1021(a) of the Dodd-Frank 

Act of ensuring that all consumers have 

access to markets for consumer financial 

products and services that are fair, 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
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232 78 FR 10901, 10966 (Feb. 14, 2013). 

233 Id. at 10966 n.125. 

234 78 FR 62993, 63000–02 (Oct. 23, 2013). 

235Comment 41(e)(5)–3. 

transparent, and competitive, and the 

objective under section 1021(b) of the 

Dodd-Frank Act of ensuring that 

markets for consumer financial products 

and services operate transparently and 

efficiently to facilitate access and 

innovation. 

41(e)(5) Certain Consumers in 

Bankruptcy 

The Bureau is proposing to revise 

§ 1026.41(e)(5) to limit the 

circumstances in which a servicer is 

exempt from the periodic statement 

requirements with respect to a 

consumer who is a debtor in 

bankruptcy. Current § 1026.41(e)(5) 

provides that a servicer is exempt from 

the requirement to provide periodic 

statements for a mortgage loan while the 

consumer is a debtor in bankruptcy. 

Comment 41(e)(5)–3 states that if there 

are multiple obligors on the mortgage 

loan, the exemption applies if any of the 

obligors is in bankruptcy, and comment 

41(e)(5)–2.ii explains that a servicer has 

no obligation to resume providing 

periodic statements with respect to any 

portion of the mortgage debt that is 

discharged in bankruptcy. In general, 

the proposed revisions to § 1026.41(e)(5) 

limit the exemption to consumers in 

bankruptcy who are surrendering the 

property or avoiding the lien securing 

the mortgage loan and to consumers 

who have requested that a servicer cease 

providing periodic statements (or 

coupon books, as applicable). In cases 

where a mortgage loan has multiple 

obligors and not all of them are in 

bankruptcy, the exemption would apply 

to a non-bankrupt obligor only when (i) 

one of the obligors is in Chapter 12 or 

Chapter 13 bankruptcy, and (ii) the nonbankrupt obligor requests that a servicer 

cease providing periodic statements or 

coupon books. 

Specifically, proposed 

§ 1026.41(e)(5)(i) limits the exemption 

to when two conditions are satisfied. 

First, the consumer must be a debtor in 

a bankruptcy case, must have 

discharged personal liability for the 

mortgage loan through bankruptcy, or 

must be a primary obligor on a mortgage 

loan for which another primary obligor 

is a debtor in a Chapter 12 or Chapter 

13 bankruptcy case. Second, one of the 

following circumstances must apply: (1) 

The consumer requests in writing that 

the servicer cease providing periodic 

statements or coupon books; (2) the 

consumer’s confirmed plan of 

reorganization provides that the 

consumer will surrender the property 

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 arrearages or the 

maintenance of payments due under the 

mortgage loan; (3) a court enters an 

order in the consumer’s 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 respect to the property 

securing the mortgage loan, or requiring 

the servicer to cease providing periodic 

statements or coupon books; or (4) the 

consumer files with the bankruptcy 

court a Statement of Intention pursuant 

to 11 U.S.C. 521(a) identifying an intent 

to surrender the property securing the 

mortgage loan. 

The proposal also provides that the 

exemption terminates and a servicer 

must resume providing periodic 

statements or coupon books in two 

general circumstances. First, 

notwithstanding meeting the above 

conditions for an exemption, the 

proposal requires servicers to provide 

periodic statements or coupon books if 

the consumer requests them in writing 

(unless a court has entered an order 

requiring otherwise). Second, with 

respect to any portion of the mortgage 

debt that is not discharged through 

bankruptcy, a servicer must resume 

providing periodic statements or 

coupon books within a reasonably 

prompt time after the next payment due 

date that follows the earliest of the 

following outcomes in either the 

consumer’s or the joint obligor’s 

bankruptcy case, as applicable: the case 

is dismissed, the case is closed, the 

consumer reaffirms the mortgage loan 

under 11 U.S.C. 524, or the consumer 

receives a discharge under 11 U.S.C. 

727, 1141, 1228, or 1328. 

Section 1420 of the Dodd-Frank Act 

amended section 128(f) of TILA to 

require periodic statements for 

residential mortgage loans. On January 

17, 2013, the Bureau issued the 2013 

TILA Servicing Final Rule 

implementing the periodic statement 

requirements and related exemptions in 

§ 1026.41. (In certain circumstances, 

servicers may provide borrowers with a 

coupon book in place of periodic 

statements.) In the preamble to the final 

rule, the Bureau acknowledged 

industry’s concern that the Bankruptcy 

Code’s automatic stay prevents attempts 

to collect a debt from a consumer in 

bankruptcy, but the Bureau explained 

that it did not believe the Bankruptcy 

Code would prevent a servicer from 

sending a consumer a statement on the 

status of the mortgage loan.232 The 

Bureau further explained that the final 

rule allowed servicers to make changes 

to the periodic statement that they 

believe are necessary when a consumer 

is in bankruptcy, such as including a 

message about the bankruptcy and 

presenting the amount due to reflect 

payment obligations determined by the 

individual bankruptcy proceeding.233

After publication of the final rule, 

industry stakeholders expressed more 

detailed concerns about the requirement 

to provide periodic statements to 

consumers under bankruptcy 

protection. Industry commenters 

expressed continued concerns about 

potential conflicts with bankruptcy law 

and many indicated that the periodic 

statement would need to be redesigned 

for consumers in bankruptcy. The 

Bureau received numerous inquiries 

and requests for clarification regarding 

how to reconcile the periodic statement 

requirement with various bankruptcy 

law requirements. Industry stakeholders 

expressed concern that bankruptcy 

courts, under certain circumstances, 

may find that a periodic statement 

violates the automatic stay or discharge 

injunction, even if a disclaimer were 

included. They requested guidance 

regarding whether and how servicers 

could permit consumers to opt-out of 

receiving statements. Bankruptcy 

trustees raised similar concerns and 

explained that sending a periodic 

statement that fails to recognize the 

unique character of Chapter 13’s 

treatment of a mortgage in default 

arguably violates the Bankruptcy Code’s 

automatic stay. Servicers and trustees 

further questioned how periodic 

statements could be adapted to the 

specific circumstances that may arise 

depending on the type of bankruptcy 

proceeding (i.e., liquidation under 

Chapter 7, or reorganization under 

Chapter 11, Chapter 12, or Chapter 13). 

Based on these inquiries, the Bureau 

determined that the interaction of 

bankruptcy law and the periodic 

statement requirement necessitated 

further study and that there was 

insufficient time before the rule’s 

January 10, 2014 effective date to 

provide further calibration of the 

requirements. Accordingly, the Bureau 

issued the October 2013 IFR, which 

added current § 1026.41(e)(5) to exempt 

servicers from the periodic statement 

requirement with respect to consumers 

in bankruptcy.234 The Bureau explained 

in commentary that the exemption in 

§ 1024.41(e)(5) applies with respect to 

any person sharing primary liability on 

a mortgage loan with a debtor in 

bankruptcy,235 and that a servicer has 

no obligation to resume compliance 


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236Comment 41(e)(5)–2.ii. 

237 78 FR 62993, 63001 (Oct. 23, 2013). 

238 Id. at 63002. 

239Written or oral presentations to the Bureau 

imparting information or argument directed to the 

merits or outcome of the IFR were subject to the 

Bureau’s policy on ex parte presentations. See CFPB 

Bulletin 11–3. 

with § 1024.41 with respect to any 

portion of a mortgage loan that is 

discharged under applicable provisions 

of the Bankruptcy Code.236

In issuing the IFR, the Bureau did not 

take a position as to whether providing 

periodic statements to a consumer in 

bankruptcy violates the automatic stay 

or discharge injunction. The Bureau also 

did not discourage servicers that send 

tailored periodic statements to 

consumers in bankruptcy from 

continuing to do so. The Bureau further 

expressed its belief that some 

consumers facing the complexities of 

bankruptcy may benefit from receiving 

a periodic statement, tailored to their 

circumstances.237

In the IFR, the Bureau stated that it 

would continue to examine this issue 

and might reinstate the requirement to 

provide a consumer in bankruptcy with 

a periodic statement. However, the 

Bureau explained that it would not 

reinstate any such requirement without 

notice and comment rulemaking and an 

appropriate implementation period. The 

Bureau solicited comment on the scope 

of the exemption, when a servicer 

qualifies for the exemption and when it 

must resume sending statements, and 

how the content of the periodic 

statement might be tailored to meet the 

particular needs of consumers in 

bankruptcy.238

Since issuing the IFR, the Bureau has 

continued to engage various 

stakeholders on the scope of this 

exemption, including hosting the 

roundtable discussion on June 16, 2014, 

among representatives of consumer 

advocacy groups, bankruptcy attorneys, 

servicers, trade groups, bankruptcy 

trustees, and the U.S. Trustee’s Office. 

The Bureau has also sought comment 

from bankruptcy judges and experts and 

conducted its own further analysis of 

the intersection of the periodic 

statement requirement and bankruptcy 

law.239

Based upon its review of the 

comments received and its study of the 

intersection of the periodic statement 

requirements and bankruptcy law, the 

Bureau believes it may be appropriate to 

reinstate the periodic statement 

requirements with respect to consumers 

in bankruptcy under certain 

circumstances. The Bureau is proposing 

to do so in the present rulemaking 

because, as noted in the IFR, the Bureau 

believes that it would be preferable to 

use notice and comment rulemaking, 

rather than simply finalizing the IFR 

with modifications, to reinstate the 

periodic statement requirements with 

respect to such consumers. The Bureau 

believes that this approach will provide 

stakeholders the opportunity to more 

fully consider and comment on the 

Bureau’s specific proposal. The Bureau 

also believes that it is appropriate to 

address comments it already received in 

response to the IFR. Accordingly, the 

following discussion of the proposal 

with respect to the periodic statement 

requirements also contains discussion of 

the comments received on the IFR, as 

well comments received after the IFR’s 

official comment period ended. 

Comments on the Scope of the 

Exemption 

Comments on the scope of the 

exemption addressed two broad issues: 

(1) whether to maintain the current 

exemption; and (2) if a more limited 

exemption is appropriate, under what 

circumstances should a consumer in 

bankruptcy receive periodic statements. 

On the first issue, several servicers 

and trade groups requested that the 

Bureau maintain the exemption without 

any adjustments. Some trade groups 

argued that the exemption provides a 

clear rule to servicers that periodic 

statements are not required for 

consumers in bankruptcy, whereas the 

original 2013 TILA Servicing Final Rule 

was unclear about the information 

periodic statements should contain and 

when it may be permissible to not 

provide periodic statements to a 

consumer in bankruptcy. These trade 

groups also commented that the amount 

due and other disclosures mandated by 

§ 1026.41 could be confusing to 

consumers who are making payments 

according to a bankruptcy plan. During 

the bankruptcy roundtable discussion, a 

credit union and a community bank 

stated that their systems are not 

equipped to produce periodic 

statements that reflect Chapter 13’s 

unique accounting practices and that 

tracking payments in a Chapter 13 case 

requires a significant amount of time 

and effort. These participants 

maintained that the cost of upgrading 

their systems outweighed any benefit to 

the relatively few bankrupt consumers 

in their portfolios. The credit union 

suggested that, at a minimum, the 

Bureau adopt a modified exemption 

from any future periodic statement 

requirement for entities with a limited 

number of consumers in bankruptcy or 

a limited percentage of their mortgage 

loans subject to bankruptcy 

proceedings. 

Consumer advocacy groups strongly 

objected to the exemptions set forth in 

the IFR. They argued that consumers in 

bankruptcy need information about 

their mortgage loan accounts in order to 

make timely payments, determine 

whether the servicer correctly 

calculated and applied payments, and 

object to any account errors. The 

consumer advocacy groups stated that, 

in the past, such consumers have 

suffered improper fees and charges 

because servicers have avoided 

implementing protocols to account for 

payments made during bankruptcy. 

Moreover, the consumer advocacy 

groups argued that servicers’ concerns 

that providing periodic statements 

would violate the automatic stay are 

exaggerated because court decisions 

finding stay violations have generally 

involved extreme facts—for example, 

servicers overtly attempting to collect 

payments outside of the bankruptcy 

process or ignoring a consumer’s request 

to cease receiving statements. 

An association of Chapter 13 trustees 

commented that periodic statements are 

necessary in Chapter 13 cases to 

determine whether servicers are 

correctly applying payments. The 

trustees echoed the consumer advocacy 

groups’ concerns that servicers have not 

established systems to properly track 

and apply payments and that consumers 

are often subject to erroneous fees and 

charges. They argued that requiring 

servicers to disclose bankruptcy 

accounting practices would likely force 

servicers to improve their practices. 

A bankruptcy law professor 

commented that in light of consumers’ 

in bankruptcy demonstrated difficulty 

in paying their debts, such consumers 

need periodic statements to remind 

them of their payment obligations and 

that depriving them of statements is 

antithetical to bankruptcy’s purpose of 

financial rehabilitation. One bankruptcy 

judge commented that requiring 

periodic statements in Chapter 13 cases 

may force servicers to improve their 

systems and more accurately apply 

consumer payments. Another 

bankruptcy judge suggested that, in lieu 

of monthly statements, the Bureau could 

require servicers to send initial notices 

acknowledging a consumer’s 

bankruptcy case and identifying the 

monthly payment amount, followed by 

semi-annual or annual statements 

disclosing how the servicer has applied 

payments and the amount of 

outstanding fees. 

Several servicers and trade groups, 

while supporting a temporary 

exemption, commented that a narrower 

exemption would be appropriate 

depending on whether the consumer 


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240See, e.g., Henry v. Assocs. Home Equity Servs., 

Inc. (In re Henry), 266 B.R. 457, 471 (Bankr. C.D. 

Cal. 2001) (‘‘A secured creditor should be 

encouraged to send out payment coupons, 

envelopes and periodic statements if a debtor has 

filed a statement that the debtor plans to keep 

property subject to secured debt and to make 

payments. Debtors frequently complain to the court 

that they want to make their payments, but their 

creditors do not cooperate by providing payment 

coupons.’’); In re Freeman, 352 B.R. 628 (Bankr. 

N.D. W. Va. 2006) (overruling creditor’s objection 

to the debtor’s request for periodic statements that 

intends to retain the property, as 

discussed more below. 

The Bureau also received comments 

regarding which consumers should 

receive periodic statements if the 

exemption did not apply to all 

consumers in bankruptcy. Commenters 

were generally in agreement that 

periodic statements would be 

appropriate for some consumers but not 

others. Some industry commenters drew 

a distinction between consumers who 

intend to retain their property and those 

who intend to surrender it or cease 

making payments on the mortgage loan. 

Specifically, these commenters took the 

position that periodic statements are not 

appropriate when a consumer intends to 

surrender the property or avoid (i.e., 

render unenforceable) the lien securing 

the mortgage loan, when a consumer 

requests that a servicer cease providing 

periodic statements, when a court order 

or local rule prohibits providing 

statements, or after a court enters an 

order lifting the automatic stay to permit 

a servicer to pursue foreclosure. 

However, these commenters suggested 

that consumers in Chapter 11, Chapter 

12, and Chapter 13 bankruptcy should 

receive statements when the plan of 

reorganization provides that the 

consumer will retain the property and 

continue making payments on the 

mortgage loan. In cases where a 

consumer retains the property, 

commenters noted, the consumer can 

benefit from information about the 

payments they must make to keep the 

property. Similarly, certain industry 

commenters suggested that consumers 

in Chapter 7 bankruptcy should receive 

statements if they file a Statement of 

Intention with the bankruptcy court 

stating that they intend to retain the 

property. 

With some distinctions discussed 

below, consumer advocacy groups and 

trustees agreed that it may be 

appropriate to distinguish between 

consumers retaining the property and 

those surrendering it through 

bankruptcy. However, consumer 

advocacy groups also argued that 

comments 41(e)(5)-2.ii and 3 are 

unnecessarily broad in stating that the 

exemption applies to all joint obligors of 

a consumer in bankruptcy and that 

servicers have no obligation to resume 

providing periodic statements with 

respect to any portion of a mortgage 

loan that is discharged in bankruptcy. 

These groups maintained that joint 

obligors and consumers who have 

discharged a mortgage loan should be 

able to receive periodic statements in 

appropriate circumstances. 

Despite general agreement on when 

periodic statements may be appropriate, 

commenters disagreed on three points. 

First, they disagreed on whether 

Chapter 7 consumers should be required 

to opt-in to receive periodic statements. 

Consumer advocacy groups argued that, 

as a default rule, a consumer in Chapter 

7 bankruptcy should receive periodic 

statements. A law professor and 

bankruptcy judge generally agreed with 

this approach. On the other hand, 

servicers and trade groups favored an 

opt-in method, in which consumers 

would receive periodic statements only 

if their Statement of Intention filed with 

the court pursuant to 11 U.S.C. 521(a) 

identified an intent to retain the 

property or if they otherwise 

affirmatively requested statements. One 

servicer added that bankruptcy courts 

might not agree that checking the box to 

retain property on the Statement of 

Intention suffices as an affirmative 

request to receive periodic statements 

and that a court might therefore view 

the statement as an unwanted collection 

attempt. 

Second, two trade groups initially 

maintained that periodic statements are 

unnecessary when a consumer is 

making all payments on the mortgage 

loan through a Chapter 13 trustee (and 

not directly to the servicer), though one 

of the groups stated in subsequent 

comments that all consumers in Chapter 

13 should receive statements. Chapter 

13 trustees strenuously argued that 

statements are necessary in all cases to 

determine whether servicers are 

correctly applying plan payments. 

Several servicers took the position that 

there should be a uniform approach in 

all Chapter 13 cases so that servicers do 

not have to implement different 

protocols depending on the procedures 

governing a particular Chapter 13 case. 

Third, commenters were divided on 

whether a trustee overseeing a 

consumer’s Chapter 13 case should 

receive periodic statements. Bankruptcy 

trustees argued that a trustee’s access to 

periodic statements is vital because it 

would enable the trustee to monitor 

how servicers are applying payments 

and engage servicers to correct payment 

application errors early on. Some 

trustees suggested that servicers be 

required to provide statements upon a 

trustee’s request. Similarly, a law 

professor commented that there are 

compelling reasons to provide 

statements to trustees, particularly in 

those cases where a consumer is 

required to send periodic payments to a 

trustee and the trustee acts as a 

disbursing agent by remitting the 

payments to the servicer. 

Industry participants objected on 

several grounds to providing statements 

to trustees. First, they maintained that 

trustees do not need statements because 

they receive all the information they 

need pursuant to the Federal Rules of 

Bankruptcy Procedure. Two trade 

groups argued that in the event that a 

trustee needs a periodic statement 

during the bankruptcy case, a trustee 

may simply request a copy from the 

consumer. Second, industry participants 

objected to the burden imposed by 

providing additional statements to 

trustees, either on a regular or asneeded basis. Finally, industry 

participants argued that privacy 

concerns are implicated by sending 

statements to a trustee who is not a 

fiduciary of the consumer. For example, 

some servicers that are also banks use 

combined statements that provide 

information not only related to the 

mortgage loan, but also related to other 

accounts a consumer has with the bank. 

Industry participants argued that, in 

those circumstances, the bank would 

need to redact the information 

pertaining to the consumer’s other 

accounts, leading to further burden and 

costs to produce the statements. 

Benefits to Consumers in Bankruptcy of 

Receiving Periodic Statements 

Based upon the comments outlined 

above, continued outreach and 

monitoring efforts, and further analysis, 

the Bureau believes that certain 

consumers in bankruptcy will benefit 

from receiving periodic statements (or 

coupon books, in the case of servicers 

that provide them instead of periodic 

statements under § 1026.41(e)(3)). Since 

the January 10, 2014 effective date, the 

Bureau has received complaints from 

consumers who are debtors in 

bankruptcy and have requested to 

receive periodic statements or other 

written information regarding upcoming 

payments, but have had their requests 

denied by servicers. Consumers have 

complained that, as a result, they may 

inadvertently fall behind on payments 

or at a minimum lack basic information 

about the status of their loans. Case law 

indicates that bankruptcy courts have 

heard similar complaints and that 

consumers are often frustrated by the 

lack of payment information provided to 

them.240 To that end, the Bureau 


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were normally required by State law); cf. Payne v. 

Mortg. Elec. Registration Sys., Inc. (In re Payne), 387 

B.R. 614, 626 (Bankr. D. Kan. 2008) (‘‘[The 

servicer]’s representative testified [that the servicer] 

does not send payments books to mortgagors in 

bankruptcy because [the servicer] cannot present a 

true and accurate accounting of the loan payments 

[the servicer] is receiving from the Trustee as 

opposed to debtors’ payments history.’’). 

241See, e.g., LBR 4001–2, Bankr. M.D. Ala.; LBR 

4072–1, Bankr. N.D. Ala.; Model Chapter 13 Plan, 

Bankr. S.D. Ala.; Bankr. D. Colo. LBR 4001–4; 

Bankr. S.D. Ill. Model Chapter 13 Plan; Bankr. E.D. 

La. General Order 2012–1 (adopting model Chapter 

13 plan); Bankr. D. Md. L.R. 4001–5; Bankr. D. 

Mass. L.R. 4001–3; Bankr. E.D. Mich. Model 

Chapter 13 Plan; Bankr. E.D. Mo. L.R. 3021; Bankr. 

W.D. Mo. L.R. 4001–4; Mont. LBR 4001–3; D. Kan. 

Bk. S.O. 08–4; District of New Jersey Local 

Bankruptcy Rules, D.N.J LBR 4001–3; Bankr. 

N.D.N.Y. Model Chapter 13 Plan; E.D.N.C. LBR 

4001–2; Bankr. M.D.N.C Standing Order, In re 

Terms and Provisions Available for Incorporation 

into Chapter 13 Confirmation Orders; W.D.N.C. LBR 

4001–1; Bankr. D.N.H. L. Form 3015–1A, Model 

Chapter 13 Plan; Bankr. N.D. Ohio Admin. Order 

13–02, In re Form Chapter 13 Plan; Bankr. D. Or. 

L.R. 3015–1; R.I. LBR 4001–1; SC LBR 3015–1 

(adopting model Chapter 13 plan); Bankr. N.D. TX 

General Order 2010–1, In re Amended Standing 

Order Concerning All Chapter 13 Cases; Bankr. S.D. 

TX Uniform Plan and Motion for Valuation of 

Collateral; Bankr. W.D. TX (Austin Div.), 

Consolidated Standing Order for Chapter 13 Case 

Administration for Austin Division (adopting model 

Chapter 13 plan); Bankr. W.D. TX (San Antonio 

Div.), Model Chapter 13 Plan; Vt. LBR 3071–1; 

Bankr. W.D. Wash. L. Form 13–4; Bankr. E.D. Wis. 

Model Chapter 13 Plan. 

242 78 FR 10901, 10964–67 (Feb. 14, 2013). 

243See Henry, 266 B.R. at 476 (discussing the 

ride-through option and disagreement among courts 

as to whether the Bankruptcy Code permits it); In 

re Covel, 474 B.R. 702, 708 (Bankr. W.D. Ark. 2012) 

(holding that Congress eliminated the ride-through 

option for personal property in 2005, but ‘‘[b]y not 

making corresponding changes concerning real 

property, Congress appears to tacitly recognize a 

ride through option for real property.’’); Kibler v. 

WFS Fin., Inc. (In re Kibler), No. 00–2604, 2001 WL 

388764, at *5 (Bankr. E.D. Cal. Mar. 19, 2001) (‘‘In 

jurisdictions that recognize the ‘ride-though’ option, 

debtors may want to preserve their property, yet not 

incur the potential personal liability imposed by a 

reaffirmation agreement. These debtors . . . need to 

receive normal monthly billings to avoid a contract 

default and potential foreclosure.’’). 

244 11 U.S.C. 524(j) (‘‘Subsection (a)(2) does not 

operate as an injunction against an act by a creditor 

that is the holder of a secured claim, if—(1) such 

creditor retains a security interest in real property 

that is the principal residence of the debtor; (2) 

such act is in the ordinary course of business 

between the creditor and the debtor; and (3) such 

act is limited to seeking or obtaining periodic 

payments associated with a valid security interest 

in lieu of pursuit of in rem relief to enforce the 

lien.’’). 

245See 4 Collier on Bankruptcy ¶ 524.09 (Alan N. 

Resnick & Henry J. Sommer eds., 16th ed. 2014) 

(‘‘Section 524(j) clarifies that when a debtor does 

not reaffirm a mortgage debt secured by real estate 

that is the debtor’s principal residence, the creditor 

may continue to send statements to the debtor in 

the ordinary course of business and collect 

payments made voluntarily by the debtor. The 

provision makes clear that debtors do not have to 

reaffirm such debts in order to keep paying them. 

In fact, it has long been the practice that mortgage 

debts are not reaffirmed.’’). 

246Fed. R. Bankr. P. 3002.1 (requiring, among 

other things, servicers to provide 21-day advance 

notice of a change in payment amount and notice 

within 180 days after a servicer incurs a fees or 

expense for which the consumer is liable, and also 

providing for a reconciliation process at the end of 

the case to determine if a servicer disputes whether 

the consumer is current on the mortgage loan). 

247Fed. R. Bankr. P. 3002.1 Advisory Committee’s 

Notes (2011) (‘‘[Rule 3002.1] is added to aid in the 

implementation of § 1322(b)(5), which permits a 

chapter 13 debtor to cure a default and maintain 

payments on a home mortgage over the course of 

the debtor’s plan. It applies regardless of whether 

the trustee or the debtor is the disbursing agent for 

postpetition mortgage payments. In order to be able 

to fulfill the obligations of § 1322(b)(5), a debtor and 

the trustee have to be informed of the exact amount 

needed to cure any prepetition arrearage, see Rule 

3001(c)(2), and the amount of the postpetition 

payment obligations.’’); In re Sheppard, No. 10– 

33959–KRH, 2012 WL 1344112, at *2 (Bankr. E.D. 

Va. Apr. 18, 2012) (‘‘Bankruptcy Rule 3002.1 was 

adopted to resolve significant and often hidden 

problems encountered by Chapter 13 debtors who 

utilized § 1322(b)(5) of the Bankruptcy Code to cure 

mortgage defaults in their confirmed plans. While 

debtors could cure an arrearage on their principal 

residence under § 1322(b)(5), they often incurred 

Continued 

understands that nearly 30 bankruptcy 

courts have adopted local rules 

permitting or requiring servicers to 

provide periodic statements or coupon 

books under certain circumstances.241

The Bureau does not believe that a 

consumer’s status in bankruptcy should 

act as a bar to receiving fundamental 

information about the mortgage loan 

account. The Bureau believes that, like 

all consumers, those in bankruptcy may 

benefit from information regarding the 

application of their payments to 

principal, interest, escrow, and fees. As 

the Bureau noted in the 2013 TILA 

Servicing Final Rule, the explanation of 

amount due, transaction activity, and 

past payment breakdown give 

consumers the information they need to 

identify possible errors on the account 

and enable consumers to understand the 

costs of their mortgage loan.242

The Bureau understands that in the 

absence of a requirement that servicers 

provide periodic statements, however, 

consumers in bankruptcy often lack 

such crucial information about their 

mortgage loan account. The Bureau 

understands that, for example, 

consumers in Chapter 7 bankruptcy or 

those who have discharged personal 

liability for a mortgage loan often do not 

receive written information regarding 

their mortgage payments. This lack of 

information is particularly troubling for 

consumers in Chapter 7 bankruptcy who 

use the so-called ‘‘ride-through’’ 

option—that is, consumers who 

discharge personal liability for the 

mortgage loan through bankruptcy but 

continue making mortgage payments to 

forestall foreclosure, which enables 

them to remain in their home. In that 

instance, the lien is unaffected by 

bankruptcy, such that a consumer’s 

post-bankruptcy failure to stay current 

on the mortgage would enable a servicer 

to foreclose on the property, but the 

servicer could not pursue collection 

efforts or a deficiency judgment against 

the consumer personally.243 The Bureau 

understands that in many cases, using 

this option may be a strategic decision 

by a consumer to avoid a future 

deficiency judgment, but that, in some 

instances, courts will not permit 

consumers to reaffirm a mortgage loan, 

forcing them to use the ride-through 

option despite a willingness to reaffirm. 

Because the ride-through option 

discharges a consumer’s personal 

liability, current § 1026.41(e)(5) exempts 

a servicer from providing periodic 

statements for the life of the mortgage 

loan—even if the maturity date is years 

away. The Bureau does not believe that 

this is an optimal result for consumers, 

nor is it the result Congress may have 

intended when it amended the 

Bankruptcy Code in 2005 to expressly 

provide that a mortgage creditor does 

not violate the discharge injunction by 

seeking to obtain periodic payments on 

a discharged mortgage loan in the 

ordinary course of its relationship with 

a debtor in lieu of pursuing 

foreclosure.244 In light of a Bankruptcy 

Code provision apparently 

contemplating that consumers will use 

the ride-through option with respect to 

their principal residence,245 as well as 

the fact that in some circumstances 

courts will not permit a consumer to 

reaffirm a mortgage loan, the Bureau 

believes that consumers who continue 

making payments after discharging a 

mortgage loan should not be denied 

periodic statements or coupon books. 

The Bureau therefore declines to follow 

the suggestion that periodic statements 

or coupon books be conditioned on a 

consumer reaffirming the mortgage loan. 

The Bureau also believes that 

consumers in Chapter 13 would benefit 

from receiving the information set forth 

in periodic statements or coupon books 

provided under § 1026.41. The Bureau 

understands that, effective December 1, 

2011, the Federal Rules of Bankruptcy 

Procedure require servicers to disclose 

certain mortgage loan information to 

consumers whose Chapter 13 plans 

provide that the consumer will cure prebankruptcy arrearages and maintain 

regular periodic payments.246 Thus, a 

consumer with a Chapter 13 plan may 

receive more information and greater 

protections than a consumer in a 

Chapter 7 case. The Bureau 

understands, however, that these 

disclosure requirements were motivated 

by pervasive and documented servicer 

failures to make accurate filings or 

disclose fees during Chapter 13 cases.247


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significant fees and other costs as a result of 

postpetition defaults or from interest or escrow 

fluctuations under the terms of the original loan 

documents. Fearful that any attempt to address 

these fees and charges could be construed as a 

violation of the automatic stay, many creditors 

would not inform debtors that these charges had 

been incurred until after the Chapter 13 case was 

closed. As the fees and charges were postpetition 

obligations not included in the plan and thus not 

discharged at the conclusion of the case, these 

debtors would emerge from bankruptcy only to face 

a substantial and previously undisclosed arrearage. 

This outcome was inconsistent with the goal of 

providing debtors with a fresh start.’’); In re 

Thongta, 480 B.R. 317, 319 (Bankr. E.D. Wis. 2012) 

(similar). 

248See, e.g., Sheppard, 2012 WL 1344112, at *2; 

Thongta, 480 B.R. at 319. 

249 11 U.S.C. 1322(b)(5). 

250See, e.g., Boday v. Franklin Credit Mgmt. Corp. 

(In re Boday), 397 B.R. 846, 850–51 (Bankr. N.D. 

Ohio 2008) (‘‘Section 1322(b)(5), by splitting a 

claim, means that a creditor is no longer permitted 

to allocate payments according to the terms of its 

contract. Instead, its effect is to require that any 

prepetition arrearage claim must be paid separately, 

according to the terms of the debtor’s confirmed 

plan, based upon the creditor’s allowed claim. The 

remaining debt, consisting of those payments which 

become due after the petition is filed, is then paid 

according to the terms of the parties’ contract and 

original loan amortization as if no default ever 

existed . . . . From an accounting standpoint, this 

requires that a creditor allocate a debtor’s loan 

payments in the following manner: First, the 

creditor must apply the arrearage payments it 

receives during the plan’s duration in accordance 

with the terms of the plan, so that upon completion 

of the plan the debtor is deemed current on the 

prepetition amortization schedule. Second, 

payments received from the debtor to service those 

payments which contractually accrue postpetition[] 

must be allocated according to the terms of the 

parties’ contract as if no default had occurred.’’); In 

re Wines, 239 B.R. 703, 708 (Bankr. D.N.J. 1999) 

(‘‘Crediting payments outside the plan to the 

installments due contemporaneously according to 

the original schedule is the only way to put the 

debtors in the same position as if default had never 

occurred.’’); In re Collins, No. 07–30454, 2007 WL 

2116416, at *13 (Bankr. E.D. Tenn. July 19, 2007) 

(holding that Chapter 13 cure and maintain plan 

can include provisions requiring servicer to apply 

payments separately and stating that such a 

provision ‘‘is not only reasonable but required’’); 

see also Fannie Mae, Fannie Mae Single Family 

2012 Servicing Guide, at 705–35 through 705–36 

(Mar. 14, 2012), available at https://

www.fanniemae.com/content/guide/svc031412.pdf 

(‘‘The servicer must maintain detailed records of 

any payments it receives during the confirmation 

process—the type of payment (pre-petition or postpetition), the amount received, the receipt date, the 

source of the payment, and the allocation of the 

payment (principal, interest, late charges, etc.). The 

servicer should generally hold any pre-petition 

payments it receives as ‘unapplied’ funds until an 

amount equal to the full monthly (or biweekly) 

payment that is due under the mortgage note is 

available for application to the mortgage loan 

balance. However, if the court requires the 

payments to be applied under the terms of the 

repayment plan, the servicer must apply the 

payments in its records as required.’’). 

251See, e.g., In re Jones, 366 B.R. 584, 594–98 

(Bankr. E.D. La. 2007) (sanctioning servicer that 

applied all amounts received to pre- and postpetition charges, interest, and non-interest bearing 

debt, resulting ‘‘in such a tangled mess’’ that neither 

the CPA debtor nor the servicer could explain the 

accounting, and stating that ‘‘[i]n this Court’s 

experience, few, if any, lenders make the 

adjustments necessary to properly account for a 

reorganized debt repayment plan.’’); In re Hudak, 

No. 08–10478–SBB, 2008 WL 4850196, at *5 

(Bankr. D. Colo. Oct. 24, 2008) (‘‘Many courts have 

noted that mortgage lenders simply do not 

accommodate for the accounting intricacies created 

by Chapter 13.’’); Payne v. Mortg. Elec. Registration 

Sys., Inc. (In re Payne), 387 B.R. 614, 627 (Bankr. 

D. Kan. 2008) (‘‘[The servicer] admitted their 

computer system does not allow debtors who make 

all their payments in a timely manner to exit 

bankruptcy current on their mortgage obligation.’’); 

In re Myles, 395 B.R. 599, 606 (Bankr. M.D. La. 

2008) (holding that debtors stated claim for stay 

violation where creditor allegedly treated a Chapter 

13 debtor as in default due to improper payment 

application and applied payments to improper fees 

as a result); Boday, 397 B.R. at 850–51 (holding that 

creditor violated plan and § 1322(b)(5) by applying 

plan payments to interest rather than principal 

under daily simply interest loan); In re Rathe, 114 

B.R. 253, 256–57 (Bankr. D. Idaho 1990) (‘‘[The 

servicer]’s accounting procedure applied payments 

to the earliest payments due and not to the 

payments due and owing during the pendency of 

the plan. The purpose of a Chapter 13 plan is to 

allow a debtor to pay arrearages during the 

pendency of the plan while continuing to make 

payments at the contract rate. Payments made 

during the pendency of the Chapter 13 plan should 

have been applied by [the servicer] to the current 

payments due and owing with the arrearage 

amounts to be applied to the back payments. [The 

servicer] cannot utilize its accounting procedures to 

contravene the terms of a confirmed Chapter 13 

plan and the Bankruptcy Code.’’); In re Stewart, 391 

B.R. 327 (Bankr. E.D. La. 2008) (sanctioning servicer 

for misapplying payments and noting that ‘‘[t]he 

reconciliation of Debtor’s account took [the 

servicer] four months to research and three hearings 

before this Court to explain,’’ that ‘‘[a]n account 

history was not produced until two months after the 

filing of the Objection,’’ and that ‘‘[a]n additional 

two months were spent obtaining the necessary 

information to explain or establish the substantial 

charges, costs, and fees reflected on the account’’), 

vacated in part, 647 F.3d 553 (5th Cir. 2011). 

252See, e.g., Exhibit A at 9, United States v. Bank 

of Am., (2014) (No. 12–361 (RMC), 2014 WL 

1016286 (National Mortgage Settlement)), available 

at https://d9klfgibkcquc.cloudfront.net/OcwenConsent-Judgment-Ex-A.pdf (providing that, among 

other things, ‘‘[i]n active chapter 13 cases, Servicer 

shall ensure that: a. prompt and proper application 

of payments is made on account of (a) pre-petition 

arrearage amounts and (b) postpetition payment 

amounts and posting thereof as of the successful 

consummation of the effective confirmed plan; b. 

the debtor is treated as being current so long as the 

debtor is making payments in accordance with the 

terms of the then effective confirmed plan and any 

later effective payment change notices’’). 

253 78 FR 10901, 10964–67 (Feb. 14, 2013). 

Consumers would often successfully 

make all payments required under their 

Chapter 13 plan, only to find that the 

servicer claimed substantial additional 

amounts were still owed.248

The Bureau understands from its 

outreach that some servicers have a long 

history of misapplying payments in 

Chapter 13 cases and that consumers 

often lack information about how 

servicers are applying payments during 

bankruptcy. With respect to mortgage 

loans, Chapter 13 contains unique 

provisions that allow a consumer to 

repay pre-bankruptcy arrearages over a 

reasonable period of time while also 

making the regular periodic payments as 

they come due under the mortgage 

loan.249 Under Chapter 13, servicers 

may need to adopt special accounting 

practices for consumers with these 

‘‘cure and maintain’’ plans and 

separately track payments made on the 

pre-bankruptcy arrearages and the 

regular periodic payments.250 These 

accounting practices differ from a 

servicer’s usual practice because, so 

long as a consumer is timely making all 

the payments due under the plan, a 

servicer should not treat a consumer as 

delinquent by, among other things, 

assessing late fees. 

Courts have detailed some servicers’ 

failure to properly credit payments 

made pursuant to Chapter 13 plans, 

noting that servicers’ systems and 

accounting practices often fail to adjust 

to the needs of Chapter 13, and courts 

have sanctioned servicers or disallowed 

fees.251 These difficulties were also 

documented in and formed the basis of 

part of the National Mortgage 

Settlement, which required, among 

other things, that the subject servicers 

properly account for payments received 

in bankruptcy.252

In light of these documented concerns 

about servicers not properly applying 

payments in Chapter 13 cases, the 

Bureau agrees with consumer advocacy 

groups and Chapter 13 trustees that 

periodic statements would benefit 

consumers in Chapter 13 cases. The 

Bureau believes that, as with all 

consumers, those in bankruptcy may be 

able to use the information set forth in 

the explanation of amount due, 

transaction activity, and past payment 

breakdown to understand their 

payments obligations and identify 

possible servicer errors.253 This 

information may be particularly 

valuable to a consumer in Chapter 13, 

given the greater risk of payment 

application errors. The Bureau also 

agrees with commenters that in cases 

where a consumer was current as of the 

date of the bankruptcy petition or is 

making periodic payments directly to a 

servicer, a monthly reminder of 

amounts due may help a consumer 

make timely payments. 

The Bureau understands and 

appreciates the concerns expressed by 

many servicers that their systems are 

not currently set up to easily track how 

payments are applied in Chapter 13 

cases and that, in order to be able to 

disclose this information on a periodic 

statement, they may need to incur 

significant costs to upgrade their 

systems. Servicers and trade groups also 

argued that consumers may not 

understand the complexities of 

accounting for payments made under a 


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254See Ed Flynn, Chapter 13 Revisited: Can It 

Help Solve the Judiciary’s Fiscal Problems?, 32 a.m. 

Bankr. Inst. J. 20, 20 (Dec. 2013). 

255The Bureau further notes that in instances 

where bankruptcy courts have local rules expressly 

permitting periodic statements or coupon books, the 

rules predominantly apply when the consumer is a 

debtor under Chapter 13. See supra, note 241. 

256Connor v. Countrywide Bank NA (In re 

Connor), 366 B.R. 133, 136, 138 (Bankr. D. Haw. 

2007)); see also Henry, 266 B.R. at 471 (collecting 

cases). 

257Connor, 366 B.R. at 138 (debtor failed to state 

a claim for stay violation related to periodic 

statements received prior to Chapter 13 plan 

confirmation, but debtor did state a claim related 

to statements received after conversation to Chapter 

7 because debtor had indicated his intent to 

surrender the property); In re Joens, No. 03–02077, 

2003 WL 22839822, at *2–3 (Bankr. N.D. Iowa Nov. 

21, 2003) (creditor violated automatic stay by 

sending collection letters and periodic statements to 

Chapter 7 debtor who intended to surrender, but 

noting that it would have been proper to send 

statements if the debtor had intended to retain). 

258Henry, 266 B.R. at 471 (holding that creditor 

did not violate the automatic stay by sending 

periodic statements and notice of default to debtors 

who retain their property by continuing to make 

payments without reaffirming the mortgage loan); 

Kibler v. WFS Fin., Inc. (In re Kibler), No. 00–2604, 

2001 WL 388764 (Bankr. E.D. Cal. Mar. 19, 2001) 

(noting that borrowers who retain their property by 

continuing to make payments without reaffirming 

the mortgage loan ‘‘need to receive normal billings 

to avoid a contract default and potential 

foreclosure’’). 

259See 4 Collier on Bankruptcy ¶ 524.04 

(‘‘Section 524(j) clarifies that when a debtor does 

not reaffirm a mortgage debt secured by real estate 

that is the debtor’s principal residence, the creditor 

may continue to send statements to the debtor in 

the ordinary course of business and collect 

payments made voluntarily by the debtor.’’) (citing 

Jones v. Bac Home Loans Servicing, LP (In re Jones), 

No. 09–50281, 2009 WL 5842122, at *3 (Bankr. S.D. 

Ind. Nov. 25, 2009)); cf. Ramirez v. Gen. Motors 

Acceptance Corp. (In re Ramirez), 280 B.R. 252, 

257–58 (C.D. Cal. 2002) (holding that creditor did 

not violate discharge injunction by sending periodic 

statements and a ‘‘summary of voluntary payments’’ 

to a debtor who his vehicle without reaffirming the 

loan). 

260Connor, 366 B.R. at 138 (holding that debtor 

failed to state a claim for stay violation related to 

periodic statements received prior to Chapter 13 

plan confirmation); Pultz v. NovaStar Mortg., Inc. 

(In re Pultz), 400 B.R. 185, 190–92 (Bankr. D. Md. 

2008) (noting that sending of single loan statement 

was useful to the debtor for forecasting the amount 

of the unsecured debt she could pay through her 

Chapter 13 plan); Schatz v. Chase Home Fin. (In re 

Schatz), 452 B.R. 544 (Bankr. M.D. Pa. 2011) (‘‘I also 

recognize that such information could assist a 

Chapter 13 debtor in drafting his Chapter 13 

plan.’’). 

261Henry, 266 B.R. at 471 (‘‘A secured creditor 

should be encouraged to send out payment 

coupons, envelopes and periodic statements if a 

debtor has filed a statement that the debtor plans 

to keep property subject to secured debt and to 

make payments.’’); Cousins v. CitiFinancial Mortg. 

Co. (In re Cousins), 404 B.R. 281, 286–87 (Bankr. 

S.D. Ohio 2009) (stating in dicta that periodic 

statements can be helpful to Chapter 13 debtors 

making direct payments to understand amounts 

due). 

262 Joens, 2003 WL 22839822, at *2–3 (holding 

that creditor violated automatic stay by sending 

several collection letters and periodic statements to 

Chapter 7 debtor who had indicated an intent to 

surrender); Connor, 366 B.R. at 138 (holding that 

debtor stated a claim related to periodic statements 

and demand letter received after conversion to 

Chapter 7 because he had indicated his intent to 

surrender the property). 

263Curtis v. LaSalle Nat’l Bank (In re Curtis), 322 

B.R. 470, 484–85 (Bankr. D. Mass. 2005) (holding 

that wholly unsecured junior lienholder violated 

automatic stay by, among other things, sending a 

RESPA transfer letter demanding payment to a 

Chapter 13 debtor whose plan provided for 

avoiding the lien). 

Chapter 13 plan. As the Bureau noted in 

the 2013 TILA Servicing Final Rule, 

however, it is precisely this complexity 

that necessitates providing a consumer 

with a periodic statement. The Bureau 

believes that providing this information 

will enable consumers to make 

payments, detect errant payment 

application, and understand the costs of 

their mortgage loans. In addition, the 

Bureau notes that while the Bankruptcy 

Rules provide for a reconciliation 

procedure once the consumer completes 

all payments under a Chapter 13 plan, 

most Chapter 13 cases are dismissed 

prior to completion.254 As a result, most 

consumers in Chapter 13 bankruptcy 

will not have a trustee or court oversee 

and ultimately determine whether a 

servicer correctly applied payments. For 

these consumers, having a record of 

payments made and applied may help 

resolve disputes once the bankruptcy 

case is over.255 Accordingly, the Bureau 

believes that all consumers in Chapter 

13 cases who intend to retain the 

property, including those making 

payments through a trustee, would 

benefit from receiving periodic 

statements (or coupon books in the case 

of servicers that provide them instead of 

periodic statements under 

§ 1026.41(e)(3)). 

Scope of Exemption 

The Bureau is proposing to limit the 

scope of the exemption in 

§ 1026.41(e)(5) to consumers in 

bankruptcy who have made a 

determination to surrender the property 

or avoid the lien securing the mortgage 

loan or who have requested that a 

servicer cease providing periodic 

statements or coupon books. The Bureau 

believes that drawing a distinction 

between consumers who intend to 

retain the property and those who 

intend to surrender the property may 

strike an appropriate balance between 

consumers’ need for information about 

their mortgage loans and the burden on 

servicers to provide information to such 

consumers while also avoiding 

violations of bankruptcy law. 

The Bureau believes that this 

approach, favored by many commenters, 

also is consistent with bankruptcy case 

law. Courts have observed that whether 

periodic statements are appropriate in 

bankruptcy typically depends on 

whether ‘‘the debtor needed the 

information contained in the statements 

when the statements were sent’’ and 

that debtors need information about 

their mortgage loan when they intend to 

retain property, not when they intend to 

surrender it.256 Indeed, some courts 

have found that a periodic statement 

was permissible when the debtor 

planned to retain the property, but that 

the same form of periodic statement 

violated the automatic stay after the 

same debtor changed his mind and 

decided to surrender his home.257

Using this framework, courts have 

held that periodic statements are 

appropriate for Chapter 7 debtors if the 

Statement of Intention identifies an 

intent to retain the property258 or if a 

consumer otherwise continues to make 

voluntary payments after the 

bankruptcy case.259 Similarly, courts 

have found that Chapter 13 debtors who 

have not yet proposed a plan of 

reorganization may benefit from 

periodic statements because they need 

information about the amount of their 

mortgage loan debt in order to formulate 

a plan of reorganization260 and that 

Chapter 13 debtors also benefit from 

periodic statements if their proposed or 

confirmed plan provides that they will 

retain the property and continue making 

payments.261

Conversely, bankruptcy courts have 

determined that periodic statements can 

constitute impermissible collection 

attempts in violation of the automatic 

stay when a consumer has indicated an 

intent to surrender the property, either 

through the Statement of Intention in a 

Chapter 7 case or a plan of 

reorganization in a Chapter 13 case.262

Similarly, courts have held that a 

Chapter 13 consumer with a plan of 

reorganization that provides for 

‘‘avoiding’’ a junior lien—that is, 

rendering the lien unenforceable and 

treating the mortgage debt as an 

unsecured claim—has no need for 

statements regarding the amounts due 

under the mortgage loan.263 Finally, 

courts have found that consumers do 

not need statements when they have 

actually surrendered or vacated the 


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264 In re Roush, 88 B.R. 163, 164–65 (Bankr. S.D. 

Ohio 1988) (holding that creditor violated the 

discharge injunction when it sent a collection letter 

to debtor three years after debtor surrendered 

property); In re Bruce, No. 00–50556 C–7, 2000 WL 

33673773, at *4 (Bankr. M.D.N.C. Nov. 7, 2000) 

(holding that creditor violated the discharge 

injunction by sending periodic statements and 

calling the debtor at his place of employment after 

receiving notice that the debtor had vacated the 

property). 

265 In re Draper, 237 B.R. 502, 505–06 (Bankr. 

M.D. Fla. 1999) (holding that creditor violated the 

stay by sending periodic statements to Chapter 13 

debtor who had asked not to receive them). 

266The Bureau understands from its outreach that 

at least one large national bank that provides 

periodic statements to all of its consumers in 

bankruptcy, except those who opt-out, has not 

encountered problems with the automatic stay. 267See 11 U.S.C. 1201, 1301. 

property,264 or requested that the 

servicer not send periodic statements.265

Therefore, the Bureau is proposing to 

revise the scope of the exemption in 

§ 1026.41(e)(5). Consistent with most 

comments the Bureau received and the 

case law discussed above, proposed 

§ 1026.41(e)(5) limits the scope of the 

exemption to those consumers who no 

longer need the information in the 

periodic statement. Specifically, 

proposed § 1026.41(e)(5)(i) limits the 

exemption to when two conditions are 

satisfied. First, the consumer must be a 

debtor in a bankruptcy case, must have 

discharged personal liability for the 

mortgage loan through bankruptcy, or 

must be a primary obligor on a mortgage 

loan for which another primary obligor 

is a debtor in a Chapter 12 or Chapter 

13 case. The purpose of this 

requirement is to limit the exemption to 

consumers who may be protected by the 

Bankruptcy Code’s automatic stay or 

discharge injunction provisions. 

Second, one of the following 

circumstances must also apply: (1) the 

consumer requests in writing that the 

servicer cease providing periodic 

statements or coupon books;266 (2) the 

consumer’s confirmed plan of 

reorganization provides that the 

consumer will surrender the property 

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 arrearages or the 

maintenance of payments due under the 

mortgage loan; (3) a court enters an 

order in the consumer’s 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 respect to the property 

securing the mortgage loan, or requiring 

the servicer to cease providing periodic 

statements or coupon books; or (4) the 

consumer files with the overseeing 

bankruptcy court a Statement of 

Intention pursuant to 11 U.S.C. 521(a) 

identifying an intent to surrender the 

property securing the mortgage loan. As 

commenters noted, in each of these 

situations, a consumer is no longer 

retaining the property, is no longer 

making regular periodic payments on 

the mortgage loan, or has affirmatively 

requested not to receive statements or 

coupon books. As a result, the Bureau 

believes that the statement’s value is 

diminished and may be outweighed by 

a correspondingly increased risk of a 

court finding that a servicer violated the 

automatic stay by sending periodic 

statements or coupon books in this 

circumstance. 

With respect to joint obligors who are 

not in bankruptcy, proposed 

§ 1026.41(e)(5)(i) effectively limits the 

exemption to those joint obligors who (i) 

share primary liability with a consumer 

who is a debtor in a Chapter 12 or 

Chapter 13 case, and (ii) have requested 

that a servicer cease providing periodic 

statements or coupon books. As 

discussed in the section-by-section 

analysis of § 1024.39(d)(1), a non-debtor 

joint obligor is protected by the 

Bankruptcy Code’s automatic stay 

provisions only in Chapter 12 or 

Chapter 13 cases.267 The Bureau 

understands from outreach that these 

joint obligors generally have a need to 

continue receiving periodic statements 

or coupon books. Moreover, these joint 

obligors are not bound by a debtor’s 

decision to surrender the property 

securing the mortgage loan. 

Accordingly, the Bureau believes that it 

is appropriate for the non-debtor joint 

obligors to continue receiving periodic 

statements or coupon books unless nondebtor joint obligors have requested that 

the servicer cease providing them. 

Proposed comment 41(e)(5)(i)–1 

clarifies the exemption’s applicability 

with respect to joint obligors. The 

proposed comment states that when two 

or more consumers are primarily liable 

on a mortgage loan, an exemption under 

§ 1026.41(e)(5)(i) with respect to one of 

the primary obligors does not affect the 

servicer’s obligations to comply with 

§ 1026.41 with respect to the other 

primary obligors. The Bureau believes 

that the proposed comment will serve to 

eliminate ambiguity concerning whether 

a servicer must continue to provide 

statements or coupon books to joint 

obligors when an exemption under 

§ 1026.41(e)(5)(i) applies to one of the 

obligors. The proposed comment also 

references § 1026.41(f), explaining that 

if one of the joint obligors is in 

bankruptcy and no exemption under 

§ 1026.41(e)(5)(i) applies, the servicer 

would be required to provide periodic 

statements or coupon books with certain 

bankruptcy-specific modifications set 

forth in § 1026.41(f). In that instance, 

the servicer could provide the periodic 

statements or coupon books with the 

bankruptcy-specific modifications to 

any of the primary obligors on the 

mortgage loan, even if not all of them 

are in bankruptcy. 

Proposed comment 41(e)(5)(i)–2 also 

clarifies that, for purposes of 

§ 1026.41(e)(5), the term ‘‘plan of 

reorganization’’ refers to a consumer’s 

plan of reorganization filed under 

applicable provisions of the Bankruptcy 

Code and confirmed by a court with 

jurisdiction over a consumer’s 

bankruptcy case. The proposed 

comment is intended to avoid confusion 

about the meaning of the term ‘‘plan of 

reorganization’’ and whether the term 

refers to a proposed plan or one that has 

been confirmed by a court. 

Finally, proposed comment 

41(e)(5)(i)(B)(4)–1 further clarifies that, 

for purposes of determining whether a 

servicer is exempt under 

§ 1026.41(e)(5)(i) based on a consumer’s 

Statement of Intention filed in the 

consumer’s bankruptcy case, a servicer 

must rely on a consumer’s most recently 

filed Statement of Intention. Thus, 

under the proposed rule, if a consumer 

originally filed a Statement of Intention 

identifying an intent to retain the 

property, but the consumer then files an 

amended Statement of Intention 

identifying an intent to surrender the 

property, a servicer must rely on the 

amended filing to determine that the 

exemption applies. The Bureau believes 

that the proposed comment will avoid 

uncertainty about whether the 

exemption applies when a consumer 

has filed multiple or amended 

Statements of Intention. 

Proposed § 1026.41(e)(5)(ii) states 

when a servicer must resume providing 

periodic statements or coupon books in 

compliance with § 1024.41. First, 

proposed § 1026.41(e)(5)(ii)(A) provides 

that a servicer is not exempt from the 

requirements of § 1024.41 with respect 

to a consumer who submits a written 

request to continue receiving periodic 

statements or coupon books, unless a 

court enters an order requiring 

otherwise. The Bureau believes that 

consumers should have the right to 

receive information regarding their 

mortgage loan. Further, allowing 

consumers to opt-in will enable 

consumers to receive statements or 

coupon books when their intent with 

regard to retaining the property changes. 

The Bureau understands that, for 

example, some Chapter 7 debtors will 

file a Statement of Intention that 

initially discloses an intent to surrender 


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the property but subsequently decide to 

keep the property. In that case, the 

Bureau believes a consumer should be 

able to receive periodic statements or 

coupon books. Proposed comment 

41(e)(5)(ii)–1 clarifies that a servicer 

must comply with a consumer’s most 

recent written request to cease or to 

continue, as applicable, providing 

periodic statements or coupon books. 

Second, proposed 

§ 1026.41(e)(5)(ii)(B) provides that a 

servicer must resume compliance with 

§ 1026.41 within a reasonably prompt 

time after the next payment due date 

that follows the earliest of the following 

outcomes in either the consumer’s or 

the joint obligor’s bankruptcy case, as 

applicable: (1) the case is dismissed; (2) 

the case is closed; (3) the consumer 

reaffirms the mortgage loan under 11 

U.S.C. 524; or (4) the consumer receives 

a discharge under 11 U.S.C. 727, 1141, 

1228, or 1328. Proposed 

§ 1026.41(e)(5)(ii)(B) largely tracks 

current comment 41(e)(5)–2.i, and the 

Bureau believes that a bankruptcy 

exemption is no longer necessary once 

the borrower has exited bankruptcy or 

reaffirmed personal liability for the 

mortgage loan. One commenter 

requested that the obligation to resume 

providing periodic statements should be 

triggered only upon a servicer’s receipt 

of a proper notice indicating that the 

case has been dismissed, closed, or 

discharged. The Bureau understands 

that servicers ordinarily receive notice 

of the dismissal, closing, or discharge, 

as applicable, and it has not received 

comments indicating that servicers often 

fail to receive the required notices. The 

Bureau also believes that the 

‘‘reasonably prompt’’ standard is 

flexible enough to account for instances 

in which a servicer had no reason to 

know that the consumer’s bankruptcy 

case was terminated. Additionally, 

reaffirmation agreements require a 

creditor’s consent, and the Bureau 

understands that a servicer should be 

aware of when such an agreement is 

entered into and approved. 

In combination, proposed 

§ 1026.41(e)(5)(ii)(A) and (B) require a 

servicer to resume providing periodic 

statements or coupon books within a 

reasonably prompt time after the next 

payment due date following receipt of a 

consumer’s written request, the case 

closing or dismissal, the consumer’s 

reaffirmation of the mortgage loan, or 

the consumer receiving a discharge. 

Proposed comment 41(e)(5)(ii)–2 

clarifies that delivering, emailing or 

placing the periodic statement or 

coupon book in the mail within four 

days after the next payment due date, or 

within four days of the close of any 

applicable courtesy period, generally 

would be considered reasonably 

prompt. (With respect to coupon books, 

resuming compliance requires providing 

a new coupon book only to the extent 

the servicer has not previously provided 

the consumer with a coupon book that 

covers the upcoming billing cycle(s); 

duplicate coupon books are not 

required.) This interpretation of 

‘‘reasonably prompt’’ is consistent with 

the Bureau’s interpretation currently set 

forth in comment 41(b)–1. 

Finally, proposed comment 41(e)(5)–1 

clarifies that, if an agent of a consumer 

submits a request to cease or to continue 

providing periodic statements or 

coupon books, the request is deemed 

submitted by the consumer. The Bureau 

understands that attorneys or housing 

counselors often communicate with a 

servicer on a consumer’s behalf, and the 

Bureau believes that it is important to 

clarify that a servicer must comply with 

a request to cease or commence 

providing periodic statements or 

coupon books by such an agent of a 

consumer. 

The Bureau has also considered, but 

declines to propose at this time, four 

suggestions regarding the scope of 

§ 1026.41(e)(5). First, the Bureau 

declines to propose to require a 

consumer in Chapter 7 bankruptcy to 

opt-in affirmatively to receiving 

periodic statements or coupon books. As 

explained above, the Bureau believes 

that servicers should provide statements 

or coupon books to consumers in 

Chapter 7 unless one or more of the 

specified exceptions applies. The 

Bureau is concerned that requiring a 

consumer to affirmatively opt-in may 

disrupt the flow of periodic statements 

or coupon books shortly after the 

bankruptcy filing and may cause a 

consumer to fail to make a timely 

mortgage loan payment. Additionally, 

the Bureau is concerned that consumers, 

particularly those not represented by 

counsel, may not be aware of the right 

to request periodic statements or 

coupon books. 

Second, the Bureau declines to adopt 

a consumer advocacy group’s suggestion 

that a consumer should continue 

receiving periodic statements unless the 

consumer discloses an intent to 

surrender the property, is in default, 

and has been denied for all loss 

mitigation options. The Bureau 

appreciates that this approach would 

ensure that a consumer would receive 

statements until all retention options 

have been exhausted, but the Bureau is 

concerned that it may unduly burden 

servicers. The Bureau believes that a 

more simple test based on the 

consumer’s intent to retain or surrender 

the property may provide a less 

ambiguous standard and assist servicers 

in determining whether the exemption 

applies. 

Third, the Bureau does not believe 

that it would be appropriate to create a 

special exemption from the periodic 

statement requirement for servicers with 

a limited number of consumers in 

bankruptcy or a limited percentage of 

their portfolio subject to bankruptcy 

proceedings. The Bureau believes that 

the existing small servicer exemption in 

§ 1026.41(e)(4) sufficiently balances the 

potential costs of providing periodic 

statements with the potential burden on 

smaller servicers. Furthermore, the 

Bureau notes that an exemption based 

upon the number of customers a 

servicer has in bankruptcy (rather than 

total number of loans in a servicer’s 

portfolio) would lead to uncertainty, as 

factors outside of the servicer’s 

control—for example, regional 

economic conditions—may cause a 

servicer to lose the exemption for a 

given year. 

Finally, at this time, the Bureau does 

not believe that servicers should be 

required to provide Chapter 13 trustees 

with periodic statements, either as a 

matter of course or upon a trustee’s 

request. The Bureau is concerned that 

requiring a servicer to send statements 

to a trustee may unduly increase the 

burden on servicers. The Bureau also 

recognizes the privacy concerns raised 

by servicers. If servicers were in some 

cases required to redact certain 

information based on privacy concerns, 

this could further increase costs to 

servicers. Additionally, the Bureau 

understands that there may be other 

ways for trustees to obtain copies of 

periodic statements, such as requesting 

them from a consumer or obtaining a 

court order requiring them in a 

particular case. The Bureau seeks 

comment on whether a servicer should 

be required to provide periodic 

statements to a Chapter 13 trustee 

overseeing a consumer’s case and, if so, 

under what circumstances. The Bureau 

also seeks comment on whether trustees 

have sufficient alternative means of 

obtaining periodic statements or similar 

information from consumers or 

servicers. 

In addition, the Bureau seeks 

comment on the scope of the proposed 

exemption, the requirements for 

qualifying for the exemption, and when 

servicers must resume sending periodic 

statements or coupon books. In 

particular, the Bureau solicits comment 

on whether consumers in bankruptcy 

should be required to opt-in to receive 

periodic statements or coupon books 

and, if so, whether documents filed with 


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268For purposes of § 1026.41, ‘‘servicer’’ includes 

the creditor, assignee, or servicer, as applicable. 12 

CFR 1026.41(a)(2). 269 12 CFR 1026.41(e)(1) through (5). For loans 

serviced by a small servicer, a creditor or assignee 

is also exempt from the Regulation Z periodic 

statement requirements. 12 CFR 1026.41(e)(4)(i). 

The proposal provides amendments to the periodic 

statement exemption for a consumer that is a debtor 

in bankruptcy. See section-by-section analysis of 

§ 1026.41(e)(5). 270 78 FR 10901, 10960 (Feb. 14, 2013). 

the bankruptcy court, such as a 

Statement of Intention or plan of 

reorganization, are sufficient to qualify 

as a request to receive periodic 

statements or coupon books. The Bureau 

further requests comment on how 

consumers in bankruptcy may be made 

aware of their ability to opt-in or opt-out 

of receiving periodic statements or 

coupon books, whether such requests 

must be made in writing, whether oral 

requests should be sufficient, and 

whether servicers should be able to 

designate an exclusive mailing address 

for receiving written requests. With 

respect to resuming compliance after the 

case closing or dismissal or borrower’s 

discharge, as applicable, the Bureau 

solicits comment on whether servicers 

ordinarily receive sufficient notice of 

these events. 

Legal Authority 

The Bureau is proposing to exercise 

its authority under sections 105(a) and 

(f) of TILA and section 1405(b) of the 

Dodd-Frank Act to exempt servicers 

from the requirement in section 128(f) of 

TILA to provide periodic statements for 

a mortgage loan in certain bankruptcyrelated circumstances. For the reasons 

discussed above, the Bureau believes 

this exemption is necessary and proper 

under section 105(a) of TILA to facilitate 

compliance. In addition, consistent with 

section 105(f) of TILA and in light of the 

factors in that provision, the Bureau 

believes that imposing the periodic 

statement requirement for certain 

consumers in bankruptcy may not 

currently provide a meaningful benefit 

to those consumers in the form of useful 

information. Consistent with section 

1405(b) of the Dodd-Frank Act, the 

Bureau also believes that the 

modification of the requirements in 

section 128(f) of TILA to provide this 

exemption is in the interest of 

consumers and in the public interest. 

41(e)(6) Charged-off Loans 

The Bureau is proposing to add a new 

exemption from the requirement to 

provide periodic statements under 

§ 1026.41. The proposed exemption 

would apply to a mortgage loan that a 

servicer has charged off in accordance 

with loan-loss provisions if the servicer 

will not charge any additional fees or 

interest on the account, provided that 

the servicer must provide the consumer 

a final periodic statement within 30 

days of charge off or the most recent 

periodic statement. 

The periodic statement rule set forth 

in § 1026.41 requires the creditor, 

assignee, or servicer of a closed-end 

consumer credit transaction secured by 

a dwelling (a mortgage loan) to provide 

the consumer, for each billing cycle, a 

periodic statement meeting certain time, 

form, and content requirements.268 The 

Bureau’s February 2013 TILA Servicing 

Final Rule and October 2013 IFR 

provide certain exemptions from the 

periodic statement rule. Specifically, the 

current exemptions apply to reverse 

mortgage transactions, timeshare plans, 

fixed-rate loans if the servicer provides 

the consumer a coupon book, small 

servicers, and mortgage loans while the 

consumer is a debtor in bankruptcy 

under Title 11.269

The Bureau understands that a 

servicer, pursuant to certain accounting 

standards and at a creditor’s direction, 

may be required to charge off a 

delinquent mortgage loan in accordance 

with applicable loan-loss provisions. 

Charge off is an accounting practice that 

indicates that the creditor or servicer no 

longer considers the mortgage loan to be 

an asset. However, charge off does not 

release the consumer from liability for 

the mortgage loan. In some cases, 

although the mortgage loan has been 

charged off, the underlying lien secured 

by the dwelling remains in place. 

Therefore, even after charge off, the 

credit transaction is still secured by a 

dwelling. It is the Bureau’s position that 

under the current rule, unless the lien 

is released, the periodic statement is 

required for all charged-off mortgage 

loans, regardless of whether the 

mortgage loan was charged off prior to 

the effective date of the rule (January 10, 

2014). 

The Bureau has learned that the 

manner in which charged-off mortgage 

loans are serviced may differ from the 

manner in which non-charged-off 

mortgage loans are serviced. The Bureau 

understands that a servicer’s software, 

systems, and platforms may treat 

charged-off mortgage loans distinctly, 

such that providing a periodic statement 

for a charged-off mortgage loan may be 

more burdensome, and therefore more 

costly, than providing a periodic 

statement for a non-charged-off 

mortgage loan. The Bureau also 

understands, however, that even after 

charge off, a servicer may pass along 

various fees to the consumer, such as 

attorney’s fees, court costs, filing fees, 

garnishment fees, property maintenance 

fees, taxes, insurance, and fees for 

maintaining the lien. The Bureau 

believes that where a servicer continues 

to charge a consumer fees and interest, 

the periodic statement may provide 

significant value to a consumer. As the 

Bureau stated in the February 2013 

TILA Servicing Final Rule, the Bureau 

carefully considered concerns expressed 

about circumstances in which the 

periodic statement should not be 

required (e.g., after acceleration), and 

acknowledged that some circumstances 

could make providing a periodic 

statement more complicated. However, 

the Bureau noted that ‘‘such 

circumstances are often precisely when 

a consumer most needs the periodic 

statement,’’ as the Bureau ‘‘believes an 

important role of the periodic statement 

is to document fees and charges to the 

consumer; as long as such charges may 

be assessed, the consumer is entitled to 

receive a periodic statement.’’270

The Bureau has considered the 

competing concerns posed by the costs 

to a servicer to provide periodic 

statements for charged-off mortgage 

loans and the benefits to a consumer to 

continue to be informed of fees and 

charges that a servicer may assess after 

charge off. Although the periodic 

statement rule provides important 

consumer protections, the Bureau 

believes that if a servicer will not charge 

any additional fees or interest on the 

account, the benefit to a consumer of 

receiving a periodic statement may be 

outweighed by the potential for 

increased costs passed on to consumers. 

Therefore, when the servicer will assess 

no further fees or interest, the Bureau 

believes that it may be appropriate to 

exempt a servicer from the requirements 

of § 1026.41 for a mortgage loan that a 

servicer has charged off in accordance 

with loan-loss provisions. 

Accordingly, the Bureau is proposing 

to add a new exemption from the 

periodic statement requirement for 

certain mortgage loans that a servicer 

has charged off. Specifically, proposed 

§ 1026.41(e)(6) provides that a servicer 

is exempt from the requirements of 

§ 1026.41 for a mortgage loan if the 

servicer has charged off the loan in 

accordance with loan-loss provisions 

and will not charge any additional fees 

or interest on the account, provided that 

the servicer must, within 30 days of 

charge off or the most recent periodic 

statement, provide a final periodic 

statement, clearly and conspicuously 

labeled ‘‘Final Statement—Retain This 

Copy for Your Records.’’ The Bureau is 

also proposing that the final periodic 

statement convey, in simple and clear 

terms, additional information to the 


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271 12 CFR 1026.5(b)(2)(i). 

272 74 FR 5244, 5276 (Jan. 29, 2009). 

273The proposal provides that a servicer may 

provide the final periodic statement within 30 days 

of the most recent periodic statement. This would 

allow servicers that appropriately complied with 

the periodic statement requirement for previously 

charged-off mortgage loans to now take advantage 

of the proposed exemption. 

consumer. The Bureau believes that 

providing this final periodic statement 

with the additional consumer 

information may provide important 

consumer protections that outweigh any 

potential burden on servicers associated 

with providing this one-time, final 

statement. 

The proposed exemption is similar to 

existing § 1026.5(b)(2)(i), which 

provides an exemption for certain 

charged-off accounts from the periodic 

statement requirement in § 1026.7 for 

open-end credit transactions. Section 

1026.5(b)(2)(i) states, in relevant part, 

that ‘‘[a] periodic statement need not be 

sent for an account . . . if the creditor 

has charged off the account in 

accordance with loan-loss provisions 

and will not charge any additional fees 

or interest on the account. . . .’’271 In 

finalizing this exemption under 

§ 1026.5(b)(2)(i), the Board weighed the 

costs and benefits and determined that 

‘‘the value of a periodic statement does 

not justify the cost of providing the 

disclosure because the amount of a 

consumer’s obligation will not be 

increasing,’’ while reiterating that ‘‘this 

provision does not apply if a creditor 

has charged off the account but 

continues to accrue new interest or 

charge new fees.’’272 The Bureau agrees 

with the Board’s reasoning and believes 

that a similar analysis may apply with 

respect to the proposed exemption from 

the periodic statement requirement in 

§ 1026.41 for a mortgage loan that a 

servicer has charged off in accordance 

with loan-loss provisions if the servicer 

will not charge any additional fees or 

interest on the account. 

However, because closed-end 

consumer credit transactions secured by 

a dwelling are distinct from unsecured, 

open-end credit transactions by virtue of 

the underlying lien, the Bureau believes 

that it is appropriate to impose 

additional requirements in this context. 

Specifically, proposed § 1026.41(e)(6) 

provides that for a servicer to take 

advantage of the exemption, the servicer 

must, within 30 days of charge off or the 

most recent periodic statement,273

provide a final periodic statement, 

clearly and conspicuously labeled 

‘‘Final Statement—Retain This Copy for 

Your Records.’’ Under proposed 

§ 1026.41(e)(6), the final periodic 

statement may be the last piece of 

information or documentation that a 

consumer receives with respect to the 

charged-off mortgage loan. Consumers 

may need this information for further 

tax-reporting and other financial 

accounting purposes. Additionally, the 

Bureau believes that consumers may 

need to later demonstrate the status of 

the loan to the servicer or a subsequent 

purchaser, assignee, or transferee. 

Consequently, the Bureau believes that 

a consumer should be advised to retain 

the final periodic statement for recordkeeping purposes. 

Further, the Bureau is concerned that 

consumers may misconstrue the charge 

off to mean that the mortgage loan 

obligation or lien has been released, or 

the debt forgiven, when in fact this is 

generally not the case. Therefore, the 

Bureau believes that the proposed final 

periodic statement must also convey, in 

simple and clear terms, important 

information to the consumer about what 

it means for a mortgage loan to be 

charged off. Proposed § 1026.41(e)(6) 

provides that the final periodic 

statement must explain in simple and 

clear terms that: the mortgage loan has 

been charged off and the servicer will 

not charge any additional fees or 

interest on the account; the lien on the 

property remains in place and the 

consumer remains liable for the 

mortgage loan obligation; the consumer 

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 cancelled or 

forgiven; and the loan may be 

purchased, assigned, or transferred. 

The Bureau is aware that mortgage 

loans may be purchased, assigned, or 

transferred after charge off. The Bureau 

recognizes that such situations may 

pose special accounting challenges for 

both servicers and consumers. The 

Bureau notes that nothing in this 

proposal is intended to impact a debt 

collector’s obligations under the 

FDCPA, including, for example, the 

requirement to send a consumer a 

written notice validating the debt under 

section 809 of the FDCPA. Additionally, 

the Bureau is proposing comment 

41(e)(6)–1 to explicate the relationship 

between proposed § 1026.41(e)(6) and 

§ 1026.39, which requires certain 

disclosures upon the purchase, 

assignment, or transfer of a mortgage 

loan. First, the proposed comment 

reiterates that if a charged-off mortgage 

loan is subsequently purchased, 

assigned, or transferred, a covered 

person, as defined in § 1026.39(a)(1), 

must provide the transfer disclosure 

required by § 1026.39. Second, the 

proposed comment provides that a 

covered person, as defined in 

§ 1026.39(a)(1), who would otherwise be 

subject to the requirements of § 1026.41, 

may take advantage of the exemption in 

§ 1026.41(e)(6) as long as it treats the 

mortgage loan as charged off and will 

not charge any additional fees or 

interest on the account. Third, the 

proposed comment further explains that 

if the consumer previously received a 

final periodic statement, a covered 

person (the purchaser, assignee, or 

transferee) is not also required to 

provide a final periodic statement, 

unless it began sending the consumer 

periodic statements and then later met 

the criteria under proposed 

§ 1026.41(e)(6). The Bureau seeks 

comment on whether proposed 

comment 41(e)(6)–1 appropriately 

addresses circumstances under which a 

charged-off mortgage loan may be 

purchased, assigned, or transferred, and 

whether there are additional 

considerations related to purchase, 

assignment, or transfer of a charged-off 

mortgage loan for which the Bureau 

should account. 

The Bureau is also proposing 

comment 41(e)(6)–2 to clarify that the 

obligation to provide a periodic 

statement for a charged-off mortgage 

loan resumes if a servicer or a covered 

person, as defined in § 1026.39(a)(1), 

who would otherwise be subject to the 

requirements of § 1026.41, fails to treat 

the mortgage loan as charged off at any 

time or charges any additional fees or 

interest on the account. Proposed 

comment 41(e)(6)–2 further provides 

that the servicer or covered person may 

not retroactively assess fees or interest 

on the account for the period of time 

during which the exemption in 

§ 1026.41(e)(6) applied. If the servicer or 

covered person were to at any time no 

longer treat the mortgage loan as 

charged off, begin charging fees or 

interest on the account, or retroactively 

assess fees or interest on the account, 

such conduct would contravene the 

purpose of the proposed exemption 

from the otherwise applicable periodic 

statement requirement for charged-off 

mortgage loans. 

The Bureau has narrowly tailored the 

proposed new exemption from the 

requirements of § 1026.41. The 

proposed exemption applies only to 

mortgage loans that have been charged 

off in accordance with loan-loss 

provisions and only if the servicer will 

not charge any additional fees or 

interest on the account. Additionally, 

the proposed exemption requires that 

the servicer provide the consumer a 

final periodic statement within 30 days 

of charge off or the most recent periodic 

statement, that such statement includes 

basic consumer information about the 


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74256 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

nature of the charge off, and that the 

obligation to make periodic statements 

resumes if a servicer or covered person 

charges fees or interest on the account 

in the future. The Bureau believes that 

limiting the proposed exemption in this 

fashion reduces the risk that this 

proposed exemption will be used to 

circumvent the servicing rules. The 

Bureau seeks comment on whether 

limiting the proposed exemption for 

charged-off mortgage loans as described 

above is appropriate. Additionally, the 

Bureau seeks comment on whether 

mortgage loans that were charged off 

prior to the rule’s effective date (January 

10, 2014) should be granted a 

grandfather period to provide servicers 

additional time to comply with either 

the proposed exemption for charged-off 

mortgage loans or the otherwise 

applicable periodic statement rule. 

Finally, the Bureau seeks comment on 

whether there are alternatives to 

periodic statements for charged-off 

mortgage loans, such as an annual 

reminder to the consumer of a loan’s 

status, including what might be the 

associated benefits to consumers and 

costs to servicers of such alternatives. 

Legal Authority 

The Bureau is proposing to exempt 

from the periodic statement requirement 

under section 128(f) of TILA a mortgage 

loan that a servicer has charged off in 

accordance with loan-loss provisions if 

the servicer will not charge any 

additional fees or interest on the 

account, provided that the servicer must 

provide the consumer a final periodic 

statement within 30 days of charge off 

or the most recent periodic statement. 

The Bureau is proposing this exemption 

pursuant to its authority under section 

105(a) and (f) of TILA and section 

1405(b) of the Dodd-Frank Act. 

For the reasons discussed above, the 

Bureau believes that the proposed 

exemption is necessary and proper 

under section 105(a) of TILA to facilitate 

TILA compliance. As discussed above, 

the Bureau believes that the proposal to 

exempt certain mortgage loans that a 

servicer has charged off facilitates 

compliance with TILA by allowing 

servicers to service loans cost effectively 

in compliance with applicable 

regulatory requirements. 

In addition, consistent with section 

105(f) of TILA and in light of the factors 

in that provision, for servicers that are 

required to charge off mortgage loans in 

accordance with loan-loss provisions, 

the Bureau believes that requiring them 

to comply with the periodic statement 

requirement in section 128(f) of TILA 

would not provide a meaningful benefit 

to consumers in the form of useful 

information or protection. The Bureau 

believes, as noted above, that requiring 

provision of periodic statements would 

impose significant costs and burden. 

Specifically, the Bureau believes that 

the proposal will not complicate, 

hinder, or make more expensive the 

credit process. In addition, consistent 

with section 1405(b) of the Dodd-Frank 

Act, for the reasons discussed above, the 

Bureau believes that exempting a 

mortgage loan that a servicer has 

charged off in accordance with loan-loss 

provisions if the servicer will not charge 

any additional fees or interest on the 

account, provided that the servicer must 

provide the consumer a final periodic 

statement within 30 days of charge off 

or the most recent periodic statement, 

from the requirements of section 128(f) 

of TILA would be in the interest of 

consumers and in the public interest. 

In addition, the Bureau relies on its 

authority pursuant to section 1022(b) of 

the Dodd-Frank Act to prescribe 

regulations necessary or appropriate to 

carry out the purposes and objectives of 

Federal consumer financial law, 

including the purposes and objectives of 

Title X of the Dodd-Frank Act. 

Specifically, the Bureau believes that 

the proposed rule is necessary and 

appropriate to carry out the purpose 

under section 1021(a) of the Dodd-Frank 

Act of ensuring that all consumers have 

access to markets for consumer financial 

products and services that are fair, 

transparent, and competitive, and the 

objective under section 1021(b) of the 

Dodd-Frank Act of ensuring that 

markets for consumer financial products 

and services operate transparently and 

efficiently to facilitate access and 

innovation. 

41(f) Modified Periodic Statements and 

Coupon Books for Certain Consumers in 

Bankruptcy 

The Bureau is proposing § 1026.41(f) 

to modify the periodic statement and 

coupon book requirements with respect 

to certain consumers who are in 

bankruptcy or have discharged personal 

liability for a mortgage loan through 

bankruptcy. As discussed in the sectionby-section analysis of § 1026.41(e)(5), 

proposed § 1026.41(e)(5) exempts 

servicers from the requirement to 

provide periodic statements or coupon 

books to such consumers in some but 

not all circumstances. When no 

exemption under proposed 

§ 1026.41(e)(5) applies, proposed 

§ 1026.41(f) specifies various 

clarifications and modifications to the 

periodic statements or coupon books 

provided to such consumers. The 

following discussion first addresses the 

proposed clarifications and 

modifications to the periodic statement 

requirements. It then addresses 

proposed changes with respect to 

coupon books provided instead of 

periodic statements under 

§ 1026.41(e)(3). 

The Bureau is proposing two sets of 

modifications to the required layout and 

content for periodic statements 

provided to consumers in bankruptcy. 

The first set of modifications, in 

proposed § 1026.41(f)(1) and (2), applies 

to periodic statements provided to any 

consumer who is a debtor in a case 

under any chapter of the Bankruptcy 

Code, as well to a consumer who has 

discharged personal liability for a 

mortgage loan through bankruptcy. 

Proposed § 1026.41(f)(1) provides that 

servicers may exclude from the periodic 

statement the amount of any late fee and 

the date on which that fee will be 

imposed if payment has not been 

received. Proposed § 1026.41(f)(1) also 

provides that servicers may exclude the 

delinquency-related disclosures set 

forth in § 1024.41(d)(8)(i), (ii), and (v)— 

that is, the date on which the consumer 

became delinquent; a notification of 

possible risks, such as foreclosure and 

expenses, that may be incurred if the 

delinquency is not cured; and a notice 

of whether the servicer has made the 

first notice or filing required by 

applicable law for any judicial or nonjudicial foreclosure process, if 

applicable. Proposed § 1026.41(f)(2) 

requires the periodic statement to 

include on the first page a statement 

acknowledging the consumer’s 

bankruptcy case or the discharged 

nature of the mortgage loan and a 

statement that the periodic statement is 

for informational purposes only. 

The second set of modifications, in 

proposed § 1026.41(f)(3), applies 

specifically to periodic statements 

provided to a consumer who is a debtor 

in a case under Chapter 12 or Chapter 

13 of the Bankruptcy Code. Proposed 

§ 1026.41(f)(3)(i) provides that, in 

addition to the information identified in 

proposed § 1026.41(f)(1), a servicer may 

also omit the remainder of the 

delinquency information normally 

required by § 1026.41(d)(8). Proposed 

§ 1026.41(f)(3)(ii) through (v) clarify and 

modify certain disclosures required by 

§ 1026.41(d), including the amount due, 

explanation of amount due, past 

payment breakdown, and transaction 

activity. The changes are intended to 

ensure that these disclosures accurately 

portray the consumer’s payment 

obligations while in bankruptcy. 

Proposed § 1026.41(f)(3)(vi) and (vii) 

require a servicer to include new 

disclosures related to a consumer’s prebankruptcy arrearage (if any), as well as 


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274The lack of comments about Chapter 11 and 

Chapter 12 is consistent with the fact that relatively 

few consumers seek to reorganize their debts under 

those chapters. In 2013, for example, only 1,320 

nonbusiness cases were filed under Chapter 11, and 

just 495 cases were filed under Chapter 12. By 

comparison, in the same year, approximately 

705,000 nonbusiness cases were filed under 

Chapter 7 and another 330,000 under chapter 13. 

See Administrative Office of the U.S. Courts, U.S. 

Bankruptcy Courts—Business and Nonbusiness 

Cases Commenced, by Chapter of the Bankruptcy 

Code, During the 12-Month Period Ending 

December 31, 2013, available at http://

www.uscourts.gov/uscourts/Statistics/

BankruptcyStatistics/BankruptcyFilings/2013/

1213_f2.pdf. 

275See 11 U.S.C. 1222(b)(5), 1322(b)(5) (both 

stating that a plan ‘‘may provide for the curing of 

any default within a reasonable time and 

maintenance of payments while the case is pending 

on any unsecured claim or secured claim on which 

the last payment is due after the date on which the 

final payment under the plan is due.’’). Under 

Chapter 12, moreover, a court may modify the terms 

of a mortgage loan secured by a principal residence. 

11 U.S.C. 1222(b)(2). 

disclaimers related to the consumer’s 

status in bankruptcy and the accuracy of 

the information provided in the periodic 

statement. 

Proposed § 1026.41(f)(4) addresses the 

situation where more than one 

consumer is primarily obligated on a 

mortgage loan and a servicer is required 

to provide at least one of the primary 

obligors with a modified periodic 

statement pursuant to § 1026.41(f). 

Proposed § 1026.41(f)(4) provides that a 

servicer may provide the modified 

version of the periodic statement to any 

or all of the primary obligors instead of 

periodic statements not including the 

bankruptcy-specific modifications, even 

if not all primary obligors are debtors in 

bankruptcy. On the other hand, as 

proposed comment 41(e)(5)(i)–1 and the 

section-by-section analysis of 

§ 1026.41(e)(5) explain, if a servicer 

were exempt under proposed 

§ 1026.41(e)(5)(i) from providing 

periodic statements to the obligor in 

bankruptcy, the servicer would continue 

to provide regular periodic statements, 

without any of the bankruptcy-specific 

modifications, to the obligors who are 

not in bankruptcy. 

Proposed § 1026.41(f)(5) provides that 

the modifications set forth above also 

apply to coupon books provided instead 

of periodic statements under 

§ 1026.41(e)(3). Specifically, proposed 

§ 1026.41(f)(5) provides that the 

modifications set forth in proposed 

§ 1026.41(f)(1) and (3)(i) through (v) and 

(vii) apply to coupon books and other 

information a servicer provides to the 

consumer under § 1026.41(e)(3). 

Proposed § 1026.41(f)(5) permits the 

servicer to put the disclosures required 

under proposed § 1026.41(f)(2) and 

(3)(vii) anywhere in the coupon book or 

give them on a separate page enclosed 

with the coupon book provided to the 

consumer. The servicer must also make 

available upon request the pre-petition 

arrearage information set forth in 

proposed § 1026.41(f)(3)(vi). 

As discussed in the section-by-section 

analysis of § 1026.41(e)(5), the Bureau 

sought comment in the October 2013 

IFR as to how the content of periodic 

statements might be tailored to meet the 

particular needs of consumers in 

bankruptcy. The Bureau received 

written comments in response to that 

solicitation during the official comment 

period. Since then, the Bureau has 

continued to receive comments and, as 

part of its Implementation Plan, has 

consulted with servicers, trade groups, 

consumer advocacy groups, bankruptcy 

attorneys, bankruptcy trustees, and 

bankruptcy judges regarding how 

periodic statements may be tailored for 

purposes of bankruptcy, including 

hosting the roundtable discussion on 

June 16, 2014. Accordingly, the 

following discussion of proposed 

§ 1026.41(f) contains discussion of the 

comments received during the official 

comment period, as well as discussion 

of ex parte comments received after that 

period ended. The following discussion 

first addresses the proposed 

clarifications and modifications to the 

periodic statement requirements; it then 

addresses proposed changes with 

respect to coupon books provided 

instead of periodic statements under 

§ 1026.41(e)(3). The clarifications and 

modifications proposed for periodic 

statements generally apply to coupon 

books as well. 

Modified Statements for Consumers in 

Bankruptcy 

Commenters agreed that the required 

content and layout of the periodic 

statement, which is governed by 

§ 1026.41(d), would need to be clarified 

or modified for at least some consumers 

in bankruptcy. Commenters suggested 

different modifications depending on 

whether a consumer is a debtor in a 

liquidation case under Chapter 7 or a 

reorganization case under Chapter 13 of 

the Bankruptcy Code. Most commenters 

did not specifically address how the 

§ 1026.41(d) disclosures should be 

modified with respect to a consumer in 

a Chapter 11 or Chapter 12 case.274 As 

discussed in more detail below, 

comments focused on whether certain 

language or disclosures—such as past 

due amounts or delinquency 

information—could be construed as an 

impermissible attempt to collect a debt 

in violation of the Bankruptcy Code’s 

automatic stay, as well as whether other 

disclosures—such as the amount due 

and past payment breakdown—could be 

adjusted to reflect the payment terms of 

a consumer’s bankruptcy plan. 

Commenters were also concerned about 

whether periodic statements could 

accurately reflect amounts due and paid 

under a bankruptcy plan or whether the 

disclosures would be unavoidably 

confusing or inaccurate. Finally, 

industry commenters expressed concern 

about the potential operational 

challenges and costs associated with 

providing periodic statements to 

consumers in bankruptcy. 

Based on the comments received, the 

Bureau’s outreach, and the Bureau’s 

understanding of periodic statements 

that some servicers use for consumers in 

bankruptcy, the Bureau believes that it 

is appropriate to modify or omit certain 

of the disclosures required by 

§ 1026.41(d) with respect to periodic 

statements provided to consumers in 

bankruptcy. As explained in more detail 

in the section-by-section analyses of 

§ 1026.41(f)(1) through (3), the Bureau 

believes that the modifications and 

omissions are necessary to ensure that 

servicers do not violate the Bankruptcy 

Code’s automatic stay by providing 

periodic statements and to ensure that 

periodic statements accurately reflect 

the payments made by consumers in 

bankruptcy. The Bureau further believes 

that it is appropriate to require certain 

modifications to the periodic statement 

specifically for consumers who have 

filed under Chapter 12 or Chapter 13. 

The Bureau believes different forms may 

be appropriate in part because of the 

special treatment of mortgage loans 

secured by a consumer’s principal 

residence under Chapter 12 and Chapter 

13, which permit a consumer to repay 

pre-bankruptcy arrearages over a 

reasonable time while continuing to 

make monthly periodic payments due 

under the loan.275

Accordingly, proposed § 1024.41(f) 

provides that unless a servicer is exempt 

under § 1026.41(e), a servicer must 

comply with the requirements of 

§ 1024.41 with respect to a consumer 

who is a debtor in bankruptcy or has 

discharged personal liability for a 

mortgage loan through bankruptcy, 

subject to certain modifications set forth 

in § 1026.41(f)(1) through (3), as 

applicable. Briefly stated, proposed 

§ 1026.41(f)(1) permits servicers to 

exclude from periodic statements 

certain of the disclosures ordinarily 

required by § 1026.41(d), and proposed 

§ 1026.41(f)(2) requires servicers to 

include statements identifying the 

consumer’s status in bankruptcy and 

advising that the periodic statement is 

for informational purposes. While the 

modifications sets forth in proposed 


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276See, e.g., In re Draper, 237 B.R. 502, 505–06 

(Bankr. M.D. Fla. 1999) (statement listed the ‘‘total 

amount due’’); Butz v. People First Fed. Credit 

Union (In re Butz), 444 B.R. 301 (Bankr. M.D. Pa. 

2011) (statement requested immediate payment of 

an ‘‘amount due’’); Harris v. Mem’l Hosp. (In re 

Harris), 374 B.R. 611, 614 (Bankr. N.D. Ohio 2007) 

(statement advised that the ‘‘account is past due’’). 

§ 1026.41(f)(1) and (2) apply to any 

periodic statement provided to a 

consumer in bankruptcy (or who has 

discharged personal liability for a 

mortgage loan through bankruptcy), 

proposed § 1026.41(f)(3) specifies 

additional modifications required for 

consumers in Chapter 12 or Chapter 13 

bankruptcy. 

Proposed comment 41(f)-1 clarifies 

that a servicer must resume providing 

regular periodic statements in 

accordance with § 1026.41 if the 

consumer’s bankruptcy case is closed or 

dismissed. The comment also clarifies 

that the requirements of § 1026.41(f) 

continue to apply, however, if the 

consumer has discharged personal 

liability for the mortgage loan. The 

purpose of this comment is to clarify 

when a servicer is no longer required to 

provide periodic statements with the 

modifications set forth in proposed 

§ 1026.41(f)(1) through (3). 

Terminology and Other Modifications 

Commenters agreed on the need to 

allow servicers to use alternative 

terminology on periodic statements for 

consumers in bankruptcy. Two trade 

groups stated that bankruptcy courts 

sometimes disfavor language such as 

‘‘amount due,’’ ‘‘payment due date,’’ 

and ‘‘overdue’’ or ‘‘past due payments,’’ 

as those terms call to mind an attempt 

to collect a debt. These groups suggested 

that servicers be allowed to use 

alternatives, such as ‘‘payment 

amount,’’ ‘‘payment date,’’ or ‘‘unpaid 

past payments.’’ Servicers, trustees, and 

consumer advocacy groups had similar 

suggestions, noting that terms like 

‘‘voluntary payment amount’’ or 

‘‘contractual payment date’’ are more 

consistent with the notion that the 

periodic statements would be 

informational in nature. 

Commenters also agreed that 

alternative terminology is necessary in 

Chapter 13 cases, in which a borrower 

may make two streams of payments. 

Commenters suggested that servicers be 

able to refer to the payments as ‘‘prepetition payments’’ (to describe prebankruptcy arrearages) or ‘‘post-petition 

payments’’ (to describe periodic 

payments), or use other terms that 

reflect that dual stream of payments. A 

consumer advocacy group noted that 

such terminology is pervasive in 

bankruptcy and that, while a normal 

consumer may not be familiar such 

terms, a consumer in bankruptcy 

usually would be. 

The Bureau agrees with the comments 

that servicers may need to use 

alternative terminology in periodic 

statements provided to consumers in 

bankruptcy. Commenters’ concerns 

about collection language appear to be 

borne out by court decisions that have 

occasionally focused on the precise 

language of the terms used on periodic 

statements.276 Similarly, the Bureau 

believes that the need to distinguish 

between pre-petition and post-petition 

payments in a Chapter 13 case may 

require different terminology than that 

used on other periodic statements. The 

Bureau further notes that it intends to 

conduct consumer testing on sample 

forms and will attempt to discern 

whether any particular terminology is 

more or less understandable for 

consumers. 

Accordingly, the Bureau is proposing 

comment 41(f)–2, which provides that 

servicers may use terminology other 

than that found on the sample periodic 

statement in appendix H–30, so long as 

the new terminology is commonly 

understood. Current comment 41(d)–3 

provides similar flexibility with respect 

to, for example, regional differences, but 

the Bureau believes that it is important 

to clarify that, for purposes of 

§ 1026.41(f)(1) through (3), servicers 

may use terminology specific to the 

circumstances of bankruptcy. 

Commenters, particularly servicers 

and trade groups, also emphasized the 

need for general flexibility in the 

periodic statement requirements for 

consumers in bankruptcy. They stated 

that many bankruptcy courts and 

trustees have their own local rules and 

procedures, and industry commenters 

argued that servicers need to be able to 

modify statements to reflect these local 

practices or the unique circumstances of 

a consumer’s individual bankruptcy 

case. Two trade groups further argued 

that servicers should be permitted to 

craft disclosures they believe are 

necessary to convey to consumers that 

a servicer is not attempting to collect a 

debt or to explain how a consumer can 

request to not receive further statements 

and that the Bureau should not 

prescribe a ‘‘one size fits all’’ disclosure 

regime. 

The Bureau agrees with the 

commenters that servicers may need 

flexibility to modify the periodic 

statement’s content to comply with 

applicable rules and guidelines. The 

Bureau understands that many local 

bankruptcy rules already have certain 

requirements in place regarding 

periodic statements, and the Bureau 

believes that servicers should be able to 

comply with both those rules and 

Regulation Z. The Bureau further 

believes that giving servicers the 

flexibility to include disclosures related 

to a consumer’s status in bankruptcy is 

important and necessary to permit 

servicers to comply with local practice 

or rules. 

Accordingly, the Bureau is proposing 

comment 41(f)–3, which states that a 

periodic statement provided under 

§ 1026.41(f) may be modified as 

necessary to facilitate compliance with 

the Bankruptcy Code, the Federal Rules 

of Bankruptcy Procedure, court orders, 

and local rules, guidelines, and standing 

orders. Proposed comment 41(f)–3 

further provides that servicers may 

include additional disclaimers related to 

a borrower’s status in bankruptcy or that 

advise a consumer how to submit a 

written request to cease receiving 

periodic statements. The Bureau seeks 

comment on proposed comment 41(f)–3, 

including whether it may afford 

servicers too little or too much 

flexibility with respect to the required 

content of periodic statements. 

41(f)(1) Requirements Not Applicable 

Section 1026.41(d) requires periodic 

statements to disclose information 

related to a consumer’s failure to make 

timely payments. Section 

1026.41(d)(1)(ii) sets forth one such 

disclosure, requiring a periodic 

statement to include the amount of any 

late fee and the date on which the fee 

will be imposed if payment has not been 

received. Section 1026.41(d)(8) requires 

that a periodic statement include certain 

information for consumers who are 45 

days or more delinquent on a mortgage 

loan. Specifically, § 1024.41(d)(8)(i), (ii), 

and (v) require the disclosure of the date 

on which the consumer became 

delinquent; a notification of possible 

risks, such as foreclosure and expenses, 

that may be incurred if the delinquency 

is not cured; and a notice of whether the 

servicer has made the first notice or 

filing required by applicable law for any 

judicial or non-judicial foreclosure 

process, if applicable. Section 

1026.41(d) also contains certain layout 

requirements, including the requirement 

in § 1026.41(d)(1)(iii) that the amount 

due be displayed more prominently 

than other disclosures on the page. 

Proposed § 1026.41(f)(1) provides that 

certain of § 1026.41(d)’s disclosures and 

layout requirements do not apply to 

periodic statements provided to 

consumers in bankruptcy under 

proposed § 1026.41(f). Servicers may 

exclude the disclosures set forth in 

§ 1026.41(d)(1)(ii) and (8)(i), (ii), and (v), 

and servicers do not need to comply 


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277Compare Pearson v. Bank of Am., No. 3:12– 

cv–00013, 2012 WL 2804826, *5–6 (W.D. Va. July 

10, 2012) (holding that creditor did not violate 

discharge injunction because, among other things, 

the periodic statements included a prominent 

bankruptcy disclaimer noting that creditor could 

not collect debt or pressure debtor for payment) 

with Harlan v. Rosenberg & Assocs. (In re Harlan), 

402 B.R. 703, 716 (Bankr. W.D. Va. 2009) (holding 

that Chapter 7 debtors stated a plausible claim for 

violation of the discharge injunction where, among 

other things, creditor’s letters stated that ‘‘this is an 

attempt to collect a debt’’ and had bankruptcy 

disclaimers in regular-sized font in the middle of 

the page). 

278 12 CFR 1026.41(d)(1) (stating that the (d)(1) 

disclosures must be ‘‘[g]rouped together in close 

proximity to each other and located at the top of 

the first page of the statement’’). 

279 78 FR 10901, 10971–72 (Feb. 14, 2013). 

280Compare Brown v. Bank of Am. (In re Brown), 

481 B.R. 351, 360 (Bankr. W.D. Pa. 2012) with 

Schatz, 452 B.R. at 550 (no stay violation where 

among other things, creditor did not threaten any 

late fees); see also Duke, 79 F.3d at 45 (‘‘[T]he 

respite provided by § 362 ‘is not from 

communication with creditors, but from the threat 

of immediate action by creditors, such as a 

foreclosure or a lawsuit.’’’) (quoting Brown v. Pa. 

State Emps. Credit Union, 851 F.2d 81, 86 (3d Cir. 

1988)). 

281 12 CFR 1026.41(d)(1)(ii). 

282 12 CFR 1026.41(d)(8)(iv). 

283 12 CFR 1026.41(d)(8)(vii). 

284 12 CFR 1026.41(d)(8)(iii). 

285 12 CFR 1026.41(d)(8)(vi). 

286 78 FR 10901, 10971 (Feb. 14, 2013). 

with § 1026.41(d)(1)(iii)’s requirement to 

display the amount due more 

prominently than other disclosures on 

the page. 

Industry commenters maintained that 

certain disclosures required by 

§ 1026.41(d) could be interpreted as a 

violation of the Bankruptcy Code’s 

automatic stay because they threaten 

consequences for non-payment or 

emphasize past due amounts. 

Specifically, some industry participants 

commented that the notice of potential 

late fees required by § 1026.41(d)(1)(ii) 

and the delinquency information 

required by § 1026.41(d)(8) could be 

viewed as collection attempts. 

Additionally, two trade groups objected 

to the amount due being the most 

prominent disclosure on the page, as 

required by § 1026.41(d)(1)(iii), arguing 

that servicers should be allowed to 

make bankruptcy disclaimers the most 

prominent disclosures on the page. 

Consumer advocacy groups objected to 

removing the delinquency information, 

stating that it is valuable information for 

consumers to receive and that a court 

would not find that a servicer violated 

the automatic stay by including this on 

a statement that also contained 

appropriate bankruptcy disclaimers. 

Proposed § 1026.41(f)(1) addresses 

these concerns by modifying the 

required content and layout of periodic 

statements for consumers in bankruptcy. 

The proposal provides that the 

requirement set forth in 

§ 1026.41(d)(1)(iii) that the amount due 

be the most prominent disclosure on the 

page would not apply when a consumer 

is in bankruptcy or has discharged 

personal liability for a mortgage loan 

through bankruptcy. Consistent with the 

flexibility the Bureau would afford 

servicers in modifying the periodic 

statement as necessary, discussed above, 

the Bureau believes it is appropriate for 

other disclosures, such as a disclaimer 

acknowledging the consumer’s 

bankruptcy case and advising that the 

statement is for informational purposes 

only, to be the most prominent 

disclosures on the page.277 The Bureau 

notes that the amount due disclosures 

required by § 1026.41(d)(1) would still 

be required to be located at the top of 

the first page of the statement.278

The Bureau believes that receiving 

information regarding the consequences 

of late payments or continued 

delinquencies, such as disclosures 

regarding potential fees and possible 

foreclosure, provides tangible benefits to 

consumers.279 Nonetheless, the Bureau 

understands that, in certain instances, 

bankruptcy courts have found that 

statements regarding potential late fees 

or foreclosure and other language that 

could be construed as threatening 

consequences for a failure to make 

payments could violate the automatic 

stay.280 Furthermore, the Bureau 

believes that a consumer in bankruptcy 

may already be aware of the 

consequences of non-payment and may 

have filed for bankruptcy precisely to 

avoid those consequences. The Bureau 

therefore believes that it may be 

appropriate to permit servicers to 

exclude from the periodic statement 

certain information regarding 

consequences of late payment or 

continued non-payment. 

As such, for consumers in bankruptcy 

or who have discharged personal 

liability for a mortgage loan through 

bankruptcy, proposed § 1026.41(f)(1) 

permits servicers to exclude from the 

periodic statement the amount of any 

late payment fee that will be imposed 

and the date on which that fee will be 

imposed if payment has not been 

received.281 Proposed § 1026.41(f)(1) 

also permits servicers to exclude the 

delinquency-related disclosures set 

forth in § 1024.41(d)(8)(i), (ii), and (v)— 

that is, the date on which the consumer 

became delinquent; a notification of 

possible risks, such as foreclosure and 

expenses, that may be incurred if the 

delinquency is not cured; and a notice 

of whether the servicer has made the 

first notice or filing required by 

applicable law for any judicial or nonjudicial foreclosure process, if 

applicable. While the Bureau believes 

that this is valuable information for any 

consumer, including a consumer in 

bankruptcy, the Bureau is concerned 

that courts or consumers may interpret 

a periodic statement containing such 

disclosures as attempting to compel 

payment of a debt, rather than simply 

providing information to a consumer. 

On the other hand, the Bureau 

believes that the remainder of the 

delinquency disclosures required by 

§ 1026.41(d)(8) may be appropriate for 

consumers in a Chapter 7 or Chapter 11 

case, and for consumers who have 

discharged personal liability for a 

mortgage loan. For example, references 

to any loss mitigation program to which 

the consumer has agreed 282 or to 

homeownership counselor 

information 283 do not relate to amounts 

owed, nor do they threaten 

consequences for non-payment. No 

commenter specifically identified this 

information as problematic and none 

cited case law indicating that providing 

it would cause a servicer to violate the 

automatic stay. 

Additionally, the Bureau believes that 

consumers in Chapter 7 or Chapter 11 

bankruptcy (or those who have 

discharged personal liability for a 

mortgage loan through bankruptcy) who 

are intending to retain their homes have 

a need for information regarding recent 

account activity 284 and the amount 

needed to bring the loan current.285 As 

the Bureau stated in the 2013 TILA 

Servicing Final Rule, the accounting 

associated with mortgage loan payments 

is complicated and can be even more so 

in delinquency situations.286 The 

account history helps a consumer better 

understand the exact amount owed on 

the loan and how that total was 

calculated and it enables a consumer to 

better identify errors in payment 

application. Moreover, the Bureau 

understands that many housing 

counselors believe that this information 

is vital when trying to assist a consumer 

to pursue home retention options and 

cure prior defaults because it enables 

the counselor to understand the 

circumstances of a consumer’s 

delinquency. The Bureau believes that 

this information may have unique 

benefits for a consumer in bankruptcy 

because such a consumer may be facing 

an immediate decision whether to retain 

or surrender a home and in that 

situation the consumer needs accurate 

information about the amounts they 

owe. 

The Bureau further notes that the 

disclosures in § 1026.41(d)(8) do not 

require a servicer to use any specific 


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287 Id. at 10972 (‘‘[T]he Bureau notes that specific 

language is not required by the regulation. * * *’’). 

288Compare Jones v. Bac Home Loans Servicing, 

LP (In re Jones), No. 09–50281, 2009 WL 5842122, 

at *3 (Bankr. S.D. Ind. Nov. 25, 2009) (no discharge 

violation where letter acknowledged the discharge 

and uncollectability of the debt); Pearson v. Bank 

of Am., No. 3:12–cv–00013, 2012 WL 2804826, at 

*5–6 (W.D. Va. July 10, 2012) (holding that creditor 

did not violate discharge injunction for debtor who 

had intent to surrender by sending a statement 

asking for payment and noting late charge because 

the statement included prominent bankruptcy 

disclaimer noting that creditor could not collect 

debt or pressure debtor for payment and an opt-out 

clause); Schatz v. Chase Home Fin. (In re Schatz), 

452 B.R. 544, 550 (Bankr. M.D. Pa. 2011) (holding 

that creditor did not violate the stay where the 

disclaimer was located in the center of the first 

page, ‘‘not buried in boilerplate language, nor 

hidden on the backside of the document’’) with 

Brown v. Bank of Am. (In re Brown), 481 B.R. 351, 

360 (Bankr. W.D. Pa. 2012) (holding that the 

creditor violated the discharge injunction by 

sending periodic statements that lacked any 

bankruptcy disclaimers, threatened late fees, and 

listed amounts past due); Harlan v. Rosenberg & 

Assocs., LLC (In re Harlan), 402 B.R. 703, 716 

(Bankr. W.D. Va. 2009) (finding stay violation 

where bankruptcy disclaimer was in regular-sized 

font in the middle of the page rather than more 

prominent than other disclosures); Sipe v. Conseco 

Fin. Servicing Corp. f/k/a Green Tree Fin. Servicing 

Corp. (In re Sipe), No. 99–40166, 2001 WL 

35672616, at *4 (Bankr. W.D.N.C. July 18, 2001) 

(finding a stay violation in part because ‘‘[t]here is 

nothing in ‘bold letters’ across the front of the 

statements to indicate that their sole purpose is to 

advise the debtor of the receipt of funds from the 

Chapter 13 Trustee’’); Curtis v. LaSalle Nat’l Bank 

(In re Curtis), 322 B.R. 470, 484 n.18 (Bankr. D. 

Mass. 2005) (finding a stay violation where the 

bankruptcy disclaimers were ‘‘[o]n the backside of 

the first page of the . . . letter, and without the 

capital letters and bold print employed for other 

sections of the letter’’). 

289See, e.g., Bankr. D. Colo. L.B.R. 4001–4(a)(1) 

(‘‘In order for communication to be protected under 

this [local rule], the communication must indicate 

it is provided for information purposes and does 

not constitute a demand for payment.’’); D. Kan. Bk. 

S.O. 08–4, ¶ (c)(2) (‘‘In order for communication to 

be protected under this provision, the 

communication must indicate it is provided for 

information purposes and does not constitute a 

demand for payment.’’). 

language.287 A servicer is therefore 

permitted to describe those disclosures 

in any numbers of ways to avoid 

concerns about the account history 

appearing to be a collection attempt 

rather than simply providing useful 

information. 

The Bureau solicits comment on the 

modifications to the periodic statement 

set forth in proposed § 1026.41(f)(1). 

Specifically, the Bureau solicits 

comment on whether the proposed 

modifications are appropriate and 

whether additional modifications are 

necessary. Further, the Bureau solicits 

comment on whether the proposed 

modifications or additional 

modifications would be necessary if the 

Bureau required a consumer in Chapter 

7 or Chapter 11 (or a consumer who has 

discharged personal liability for the 

mortgage loan through bankruptcy) to 

opt-in to receiving periodic statements 

by submitting a written request to a 

servicer. 

41(f)(2) Bankruptcy Notices 

All commenters suggested that a 

periodic statement provided to a 

consumer in bankruptcy should contain 

a disclaimer acknowledging, at a 

minimum, that the consumer is in 

bankruptcy and that the statement is for 

informational purposes only. As noted 

above, two trade groups commented that 

this should be the most prominent 

disclosure on the page. Bankruptcy 

courts have frequently cited servicers’ 

inclusion, or failure to include, this type 

of disclaimer as a factor in determining 

whether servicer has violated the 

automatic stay,288 and some bankruptcy 

courts have adopted local rules 

permitting or requiring periodic 

statements so long as they clearly 

identify that they are for informational 

purposes and are not attempts to collect 

a debt.289

The Bureau therefore believes it may 

be appropriate to require servicers to 

include a similar disclaimer on periodic 

statements provided to consumers in 

bankruptcy or who have discharged 

personal liability for a mortgage loan 

through bankruptcy. Proposed 

§ 1026.41(f)(2) requires the periodic 

statement to include on the first page a 

statement acknowledging the 

consumer’s bankruptcy case or the 

discharged nature of the mortgage loan 

and a statement that the periodic 

statement is for informational purposes 

only. The Bureau understands that this 

requirement is consistent with the 

practice of servicers that currently 

provide periodic statements to 

consumers in bankruptcy. The Bureau 

seeks comment on whether servicers 

should be permitted to include the 

disclosures under proposed 

§ 1026.41(f)(2) on a separate page 

enclosed with the periodic statement, 

whether the disclosures under proposed 

§ 1026.41(f)(2) should be permissive 

rather than mandatory, and whether 

there are other appropriate disclosures 

that should be permitted or required. 

41(f)(3) Chapter 12 and Chapter 13 

Consumers 

Proposed § 1026.41(f)(3) sets forth 

additional modifications for periodic 

statements provided to consumers in 

Chapter 12 or Chapter 13 cases. 

Proposed § 1026.41(f)(3)(i) provides 

that, in addition to the information 

identified in proposed § 1026.41(f)(1), a 

servicer may also omit the remainder of 

the delinquency information normally 

required by § 1026.41(d)(8). Proposed 

§ 1026.41(f)(3)(ii) through (v) clarify and 

modify certain disclosures required by 

§ 1026.41(d), including the amount due, 

explanation of amount due, past 

payment breakdown, and transaction 

activity. Finally, proposed 

§ 1026.41(f)(3)(vi) and (vii) require a 

servicer to include new disclosures 

related to the pre-petition arrearage (if 

any), as well as disclaimers related to 

the consumer’s status in bankruptcy and 

the accuracy of the information 

provided in the statement. 

The Bureau is proposing three 

comments to clarify the meaning of 

certain terms used in proposed 

§ 1026.41(f)(3) and related commentary. 

First, proposed comment 41(f)(3)-1 

clarifies that for purposes of 

§ 1026.41(f)(3), the term ‘‘plan of 

reorganization’’ refers to a consumer’s 

plan of reorganization filed under the 

applicable provisions of Chapter 12 or 

Chapter 13 of the Bankruptcy Code and 

confirmed by a court with jurisdiction 

over the consumer’s bankruptcy case. 

The Bureau believes that this comment 

will help avoid any confusion about the 

meaning of the term ‘‘plan of 

reorganization’’ and whether the term 

refers to a proposed plan or one that has 

been confirmed by a court. 

Second, proposed comment 41(f)(3)-2 

clarifies that for purposes of 

§ 1026.41(f)(3), ‘‘pre-petition payments’’ 

are payments made under a plan of 

reorganization to cure the consumer’s 

pre-bankruptcy defaults, if any, and that 

‘‘post-petition payments’’ are payments 

made under a plan of reorganization to 

satisfy the mortgage loan’s periodic 

payments as they come due after the 

bankruptcy case is filed. The Bureau 

believes that these terms are appropriate 

because the Bureau understands that 

they are commonly used to describe 

these two primary types of payments 

made under a plan of reorganization. 

Third, proposed comment 41(f)(3)-3 

clarifies that for purposes of 

§ 1026.41(f)(3), post-petition fees and 

charges are those fees and charges 

incurred after the bankruptcy case is 

filed. In light of proposed 

§ 1026.41(f)(3)’s requirement (discussed 

below) that servicers make certain 

disclosures about the amount of postpetition fees and charges, this proposed 

comment is intended to clarify the 

distinction between fees and charges 

imposed before the bankruptcy case was 

filed and those imposed after filing. 

In addition, the Bureau is also 

proposing comment 41(f)(3)–4 to 

address the disclosures that must be 

made on the first periodic statement 

provided to a consumer under proposed 

§ 1024.41(f)(3) after an exemption under 

§ 1026.41(e) expires. Section 


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290 78 FR 10901, 10966 (Feb. 14, 2013). 

1026.41(f)(3)(iii) through (vi) require the 

disclosure of the total sum of any postpetition fees or charges imposed, the 

total of all post-petition payments 

received and how they were applied, 

the total of all payments applied to postpetition fees or charges imposed, a list 

of all transaction activity, and the total 

of all pre-petition payments received 

‘‘since the last statement.’’ For purposes 

of the first periodic statement provided 

to the consumer following termination 

of an exemption under § 1026.41(e), 

proposed comment 41(f)(3)–4 clarifies 

that the disclosures required by 

§ 1026.41(f)(3)(iii) through (vi) may be 

limited to account activity since the last 

payment due date that occurred while 

the exemption was in effect. Proposed 

comment 41(f)(3)–4 tracks proposed 

comment 41(d)–5, discussed in the 

section-by-section analysis of 

§ 1026.41(d), and is intended to ensure 

that the disclosures required under 

§ 1026.41(f)(3)(iii) through (vi) cover the 

same time period as the disclosures 

normally required by § 1026.41(d). 

41(f)(3)(i) Requirements Not Applicable 

Proposed § 1026.41(f)(3)(i) provides 

that, in addition to the information a 

servicer may omit from the periodic 

statement under proposed 

§ 1026.41(f)(1), a servicer may also omit 

the remainder of the delinquency 

information required by § 1026.41(d)(8) 

(i.e., a servicer may also omit the 

information required by 

§ 1026.41(d)(8)(iii), (iv), (vi) and (vii)). 

Several servicers and trade groups 

argued that delinquency information is 

particularly inappropriate for Chapter 

13 consumers because these consumers 

can be contractually delinquent but still 

have made all payments due under the 

plan of reorganization. Those 

commenters suggested that reminding 

these consumers about their contractual 

delinquency could be confusing and 

provide limited value. Several industry 

commenters also argued that 

delinquency information related to 

failures to make plan payments is 

unnecessary, as the bankruptcy court is 

in a position to resolve matters related 

to post-petition defaults. Two consumer 

advocacy groups and other industry 

participants agreed that delinquency 

information may be confusing or 

provide little value to consumers in 

Chapter 13 bankruptcy. The two 

consumer advocacy groups 

recommended, in lieu of delinquency 

information, that the periodic statement 

should contain statements indicating 

that the consumer had not made all of 

the required payments and encouraging 

the consumer to contact an attorney or 

the trustee. Finally, an industry 

participant favored requiring a periodic 

statement to include a more general 

disclosure that the consumer must 

continue to make payment in order to 

retain the property. 

The Bureau agrees with commenters 

that the delinquency information may 

be confusing or of little value to 

consumers in a Chapter 13 case. As 

commenters noted, information related 

to pre-bankruptcy defaults may not be 

helpful, and in fact may be confusing, 

to a consumer whose plan of 

reorganization is designed to repay 

those defaults over time. Further, the 

Bureau understands that a consumer 

who fails to make several plan payments 

will likely face immediate consequences 

in bankruptcy, such as a trustee’s 

motion to dismiss or a servicer’s motion 

for relief from the automatic stay, and 

the delinquency information may serve 

less value in that scenario. Accordingly, 

proposed § 1026.41(f)(3)(i) provides that 

a servicer may omit the delinquency 

information required by current 

§ 1026.41(d)(8). 

41(f)(3)(ii) and (iii) Amount Due and 

Explanation of Amount Due 

Under § 1026.41(d)(1), a periodic 

statement must disclose, among other 

things, the payment due date and the 

amount due. Section 1026.41(d)(2) 

requires disclosure of an explanation of 

amount due, including (a) the monthly 

payment amount, including a 

breakdown showing how much, if any, 

will be applied to principal, interest, 

and escrow; (b) the total sum of any fees 

or charges imposed since the last 

statement; and (c) any payment amount 

past due. 

Proposed § 1026.41(f)(3)(ii) and (iii) 

modify the requirements of 

§ 1026.41(d)(1) and (2) for purposes of 

periodic statements provided to 

consumers in Chapter 12 or Chapter 13 

bankruptcy. The proposal states that the 

amount due and explanation of amount 

due disclosures may be limited to the 

monthly post-petition payments due 

under the mortgage loan and any postpetition fees or charges imposed since 

the last periodic statement. Proposed 

comments 41(f)(3)(ii)–1 and (iii)–1 

further clarify that these disclosures 

would not be required to include the 

amounts of any payments on account of 

a consumer’s pre-petition arrearages or 

that are due under a court order. 

Commenters raised three concerns 

about the amount due, payment due 

date, and explanation of amount due 

disclosures required by § 1026.41(d)(1) 

and (2) in the bankruptcy context. First, 

industry participants and bankruptcy 

trustees requested clarification about 

what payments and due dates should be 

included in these disclosures. These 

commenters stated that listing the 

amount owed under the contract, 

including all pre-petition arrearages, 

would conflict with the terms of a 

bankruptcy plan, which allows the 

consumer to repay those arrearages over 

time. They also noted that in Chapter 13 

cases, consumers may be making two 

sets of payments that may be due on two 

different dates (and potentially due to 

two different parties), and they 

requested clarification about whether 

the amount due must include one or 

both of these payments. These 

commenters further noted that 

additional amounts may be due 

pursuant to specific court orders and 

they inquired whether those additional 

amounts must be included in the 

amount due and explanation of amount 

due. 

Industry, consumer advocacy groups, 

and bankruptcy trustees agreed that the 

amount due should reflect the postpetition payments—that is, the periodic 

payments due after the bankruptcy 

filing—and should not include amounts 

attributable to the pre-petition arrearage 

or amounts due under individual court 

orders. Commenters noted that the 

amount of the post-petition payments is 

determined by the mortgage loan 

contract and thus is information within 

a servicer’s control, while the prepetition payments and amounts owed 

under a court order are determined by 

the plan of reorganization or the court 

order. Industry commenters further 

stated that that it would be difficult to 

accurately capture these additional 

amounts and argued that they are 

unnecessary in a periodic statement, 

given that the plan or court order 

identifies the payment schedule and 

amount. During the bankruptcy 

roundtable discussion that the Bureau 

held on June 16, 2014, participants 

agreed that the amount due and 

explanation of amount due could be 

limited to post-petition payments and 

that a servicer should include a 

disclaimer advising that the plan may 

require the consumer to make additional 

payments. 

As the Bureau stated in the 2013 TILA 

Servicing Final Rule, the Bureau 

believes that it may be appropriate to 

tailor the amount due disclosures to the 

amounts due under a consumer’s plan 

of reorganization.290 Additionally, in 

light of the comments received, the 

Bureau believes that it is appropriate to 

allow servicers to limit the amount due 

and explanation of amount due 

disclosures to include only post-petition 

payments. In addition to the reasons 


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74262 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

291See, e.g., Mont. LBR 4001–3 (stating that if a 

mortgage creditor provides periodic statements to a 

Chapter 13 debtor, the ‘‘statements shall contain at 

least the following information concerning 

postpetition mortgage payments to be made directly 

to the mortgagee * * * (A) the date of the statement 

and the date the next payment is due; (B) the 

amount of the current monthly payment’’); Vt. LBR 

3071–1 (similar). 292See 78 FR 10901, 10965 (Feb. 14, 2013). 

provided by commenters, the Bureau 

understands that some local rules 

adopted by bankruptcy courts that 

address periodic statements provide that 

the statements should reflect the postpetition payments, and that these local 

rules would not require a servicer to 

include pre-petition payments or 

amounts due under a court order in the 

amount due field.291 Accordingly, 

proposed § 1026.41(f)(2)(ii) and (iii) 

require a servicer to include postpetition payments in the amount due 

and explanation of amount due, 

including any past due post-petition 

payments, but do not require a servicer 

to include pre-petition payments that 

may be due under the plan of 

reorganization. 

The second concern that commenters 

raised pertained to the explanation of 

amount due. Specifically, industry 

requested that the explanation of 

amount due not include a breakdown of 

how much, if any, of the post-petition 

payment will be applied to principal, 

interest, and escrow, as would normally 

be required under § 1026.41(d)(2)(i). 

Two trade groups argued that this 

breakdown would confuse a consumer 

because a servicer must apply the postpetition payment to the oldest 

outstanding unpaid periodic payment, 

which often has a different breakdown 

of principal and interest than the 

current month’s payment. The trade 

groups commented that consumers 

would not understand why the 

allocation under the explanation of 

amount due would not correspond to 

how the servicer actually applied the 

payment. The trade groups and a 

servicer further commented that 

servicers cannot always discern how a 

trustee may allocate payments to 

principal, interest, and escrow, so the 

breakdown on the periodic statement 

may not match the trustee’s records, 

which could foster further confusion. 

Comments from bankruptcy trustees 

and consumer advocacy groups took the 

opposing view, arguing that disclosing 

how payments will be allocated (and 

how they were applied, as discussed 

below) is vital to ensuring that servicers 

are correctly applying payments. These 

commenters stated that servicers have 

particular difficulty accounting for 

escrow payments in bankruptcy and 

that disclosing the amount to be applied 

to escrow is crucial to ensuring 

compliance with the bankruptcy plan. 

Bankruptcy trustees noted that a 

breakdown of principal and interest is 

helpful for determining whether 

servicers correctly applied payments 

due under a daily simple interest loan. 

The trustees and consumer advocacy 

groups also strongly disagreed with 

industry’s legal premise, arguing that 

Chapter 13 plans can in fact require a 

servicer to apply a post-petition 

payment to the current month rather 

than to the oldest outstanding debt. 

Although the Bureau understands 

industry commenters’ concerns about 

the potential for consumer confusion, 

the Bureau believes that this concern 

may be outweighed by the benefits of 

disclosing the breakdown of the postpetition payments by principal, interest, 

and escrow. This breakdown is intended 

to give a consumer a snapshot of why 

the consumer is being asked to pay the 

amount due.292 Without an explanation 

of, for example, the amount attributable 

to escrow, a consumer and the 

consumer’s attorney may be unable to 

discern how a servicer calculated the 

amount due. Furthermore, as described 

in the section-by-section analysis of 

§ 1026.41(f)(3)(vii), to address the 

potential for borrower confusion, 

proposed § 1026.41(f)(3)(vii) requires a 

servicer to include a statement that the 

application of payments on the periodic 

statement may not reflect the trustee’s 

allocations and a statement encouraging 

the consumer to contact the consumer’s 

attorney or trustee with any questions. 

Moreover, the Bureau notes that it 

intends to conduct consumer testing on 

a proposed sample statement for 

Chapter 13 consumers and that it will 

test whether consumers are in fact 

confused by any discrepancy between 

the allocation in the amount due and 

the allocation in the past payment 

breakdown. Accordingly, proposed 

§ 1026.41(f)(3)(iii) leaves in place 

§ 1026.41(d)(2)(i)’s requirement to 

include a breakdown of the amount of 

the monthly payment, if any, that will 

be applied to principal, interest and 

escrow. 

Finally, commenters inquired about 

whether post-petition fees and 

charges—that is, fees and charges 

imposed after the bankruptcy filing—are 

required or permitted to be included in 

the amount due and explanation of 

amount due. Two consumer advocacy 

groups maintained that no law prevents 

servicers from advising consumers of 

fees or charges that have been assessed 

during a bankruptcy case and that 

consumers would benefit from being 

informed of these fees and charges when 

they are imposed, rather than later in 

the bankruptcy case. One large servicer 

agreed that consumers would benefit 

from learning about fees as they are 

incurred. A trade group, two large 

servicers, and an industry representative 

stated in joint comments that most 

servicers would prefer to include fees 

and charges on a periodic statement so 

that they could collect the fees shortly 

after assessing them and that 

operationally it would be easier to 

include fees and charges on a periodic 

statement than to not include them. 

These commenters noted, however, that 

a minority of servicers are concerned 

that they should first disclose any postpetition fees and charges to the 

bankruptcy court through the 

procedures outlined in Federal Rule of 

Bankruptcy Procedure 3002.1. 

The Bureau agrees with the comments 

that consumers, including those in 

bankruptcy, benefit from learning of fees 

and charges that have been imposed on 

their account. The Bureau believes that 

this would assist consumers’ efforts to 

budget their finances and timely pay 

fees and charges. The Bureau further 

believes that a servicer also benefits 

from fees or charges being disclosed on 

the periodic statement because it 

enables the servicer to quickly collect 

the fees or charges. The Bureau 

appreciates the concern of some 

servicers that they would prefer to first 

disclose the fees and charges to a 

bankruptcy court through the 

procedures set forth in Federal Rule of 

Bankruptcy Procedure 3002.1. In the 

bankruptcy context, however, a servicer 

that defers collecting a fee or charge 

until after complying with the Federal 

Rule of Bankruptcy Procedure 3002.1 

procedures, and thus after a potential 

court determination on the allowability 

of the fee or charge, is not required to 

disclose the fee or charge until 

complying with such procedures. For 

these reasons, proposed 

§ 1026.41(f)(2)(ii)(A) and (B) require a 

servicer to include in the explanation of 

amount due the total sum of any postpetition fees or charges imposed since 

the last periodic statement. A servicer 

that defers collecting a fee or charge 

until after complying with the Federal 

Rule of Bankruptcy Procedure 3002.1 

procedures, and thus after a potential 

court determination on the allowability 

of the fee or charge, is not required to 

disclose the fee or charge until 

complying with such procedures. 

Proposed comment 41(f)(3)(ii)–1 is 

intended to clarify the amounts that 

must be included in the amount due 

and the amounts that may be included 

in the amount due at a servicer’s 


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293 Id. at 10966 (Feb. 14, 2013). 

discretion. The proposed comment 

clarifies that, for a consumer in Chapter 

12 or Chapter 13 bankruptcy, the 

amount due is not required to include 

any amounts other than the postpetition payments or post-petition fees 

and charges that a servicer has imposed. 

Additionally, the proposed comment 

explains that a servicer has not imposed 

a fee or charge if it will comply with 

Federal Rule of Bankruptcy Procedure 

3002.1 before attempting to collect a fee 

or charge. The comment further 

explains that while only post-petition 

payments and post-petition fees and 

charges are required to be included in 

the amount due, a servicer has the 

flexibility to include other amounts, 

such as the amount owed under an 

agreed court order, in the amount due, 

so long as those other amounts are also 

disclosed in the explanation of amount 

due and transaction activity. 

Proposed comment 41(f)(3)(iii)–1 

provides similar clarification with 

respect to the explanation of amount 

due. It states that the explanation of 

amount due is not required to include 

any amounts other than the postpetition payments and post-petition fees 

and charges that a servicer has imposed. 

A servicer nonetheless has the 

flexibility to include other amounts, 

such as amounts payable under an 

agreed court order, in the explanation of 

amount due, so long as those other 

amounts are disclosed in the amount 

due and transaction activity. The 

Bureau believes that proposed 

comments 41(f)(3)(ii)–1 and (iii)–1 will 

assist servicers in understanding what 

amounts must be, and are permitted to 

be, included in the amount due and 

explanation of amount due. 

The Bureau solicits comment on 

whether the explanation of amount due 

should include a breakdown of the 

amount of the monthly payment that 

will be applied to principal, interest and 

escrow, or whether a more limited 

disclosure is appropriate, such as listing 

the monthly payment as a lump sum or 

listing the principal and interest as a 

combined figure with the escrow 

amount disclosed separately. 

Additionally, the Bureau requests 

comment on whether a servicer should 

be permitted or required to include 

post-petition fees and charges in the 

amount due disclosure. 

41(f)(3)(iv) Past Payment Breakdown 

Proposed § 1026.41(f)(3)(iv) is 

intended to provide a consumer with a 

snapshot of how their payments have 

been applied, much the same as 

§ 1026.41(d)(3). Specifically, proposed 

§ 1026.41(f)(3)(iv) requires the periodic 

statement to include the total of all postpetition payments received since the 

last statement and a breakdown of the 

amounts, if any, applied to principal, 

interest, and escrow, as well as the 

amount, if any, currently held in any 

suspense or unapplied funds account 

and a total of all payments applied to 

post-petition fees or charges since the 

last statement. Proposed 

§ 1026.41(f)(3)(iv) also requires the 

periodic statement to include the total 

of all post-petition payments received 

since the beginning of the calendar year 

and a breakdown of the amounts, if any, 

applied to principal, interest, and 

escrow, as well as a the amount, if any, 

currently held in any suspense or 

unapplied funds account and total of all 

payments applied to post-petitions fees 

or charges since the beginning of the 

calendar year. 

Industry commenters objected to the 

requirement that a periodic statement 

must contain a past payment breakdown 

including a breakdown of payments by 

the amount applied to principal, 

interest, and escrow, maintaining that 

this could confuse consumers because it 

may not be consistent with the trustee’s 

records. Industry commenters requested 

that the post-petition payments received 

be disclosed as a lump sum total. A 

credit union commented that, although 

it tracks the amounts applied to postpetition fees and charges, its systems are 

not currently configured to display that 

total on a periodic statement. The credit 

union further commented that similar 

smaller entities would need to upgrade 

their systems to disclose this 

information. 

Consumer advocacy groups and 

bankruptcy trustees commented that 

receiving a breakdown of how postpetition payments were applied to 

principal, interest, and escrow is vital to 

determining whether a servicer is 

correctly applying payments due under 

a plan of reorganization. These 

commenters stated that a lump sum 

disclosure would be of significantly less 

value. 

The Bureau understands servicers’ 

concerns about borrower confusion, but 

as discussed in the section-by-section 

analysis of 41(f)(3)(ii) with respect to the 

explanation of amount due, the Bureau 

believes that these concerns may be 

outweighed by the benefits of disclosing 

the breakdown of the post-petition 

payments by principal, interest, and 

escrow. This breakdown allows a 

consumer to identify potential errors in 

payment application, including any 

misapplication of payments to escrow or 

fees. The Bureau believes that this 

breakdown also plays an important role 

in educating a consumer. The Bureau 

also believes that the information 

pertaining to payments received since 

the last statement inform consumers of 

how much their outstanding principal 

has decreased, while the year-to-date 

information educates consumers about 

the costs of their mortgage loan.293

Furthermore, as set forth below, to 

address the potential for borrower 

confusion, proposed § 1026.41(f)(3)(vii) 

requires a servicer to include a 

statement that the application of 

payments on the periodic statement may 

not reflect the trustee’s allocations, as 

well as a statement encouraging the 

consumer to contact the consumer’s 

attorney or trustee with any questions. 

Therefore, the Bureau is proposing 

§ 1026.41(f)(3)(iv) to require a servicer to 

include a breakdown of the amount of 

the post-petition payments that was 

applied to principal, interest and 

escrow. 

The Bureau solicits comment on 

whether the past payment breakdown 

should include a breakdown of the 

amount of the post-petition payments 

that were applied to principal, interest 

and escrow, or whether a more limited 

disclosure is appropriate, such as listing 

the amounts applied as a lump sum or 

listing the principal and interest as a 

combined figure with the escrow 

amount broken out separately. 

41(f)(3)(v) Transaction Activity 

Proposed § 1026.41(f)(3)(v) provides 

that the transaction activity information 

required to be disclosed on a periodic 

statement under § 1026.41(d)(4) must 

include any post-petition payments, 

pre-petition payments, and payments of 

post-petition fees or charges the servicer 

has received since the last statement. 

Consumer advocacy groups and 

bankruptcy trustees commented that the 

transaction activity should include both 

pre-petition payments and post-petition 

payments received by the servicer so 

that a consumer and the trustee have a 

record of which payments a servicer has 

received and when. Industry 

commenters did not object to disclosing 

these amounts, though they commented 

that it would be extremely difficult for 

a servicer to identify the source of any 

payments—whether a payment came 

from a trustee, a consumer, or a thirdparty–and that the source of payment is 

not important to the consumer. During 

the bankruptcy roundtable that the 

Bureau held on June 16, 2014, 

representatives from consumer 

advocacy groups and bankruptcy 

trustees agreed that the source of 

payments is not as important as simply 

identifying the amount of the payment 

received. Additionally, consumer 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74264 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

294 78 FR 10901, 10967 (Feb. 14, 2013). 

advocacy groups stated that there is no 

prohibition on disclosing post-petition 

fees or charges that have been imposed 

on a consumer, and that a consumer 

would benefit from having those fees 

disclosed on a periodic statement. 

Several servicers stated that their 

preference would be to disclose fees and 

charges as they are imposed so that they 

can be collected on a real-time basis. 

As discussed in the 2013 TILA 

Servicing Final Rule, the Bureau 

believes that it is important for 

consumers to understand account 

activity that credits or debits the amount 

due, including any fees or charges that 

have been assessed.294 The Bureau 

believes that consumers in bankruptcy 

would similarly benefit from these 

disclosures. Additionally, the Bureau 

believes that consumers in bankruptcy 

may benefit if the transaction activity 

includes pre-petition payments. 

Although those payments would not 

affect the amount due (which would be 

limited to post-petition payments and 

fees), the pre-petition payments do 

reduce a consumer’s pre-petition 

arrearage and thus serve to reduce a 

consumer’s delinquency. Generally, the 

Bureau believes that having an accurate 

picture of a delinquency is essential for 

consumers to engage in financial 

planning. Moreover, the Bureau 

understands that there may be a 

significant delay between when a 

consumer sends a pre-petition payment 

to a trustee and when a servicer 

ultimately receives that payment, and 

the Bureau believes it may benefit 

consumers to have a record of when 

such payments are received. 

Accordingly, proposed § 1026.41(f)(3)(v) 

provides that the transaction activity 

information set forth in § 1026.41(d)(4) 

must include any post-petition 

payments, pre-petition payments, and 

payments of post-petition fees or 

charges the servicer has received since 

the last statement. 

Proposed comment 41(f)(3)(v)–1 

clarifies that the brief description of the 

transaction activity required by 

§ 1026.41(d)(4) does not need to identify 

the source of the payments received by 

the servicer. The Bureau believes that 

this clarification is necessary in light of 

servicers’ comments that they are not 

able to provide this information on a 

periodic statement. 

The Bureau solicits comment on 

whether the transaction activity should 

including post-petition payments, prepetition payments, and post-petition 

fees and charges, or whether it should 

disclosure different or additional types 

of activity. 

41(f)(3)(vi) Pre-petition Arrearage 

For consumers in Chapter 12 or 

Chapter 13 bankruptcy, proposed 

§ 1026.41(f)(3)(vi) requires a servicer to 

disclose, if applicable, the total of all 

pre-petition payments received by the 

servicer since the last periodic 

statement, the total of all pre-petition 

payments received by the servicer since 

the beginning of the current calendar 

year, and the current balance of the 

consumer’s pre-petition arrearage. 

As discussed in the section-by-section 

analyses of § 1026.41(f)(3)(ii) through 

(iv), some industry representatives 

submitted ex parte comments objecting 

to a requirement to break down payment 

application by principal, interest, and 

escrow, and industry commenters 

voiced a stronger objection to doing so 

for pre-petition payments. Industry 

commenters stated that the pre-petition 

arrearage is treated essentially as a lump 

sum claim in bankruptcy, and that each 

payment received goes to reduce the 

amount of that claim. They maintained 

that, as a result, it is unnecessary to 

disclose whether a portion of a payment 

is being applied to principal or prepetition escrow shortages, and that it is 

equally unnecessary and unhelpful to 

advise the consumer if any portion of 

the payment is being held in suspense. 

These commenters further stated that a 

Chapter 13 trustee and a servicer may 

allocate a different portion of the prepetition payments to, for example, 

principal or fees, and that the differing 

allocations would be extremely difficult 

to reconcile. Several servicers stated 

that they could disclose the amount of 

any pre-petition payments received as 

well as the current balance the prepetition arrearage. A credit union 

commented that it and other smallersized entities currently lack the capacity 

to export information about pre-petition 

payments onto a periodic statement, 

however, and that any requirement to 

do so would require them to modify 

their systems. 

Consumer advocacy groups and 

bankruptcy trustees commented that 

breaking down pre-petition payments by 

principal, interest, and escrow would be 

unnecessary for purposes of periodic 

statements because the arrearage is 

treated as a lump sum claim in 

bankruptcy. They expressed comfort 

with the idea of servicers disclosing the 

amount of pre-petition payments 

received and the current balance of prepetition arrearage. 

The Bureau believes that consumers 

need a record of payments received by 

a servicer, including pre-petition 

payments, in order to better understand 

the status of their mortgage loans and 

any delinquencies. The Bureau also 

believes that, in light of the comments 

from industry, consumer advocacy 

groups, and bankruptcy trustees, 

servicers should not be required to 

break down pre-petition payments by 

principal, interest, and escrow and that 

consumers would benefit from 

disclosure of the aggregate amounts of 

these payments. Although the Bureau 

understands that some servicers may 

not be currently equipped to identify 

the amount of the pre-petition arrearage 

on a periodic statement, the Bureau 

understands that servicers keep records 

of this information and believes that, 

with an appropriate implementation 

period, servicers would be able to 

provide it on a periodic statement. 

Accordingly, proposed 

§ 1026.41(f)(3)(vi) requires a servicer to 

disclose, if applicable, the total of all 

pre-petition payments received since 

the last periodic statement, the total of 

all pre-petition payments received since 

the beginning of the current calendar 

year, and the current balance of the 

consumer’s pre-petition arrearage. 

The Bureau understands that, in some 

instances, such as before a servicer files 

a proof of claim in a consumer’s 

bankruptcy case or if a consumer or 

trustee objects to a servicer’s claim, the 

amount of the pre-petition arrearage 

may not be determined or may be in 

dispute. In that instance, the Bureau 

believes that it may be appropriate for 

the periodic statement to reflect the 

unresolved nature of the arrearage. 

Accordingly, proposed comment 

41(f)(3)(vi)–1 provides that to the extent 

the amount of a consumer’s pre-petition 

arrearage is subject to dispute or has not 

yet been determined, the periodic 

statement may include a statement 

acknowledging the unresolved nature of 

the pre-petition arrearage. 

The Bureau solicits comment on 

whether periodic statements should be 

required to disclose the pre-petition 

payments received and applied and the 

balance of the pre-petition arrearage, 

and whether there are alternative 

avenues for apprising consumers of this 

information. 

41(f)(3)(vii) Additional Disclosures 

Proposed § 1026.41(f)(3)(vii) requires 

a servicer to include four additional 

statements on the periodic statement, as 

applicable, when a consumer is in 

Chapter 12 or Chapter 13 bankruptcy. 

First, § 1026.41(f)(3)(vii)(A) requires a 

statement that the amount due includes 

only post-petition payments and does 

not include other payments that may be 

due under the terms of the consumer’s 

bankruptcy plan. The purpose of this 

disclosure is to ensure that a consumer 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74265 

understands that there may be 

additional amounts due under the plan 

that relate to the mortgage debt. Several 

industry participants and consumer 

advocacy groups recommended that 

periodic statements include such a 

disclaimer, and the Bureau believes that 

it may be appropriate to avoid consumer 

confusion. 

Second, proposed 

§ 1026.41(f)(3)(vii)(B) requires a 

statement that if the consumer’s 

bankruptcy plan requires the consumer 

to make the post-petition mortgage 

payments directly to a bankruptcy 

trustee, the consumer should send the 

payment to the trustee and not to the 

servicer. This proposed disclosure is 

intended to avoid consumer confusion 

about whether to send a post- petition 

payment to the trustee or servicer. 

Several industry participants and 

consumer advocacy groups stated that 

such a disclosure would be helpful to 

avoid confusion and that some servicers 

already include such a disclosure on 

their periodic statement. The Bureau 

believes that such a disclosure is 

appropriate. 

Third, proposed § 1026.41(f)(3)(vii)(C) 

requires a statement that the 

information disclosed on the periodic 

statement may not reflect payments the 

consumer has made to the trustee and 

may not be consistent with the trustee’s 

records. Finally, proposed 

§ 1026.41(f)(3)(vii)(D) requires a 

statement that encourages the consumer 

to contact the consumer’s attorney or 

the trustee with questions regarding the 

application of payments. Several 

industry participants stated that these 

disclosures would be helpful because 

there can be a delay between when a 

trustee receives a payment from a 

consumer and when the trustee remits 

that payment to a servicer, and a 

consumer may wonder why the 

statement does not reflect all payments 

the consumer has made. For pre-petition 

payments, in particular, the Bureau 

understands that the delay can be weeks 

or even months as a trustee may not 

distribute payments on pre-petition 

claims until the creditor files a proof of 

claim or until higher priority claims 

have been paid in full. Additionally, the 

Bureau understands that a trustee may 

allocate payments differently than a 

servicer, and until the allocations are 

reconciled, a periodic statement 

provided by a servicer may reflect 

different allocations than a trustee’s 

records. Based on these timing and 

allocation issues, the Bureau believes 

that it is appropriate to advise 

consumers of the differences between a 

servicer’s records and a trustee’s records 

and that encouraging consumers to 

contact their attorney of the trustee may 

be a helpful disclosure. 

The Bureau solicits comment on 

whether servicers should be permitted 

to include the disclosures under 

proposed § 1026.41(f)(3)(vii) on a 

separate page enclosed with the 

periodic statement, whether the 

disclosures under proposed 

§ 1026.41(f)(3)(vii) should be permissive 

or mandatory when applicable, and 

whether there are other disclosures that 

a servicer should be required to include 

in a periodic statement under proposed 

§ 1026.41(f). 

41(f)(4) Multiple Obligors 

Proposed § 1026.41(f)(4) addresses the 

situation where more than one 

consumer is primarily obligated on a 

mortgage loan and a servicer is required 

to provide at least one of the primary 

obligors with a modified periodic 

statement pursuant to § 1026.41(f). 

Proposed § 1026.41(f)(4) provides that 

the servicer may provide the modified 

version of the periodic statement to any 

or all of the primary obligors instead of 

any statements not including the 

bankruptcy-specific modifications, even 

if not all primary obligors are debtors in 

bankruptcy. On the other hand, as 

proposed comment 41(e)(5)(i)–5 and the 

section-by-section analysis of 

§ 1026.41(e)(5) explain, if a servicer 

were exempt under proposed 

§ 1026.41(e)(5)(i) from providing 

periodic statements to the obligor in 

bankruptcy, the servicer would continue 

to provide regular periodic statements, 

without any of the bankruptcy-specific 

modifications, to the obligors who are 

not in bankruptcy. 

During the bankruptcy roundtable 

discussion, representatives from 

industry and consumer advocacy groups 

agreed that if a servicer is required to 

provide a periodic statement with 

bankruptcy-specific information to a 

consumer, the servicer should be 

permitted to send the same modified 

form of statement to any or all of the 

consumer’s co-obligors on the mortgage 

loan, even if not all the obligors are 

debtors in bankruptcy. One large 

servicer noted that sending one type of 

statement to all joint obligors on a 

mortgage loan reflects its current 

practice when one or more obligors is a 

debtor in bankruptcy. Industry 

representatives stated that sending one 

type of statement per mortgage loan 

account would be less burdensome and 

would be easier to administer than 

sending different types of statements to 

different obligors on the same account. 

The Bureau agrees with the 

bankruptcy roundtable participants that 

a servicer should be permitted to 

provide only one type of periodic 

statement per mortgage loan account. 

The Bureau believes that it would 

impose an undue burden on servicers to 

have to send one version of the periodic 

statement to a consumer in bankruptcy 

and a different version to the 

consumer’s non-bankrupt co-obligors. 

Moreover, the Bureau believes such a 

result would be inconsistent with 

comment 41(a)–1, which clarifies that 

when more than one consumer is 

primarily obligated on a mortgage loan, 

a servicer may send the periodic 

statement to any one of the primary 

obligors; the servicer is not required to 

provide periodic statements to all 

primary obligors, let alone different 

versions of the periodic statement. 

Accordingly, proposed § 1026.41(f)(4) 

provides that if a servicer is required to 

provide periodic statements with the 

modifications set forth in proposed 

§ 1026.41(f) in connection with a 

mortgage loan for which more than one 

consumer is primarily obligated, the 

servicer may provide the modified 

statements to any or all of the primary 

obligors instead of any statements not 

including the bankruptcy-specific 

modifications, even if not all of the 

primary obligors are debtors in 

bankruptcy. 

Proposed comment 41(f)(4)–1 

provides an illustration of a servicer’s 

obligations with respect to a mortgage 

loan where two spouses are obligors on 

a mortgage loan, and only one spouse 

files for Chapter 13 bankruptcy. In this 

example, the plan of reorganization for 

the spouse in bankruptcy provides for 

the retention of the property securing 

the mortgage loan by making prepetition and post-petition payments, 

thus requiring the servicer to provide a 

periodic statement with the 

modifications set forth in proposed 

§ 1026.41(f)(1) through (3). Proposed 

comment 41(f)(4)–1 clarifies that the 

servicer can provide the periodic 

statements with the modifications set 

forth in proposed § 1026.41(f)(1) 

through (3) to either spouse, even 

though one spouse is not in bankruptcy. 

41(f)(5) Coupon Books 

Proposed § 1026.41(f)(5) provides that 

certain modifications in proposed 

§ 1026.41(f)(1) and (3) apply to coupon 

books provided instead of periodic 

statements under § 1026.41(e)(3). 

Proposed § 1026.41(f)(5) permits the 

servicer to put the disclosures required 

under proposed § 1026.41(f)(2) and 

(3)(vii) anywhere in the coupon book or 

provide them on a separate page 

enclosed with the coupon book 

provided to the consumer. The servicer 

also must make available upon request 


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to the consumer by telephone, in 

writing, in person, or electronically, if 

the consumer consents, the pre-petition 

arrearage information listed in proposed 

§ 1026.41(f)(3)(vi), as applicable. Lastly, 

proposed § 1026.41(f)(5) provides that 

the modifications set forth in proposed 

§ 1026.41(f)(1) and (3)(i) through (v) and 

(vii) apply to coupon books and other 

information a servicer provides to the 

consumer under § 1026.41(e)(3). 

The Bureau believes that proposed 

§ 1026.41(f)(5) will not impose 

significant burdens on servicers that use 

coupon books. The statements set forth 

in proposed § 1026.41(f)(1) and (3)(vii) 

are the only new, bankruptcy-specific 

disclosures that a servicer must include 

in a coupon book. These are 

standardized statements—servicers will 

not need to craft language for individual 

borrowers. Additionally, the Bureau is 

proposing to allow servicers to include 

these statements anywhere in the 

coupon book or on a separate page 

enclosed with the coupon book. The 

remainder of the modifications set forth 

in proposed § 1026.41(f)(1) and (3)(i) 

through (v) and (vii) do not require a 

servicer to modify any of the disclosures 

in the coupon book or provide new 

information to a consumer. Rather, these 

modifications provide that certain 

disclosures (such as a description of late 

payment fees) are not required when a 

consumer is in bankruptcy and clarify 

the requirements for certain other 

disclosures (such as amount due) in a 

manner that is consistent with the 

information already provided in a 

coupon book. Thus, while a servicer has 

the option to modify its coupon books 

to omit certain disclosures that are not 

required when a consumer is in 

bankruptcy, the proposal does not 

require servicers to redesign their 

coupon books specifically for 

consumers in bankruptcy, and servicers 

can determine the most cost-efficient 

method of providing the required 

information. Moreover, proposed 

§ 1026.41(f)(5) permits a servicer to 

provide modified coupon books 

according to its normal schedule. For 

example, if a servicer provided a 12- 

month coupon book to a consumer in 

January and the consumer filed for 

bankruptcy in March, the servicer 

would not need to issue a new, 

modified coupon book accompanied by 

the proposed § 1026.41(f)(1) and (3)(vii) 

disclosures until the following January. 

Providers of coupon books will also, 

at the consumer’s request, have to 

provide the pre-petition arrearage 

information set forth in proposed 

§ 1026.41(f)(3)(vi). The Bureau 

understands, however, that servicers 

already maintain internal records 

regarding pre-petition payments and the 

balance of the pre-petition arrearage; 

therefore, the Bureau does not believe 

that the cost of providing this 

information upon a consumer’s request 

will impose significant new burdens. 

The Bureau solicits comment on 

applying the modifications set forth in 

proposed § 1026.41(f)(1) and (3)(i) 

through (v) and (vii) when a servicer 

provides coupon books under 

§ 1026.41(e)(3). In particular, the Bureau 

solicits comment on whether there may 

be alternative means to providing 

consumers with substantially the same 

information regarding the mortgage loan 

account while they are in bankruptcy. 

Additionally, the Bureau solicits 

comment on whether servicers should 

be required to issue a new coupon book 

or other disclosures immediately upon a 

consumer’s bankruptcy filing. Finally, 

the Bureau solicits comment on 

servicers’ current practices with respect 

to providing coupon books to 

consumers in bankruptcy. 

Sample Forms 

Proposed sample forms for periodic 

statements are provided in proposed 

appendices H–30(E) and (F). Section 

1026.41(c) specifies that sample forms 

for periodic statements are provided in 

appendix H–30 and that proper use of 

these forms complies with the form and 

layout requirements of § 1026.41(c) and 

(d). The Bureau believes that sample 

forms are appropriate to provide 

servicers with guidance for complying 

with the requirements of § 1026.41(c) 

and (d) as modified by proposed 

§ 1026.41(f). The Bureau therefore 

exercises its authority under, among 

other things, section 128(f) of TILA to 

propose sample forms for § 1026.41(c) 

and 1026.41(d), as modified by 

§ 1026.41(f). Proposed appendix H– 

30(E) provides a sample form for 

complying with the requirements of 

§ 1026.41(f) with respect to a consumer 

in a Chapter 7 or Chapter 11 bankruptcy 

case or a consumer who has discharged 

personal liability for a mortgage loan. 

This form includes the delinquency 

information required by § 1026.41(d)(8) 

as an example; a servicer is not required 

to include this information if it is not 

applicable to a consumer. Proposed 

appendix H–30(F) provides a sample 

form for complying with the 

requirements of proposed § 1026.41(f) 

with respect to a consumer in a Chapter 

12 or Chapter 13 bankruptcy case. The 

Bureau notes that these are not required 

forms and that any arrangements of the 

information that meet the requirements 

of § 1026.41 would be considered in 

compliance with the section. 

The Bureau intends to conduct 

consumer testing on the sample forms in 

proposed appendices H–30(E) and H– 

30(F) following publication of this 

proposed rule. Prior to finalizing any 

such sample forms, the Bureau will 

publish and seek comment on a report 

summarizing the methods and results of 

the consumer testing. 

Legal Authority 

The Bureau is proposing 

§ 1026.41(f)—which contains content 

and layout requirements for periodic 

statements in bankruptcy—to 

implement section 128(f) of TILA as 

well as section 105(a) of TILA and 

section 1032(a) of the Dodd-Frank Act. 

Section 128(f)(1)(e) of TILA requires the 

periodic statement to include a 

description of any late payment fees. 

For the reasons discussed above, the 

Bureau is proposing to use its authority 

under section 105(a) and (f) of TILA to 

exempt servicers from having to include 

this information in periodic statements 

provided to consumers who are in 

bankruptcy or have discharged personal 

liability for a mortgage loan. This 

proposed exemption is additionally 

authorized under section 1405(b) of the 

Dodd-Frank Act. 

Appendix H—Closed-End Model Forms 

and Clauses 

Appendix H—4(C) to Part 1026 

The 2013 TILA Servicing Final Rule 

revised the commentary to § 1026.19(b) 

to reflect the revised § 1026.20(c) and 

revised § 1026.20(d) ARM notices. This 

proposal modifies the Variable-Rate 

Model Clauses in appendix H—4(C) to 

reflect the language in the revised 

commentary. No change to the table of 

contents of appendix H is necessary. 

Appendix H—14 to Part 1026 

The 2013 TILA Servicing Final Rule 

changed the commentary to § 1026.19(b) 

to reflect the revised § 1026.20(c) and 

revised § 1026.20(d) ARM notices. This 

proposal modifies the Variable-Rate 

Mortgage Sample form in appendix H— 

14 to reflect the language in the revised 

commentary. No change to the table of 

contents of appendix H is necessary. 

Appendix H—30(C) to Part 1026 

This proposal makes a minor 

technical revision to the entry for H— 

30(C) in the table of contents at the 

beginning of this appendix and 

republishes sample form H—30(C). The 

technical change amends ‘‘Sample Form 

of Periodic Statement for a PaymentOptions Loan (§ 1026.41)’’ to ‘‘Sample 

Form of Periodic Statement for a 

Payment-Option Loan (§ 1026.41).’’ 


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295Specifically, section 1022(b)(2)(A) of the 

Dodd-Frank Act requires the Bureau to consider the 

potential benefits and costs of the regulation to 

consumers and covered persons, including the 

potential reduction of access by consumers to 

consumer financial products and services; the 

impact of proposed rule on insured depository 

institutions and insured credit unions with less 

than $10 billion in total assets as described in 

section 1026 of the Dodd-Frank Act; and the impact 

on consumers in rural areas. 

Appendices H—30(E) and H—30(F) to 

Part 1026 

This proposal provides proposed 

sample forms for periodic statements for 

certain consumers in bankruptcy in 

proposed appendices H—30(E) and H— 

30(F) and makes corresponding 

additions to the table of contents for 

appendix H. Section 1026.41(c) 

specifies that sample forms for periodic 

statements are provided in appendix 

H—30 and that proper use of these 

forms complies with the form and 

layout requirements of § 1026.41(c) and 

(d). The Bureau believes that sample 

forms may be appropriate to provide 

servicers with guidance for complying 

with the requirements of § 1026.41(c) 

and (d) as modified by proposed 

§ 1026.41(f). The Bureau therefore 

exercises its authority under, among 

other things, section 128(f) of TILA to 

provide sample forms for § 1026.41(c) 

and (d), as modified by § 1026.41(f). 

Appendix H—30(E) provides a sample 

form for complying with the 

requirements of § 1026.41(f) with 

respect to a consumer in a Chapter 7 or 

Chapter 11 bankruptcy case or a 

consumer who has discharged personal 

liability for a mortgage loan. Appendix 

H—30(F) provides a sample form for 

complying with the requirements of 

§ 1026.41(f) with respect to a consumer 

in a Chapter 12 or Chapter 13 

bankruptcy case. They would not be 

required forms, however, and any 

arrangements of the information that 

meet the requirements of § 1026.41 

would be considered in compliance 

with the section. 

The Bureau intends to conduct 

consumer testing on the sample forms in 

proposed appendices H—30(E) and H— 

30(F) following publication of this 

proposed rule. Prior to finalizing any 

such sample forms, the Bureau will 

publish and seek comment on a report 

summarizing the methods and results of 

the consumer testing. 

VI. Dodd-Frank Act Section 1022(b) 

A. Overview 

In developing the proposed rule, the 

Bureau has considered the proposed 

rule’s potential benefits, costs, and 

impacts.295 The Bureau requests 

comment on the preliminary analysis 

presented below as well as submissions 

of additional data that could inform the 

Bureau’s analysis of the benefits, costs, 

and impacts. In developing the 

proposed rule, the Bureau has 

consulted, or offered to consult with, 

the prudential regulators, the Securities 

and Exchange Commission, HUD, the 

Federal Housing Finance Agency, the 

Federal Trade Commission, and the 

Department of the Treasury, including 

regarding consistency with any 

prudential, market, or systemic 

objectives administered by such 

agencies. 

The Bureau is now proposing several 

additional amendments to the Mortgage 

Servicing Rules to revise regulatory 

provisions and official interpretations 

relating to the Regulation X and Z 

mortgage servicing rules. The proposals 

cover nine major topics, summarized 

below generally in the order they appear 

in the proposed rule. More details can 

be found in the proposed rule. 

1. Successors in interest. The Bureau 

is proposing three sets of rule changes 

relating to successors in interest. First, 

the Bureau is proposing to apply all of 

the Mortgage Servicing Rules to 

successors in interest once a servicer 

confirms the successor in interest’s 

identity and ownership interest in the 

property. Second, the Bureau is 

proposing rules relating to how a 

mortgage servicer confirms a successor 

in interest’s status. Third, the Bureau is 

proposing that, to the extent that the 

Mortgage Servicing Rules apply to 

successors in interest, the rules apply 

with respect to all successors in interest 

who acquire an ownership interest in a 

transfer protected from acceleration, and 

therefore foreclosure, under Federal 

law. 

2. Definition of delinquency. The 

Bureau is proposing to add a general 

definition of delinquency that would 

apply to all of the servicing provisions 

of Regulation X and the provisions 

regarding periodic statements for 

mortgage loans in Regulation Z. Under 

the proposed definition, a borrower and 

a borrower’s mortgage loan obligation 

are delinquent beginning on the date a 

payment sufficient to cover principal, 

interest, and, if applicable, escrow, 

becomes due and unpaid. 

3. Requests for information. The 

Bureau is proposing amendments that 

would change how a servicer must 

respond to requests for information 

asking for ownership information for 

loans in trust for which Fannie Mae or 

Freddie Mac is the trustee, investor, or 

guarantor. 

4. Force-placed insurance. The 

Bureau is proposing to amend the 

required disclosures to account for 

when a servicer wishes to force-place 

insurance when the borrower has 

insufficient, rather than expiring or 

expired, hazard insurance coverage on 

the property. Additionally, the Bureau 

is proposing to give servicers the option 

to include a borrower’s mortgage loan 

account number on the notices required 

under § 1024.37. The Bureau is also 

proposing several technical edits to 

correct discrepancies between the 

model forms and the text of § 1024.37. 

5. Early intervention. The Bureau is 

proposing to clarify generally the early 

intervention live contact obligations and 

written early intervention notice 

obligations. The Bureau is also 

proposing to require servicers to provide 

written early intervention notices to 

certain borrowers who are in 

bankruptcy or who have invoked their 

cease communication rights under the 

FDCPA. 

6. Loss mitigation. The Bureau is 

proposing to: (1) Require servicers to 

meet the loss mitigation requirements 

more than once in the life of a loan for 

borrowers who become current after a 

delinquency; (2) Modify the existing 

exception to the 120-day prohibition on 

foreclosure filing to allow a servicer to 

join the foreclosure action of a senior 

lienholder; (3) Clarify that servicers 

have significant flexibility in setting a 

reasonable date by which a borrower 

must return documents and information 

to complete an application, so long as 

the date maximizes borrower 

protections and allows borrowers a 

reasonable period of time to return 

documents and information; (4) Clarify 

that servicers must take affirmative 

steps to delay a foreclosure sale, even 

where the sale is conducted by a third 

party; clarify the servicer’s duty to 

instruct foreclosure counsel to take 

steps to comply with the dual-tracking 

prohibitions; and indicate that a servicer 

who has not taken, or caused counsel to 

take, all reasonable affirmative steps to 

delay the sale, is required to dismiss the 

foreclosure action if necessary to avoid 

the sale; (5) Require that servicers 

promptly provide a written notice once 

they receive a complete loss mitigation 

application; require that the notice 

indicate that the servicer has received a 

complete application but clarify that the 

servicer might later request additional 

information if needed; require that the 

notice provide the date of completion 

and a disclosure indicating whether a 

foreclosure sale was scheduled as of that 

date, the date foreclosure protections 

began, a statement informing the 

borrower of applicable appeal rights, 

and a statement that the servicer will 

complete its evaluation within 30 days 

from the date of the complete 


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application; (6) Address and clarify how 

servicers obtain information not in the 

borrower’s control and evaluate a loss 

mitigation application while waiting for 

such third party information; prohibit 

servicers from denying borrowers based 

upon delay in receiving such third party 

information; require that servicers 

promptly provide a written notice to the 

borrower if the servicer lacks third party 

information 30 days after receiving the 

borrower’s complete application; and 

require servicers to notify borrowers of 

their determination in writing promptly 

upon receipt of the third party 

information; (7) Permit servicers to offer 

a short-term repayment plan based upon 

an evaluation of an incomplete 

application; (8) Clarify that servicers 

may stop collecting documents and 

information from a borrower pertaining 

to a loss mitigation option after 

receiving information confirming that 

the borrower is ineligible for that 

option; and (9) Address and clarify how 

loss mitigation procedures and 

timelines apply to a transferee servicer 

that receives a mortgage loan for which 

there is a loss mitigation application 

pending at the time of a servicing 

transfer. 

7. Prompt payment crediting. The 

Bureau is proposing to clarify how 

servicers must treat periodic payments 

made by consumers who are performing 

under either temporary loss mitigation 

programs or permanent loan 

modifications. Under the Bureau’s 

proposal, periodic payments made 

pursuant to temporary loss mitigation 

programs would continue to be credited 

according to the loan contract and 

could, if appropriate, be credited as 

partial payments, while periodic 

payments made pursuant to a 

permanent loan modification would be 

credited under the terms of the 

permanent loan agreement. 

8. Periodic statements. The Bureau is 

proposing to: (1) Clarify certain periodic 

statement disclosure requirements 

relating to mortgage loans that have 

been accelerated, are in temporary loss 

mitigation programs, or have been 

permanently modified, to conform 

generally the disclosure of the amount 

due with the Bureau’s understanding of 

the legal obligation in each of those 

circumstances; (2) Require servicers to 

send modified periodic statements to 

consumers who have filed for 

bankruptcy, subject to certain 

exceptions, with content varying 

depending on whether the consumer is 

a debtor in a Chapter 7 or Chapter 13 

bankruptcy case; and to conduct 

consumer testing on proposed sample 

periodic statement forms that servicers 

could use for consumers in bankruptcy 

to ensure compliance with § 1026.41; 

and (3) Exempt servicers from the 

periodic statement requirement for 

charged-off mortgage loans if the 

servicer will not charge any additional 

fees or interest on the account and 

provides a final periodic statement. 

9. Small servicer. The proposal would 

make certain changes to the small 

servicer definition. The small servicer 

definition generally applies to servicers 

who service 5,000 or fewer mortgage 

loans for all of which the servicer is the 

creditor or assignee. The proposal 

would exclude certain seller-financed 

transactions from being counted toward 

the 5,000 loan limit, allowing servicers 

that would otherwise qualify for small 

servicer status to retain their exemption 

while servicing those transactions. 

The proposed rule also makes 

technical corrections to several 

provisions of Regulations X and Z. 

B. Provisions to Be Analyzed 

The analysis below considers the 

potential benefits, costs, and impacts to 

consumers and covered persons of key 

provisions of the proposed rule 

(proposed provisions), which include: 

1. Requirements related to successors 

in interest. 

2. A new definition of ‘‘delinquency’’ 

for purposes of Regulation X’s mortgage 

servicing rules. 

3. Early intervention written notice 

requirements for certain consumers. 

4. Changes to loss mitigation 

procedures, including: 

• Requiring a notice of complete 

application for loss mitigation 

applications; 

• Requirements applicable when 

determination of what loss mitigation 

options to offer a borrower is delayed 

because information outside the 

borrower’s control is missing; 

• Clarifications to the Mortgage 

Servicing Rules’ dual-tracking 

protections; 

• Requiring review of multiple loss 

mitigation applications from the same 

borrower in some circumstances; 

• Clarification of how loss mitigation 

timelines apply in the case of servicing 

transfers; and 

• Permitting evaluation for short-term 

repayment plans based on incomplete 

applications. 

5. Periodic statement requirements 

applicable to consumers in bankruptcy. 

6. An exemption from the servicing 

rule’s periodic statement requirement 

for loans that have been charged off. 

7. Revisions to the small servicer 

definition. 

In addition to the proposed changes 

listed above, the Bureau is proposing to 

modify or clarify other provisions of the 

Mortgage Servicing Rules. These other 

changes include: proposed commentary 

relaxing certain information provision 

requirements under § 1024.36(a) when a 

borrower requests information about the 

owner of a GSE loan; a proposed 

amendment to the force-placed 

insurance notice described in 

§ 1024.37(c) through (e) to require the 

notice to state that coverage is 

insufficient (rather than expiring), when 

applicable, and to allow inclusion of the 

account number on the notice; a 

proposed policies and procedures 

requirement under § 1024.38(b)(2)(vi) 

regarding identifying and obtaining 

documents not in the borrower’s control 

that a servicer requires to determine 

what loss mitigation options, if any, to 

offer a borrower; proposed commentary 

regarding a servicer’s flexibility in 

collecting documents and information 

to complete a loss mitigation 

application under § 1024.41(b)(1); 

proposed commentary relevant to the 

reasonable date for return of documents 

under § 1024.41(b)(2)(ii); proposed 

amendments to § 1024.41(c)(2)(iv) 

clarifying when a loss mitigation 

application is considered facially 

complete; a proposed exception to 

§ 1024.41(f)(1)’s 120-day pause for 

circumstances in which a subordinate 

lienholder joins the foreclosure action of 

a senior lienholder; proposed 

commentary clarifying the effect of 

§ 1026.36(c)’s and § 1026.41(d)’s prompt 

crediting and periodic statement 

requirements with regard to loan 

modifications; proposed commentary to 

clarify the information that must be 

included in a periodic statement 

pursuant to § 1026.41(d) following a 

period when the servicer was exempt 

from sending periodic statements; a 

proposal to remove the phrase ‘‘creditor 

or assignee’’ from the description of 

voluntarily serviced loans that may be 

excluded in applying the small servicer 

exemption under § 1026.41(e)(4), and 

certain other minor changes. The 

Bureau believes these proposed 

modifications and clarifications would 

generally benefit consumers and/or 

covered persons and impose minimal 

new costs on consumers or covered 

persons. 

C. Data Limitations and Quantification 

of Benefits, Costs and Impacts 

The discussion in this part relies on 

data that the Bureau has obtained from 

industry, other regulatory agencies, and 

publicly available sources. The Bureau 

has done extensive outreach on many of 

the issues addressed by the proposed 

rule, including discussions with several 

servicers of different sizes, consultations 

with other stakeholders, and convening 


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296Section 1026.41(e)(4)(ii) defines the term 

‘‘small servicer’’ as a servicer that either: (1) 

Services, together with any affiliates, 5,000 or fewer 

mortgage loans, for all of which the servicer (or an 

affiliate) is the creditor or assignee; or (2) is a 

Housing Finance Agency, as defined in 24 CFR 

266.5. 

297One large servicer indicated that in recent 

years the number of successors in interest applying 

to assume a mortgage loan each year represented 

less than 0.03 percent of the total loans it services. 

However, this number does not include successors 

in interest that did not apply to assume the loan but 

nonetheless might have benefitted from the 

proposed rule (for example, because they would 

have been able to obtain more information about the 

loan before deciding whether to apply to assume 

the loan). Data from the American Housing Survey 

indicate that in 2011, 239,000 homeowners 

(approximately 0.5 percent of those with a 

mortgage) had assumed the mortgage loan on their 

home; however, these data do not indicate whether 

the homeowner was a successor in interest as 

defined in the proposed rule at the time the loan 

was assumed. HUD Office of Policy Dev. and 

Continued 

a roundtable on the application of the 

Mortgage Servicing Rules in the case of 

bankrupt borrowers. However, as 

discussed further below, the data are 

generally limited with which to quantify 

the potential costs, benefits, and 

impacts of the proposed rule. 

Quantifying the benefits of the rule for 

consumers presents particular 

challenges. As discussed further below, 

certain proposed provisions may 

directly save consumers time and 

money while others may benefit 

consumers by, for example, facilitating 

household budgeting, supporting the 

consumer’s ability to obtain credit, and 

reducing default and avoidable 

foreclosure. Many of these benefits are 

qualitative in nature, while others are 

quantifiable but would require a wide 

range of data that is not currently 

available to the Bureau. The Bureau 

continues to seek data from available 

sources regarding the benefits to 

consumers of the proposed rule. 

In addition, the Bureau believes, 

based on industry outreach, that many 

servicers already follow procedures that 

comply with at least some provisions of 

the proposed rule. However, the Bureau 

does not have representative data on the 

extent to which servicer operations 

currently comply with the proposed 

rule, which means the Bureau is unable 

to quantify the benefits to consumers or 

the costs to servicers of the proposed 

rule. The Bureau continues to seek data 

from available sources regarding the 

extent to which servicer operations 

currently comply with the proposed 

rule. Even with this data, the Bureau 

would need information on the cost of 

changing current servicer practices in 

order to quantify the cost of closing any 

gaps between current practices and 

those mandated by the proposed rule. 

The Bureau continues to seek data from 

available sources regarding the costs of 

improving servicer operations, as 

specified by the proposed rule, in order 

to quantify the costs to covered persons 

of the proposed rule. 

In light of these data limitations, the 

analysis below generally provides a 

qualitative discussion of the benefits, 

costs, and impacts of the proposed rule. 

General economic principles, together 

with the limited data that are available, 

provide insight into these benefits, 

costs, and impacts. The Bureau requests 

additional data or studies that could 

help quantify the benefits and costs to 

consumers and covered persons of the 

proposed rule. 

D. Small Servicer Exemption 

Small servicers—generally, those that 

service 5,000 or fewer mortgage loans, 

all of which the servicer or affiliates 

own or originated—are exempt from 

many of the provisions of the Mortgage 

Servicing Rules, including most of the 

provisions affected by the proposed 

rule.296 Therefore, most of the 

discussion of potential benefits and 

costs below generally does not apply to 

small servicers or to consumers whose 

mortgage loans are serviced by small 

servicers. The two exceptions among the 

provisions discussed in this part are (1) 

the proposed provisions related to 

successors in interest, which would 

extend the protections of the Mortgage 

Servicing Rules, including certain 

provisions from which small servicers 

are not exempt, to successors in interest 

and (2) the proposed definition of 

delinquency in § 1024.31, which may 

affect the scope of the 2013 RESPA 

Servicing Final Rule’s prohibition on 

initiating foreclosure proceedings unless 

a borrower’s mortgage loan obligation is 

more than 120 days delinquent. 

E. Potential Benefits and Costs to 

Consumers and Covered Persons 

The Bureau believes that, compared to 

the baseline established by the Mortgage 

Servicing Final Rules, an important 

benefit of many of the proposed 

provisions to both consumers and 

covered persons is an increase in clarity 

and precision of the servicing rules and 

an accompanying reduction in 

compliance costs. Other benefits and 

costs are considered below. 

1. Successors in Interest 

The Bureau is proposing new 

requirements on mortgage servicers with 

respect to successors in interest. For 

purposes of the proposed provisions, 

successors in interest include 

individuals who receive an ownership 

interest in a property securing a 

mortgage loan in a transfer protected by 

the Garn-St Germain Act, including 

individuals who acquired an ownership 

interest in the property securing a 

mortgage loan in transfers resulting from 

the death of the borrower or through 

transfers to the borrower’s spouse or 

children, transfers incident to divorce, 

and certain other transfers. As described 

in more detail below, the proposed 

provisions would relate to how 

mortgage servicers confirm a successor 

in interest’s identity and ownership 

interest in the property, and would 

apply the Mortgage Servicing Rules to 

successors in interest whose identity 

and ownership interest in the property 

have been confirmed by the servicer. 

Proposed § 1024.36(i) requires a 

servicer to respond to a written request 

that indicates that the person making 

the request may be a successor in 

interest by providing that person with 

information regarding the documents 

the servicer requires to confirm the 

person’s identity and ownership interest 

in the property. Proposed 

§ 1024.38(b)(1)(vi) requires servicers to 

maintain certain policies and 

procedures with respect to successors in 

interest, which are generally intended to 

facilitate the process of confirming a 

person’s status as a successor in interest 

and communicating with the person 

about the status. 

Proposed § 1024.30(d) provides that a 

successor in interest shall be considered 

a borrower for the purposes of 

Regulation X’s mortgage servicing rules 

once a servicer confirms the successor 

in interest’s identity and ownership 

interest in the property. Similarly, 

proposed § 1026.2(a)(11) provides that a 

confirmed successor in interest is a 

consumer with respect to Regulation Z’s 

mortgage servicing rules. Under the 

proposed rule, the Mortgage Servicing 

Rules apply with respect to a confirmed 

successor in interest regardless of 

whether that person has assumed the 

mortgage loan obligation (i.e., legal 

liability for the mortgage debt) under 

State law. 

Potential benefits and costs to 

consumers. As described in more detail 

below, the proposal would benefit 

successors in interest by permitting 

them to protect and manage their 

interest in the property, and to make key 

decisions about that interest, without 

unnecessary delays and associated 

costs. 

The Bureau understands, based on 

discussions with certain large servicers, 

that only a small number of properties 

for which they service mortgage loans 

are transferred to successors in interest 

in any given year.297 The Bureau does 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
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Research and U.S. Census Bureau, American 

Housing Survey for the United States: 2011, at 79 

(Sept. 2013), available at http://www.census.gov/

content/dam/Census/programs-surveys/ahs/data/

2011/h150–11.pdf. 

298See 78 FR 10695, 10842–61 (Feb. 14, 2013); 78 

FR 10901, 10978–94 (Feb. 14, 2013). 

not have representative data on current 

servicer policies toward such successors 

in interest. Because the Garn-St Germain 

Act prevents foreclosure solely on the 

basis that a home was transferred to a 

successor in interest, the Bureau expects 

that servicers currently are servicing 

loans for successors in interest, even 

before such successors in interest 

assume the mortgage loan. The Bureau 

does not have representative 

information on the standards servicers 

use in servicing loans for successors in 

interest; however, as discussed below, 

the Bureau believes, based on 

information it has received from 

consumers and other stakeholders, that 

in many cases successors in interest 

would benefit from additional 

protections. 

The proposed revisions to the 

‘‘policies and procedures’’ requirements 

in § 1024.38(b)(1)(vi), together with the 

requirement in proposed § 1024.36(i) 

that servicers respond to written 

requests regarding what documents the 

servicer requires to confirm the person’s 

identity as a successor in interest, 

would benefit consumers that succeed 

to ownership of a home that is subject 

to a mortgage by reducing the time and 

effort required to establish their status 

in the eyes of the servicer. The Bureau 

believes, based on information it has 

received from consumers, consumer 

advocacy groups, and other 

stakeholders, that successors in interest 

often have difficulty demonstrating their 

identity and ownership interest in the 

property to servicers’ satisfaction, and 

that some servicers currently require 

successors in interest to submit 

documents that are unreasonable in 

light of the particular situation of that 

successor in interest or in light of the 

laws of the relevant jurisdiction. The 

Bureau has also heard repeated reports 

that some servicers have taken a long 

time to confirm the successor in 

interest’s status, even after receipt of 

appropriate documentation. The Bureau 

has also heard reports that servicers may 

fail to communicate to the successor in 

interest whether the servicer has 

confirmed the successor in interest’s 

status. Unnecessary delays and other 

difficulties can harm successors in 

interest because successors in interest 

that have not been confirmed by the 

servicer may not be able to obtain 

information about the mortgage, and in 

some instances servicers may be 

unwilling to accept payment from the 

unconfirmed successor in interest. 

These problems may lead the successor 

in interest to incur unnecessary costs 

related to the mortgage or deprive the 

person of rights to which he or she 

would otherwise be entitled, and may 

even lead to unnecessary foreclosure on 

the property. 

The Bureau’s proposal extends the 

protections of the Mortgage Servicing 

Rules to confirmed successors in 

interest, even prior to such time as they 

may assume the obligations of the 

mortgage loan under State law. The 

benefits of the Mortgage Servicing Rules 

to consumers generally are discussed in 

the 2013 RESPA Servicing Final Rule 

and the 2013 TILA Servicing Final Rule, 

in which the Bureau noted that the need 

for the Mortgage Servicing Rules arises 

in part from the fact that, because 

borrowers generally do not choose their 

servicers, it is difficult for consumers to 

protect themselves from shoddy service 

or harmful practices.298 This reasoning 

is particularly applicable to successors 

in interest because they may not be 

parties to the mortgage loan. In addition, 

successors in interest may find that they 

have a particular need for access to 

information about the mortgage loan 

secured by the property that they now 

own, which may help them avoid 

unwarranted or unnecessary costs and 

fees on the mortgage loan and prevent 

unnecessary foreclosure. 

Furthermore, successors in interest 

may benefit in particular from 

Regulation X’s rules relating to loss 

mitigation procedures, particularly 

when deciding whether to assume the 

obligations of the mortgage loan. 

Successors in interest may often 

experience a disruption in household 

income due to death or divorce and 

therefore may be more likely than other 

homeowners to need loss mitigation to 

avoid foreclosure. If the servicer does 

not evaluate the successor in interest 

promptly for loss mitigation options, or 

if the servicer requires the successor in 

interest to assume the mortgage 

obligation before evaluating the 

successor in interest for loss mitigation 

options, the successor in interest will be 

required to decide whether to assume 

the mortgage obligation without 

knowing whether a loan modification 

will be available and, if so, what terms 

will be offered. The proposal would 

allow the successor in interest to make 

a fully informed decision about whether 

to accept the mortgage obligation. 

Potential benefits and costs to covered 

persons. The costs of complying with 

the proposed provisions related to 

successors in interest depend on 

servicers’ current policies and 

procedures. Because the Garn-St 

Germain Act protects successors in 

interest from foreclosure after transfer of 

homeownership to them, servicers are 

effectively required to continue 

servicing loans following their transfer 

to successors in interest. Thus, the 

Bureau believes that servicers likely 

already have some policies and 

procedures in place for confirming a 

successor in interest’s identity and 

ownership interest in the property (and 

thereby determining whether the GarnSt Germain Act is applicable) and for 

servicing a loan secured by property 

that has been transferred to a successor 

in interest. The proposed provisions 

establish certain standards for the 

performance of these activities. To the 

extent to which some servicers are 

meeting these standards already, the 

costs for these servicers may be 

minimal. However, many servicers may 

need to significantly alter certain of 

their policies and procedures to comply 

with the proposed provisions. 

The proposed revisions to 

§ 1024.38(b)(1)(vi) and proposed 

§ 1024.36(i) may require servicers to 

develop and implement new policies 

and procedures for confirming a 

successor’s interest in a property and 

communicating with potential 

successors in interest about documents 

the servicer requires to confirm the 

person’s status. Under current 

§ 1024.38(b)(1)(vi), servicers must 

maintain policies and procedures 

designed to identify and facilitate 

communication promptly with the 

successor in interest of a deceased 

borrower. As discussed above, the 

Bureau believes that, because the GarnSt Germain Act protects successors in 

interest from foreclosure, servicers 

likely already have some policies and 

procedures in place for confirming the 

identity and ownership interest in the 

property of a successor in interest 

following transfers covered by the 

proposed rule. However, the Bureau 

does not have data on the extent to 

which servicers’ current policies and 

procedures may comply with the 

proposed provisions or the extent of the 

changes that would be required to bring 

policies and procedures into 

compliance with the proposed 

provisions. The Bureau requests 

additional information about servicers’ 

current policies and procedures for 

confirming a successor in interest’s 

status and the incremental cost to 

servicers of complying with the 

proposed requirements. 

Proposed §§ 1024.30(d) and 

1026.2(a)(11), which extend the 


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299See Am. Bankers Ass’n. Letter to Consumer 

Fin. Prot. Bureau (Oct. 24, 2014), available at http:// 

www.aba.com/Advocacy/commentletters/

Documents/

ABALetterRollingDelinquencies102414.pdf. 

300One study found that among homeowners that 

file for bankruptcy, more than 60 percent of 

Continued 

protections of the Regulation X and Z 

mortgage servicing rules to confirmed 

successors in interest, would not require 

servicers to develop new policies and 

procedures, but rather to continue to 

apply existing policies and procedures 

to a set of loans that were subject to the 

Mortgage Servicing Rules prior to being 

transferred to the successor in interest. 

As discussed above, the Bureau expects 

that such loans make up a small fraction 

of the total loans serviced by any 

particular servicer. For these reasons, 

the Bureau expects that the cost to 

servicers of complying with the 

Mortgage Servicing Rules with respect 

to confirmed successors in interest will 

be small. 

The Bureau acknowledges that, due to 

the unique circumstances of a successor 

in interest who has recently obtained an 

interest in the property, there may be 

additional costs associated with 

complying with the Mortgage Servicing 

Rules with respect to successors in 

interest. For example, successors in 

interest may have experienced a 

disruption in household income due to 

death or divorce and therefore may be 

more likely to seek loss mitigation to 

avoid foreclosure, thereby possibly 

delaying the foreclosure process. 

Successors in interest may also be more 

likely to seek information regarding the 

loan that is secured by the property in 

which they now hold an interest. 

Nonetheless, because the Bureau 

believes that the number of successors 

in interest serviced at any given time is 

small and that many servicers are 

already performing servicing tasks with 

respect to successors in interest, the 

Bureau expects that servicers would not 

incur significant additional costs as a 

result of the proposed provisions. The 

Bureau requests additional information 

about the benefits to successors in 

interest of the proposed requirements 

and the incremental cost to servicers of 

applying the Mortgage Servicing Rules 

to these loans. 

2. Definition of ‘‘Delinquency’’ 

The Bureau is proposing to add a 

general definition of delinquency in 

§ 1024.31 that would apply to all 

sections of subpart C of Regulation X, 

replacing the existing definition of 

delinquency for purposes of §§ 1024.39 

and 1024.40(a). Under the proposal, 

delinquency is defined as a period of 

time during which a borrower and the 

borrower’s mortgage loan obligation are 

delinquent, and a borrower and a 

borrower’s mortgage loan obligation are 

delinquent beginning on the day a 

periodic payment sufficient to cover 

principal, interest, and, if applicable, 

escrow, became due and unpaid, until 

such time as the payment is made. 

Proposed comment 31 (Delinquency)-2 

clarifies that, if a servicer applies 

payments to the oldest outstanding 

periodic payment, the date of the 

borrower’s delinquency must advance 

accordingly. The Bureau understands 

from its outreach that the majority of 

servicers credit payments made to a 

delinquent account to the oldest 

outstanding periodic payment. The 

Bureau also understands that some 

servicers that use this method may be 

concerned about how to calculate the 

length of a borrower’s delinquency 

without increased certainty from the 

Bureau.299

The Bureau believes that the proposed 

provision will clarify the application of 

the servicing rules without imposing 

significant new burdens on servicers. 

The Bureau recognizes that, in 

principle, the proposed provision could 

affect the circumstances under which a 

servicer may initiate foreclosure 

proceedings, because the definition of 

‘‘delinquency’’ affects the application of 

§ 1024.41(f)(1)’s prohibition on 

initiating foreclosure proceedings unless 

‘‘a borrower’s mortgage loan obligation 

is more than 120 days delinquent.’’ In 

particular, the proposed commentary 

clarifies that a servicer that otherwise 

applies payments to the oldest 

outstanding periodic payment may not 

initiate foreclosure proceedings unless 

the borrower has missed the equivalent 

of four monthly payments. Absent this 

clarification, § 1024.41(f)(1) could be 

interpreted to permit the servicer to 

commence foreclosure even if the 

borrower has missed only one payment, 

so long as the payment was missed at 

least 120 days ago and the borrower has 

not become current since. However, 

information gathered in industry 

outreach indicates that servicers 

generally would not treat borrowers 

who are behind by three or fewer 

payments as seriously delinquent. More 

specifically, servicers contacted by the 

Bureau during outreach, when asked 

about policies for referring a loan for 

foreclosure, uniformly told the Bureau 

that they generally would not initiate 

foreclosure in cases where a borrower is 

making regular payments, even if such 

a borrower has a long-standing 

delinquency of up to three months’ 

payments. In addition, Fannie Mae and 

Freddie Mac guidelines generally 

prevent servicers from initiating 

foreclosure if a loan is delinquent by 

fewer than four monthly payments. 

Therefore, the Bureau expects that the 

proposed provision will not impose 

meaningful new constraints on 

servicers. 

3. Early Intervention Written Notices 

The Bureau is proposing to revise the 

scope of the exemptions from the ‘‘early 

intervention’’ requirements in 

§ 1024.39(d) for two groups of 

borrowers: those who are debtors in 

bankruptcy and those who have 

exercised their ‘‘cease communication’’ 

rights under the FDCPA. Servicers are 

currently exempt from each of 

§ 1024.39’s early intervention 

requirements with respect to these two 

groups of borrowers. Under the 

proposed provisions, servicers would 

generally remain exempt from the ‘‘live 

contact’’ requirement of § 1024.39(a) 

with respect to these borrowers. 

However, if loss mitigation options are 

available to borrowers who are debtors 

in bankruptcy or who have exercised 

cease communication rights under the 

FDCPA, the proposed provisions require 

that a servicer, with certain exceptions, 

provide them with the written early 

intervention notice that is generally 

required by § 1024.39(b). With respect to 

consumers that have exercised their 

cease communication rights under the 

FDCPA, the proposal provides that 

servicers must provide a modified 

written notice that may not contain a 

request for payment and prohibits a 

servicer from providing the modified 

written notice more than once during 

any 180-day period. 

Potential benefits and costs to 

consumers. As discussed in more detail 

below, the proposed provision may 

benefit borrowers who are in 

bankruptcy or who have exercised their 

cease communication rights under the 

FDCPA by providing them with 

information about loss mitigation 

options that could enable them to 

remain in their homes or avoid other 

costs associated with default on their 

mortgages. 

The Bureau recognizes that many 

borrowers affected by this provision will 

have already received early intervention 

communications prior to filing for 

bankruptcy or invoking FDCPA 

protections. Most homeowners that file 

for bankruptcy have become delinquent 

on their mortgage payments prior to 

filing for bankruptcy, in which case 

their servicers frequently will have been 

required to send early intervention 

communications prior to the filing.300


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homeowners with prime mortgages and more than 

75 percent of homeowners with subprime 

mortgages became delinquent on their mortgages 

prior to filing for bankruptcy. Wenli Li and 

Michelle White, Mortgage Default, Foreclosure, and 

Bankruptcy (Nat’l Bureau of Economic Research, 

Working Paper No. 15472, Nov. 2009), available at 

http://www.nber.org/papers/w15472. 

301Fed. Housing Fin. Agency, Foreclosure 

Prevention Report, at 6 (January 2014), available at 

http://www.fhfa.gov/AboutUs/Reports/

ReportDocuments/

ForeclosurePreventionReportJan2014FINAL.pdf. 

However, many borrowers filing for 

bankruptcy are not delinquent on their 

mortgages at the time of filing, and so 

under the current rule will not receive 

required communications about loss 

mitigation options if they become 

delinquent while in bankruptcy. Even 

borrowers who do receive an early 

intervention written notice prior to their 

bankruptcy filing may benefit from 

information about available loss 

mitigation options after filing for 

bankruptcy, given that the borrower’s 

servicer may have changed or new 

options may have otherwise become 

available since the borrower initially 

became delinquent. Information 

regarding loss mitigation may have 

unique value for borrowers in 

bankruptcy as they make decisions 

about how best to eliminate or 

reorganize their debts. 

Borrowers have FDCPA protections 

only with respect to debt collectors, and 

a servicer generally is considered a debt 

collector for purposes of the FDCPA 

only if the servicer acquires servicing 

rights to a mortgage loan after the 

mortgage loan is in default. Therefore, at 

the time borrowers first become 

delinquent on a mortgage loan they do 

not have rights under the FDCPA and 

their servicers are thus generally 

obligated to provide early intervention 

communications. When servicing of 

borrowers’ loans is subsequently 

transferred while the loans are in 

default, the borrowers have FDCPA 

protections with respect to the new 

servicer and may exercise cease 

communication rights. Because the 

initial early intervention 

communications came from a different 

servicer that may have offered different 

loss mitigation options, such borrowers 

may still benefit from information about 

loss mitigation options available from 

the new servicer. Because borrowers 

who have FDCPA protections will 

generally have a longer history of 

delinquency, they may be more likely to 

face difficulty making mortgage 

payments and therefore to benefit from 

information about loss mitigation 

options. 

The proposal also may impose costs 

on some borrowers in both groups who 

would prefer not to receive any servicer 

communications regarding their 

mortgage loan. Both the Bankruptcy 

Code’s automatic stay and the FDCPA’s 

cease communication right are intended 

to protect borrowers from being 

harassed by creditors while the 

borrowers are attempting to work 

through difficult financial 

circumstances. By requiring servicers to 

send early intervention written notices 

to such borrowers, the proposal may 

cause some borrowers to receive 

unwanted communications. However, 

the Bureau notes that the proposed 

provision limits the content and 

frequency of such communications so as 

to reduce any perceived harassment. 

Specifically, the written notice is 

required to be sent only once in any 180 

day period, and in the case of borrowers 

who have exercised cease 

communications rights under the 

FDCPA, the written notice may not 

contain a request for payment. 

Furthermore, the written notice is not 

required to be sent to consumers in 

bankruptcy if they indicate that they 

intend to surrender the property. 

Potential benefits and costs to covered 

persons. The proposal to require 

servicers to send notices to borrowers 

who are in bankruptcy or who have sent 

a cease communication request under 

the FDCPA will result in certain 

compliance costs for non-exempt 

servicers. These servicers will incur 

one-time costs from changing their 

systems to provide early intervention 

notices to these groups of borrowers and 

will incur ongoing costs from 

distributing these notices to an 

additional population. The Bureau 

believes that most if not all servicers are 

likely to service at least some mortgages 

for homeowners in bankruptcy. Fewer 

servicers are likely to service mortgage 

loans for borrowers who have FDCPA 

rights with respect to the mortgage loan, 

because these rights are triggered only if 

the servicer acquired the servicing rights 

at a time when the mortgage loan was 

delinquent. Servicers that do not have a 

practice of acquiring servicing rights 

from others would therefore never 

become subject to the FDCPA and are 

not affected by the proposed changes. 

The Bureau expects that the one-time 

costs of the proposed provision will be 

small with respect to borrowers in 

bankruptcy. Servicers currently are 

required to identify borrowers in 

bankruptcy, and under the proposal 

servicers may send the same written 

early intervention notice to borrowers in 

bankruptcy that they send to any other 

borrower. Therefore, the Bureau expects 

that servicers will need to make only 

minor changes to their procedures to 

begin sending early intervention written 

notices to borrowers in bankruptcy. For 

servicers that are subject to the FDCPA 

with respect to some borrowers, upfront costs may be somewhat greater, 

because the modified written notice for 

such borrowers includes additional 

disclosures that are not required for 

other borrowers. These servicers would 

need to develop a separate form of 

notice that complies with the proposed 

provision and change their systems to 

insure that this form is sent to borrowers 

who have exercised their cease 

communication rights. The Bureau 

notes that the proposal would mitigate 

these costs by providing a model clause 

for the specific disclosures required in 

the modified written notice. 

Servicers will also incur ongoing costs 

from the requirement to distribute 

notices to these additional groups of 

borrowers. However, the Bureau 

believes that the number of additional 

notices that would be required as a 

result of the proposal is relatively small. 

With respect to borrowers in 

bankruptcy, FHFA data indicate that for 

homeowners with GSE loans, between 

0.4 percent and 0.5 percent of borrowers 

were in bankruptcy during 2013.301

Based on information from industry and 

other Federal agencies, the Bureau 

believes that the percentage of 

homeowners with non-GSE loans in 

bankruptcy may be higher, but that the 

overall percentage of homeowners with 

mortgage loans in bankruptcy is less 

than 1 percent. The Bureau expects that 

the share of borrowers who have 

exercised the FDCPA cease 

communication right is likely relatively 

small, since the right is available only 

to borrowers for whom the servicer 

acquired servicing rights after the loan 

is in default. 

4. Loss Mitigation Procedures 

Notice of Complete Loss Mitigation 

Application 

Proposed § 1024.41(c)(3) requires a 

servicer to provide a borrower a written 

notice promptly upon receiving the 

borrower’s complete loss mitigation 

application, subject to certain 

limitations discussed below. The 

required notice would inform the 

borrower that the application is 

complete; the date the servicer received 

the complete application; whether a 

foreclosure sale was scheduled as of the 

date the servicer received the complete 

application and, if so, the date of that 

scheduled sale; the date the borrower’s 

foreclosure protections began under 

§ 1024.41(f)(2) and (g); and certain other 

information regarding the borrower’s 


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rights under the servicing rules. Under 

the proposal, a notice is not required if 

the application was not complete or 

facially complete more than 37 days 

before a scheduled foreclosure sale; the 

servicer has already notified the 

borrower under § 1024.41(b)(2)(i)(B) that 

the application is complete and the 

servicer has not subsequently requested 

additional documents or information 

from the borrower to complete the 

application; or the servicer has already 

provided a notice approving or denying 

the application. 

Potential benefits and costs to 

consumers. Under the existing rule, 

servicers are not required to notify a 

borrower that a loss mitigation 

application is complete unless it is 

complete at the time the servicer 

provides the notice acknowledging 

receipt of an application under 

§ 1024.41(b)(2)(i)(B). The Bureau 

understands based on its outreach that 

many servicers currently notify 

borrowers in writing once their 

applications are complete. However, 

such notices may not include all the 

information borrowers need to 

determine when the application was 

considered complete for purposes of 

determining their protections under 

Regulation X’s mortgage servicing rules. 

The proposed provision is intended to 

benefit borrowers by providing them 

with more information about their 

application status, thereby allowing 

them to better protect their interests 

during the loss mitigation application 

process. Borrowers who have not yet 

received a notice will be able to infer 

that their applications are not yet 

complete and, if necessary, to follow up 

with the servicer to determine what 

remains missing. Once borrowers have 

received the notice, they will know that 

the servicer is prohibited from 

completing the foreclosure process until 

the application has been evaluated and 

will be able to plan based on the 

expectation that a decision will be 

reached within 30 days (unless the 

servicer determines that more 

information is needed). The notice will 

also provide the borrower, the servicer’s 

compliance function, regulators, and 

courts with a written record that can 

help them evaluate a servicer’s 

compliance with § 1024.41(c)(1)’s 30- 

day evaluation requirement. 

The Bureau notes that several 

servicers informed the Bureau during 

outreach efforts that they already 

provide a notice informing the borrower 

that an application is complete. To the 

extent that servicers are already 

providing a notice that includes some of 

the information required by the 

proposed notice, the incremental benefit 

to borrowers of the proposed provision 

may be reduced. 

Potential benefits and costs to covered 

persons. Servicers will incur costs 

associated with changing their policies 

and procedures to ensure that they are 

sending notices in compliance with the 

proposed provision, and in addition 

will incur distribution costs associated 

with sending notices to borrowers. 

However, the Bureau expects that these 

costs may be less than those associated 

with some other disclosure 

requirements, for two reasons. First, the 

existing rules already require servicers 

to determine the time at which an 

application is complete; thus, servicers 

will not be required to make any new 

determinations in order to comply with 

the requirement. Second, based on 

industry outreach, the Bureau 

understands that many servicers are 

already sending a written notification 

informing applicants that their 

applications are complete, so the costs 

of the proposed provision will be 

limited for these servicers. 

In addition, the Bureau notes that 

certain provisions of the proposal are 

intended to prevent servicers from 

incurring unnecessary costs in 

connection with the proposed 

requirement. The proposal provides that 

the notice be sent ‘‘promptly’’ rather 

than within a prescribed timeframe (and 

states in commentary that five days 

would generally be considered 

reasonably prompt), thereby allowing 

servicers some flexibility in cases where 

it would be particularly burdensome to 

send the notice immediately. 

Furthermore, the notice is not required 

under certain circumstances in which a 

borrower would not benefit from the 

notice, including when the servicer is 

able to notify the borrower of the 

outcome of its evaluation before the 

notice is sent. 

The Bureau requests data and other 

information regarding servicers’ current 

practices for informing borrowers that a 

loss mitigation application is complete 

and the incremental cost to servicers of 

complying with the proposed 

requirement. 

Information Outside of the Borrower’s 

Control 

The Bureau is proposing to amend 

§ 1024.41(c)(1) and add § 1024.41(c)(4) 

to address a servicer’s obligations with 

respect to information not in the 

borrower’s control that the servicer 

requires to determine which loss 

mitigation options, if any, it will offer 

the borrower. The proposed provision 

requires a servicer to exercise 

reasonable diligence in obtaining such 

information. The proposed provision 

also prohibits a servicer from denying a 

borrower’s complete application due to 

a lack of information not in the 

borrower’s control; requires that a 

servicer inform a borrower in writing if 

the servicer is unable to complete its 

evaluation within 30 days of receiving 

a complete application because it lacks 

information from a party other than the 

borrower or the servicer; and requires 

that a servicer promptly provide the 

borrower written notice stating the 

servicer’s determination upon receipt of 

missing information from a party other 

than the borrower or the servicer. 

Potential benefits and costs to 

consumers. Under the existing rule, if a 

servicer receives a complete loss 

mitigation application more than 37 

days before a foreclosure sale, the 

servicer must, within 30 days of receipt, 

determine what loss mitigation options, 

if any, it will offer a borrower, 

regardless of whether it has received 

required information not in the 

borrower’s control. The proposed 

provision would benefit borrowers 

applying for loss mitigation in situations 

in which the servicer cannot determine 

what loss mitigation options to offer 

within 30 days because it has not 

received necessary information from a 

party other than the servicer or the 

borrower, such as homeowner 

association payoff information or 

approval of the loan owner, investor, or 

mortgage insurance company. The 

proposal would reduce the impact on 

the borrower of such delays by 

preventing the borrower’s application 

from being denied on the basis of 

missing information outside the 

borrower’s control and ensuring that the 

borrower is aware of the application’s 

status. 

The Bureau understands from 

industry outreach that servicers 

currently follow different practices in 

the event they have not received 

information that is outside the 

borrower’s control 30 days after receipt 

of a complete loss mitigation 

application. Some servicers have 

informed the Bureau that they exceed 

the 30-day evaluation timeframe in 

§ 1024.41(c)(1) and wait to receive the 

information before making any decision 

on the application. One servicer 

informed the Bureau that it sends a 

denial notice to borrowers but also 

informs them that the servicer will 

reevaluate the application upon receipt 

of the third-party information. As a 

result, borrowers may be receiving 

confusing or conflicting messages from 

servicers about the status of their 

applications, and in some cases 

borrowers’ applications for loss 

mitigation may be denied because the 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74274 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

servicer has experienced a delay in 

receiving required information that is 

not in the borrower’s control. The 

proposed provision would give 

borrowers clearer information about 

their application status. 

Potential benefits and costs to covered 

persons. The proposed provision would 

benefit servicers by clarifying servicer 

responsibilities when non-borrower 

information has not been received 

within 30 days of receiving a complete 

application from the borrower and 

prevent servicers from risking noncompliance with the evaluation 

requirement in order to provide a 

benefit to borrowers seeking loss 

mitigation options. The proposed 

changes would also require servicers to 

review and perhaps change their 

policies applicable to gathering 

information from parties other than the 

borrower and informing borrowers of 

their loss mitigation decisions, which 

would impose one-time costs of revising 

policies and systems in addition to the 

ongoing cost of providing the new 

notices required by the proposed 

provision. 

The proposed provision also may 

impose costs on servicers because the 

requirement not to make a 

determination until information outside 

of the borrower’s control is obtained 

may delay the foreclosure process for a 

servicer that would otherwise deny an 

application without having received 

such information. The Bureau notes, 

however, that servicers are not required 

to wait for non-borrower information to 

make a determination with respect to an 

application if a decision can be made 

without such information. Furthermore, 

the Bureau understands from industry 

outreach that, in cases where investor 

approval has not been delegated to the 

servicer, the missing non-borrower 

information is frequently investor 

approval of the application. Because the 

investor ultimately bears the cost of any 

delay in a foreclosure proceeding, the 

investor is in the best position to weigh 

the cost of expediting its approval 

process against the potential delay in a 

foreclosure proceeding. 

The Bureau requests additional 

information regarding the frequency 

with which non-borrower information is 

not available to a servicer within 30 

days of a servicer’s receipt of a complete 

loss mitigation application, the types of 

information that may be missing at that 

point, the consequences for borrowers 

when this occurs, and the incremental 

cost to servicers of complying with the 

proposed requirement. 

Clarification of the 2013 RESPA 

Servicing Final Rule’s Dual-tracking 

Protections 

The Bureau is proposing revised 

commentary to § 1024.41(g) that would 

clarify servicers’ obligations with 

respect to § 1024.41(g)’s prohibition 

against moving for foreclosure judgment 

or order of sale, or conducting a sale, 

during evaluation of a complete loss 

mitigation application received more 

than 37 days before a foreclosure sale. 

As revised, proposed comment 41(g)–1 

clarifies that if, upon receipt of a 

complete loss mitigation application, a 

servicer or its foreclosure counsel fails 

to take reasonable steps to avoid a ruling 

on a pending motion for judgment or the 

issuance of an order of sale, the servicer 

must dismiss the foreclosure proceeding 

if necessary to avoid the sale. Proposed 

new comment 41(g)-5 would clarify that 

§ 1024.41(g) prohibits a servicer from 

conducting a foreclosure sale even if a 

person other than the servicer 

administers or conducts the foreclosure 

sale proceedings and that servicers must 

take reasonable steps to delay the sale 

until one of the conditions under 

§ 1024.41(g)(1)–(3) is met. The Bureau 

also proposing to revise comment 41(g)- 

3 to clarify servicers’ obligations under 

§ 1024.41(g) when acting through 

foreclosure counsel. Similarly, the 

Bureau is proposing comment 

38(b)(3)(iii)–1 to clarify that policies and 

procedures required under 

§ 1024.38(b)(3)(iii) to facilitate sharing 

of information with service provider 

personnel responsible for handling 

foreclosure proceedings must be 

reasonably designed to ensure that 

servicer personnel promptly inform 

service provider personnel handling 

foreclosure proceedings that the servicer 

has received a complete loss mitigation 

application. The proposed comments, 

taken together, would clarify that, when 

a foreclosure sale has been scheduled 

but the servicer is evaluating a complete 

loss mitigation application received 

more than 37 days before the scheduled 

foreclosure sale, the servicer must take 

all reasonable steps to delay the 

foreclosure sale. 

Section 1024.41(g) is intended to 

protect borrowers by preventing a 

foreclosure sale from going forward 

while review of a complete loss 

mitigation application is pending. The 

proposed commentary would clarify the 

steps that servicers must take to protect 

borrowers from foreclosure when a 

complete loss mitigation application is 

pending late in the foreclosure process. 

The proposed commentary would also 

reduce servicer compliance costs by 

adding clarity regarding the application 

of § 1024.41(g) when a foreclosure sale 

has been scheduled. At the same time, 

servicers would bear costs in confirming 

that their policies and procedures for 

foreclosures, including communication 

with counsel, meet the requirements of 

§ 1024.41(g) in light of the revised 

commentary. However, the Bureau does 

not believe that the proposed revisions 

would impose significant burdens on 

servicers because § 1024.41(g) and its 

existing commentary already require 

servicers to take reasonable steps to 

prevent a scheduled foreclosure sale 

from going forward when a timely loss 

mitigation application has been 

received. The proposed commentary is 

intended to aid servicers in complying 

with § 1024.41(g) by elaborating upon 

and clarifying a servicer’s obligations 

under the existing requirement, but does 

not impose new obligations on 

servicers. 

The proposed revision to comment 

41(g)–1 contemplates dismissal of the 

foreclosure action if the servicer has not 

taken, or caused its foreclosure counsel 

to take, all reasonable affirmative steps 

to delay the foreclosure sale when a 

timely loss mitigation application is 

pending. The costs of dismissal may be 

significant in the context of a particular 

mortgage. However, the Bureau does not 

believe that the proposed comment 

would impose significant overall costs 

on servicers because servicers are 

already obligated to take reasonable 

steps to delay a foreclosure sale when a 

timely loss mitigation application is 

pending. Thus, servicers generally will 

be able to avoid the costs of dismissal 

so long as they comply with existing 

requirements. 

Review of multiple loss mitigation 

applications 

Currently, § 1024.41(i) requires a 

servicer to comply with the 

requirements of § 1024.41 for only a 

single complete loss mitigation 

application for a borrower’s mortgage 

loan account. The Bureau is proposing 

to revise § 1024.41(i) to require servicers 

to comply with the requirements of 

§ 1024.41 each time a borrower submits 

a complete loss mitigation application, 

unless the servicer has previously 

complied with § 1024.41 for a 

borrower’s complete loss mitigation 

application and the borrower has been 

delinquent at all times since the 

borrower submitted the application. 

Potential benefits and costs to 

consumers. Section 1024.41’s loss 

mitigation procedures are intended to 

protect borrowers from harm in 

connection with the process of 

evaluating a borrower for loss mitigation 

options and proceeding to foreclosure. 

As discussed in the 2013 RESPA 

Servicing Final Rule, benefits to these 

borrowers include a period of 120 days 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74275 

302See 78 FR 10695, 10857–60 (Feb. 14, 2010). 

303Fed. Reserve Sys., Office of the Comptroller of 

the Currency, OCC Mortgage Metrics Report: 

Disclosure of Nat’l Bank and Fed. Savings Ass’n 

Mortgage Loan Data, at 30 (Q1 2014), available at 

http://www.occ.gov/publications/publications-bytype/other-publications-reports/mortgage-metrics2014/mortgage-metrics-q1–2014.pdf. 

304Fed. Housing Fin. Agency, Foreclosure 

Prevention Report, at 3 (May 2014), available at 

http://www.fhfa.gov/AboutUs/Reports/

ReportDocuments/

ForeclosurePreventionReportMay2014FINAL.pdf. 

305See Fannie Mae Single Family 2012 Servicing 

Guide, § 602.05, Redefault, available at https://

www.fanniemae.com/content/guide/svc031412.pdf; 

Freddie Mac Single Family Servicing Guide, 

§ B65.14, Ineligibility for Freddie Mac Standard 

Modification, available at http://www.allregs.com/

tpl/Main.aspx. 

in which to submit a loss mitigation 

application before foreclosure can 

commence, restrictions on dual 

tracking, an appeals process for denials 

of loss mitigation applications, and 

consideration for all available loss 

mitigation alternatives.302 The proposed 

provision would make these benefits 

available to borrowers who complete a 

loss mitigation application, become (or 

remain) current following the initial 

submission of a loss mitigation 

application, and subsequently 

encounter difficulties making payments 

and desire to apply for loss mitigation 

again. The provision would thereby 

benefit borrowers in two general 

circumstances: First, borrowers who 

have previously applied for and 

received a loan modification, then 

subsequently have difficulty making 

payments on the modified loan (perhaps 

due to an unrelated hardship months or 

years after the modification), will be 

able to apply for loss mitigation under 

§ 1024.41’s procedures. Second, 

borrowers who have previously applied 

for loss mitigation but were not offered 

an option that they chose to accept will 

be able to apply for loss mitigation 

under § 1024.41’s procedures if they 

become (or remain) current on their loan 

following the application. 

With regard to the first group, a 

significant percentage of the borrowers 

who receive loan modifications 

subsequently becomes delinquent. The 

OCC Mortgage Metrics Report indicates 

that for modifications completed since 

the fourth quarter of 2012, 11.5 to 13.8 

percent of modified loans were 60 or 

more days delinquent six months after 

modification, and 16.8 to 18.5 percent 

were 60 or more days delinquent after 

one year.303 For the HAMP program, the 

FHFA reports that as of May 2014, of 

625,199 permanent modifications that 

became effective between April 2009 

and May 2014, 173,791 (27.8 percent) 

had defaulted by the end of the 

period.304 These numbers suggest that a 

significant fraction of borrowers 

receiving loan modifications could 

potentially benefit from the proposed 

provision, because they would have the 

protection of § 1024.41’s loss mitigation 

procedures in the wake of these 

subsequent delinquencies. On the other 

hand, the large number of borrowers 

who become delinquent as soon as six 

months after completing a loan 

modification suggests that in many 

cases the subsequent delinquency may 

reflect not a new adverse event, but 

instead the failure of the modification to 

achieve an affordable monthly payment 

for the borrower in light of the 

circumstances that preceded the 

modification. To the extent that a 

borrower’s circumstances have not 

changed significantly, a subsequent loss 

mitigation application may not yield a 

new option for which the borrower is 

eligible and that the borrower finds 

more beneficial. 

The Bureau does not have data 

indicating the number of borrowers in 

the second group—that is, those who 

apply for loss mitigation, are not 

approved for any option that they 

choose to accept, and subsequently 

become or remain current on their 

mortgage. The Bureau notes that the 

proposed provision may provide 

additional flexibility to borrowers who 

are current on their mortgage but might 

benefit from a loss mitigation option, 

because such borrowers could apply 

and determine whether they are eligible 

for loss mitigation without losing the 

opportunity to apply for loss mitigation 

in the future. For example, homeowners 

who are able to make their mortgage 

payments but would like to determine 

whether a short sale is possible would 

be able to apply for a short sale without 

losing the protection of § 1024.41’s loss 

mitigation procedures in connection 

with any future application for loss 

mitigation. 

The benefits to borrowers of the 

proposal depend on whether and under 

what circumstances investors make loss 

mitigation options available to 

borrowers who have completed an 

earlier loss mitigation application and 

perhaps received a loan modification. 

Section 1024.41 does not require a 

servicer to make any loss mitigation 

options available to a borrower, but only 

governs a servicer’s evaluation of a 

borrower for any loss mitigation option 

that is available. Many borrowers may 

not realize benefits from the proposed 

provision because, even though it may 

entitle them to apply for a second loan 

modification, they are not eligible to 

receive one. For example, Fannie Mae 

and Freddie Mac’s servicing guidelines 

generally do not permit a subsequent 

loan modification under certain 

circumstances, including when a 

borrower has become 60 days 

delinquent within the 12 months after a 

borrower receives a prior loan 

modification.305 The Bureau notes, 

however, that for some borrowers 

affected by the proposal, any loss 

mitigation option provided as a result of 

the proposed revision may be the first 

loss mitigation option offered to that 

borrower, even if it is not the first 

evaluation of a complete application. 

Potential benefits and costs to covered 

persons. The proposed provision will 

impose costs on servicers by requiring 

them to evaluate certain borrowers for 

subsequent loss mitigation applications 

in accordance with § 1024.41’s 

requirements. Costs of complying with 

§ 1024.41’s requirements include those 

arising from the requirements to send 

specific notices, comply with the rule’s 

timelines for evaluation of loss 

mitigation applications, evaluate the 

borrower for all loss mitigation options, 

and under certain circumstances to 

delay initiation of foreclosure 

proceedings. The extent to which these 

requirements impose additional costs on 

servicers depends on their current 

policies with respect to subsequent loss 

mitigation applications. The Bureau has 

learned through its outreach efforts that 

many servicers already reevaluate 

borrowers who reapply for loss 

mitigation using the procedures set forth 

in § 1024.41. To the extent that servicer 

practices already meet the requirements 

of the rule, the burden on servicers will 

be reduced. 

The costs imposed by the rule are also 

mitigated by the fact that servicers can 

determine whether any loss mitigation 

options are available to borrowers and 

set the eligibility criteria for any second 

loss mitigation application. To the 

extent that the cost of providing 

subsequent loss mitigation 

opportunities is significant, servicers 

and creditors will have the opportunity 

to revise eligibility criteria for borrowers 

who have previously been evaluated for 

loss mitigation pursuant to the servicing 

rules, which will reduce the cost of 

complying with the proposed provision. 

In addition, the requirement that the 

borrower bring the loan current before 

§ 1024.41’s loss mitigation procedures 

apply to a subsequent application 

mitigates the costs of the proposed 

revision for servicers by limiting the risk 

that a borrower will use multiple loss 

mitigation applications as a way to 

postpone foreclosure. 


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74276 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

Loss Mitigation Timelines and Servicing 

Transfers 

The Bureau is proposing § 1024.41(k) 

to address the requirements applicable 

to loss mitigation applications pending 

at the time of a servicing transfer. 

Proposed § 1024.41(k) clarifies that, 

subject to certain exceptions, a 

transferee servicer must comply with 

§ 1024.41’s requirements within the 

same timeframes that were applicable to 

the transferor servicer. The proposed 

exceptions include a five-day extension 

of time for a transferee servicer to 

provide the written notification required 

by § 1024.41(b)(2)(i)(B), and a provision 

ensuring that a transferee servicer that 

acquires servicing through an 

involuntary transfer has at least 15 days 

after the transfer to evaluate a 

borrower’s pending complete loss 

mitigation application. The proposal 

also provides that if a borrower’s appeal 

under § 1024.41(h) is pending as of the 

transfer date, a transferee servicer must 

evaluate the appeal if it is able to 

determine whether it should offer the 

borrower the loan modification options 

subject to the appeal; a transferee 

servicer that is unable to evaluate an 

appeal must treat the appeal as a 

complete loss mitigation application 

and evaluate the borrower for all loss 

mitigation options available to the 

borrower from the transferee servicer. 

Potential benefits and costs to 

consumers. The proposed provision is 

intended to benefit borrowers who have 

loss mitigation applications in process 

at the time their mortgage loan is 

transferred to another servicer by 

ensuring that the transfer does not 

unnecessarily delay the evaluation of 

their applications. Delays in the 

processing of loss mitigation 

applications can prolong a borrower’s 

delinquency, during which time fees 

and other costs may accrue, making it 

more difficult for the borrower to 

recover from financial distress. 

The Bureau does not have 

representative data on how quickly 

servicers currently comply with the 

various loss mitigation requirements in 

the event of a servicing transfer, but 

believes that timelines vary significantly 

across servicers. The Bureau 

understands that, while some servicers 

may already be complying with the 

proposed timelines, others may not. To 

the extent that servicer practices already 

comply with the proposed provision, 

consumer benefits from the proposal 

will be lower. 

Potential benefits and costs to covered 

persons. The proposed provision is 

intended to reduce the costs to servicers 

that engage in servicing transfers of 

complying with the proposed provision 

by clarifying the application of loss 

mitigation timelines in the context of a 

servicing transfer. At the same time, 

while transferor and transferee servicers 

are currently required under § 1024.38 

to have policies and procedures in place 

to ensure the timely transfer and receipt 

of accurate data, including through the 

devotion of appropriate personnel and 

resources, the proposed provision 

would impose incremental costs on 

servicers to the extent that under their 

current transfer procedures their 

transfers do not comply with the 

proposed timelines. Transferor and 

transferee servicers both may be 

required to devote more personnel and 

other resources in the days or weeks 

before and after a transfer to ensure that 

the data is accurately transferred in a 

way that permits the transferee servicer 

to comply with the timelines with 

respect to all loss mitigation 

applications in process. 

The proposed exceptions, including 

extended timelines in connection with 

the initial notice confirming receipt of a 

loss mitigation application and in 

connection with involuntary servicing 

transfers, are intended to mitigate the 

costs to servicers of complying with the 

proposal in specific circumstances in 

which the Bureau understands that 

complying with the timelines that are 

otherwise applicable would be 

especially difficult. Additionally, the 

Bureau understands that due to the 

unique circumstances and 

complications that may arise in 

connection with a transfer, there may be 

times when, despite the transferee 

servicer’s good faith efforts, it may be 

impracticable to comply with the 

requirements of § 1024.41(c)(1) and (4) 

within 30 days of when the transferor 

servicer received the borrower’s 

complete loss mitigation application. 

The proposal mitigates compliance costs 

in such circumstances by allowing that, 

where complying with the timelines 

with respect to evaluating complete loss 

mitigation applications is impracticable 

under the circumstances, the servicer 

must comply with the requirements 

within a reasonably prompt time, while 

stating in commentary that, in general, 

a reasonably prompt time would be 

within an additional five days. 

The Bureau requests data and 

information regarding servicer timelines 

for complying with loss mitigation 

requirements following a servicing 

transfer, the extent to which consumers 

are affected by delays in the loss 

mitigation process that result from 

servicing transfers, and the costs to 

servicers of complying with the 

proposed requirement. 

Evaluation for Repayment Plans Based 

on Incomplete Applications 

The Bureau is proposing to revise 

§ 1024.41(c)(2)(iii) to permit a servicer 

to offer short-term repayment plans 

based upon an evaluation of an 

incomplete loss mitigation application. 

The proposal would be an exception to 

the general rule under § 1024.41(c)(2)(i) 

that a servicer may not evaluate a 

borrower for loss mitigation options 

based on an incomplete application, and 

would parallel the existing exception to 

this rule which permits a servicer to 

offer a short-term payment forbearance 

program based upon an incomplete 

application. Borrowers who are 

evaluated for a short-term repayment 

plan based on an incomplete 

application would not lose their 

protections under § 1024.41 with 

respect to a subsequent loss mitigation 

application. 

As with the existing exception for 

short-term payment forbearance plans, 

the proposal is intended to benefit 

borrowers and servicers by permitting 

servicers to offer a short-term loss 

mitigation option to address a 

temporary financial setback, while 

preserving borrowers’ loss mitigation 

protections, in situations in which 

completing an application would be 

time-consuming or burdensome or 

would significantly delay a decision. 

The proposal would not impose costs on 

borrowers because a borrower would 

always have the option to reject a shortterm repayment plan based on review of 

an incomplete loss mitigation 

application, provide a complete loss 

mitigation application, and be reviewed 

for all loss mitigation options available 

to the borrower (and receive other 

protections) under § 1024.41. Similarly, 

the proposal would impose no costs on 

servicers because it does not impose any 

new obligations on servicers. 

5. Periodic Statement Requirements 

Applicable to Consumers in 

Bankruptcy. 

The Bureau is proposing to revise 

§ 1026.41(e)(5) to limit the 

circumstances in which a servicer is 

exempt from the periodic statement 

requirements with respect to a 

consumer who is a debtor in 

bankruptcy. Currently, § 1026.41(e)(5) 

provides that a servicer is exempt from 

the requirement to provide periodic 

statements for a mortgage loan while the 

consumer is a debtor in bankruptcy. In 

general, the proposed revisions to 

§ 1026.41(e)(5) limit the exemption to 

consumers in bankruptcy who are 

surrendering the property or avoiding 

the lien securing the mortgage loan, to 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74277 

306Fed. Housing Fin. Agency, Foreclosure 

Prevention Report, at 6 (Jan. 2014), available at 

http://www.fhfa.gov/AboutUs/Reports/

ReportDocuments/

ForeclosurePreventionReportJan2014FINAL.pdf. 

consumers who have requested that a 

servicer cease providing periodic 

statements or coupon books, and in 

certain other circumstances. 

Notwithstanding meeting the above 

conditions for an exemption, the 

proposal requires servicers to provide 

periodic statements or coupon books if 

the consumer requests them in writing 

(unless a court has entered an order 

requiring otherwise) and to resume 

providing periodic statements when the 

consumer exits bankruptcy with respect 

to any portion of the mortgage debt that 

is not discharged through bankruptcy. 

Potential benefits and costs to 

consumers. The periodic statement 

requirements in § 1026.41 are intended 

to benefit consumers by providing 

accurate information about payments 

that consumers can use to monitor the 

servicer, assert errors if necessary, and 

track the accumulation of equity so that 

they can effectively determine how to 

allocate income and consider options 

for refinancing. The proposal is 

intended to make these benefits 

available to consumers in bankruptcy 

who own a home subject to a mortgage 

and intend to retain the home postbankruptcy, subject to the constraints of 

the Bankruptcy Code’s automatic stay. 

The Bureau does not have 

representative data describing the 

number of consumers in the bankruptcy 

process that own a home and intend to 

retain it through the bankruptcy 

process. The FHFA reports that of the 

mortgage loans serviced for Fannie Mae 

and Freddie Mac, between 0.4 percent 

and 0.5 percent were in bankruptcy 

during 2013.306 However, based on 

information the Bureau has received 

from servicers and other Federal 

agencies, the Bureau believes that the 

percentage of non-GSE loans in 

bankruptcy may be significantly higher. 

There are at least two reasons to 

expect that consumers who are in 

bankruptcy and intend to retain their 

homes are particularly likely to benefit 

from receiving periodic statements. 

First, consumers in bankruptcy have 

demonstrated difficulties in managing 

their financial obligations and face 

unique challenges in rehabilitating their 

finances. Such consumers may derive 

particular benefit from a reminder of 

their payment obligations and 

information about the status of their 

mortgages that enables them to allocate 

income and make other decisions about 

their finances. Second, as discussed in 

the section-by-section analysis of 

§ 1026.41(e)(5), there is evidence that 

some servicers may be especially prone 

to error in applying payments of 

consumers in bankruptcy, particularly 

in the context of Chapter 13 cases. This 

evidence indicates that it may be 

especially important for consumers in 

bankruptcy to be able to monitor how 

servicers apply their payments. 

Potential benefits and costs to covered 

persons. The proposed provision would 

impose costs on servicers by requiring 

them to modify systems to provide 

statements that show how payments are 

applied for consumers in bankruptcy, 

particularly those in Chapter 13 

bankruptcy. The Bureau understands 

from industry outreach that the 

principal systems some servicers 

currently use to process and apply 

mortgage payments are not designed to 

accommodate payments from 

consumers in Chapter 13 bankruptcy 

and that many servicers account for 

payments from consumers in Chapter 13 

bankruptcy using a separate system or 

process. Servicer systems for producing 

periodic statements are generally not 

designed to produce statements for 

consumers in Chapter 13 bankruptcy, 

and accounting for payments from 

consumers in Chapter 13 bankruptcy 

currently may not be done on a timeline 

that permits statements to be produced 

on a regular billing cycle. The proposed 

provision will require servicers either to 

modify the systems they use to process 

payments and produce periodic 

statements for non-bankrupt consumers 

so that those systems can accommodate 

consumers in Chapter 13 bankruptcy or 

to modify the systems they currently use 

to process payments on behalf of 

bankrupt consumers to permit them to 

produce periodic statements for 

consumers in Chapter 13 bankruptcy. 

Servicers will also incur additional 

vendor costs associated with 

distributing statements. With respect to 

servicers that provide consumers with 

coupon books, the proposed provision 

will require servicers to provide 

transaction activity and past payment 

application information to consumers 

upon a consumer’s request, consistent 

with current § 1026.41(e)(3)(iii). The 

Bureau does not believe that providing 

this information will impose significant 

new costs on servicers that provide 

coupon books because the Bureau 

understands that the vast majority of 

servicers would already be required to 

provide such information in response to 

a consumer’s written information 

request pursuant to § 1024.36. 

The Bureau is proposing to reduce the 

burden of complying with the proposed 

provision by providing model forms for 

periodic statements in bankruptcy. 

Model forms would lower costs to 

servicers by eliminating the need to 

develop compliant forms of periodic 

statements, and may also increase the 

overall usefulness to consumers of the 

periodic statements. 

6. Periodic Statements Following Charge 

Off 

The Bureau proposes to add a new 

exemption from the requirement to 

provide periodic statements under 

§ 1026.41. The proposed exemption 

would apply to a mortgage loan that a 

servicer has charged off in accordance 

with loan-loss provisions if the servicer 

will not charge any additional fees or 

interest on the account, provided that 

the servicer must provide the consumer 

a final periodic statement within 30 

days of charge off or the most recent 

periodic statement. The proposed final 

periodic statement must convey in 

simple and clear terms that: the 

mortgage loan has been charged off and 

the servicer will not charge any 

additional fees or interest on the 

account; the lien on the property 

remains in place and the consumer 

remains liable for the mortgage loan 

obligation; the consumer 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. 

Potential benefits and costs to 

consumers. The periodic statement 

requirements in § 1026.41 are intended 

to benefit consumers by providing 

accurate information about payments 

that consumers can use to monitor the 

servicer, assert errors if necessary, and 

track the accumulation of equity. Where 

a consumer’s loan has been charged off 

and the servicer will no longer charge 

any additional fees or interest on the 

account, these benefits are significantly 

decreased. So long as the consumer is 

aware that no additional fees or interest 

will be charged, monthly statements 

will include no new information useful 

to the consumer, and the consumer may 

find it confusing and bothersome to 

continue to receive identical monthly 

statements. A final notice, on the other 

hand, could provide consumers with 

important information about the 

ongoing status of the loan and the 

significance of its status. The proposed 

final statement would clarify that, 

although the mortgage loan has been 

charged off, the obligation remains in 

place and describe the implications of 

the remaining lien for the consumer. 

Although periodic statements would 

not provide new information to 

consumers where accounts have been 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74278 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

307Based on an analysis of March 2014 Call 

Report data as compiled by SNL Financial. 

charged off and fees and interest will no 

longer accrue, they may provide a 

benefit to some consumers as a 

reminder that the lien on the property 

remains in place. It is possible that, 

particularly years after a charge-off, a 

consumer (or successor in interest to the 

property securing the loan) may not 

realize that the obligation remains 

outstanding and the lien is still in place. 

A final statement that details the status 

could mitigate this issue but may not 

completely address it in all cases. This 

represents a potential cost of the 

proposal to some consumers. The 

Bureau requests additional information 

regarding the benefits to consumers of 

receiving periodic statements or other 

communications from the servicer about 

a mortgage loan, such as an annual 

reminder to the consumer of a loan’s 

status, after the loan is charged off and 

will no longer accrue fees or additional 

interest. 

Potential benefits and costs to covered 

persons. Because the provision does not 

impose any new requirements on 

servicers, it would not impose any new 

costs. The proposal would benefit 

servicers by giving them the option to 

send a final periodic statement in lieu 

of continuing to send periodic 

statements for charged-off mortgage 

loans when they find it less costly to do 

so. 

7. Small Servicer Exemption 

The Bureau is proposing to amend 

certain criteria for determining whether 

a servicer qualifies for the small servicer 

exemption set forth under 

§ 1026.41(e)(4). The proposal provides 

that transactions serviced by the 

servicer for a seller financer that meet 

certain criteria would not be considered 

in determining whether a servicer 

qualifies as a small servicer. Under the 

Mortgage Servicing Rules, small 

servicers (generally, those that service, 

together with any affiliates, 5,000 or 

fewer mortgage loans, for all of which 

the servicer (or an affiliate) is the 

creditor or assignee) are exempt from 

certain mortgage servicing requirements, 

including Regulation Z’s requirement to 

provide periodic statements for 

residential mortgage loans and several 

of Regulation X’s requirements, 

including certain provisions related to 

force-placed insurance, general 

servicing policies and procedures, and 

communicating with borrowers about, 

and evaluation of applications for, loss 

mitigation options. The proposal would 

permit small servicers to maintain their 

small servicer status if they service 

transactions for a limited class of seller 

financers: those that provide seller 

financing for only one property in any 

12-month period for the purchase of a 

property that they own, so long as they 

did not construct a residence on the 

property in the ordinary course of 

business and the financing meets certain 

restrictions. 

The Bureau believes that the proposed 

changes would have little or no effect on 

consumers that are not parties to sellerfinanced transactions, because the 

Bureau expects that, in the absence of 

the proposed changes, small servicers 

would generally choose not to service 

seller-financed transactions in order to 

maintain their status as small servicers. 

The Bureau understands that the 

practice of servicing seller-financed 

transactions is not widespread and that 

depository institutions offering this 

service do not obtain significant revenue 

from the practice, but instead offer the 

service as an accommodation to 

depository customers that are seller 

financers. Thus, the Bureau does not 

expect that servicers’ status as small 

servicers will ultimately be affected by 

the rule, meaning that the proposal 

would not have any significant effect on 

the number of consumers whose 

servicer qualifies for the small servicer 

exemption. 

Given the limited nature of servicing 

loans for seller financers, and given the 

Bureau’s understanding that these 

services are offered by depository 

institutions to their customers when 

alternative service providers are 

generally not available, the Bureau 

believes that if seller financers are 

unable to obtain servicing from the 

depository institution where they do 

their banking then, in many cases, they 

are likely to instead service the loan 

themselves. Consumers who purchase 

homes from seller financers may benefit 

from the servicing of the loan by a small 

servicer rather than directly by the seller 

financer. Purchasers of seller-financed 

residential real estate, who may be 

unable to secure credit through 

traditional means, may benefit from a 

bank receiving scheduled periodic 

payments and providing an 

independent accounting as a third party 

to the transaction. In addition, small 

servicers may be able to process 

payments and perform other servicing 

activities at a lower cost than seller 

financers, and this cost savings may be 

passed on to purchasers of sellerfinanced residential real estate. 

F. Potential Specific Impacts of the 

Proposed Rule 

Depository Institutions and Credit 

Unions with $10 Billion or Less in Total 

Assets, As Described in Section 1026 

The Bureau believes that a large 

fraction of depository institutions and 

credit unions with $10 billion or less in 

total assets that are engaged in servicing 

mortgage loans qualify as ‘‘small 

servicers’’ for purposes of the Mortgage 

Servicing Rules because they service 

5,000 or fewer loans, all of which they 

or an affiliate own or originated. The 

Bureau estimates that 96 percent of 

insured depositories and credit unions 

with $10 billion or less in total assets 

service 5,000 mortgage loans or 

fewer.307 The Bureau believes that 

servicers that service loans that they 

neither own nor originated tend to 

service more than 5,000 loans, given the 

returns to scale in servicing technology. 

The impact of the proposed rule on 

small servicers, which are exempt from 

many of the provisions of the servicing 

rules that would be affected by the 

proposed rule, is discussed below in 

connection with the Regulatory 

Flexibility Act. 

With respect to servicers that are not 

small servicers as defined in the 

Mortgage Servicing Rules, the Bureau 

believes that the consideration of 

benefits and costs of covered persons 

presented above provides a largely 

accurate analysis of the impacts of the 

proposed rule on depository institutions 

and credit unions with $10 billion or 

less in total assets that are engaged in 

servicing mortgage loans. 

Impact of the Proposed Provisions on 

Consumer Access to Credit and on 

Consumers in Rural Areas 

The Bureau believes that the 

additional costs to servicers from the 

final rule are not likely to be extensive 

enough to have a significant impact on 

consumer access to credit. The 

exemption of small servicers from many 

provisions of the proposed rule will 

help maintain consumer access to credit 

through these providers. 

Consumers in rural areas may 

experience benefits from the proposed 

rule that are different in certain respects 

from the benefits experienced by 

consumers in general. Consumers in 

rural areas may be more likely to obtain 

mortgages from small local banks and 

credit unions that either service the 

loans in portfolio or sell the loans and 

retain the servicing rights. These 

servicers may already provide most of 


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308 5 U.S.C. 601 et seq. 

309 5 U.S.C. 609. 

310For purposes of assessing the impacts of the 

proposed rule on small entities, ‘‘small entities’’ is 

defined in the RFA to include small businesses, 

small not-for-profit organizations, and small 

government jurisdictions. 5 U.S.C. 601(6). A ‘‘small 

business’’ is determined by application of Small 

Business Administration regulations and reference 

to the North American Industry Classification 

System (‘‘NAICS’’) classifications and size 

standards. 5 U.S.C. 601(3). A ‘‘small organization’’ 

is any ‘‘not-for-profit enterprise which is 

independently owned and operated and is not 

dominant in its field.’’ 5 U.S.C. 601(4). A ‘‘small 

governmental jurisdiction’’ is the government of a 

city, county, town, township, village, school 

district, or special district with a population of less 

than 50,000. 5 U.S.C. 601(5). 

311The estimated number of insured depositories 

engaged in mortgage servicing is based on the 

March 2014 Call Report data as compiled by SNL 

Financial, and the estimated number of nondepositories is based on a special analysis of 2011 

data from the Nationwide Mortgage Licensing 

System and Registry. 

312The estimated number of insured depositories 

engaged in mortgage servicing that are small entities 

is based on the March 2014 Call Report data as 

compiled by SNL Financial, and the estimated 

number of non-depositories that are ‘‘small entities’’ 

as defined in the RFA is based on data on servicer 

rank and portfolio size from Inside Mortgage 

Finance. Non-profits and small non-profits engaged 

in mortgage loan servicing would be included in 

this estimate if their primary activity is originating 

or servicing loans. The Bureau has not been able to 

separately estimate the number of non-profits and 

small non-profits engaged in loan servicing. 

313For insured depositories, the estimate is based 

on an analysis of the March 2014 Call Report data 

as compiled by SNL Financial. For depository 

institutions that are ‘‘small entities’’ as defined in 

the RFA, the Bureau estimates that all but 4 percent 

service 5,000 loans or fewer. Assuming a similar 

relationship between servicing revenue and loan 

counts holds for non-depository servicers, all but 4 

percent of non-depository servicers that are small 

entities, or approximately 55 entities, would service 

5,000 loans or less. The Bureau’s methodology for 

these estimates is described in more detail in the 

2013 RESPA Servicing Final Rule, 78 FR 10695, 

10866 (Feb. 14, 2013). 

314 78 FR 10695, 10866 (Feb. 14, 2013). 

the benefits to consumers that the 

proposed rule is designed to provide. It 

is also possible, however, that a lack of 

alternative lenders in certain rural areas 

may make it possible for the proposed 

rule to provide rural consumers with 

greater benefits than consumers 

elsewhere. 

The Bureau will further consider the 

impact of the proposed rule on 

consumers in rural areas. The Bureau 

therefore asks interested parties to 

provide data, research results and other 

factual information on the impact of the 

proposed rule on consumers in rural 

areas. 

VII. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

generally requires an agency to conduct 

an initial regulatory flexibility analysis 

(IRFA) and a final regulatory flexibility 

analysis of any rule subject to noticeand-comment rulemaking requirements, 

unless the agency certifies that the rule 

will not have a significant economic 

impact on a substantial number of small 

entities.308 The Bureau also is subject to 

certain additional procedures under the 

RFA involving the convening of a panel 

to consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.309

An IRFA is not required for this 

proposal because the proposal, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities. 

A. Application of the Proposed Rule to 

Small Entities 

The analysis below evaluates the 

potential economic impact of the 

proposed rule on small entities as 

defined by the RFA.310 The analysis 

uses as a baseline the Mortgage 

Servicing Final Rules as currently in 

effect. The Bureau has identified five 

categories of small entities that may be 

subject to the proposed rule for 

purposes of the RFA: Commercial 

banks/savings institutions (NAICS 

522110 and 522120), credit unions 

(NAICS 522130), firms providing real 

estate credit (NAICS 522292), firms 

engaged in other activities related to 

credit intermediation (NAICS 522390), 

and small non-profit organizations. 

Commercial banks, savings institutions, 

and credit unions are small businesses 

if they have $550 million or less in 

assets. Firms providing real estate credit 

are small businesses if average annual 

receipts do not exceed $38.5 million, 

and firms engaged in other activities 

related to credit intermediation are 

small businesses if their average annual 

receipts do not exceed $20.5 million. A 

small non-profit organization is any notfor-profit enterprise which is 

independently owned and operated and 

is not dominant in its field. 

The Bureau estimates that there are 

approximately 11,323 insured 

depositories (banks, thrifts and credit 

unions) and 1,388 non-depositories that 

engage in mortgage servicing and are 

therefore subject to the Mortgage 

Servicing Rules.311 Of these, the Bureau 

estimates that approximately 9,724 

depositories and 1,370 non-depositories 

are ‘‘small entities’’ as defined in the 

RFA.312

The large majority of these small 

entities qualify as ‘‘small servicers’’ for 

purposes of the Mortgage Servicing 

Rules: Generally, servicers that service 

5,000 or fewer mortgage loans, all of 

which the servicer or affiliates own or 

originated. The Bureau estimates that, 

among 11,094 small entities subject to 

the Mortgage Servicing Rules, all but 

approximately 19 depositories and all 

but approximately 55 non-depositories 

(collectively, approximately 0.6% of all 

small entities subject to the Mortgage 

Servicing Rules) service 5,000 loans or 

fewer.313 The Bureau does not have data 

to indicate whether these institutions 

service loans that they do not own and 

did not originate. However, as discussed 

in the 2013 RESPA Servicing Final Rule, 

the Bureau believes that a servicer that 

services 5,000 loans or fewer is unlikely 

to service loans that it did not originate, 

because a servicer that services loans for 

others is likely to see servicing as a 

stand-alone line of business and would 

likely need to service substantially more 

than 5,000 loans to justify its investment 

in servicing activities.314

Small servicers are exempt from many 

of the servicing provisions of Regulation 

X and Regulation Z. Pursuant to 

§ 1024.30, small servicers are exempt 

from Regulation X’s general servicing 

policies and procedures requirements 

(§ 1024.38), early intervention and 

continuity of contact requirements 

(§§ 1024.39 and 1024.40), and all loss 

mitigation procedures requirements of 

§ 1024.41 other than § 1024.41(j), which 

makes applicable to small servicers 

§ 1024.41(f)(1)’s prohibition on 

initiating foreclosure proceedings unless 

a borrower is more than 120 days 

delinquent and prohibits servicers from 

initiating foreclosure proceedings while 

a borrower is performing pursuant to the 

terms of an agreement on a loss 

mitigation option. Similarly, pursuant to 

§ 1026.41(e)(4), small servicers are 

exempt from Regulation Z’s requirement 

to provide periodic statements for 

residential mortgage loans pursuant to 

§ 1026.41. 

Given the Bureau’s estimate that all 

but approximately 0.6 percent of small 

entities subject to the rule are small 

servicers, the proposed provisions that 

amend sections of Regulation X and 

Regulation Z from which small servicers 

are exempt will not have any economic 

impact on a substantial number of small 

entities. Most provisions of the 

proposed rule would amend §§ 1024.38 

through 1024.41 and § 1026.41, and 

would therefore not affect small 

servicers. 

In addition, certain provisions of the 

proposed rule would apply to small 

servicers but would reduce servicer 

compliance costs by relaxing the 

existing rules. This includes changes to 

the commentary to § 1024.36 to reduce 

disclosure requirements when a 

borrower requests information about 

ownership of a GSE loan; an additional 

exception to § 1024.41(f)(1)’s 120-day 


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315 78 FR 10696, 10843 (Feb. 14, 2013); 78 FR 

10902, 10978 (Feb. 14, 2013). 

pause on initiating foreclosure 

proceedings for a servicer joining the 

foreclosure action of a senior lienholder; 

and revisions to the definition of small 

servicer in § 1026.41(e)(4)(iii) that 

would permit small servicers to service 

loans for seller financers under certain 

circumstances. 

There are three provisions of the 

proposed rule that do apply to small 

servicers and could potentially impose 

new costs on a substantial number of 

small entities: (1) Proposed provisions 

related to successors in interest, which 

would extend the protections of all the 

Mortgage Servicing Rules, including 

certain provisions from which small 

servicers are not exempt, to successors 

in interest; (2) the definition of 

delinquency in proposed § 1024.31, 

which may affect the scope of the 2013 

RESPA Servicing Final Rule’s 

prohibition on initiating foreclosure 

proceedings unless a borrower’s 

mortgage loan obligation is more than 

120 days delinquent; and (3) a minor 

revision to the content of force-placed 

insurance notices required by 

§ 1024.37(c). The following sections of 

this part discuss in greater detail the 

potential impact of these three 

provisions of the proposed rule on small 

servicers. 

B. Successors in Interest 

The Bureau is proposing rule changes 

that would impose new requirements on 

mortgage servicers with respect to 

successors in interest. For purposes of 

the proposed provision, successors in 

interest would include individuals who 

acquired property securing a mortgage 

loan in a transfer protected by the GarnSt Germain Act, including individuals 

who acquired an ownership interest in 

the property securing a mortgage loan in 

transfers resulting from the death of the 

borrower or through transfers to the 

borrower’s spouse or children, transfers 

incident to divorce, and certain other 

transfers. The proposed provisions 

relate to how mortgage servicers confirm 

a successor in interest’s identity and 

ownership interest in the property, and 

apply the Mortgage Servicing Rules to 

successors in interest whose identity 

and ownership interest in the property 

have been confirmed by the servicer. 

Small servicers currently must 

comply with some, but not all, of the 

Mortgage Servicing Rules, and the 

proposed changes would require small 

servicers to comply with that same set 

of rules with respect to confirmed 

successors in interest. Small servicers 

must comply with Regulation X’s 

requirements regarding general 

disclosure requirements (§ 1024.32), 

mortgage servicing transfers (§ 1024.33), 

timely escrow payments and treatment 

of escrow account balances (§ 1024.34), 

error resolution procedures (§ 1024.35), 

requests for information (§ 1024.36), and 

force-placed insurance (§ 1024.37) and 

the prohibition on initiating foreclosure 

proceedings if a borrower’s mortgage 

loan obligation is not more than 120 

days delinquent or if a borrower is 

performing pursuant to the terms of an 

agreement on a loss mitigation option 

(§ 1024.41(f)(1) and (j)), and with 

Regulation Z’s requirements regarding 

ARM disclosures (§ 1026.20(c) and (d)) 

and regarding payment processing, the 

prohibition on pyramiding of late fees, 

and the requirement to provide payoff 

statements (§ 1026.36(c)). The proposed 

provision requires small servicers to 

comply with each of these provisions 

with respect to successors in interest 

once a servicer has confirmed the 

successor in interest’s identity and 

ownership interest in the property. 

The Bureau does not believe that the 

application of these requirements to 

confirmed successors in interest would 

have a significant impact on the small 

entities subject to the Mortgage 

Servicing Rules. While the Bureau does 

not have representative data on the 

number of loans that are serviced by 

small servicers and for which the 

underlying property has been 

transferred to a successor in interest, the 

Bureau expects that such loans make up 

a small fraction of the total loans 

serviced by any small servicer. The 

proposed provision would not require 

small servicers to develop new policies 

and procedures, but rather to continue 

to apply existing policies and 

procedures for servicing loans subject to 

the servicing rules to what the Bureau 

believes is a relatively small set of loans 

previously subject to the Mortgage 

Servicing Rules before the interest in the 

property was transferred to a successor 

in interest. 

In addition, given that under the 

Garn-St Germain Act small servicers are 

effectively obligated to service loans 

secured by property that has been 

transferred to a successor in interest, 

there are reasons to expect that many 

small servicers are servicing such loans 

using the same policies and procedures 

that they use to service other mortgage 

loans that are already subject to the 

Mortgage Servicing Rules. Given that 

there are fixed costs associated with 

developing servicing policies and 

procedures and systems to implement 

those policies and procedures, it may be 

less costly for servicers to apply the 

same policies and procedures with 

respect to successors in interest that 

they apply to all other loans they 

service, rather than developing separate 

policies, procedures and systems to 

service loans for successors in interest. 

Moreover, as discussed in the 2013 

RESPA Servicing Final Rule and the 

2013 TILA Servicing Final Rule, the 

Bureau believes that small servicers 

generally depend on a ‘‘relationship’’- 

based business model that depends on 

repeat business and could suffer 

significant harm from any major failure 

to treat customers properly because 

small servicers are particularly 

vulnerable to ‘‘word of mouth.’’ 315 A 

servicer that had a practice of servicing 

loans for confirmed successors in 

interest using lower standards than 

those used to service other loans would 

risk reputational harm and an associated 

loss of business. 

Small servicers would also be subject 

to proposed § 1024.36(i), which requires 

a servicer to respond to a written 

request that indicates that the person 

making the request may be a successor 

in interest by providing the person with 

information regarding the documents 

the servicer requires to confirm the 

person’s identity and ownership interest 

in the property. Small servicers would 

be required to treat the person making 

the request as a borrower for the 

purposes of the procedural requirements 

of § 1024.36(c) through (g)—that is, for 

instance, the servicer would be required 

to acknowledge receipt of the request 

within five days and respond within 30 

or 45 days without charge. However, 

because small servicers are exempt from 

§ 1024.38, they would not be subject to 

proposed § 1024.38(b)(1)(vi), which 

requires servicers to have policies and 

procedures in place to identify and 

facilitate communication promptly with 

potential successors in interest, to 

provide promptly upon request a 

description of what documents the 

servicer reasonably requires to confirm 

the person’s status, and, upon the 

receipt of such documents, notify the 

person promptly, as applicable, that the 

servicer has confirmed the person’s 

status, has determined that additional 

documents are required (and what those 

documents are), or has determined that 

the person is not a successor in interest. 

Therefore, the proposal would not 

require small servicers to make any 

changes to their policies and procedures 

for identifying successors, but only to 

communicate to potential successors, 

using the same procedures they use to 

respond to other borrower requests, 

what documents they require to confirm 

a person’s status as a successor in 

interest. Because small servicers will 

typically already know what documents 


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316See Am. Bankers Ass’n. Letter to Consumer 

Fin. Prot. Bureau (Oct. 24, 2014), available at http:// 

www.aba.com/Advocacy/commentletters/

Documents/

ABALetterRollingDelinquencies102414.pdf. 

317Small servicers, while otherwise exempt from 

the provisions of § 1024.41, are not exempt from 

§ 1024.41(f)(1) pursuant to § 1024.41(j). 

they require, are not subject to the 

requirement only to request documents 

that are reasonably required to 

determine a person’s status, and will 

already have procedures in place for 

responding to borrower requests 

generally, the Bureau believes that the 

costs to small servicers of complying 

with § 1024.36(i) will be minimal. 

C. Definition of Delinquency 

The Bureau is proposing to add a 

general definition of delinquency in 

§ 1024.31 that would apply to all 

sections of subpart C of Regulation X, 

replacing the existing definition of 

delinquency for purposes of §§ 1024.39 

and 1024.40(a). Under the proposal, 

delinquency is defined as a period of 

time during which a borrower and the 

borrower’s mortgage loan obligation are 

delinquent, and a borrower and a 

borrower’s mortgage loan obligation are 

delinquent beginning on the day a 

periodic payment sufficient to cover 

principal, interest, and, if applicable, 

escrow, became due and unpaid, until 

such time as the payment is made. 

Proposed comment 31 (Delinquency)-2 

clarifies that, if a servicer applies 

payments to the oldest outstanding 

periodic payment, the date of the 

borrower’s delinquency must advance 

accordingly. The Bureau understands 

from its outreach that the majority of 

servicers credit payments made to a 

delinquent account to the oldest 

outstanding periodic payment. The 

Bureau also understands that some 

servicers that use this method may be 

concerned about how to calculate the 

length of a borrower’s delinquency 

without increased certainty from the 

Bureau.316

The Bureau believes that the proposed 

provision will clarify the application of 

the servicing rules—thereby reducing 

the costs to small servicers of complying 

with the rules—without imposing 

significant new burdens on servicers. 

The Bureau recognizes that, in 

principle, the proposed provision could 

affect the circumstances under which a 

servicer may initiate foreclosure 

proceedings, because the definition of 

‘‘delinquency’’ affects the application of 

§ 1024.41(f)(1)’s prohibition on 

initiating foreclosure proceedings unless 

‘‘a borrower’s mortgage loan obligation 

is more than 120 days delinquent.’’ 317

In particular, the proposed provision 

would prohibit a servicer that otherwise 

applies payments to the oldest 

outstanding periodic payment from 

initiating foreclosure proceedings unless 

the borrower has missed the equivalent 

of four monthly payments. In contrast, 

the existing rule could be interpreted to 

permit the servicer to commence 

foreclosure even if the borrower has 

missed only one payment, so long as the 

payment was missed at least 120 days 

ago and the borrower has not become 

current since. However, information 

gathered in industry outreach indicates 

that the majority of servicers generally 

do not initiate foreclosure proceedings 

in the case of consumers that are behind 

by three or fewer payments. In addition, 

Fannie Mae and Freddie Mac servicing 

guidelines generally prevent servicers 

from initiating foreclosure if a loan is 

delinquent by fewer than four monthly 

payments. For servicers that do not 

apply payments to the oldest 

outstanding periodic payment, the 

proposal would not affect their 

application of the 120-day rule. 

In addition, the Bureau believes that 

it is particularly unlikely that a small 

servicer would initiate foreclosure 

proceedings with respect to a borrower 

who is not at least four payments 

behind. As the Bureau stated in the 

2013 RESPA Servicing Final Rule, the 

vast majority of small servicers are 

community banks and credit unions that 

generally maintain a ‘‘relationship’’ 

model that depends on repeat business 

and are particularly vulnerable to 

reputational harm from a failure to treat 

customers well. The Bureau believes 

that such servicers would be 

particularly unlikely to initiate 

foreclosure proceedings in a case where 

a consumer had fallen behind by a few 

mortgage payments but continued to 

make regular payments going forward. 

For these reasons, the Bureau expects 

that the proposed provision will not 

impose meaningful new constraints on 

servicers. 

D. Changes to Force-Placed Insurance 

Notices 

The Bureau is proposing changes to 

force-placed insurance notices, which 

pursuant to § 1024.37(c) servicers must 

deliver to borrowers before they can 

charge borrowers for force-placed 

insurance, to modify the prescribed 

notices slightly to accommodate the 

circumstance where a consumer’s 

hazard insurance coverage is 

insufficient, rather than expiring. The 

proposed rule is intended to reduce the 

burden on servicers and borrowers by 

providing greater clarity in 

circumstances where the form of notice 

that is currently required does not 

accurately describe the deficiency in the 

borrower’s insurance coverage. The 

proposed change represents a minor 

amendment to the required force-placed 

insurance notice and the Bureau does 

not believe that it will impose any 

significant burden on servicers. 

Certification 

Accordingly, the undersigned certifies 

that this proposal, if adopted, would not 

have a significant economic impact on 

a substantial number of small entities. 

The Bureau requests comment on the 

analysis above and requests any relevant 

data. 

VIII. Paperwork Reduction Act 

Certain provisions of this notice of 

proposed rulemaking contain 

‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.) (Paperwork 

Reduction Act or PRA). The collection 

of information contained in this notice 

of proposed rulemaking, and identified 

as such, has been submitted to OMB for 

review under section 3507(d) of the 

PRA. Notwithstanding any other 

provision of law, under the PRA, the 

Bureau may not conduct or sponsor, and 

a person is not required to respond to, 

this information collection unless the 

information collection displays a 

currently valid control number. 

This proposed rule would amend 12 

CFR 1024 (Regulation X), which 

implements the Real Estate Settlement 

Procedures Act (RESPA), and 12 CFR 

1026 (Regulation Z), which implements 

the Truth in Lending Act (TILA). 

Regulations X and Z currently contain 

collections of information approved by 

OMB. The Bureau’s OMB control 

number for Regulation X is 3170–0016 

and for Regulation Z is 3170–0015. 

Information collections for the proposed 

rule would be authorized under OMB 

control numbers 3170–0027 for 

Regulation X and 3170–0028 for 

Regulation Z. 

The Bureau is proposing six new 

information collection requirements, or 

changes to existing information 

collection requirements, in Regulation 

X: 

1. Proposals to require servicers to 

communicate with potential successors 

in interest about their requirements for 

confirming a successor in interest’s 

identity and interest in the property and 

to treat successors in interest as 

borrowers for purposes of Regulation 

X’s mortgage servicing rules. 

2. Minor changes to force-placed 

insurance notices to address the 

circumstance in which a borrower’s 

hazard insurance coverage is 


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318For purposes of this PRA analysis, references 

to ‘‘creditors’’ or ‘‘lenders’’ shall be deemed to refer 

collectively to commercial banks, savings 

institutions, credit unions, and mortgage companies 

(i.e., non-depository lenders), unless otherwise 

stated. Moreover, reference to ‘‘respondents’’ shall 

generally mean all categories of entities identified 

in the sentence to which this footnote is appended, 

except as otherwise stated or if the context indicates 

otherwise. 

319For purposes of this PRA analysis, the 

Bureau’s depository respondents with respect to the 

proposed changes to Regulation Z are 120 

depository institutions and depository institution 

affiliates that service closed-end consumer 

mortgages. The Bureau’s non-depository 

respondents are an estimated 1,388 non-depository 

servicers. Unless otherwise specified, all references 

to burden hours and costs for the Bureau 

respondents for the collection requirements under 

the proposed changes to Regulation Z are based on 

a calculation of the burden from all of the Bureau’s 

depository respondents and half of the burden from 

the Bureau’s non-depository respondents. 

insufficient (rather than expired) and 

permit the consumer’s account number 

to be included on the notice. 

3. Provisions requiring servicers to 

provide early intervention written 

notices to consumers in bankruptcy and 

to consumers who have provided the 

servicer with a cease communications 

notice under the FDCPA. 

4. Requirement that servicers provide 

a notice to consumers when a loss 

mitigation application is complete. 

5. Requirement that servicers provide 

a notice to consumers if their 

determination with respect to a loss 

mitigation application is delayed 

beyond a date that is 30 days after 

receipt of a complete loss mitigation 

application because information from 

third parties required to evaluate the 

application has not been submitted. 

6. Requirement that servicers comply 

with the loss mitigation provisions of 

RESPA with respect to multiple loss 

mitigation applications from the same 

borrower. Servicers that offer loss 

mitigation options in the ordinary 

course of business are required to follow 

certain procedures when evaluating loss 

mitigation applications, including (1) 

providing a notice telling the borrower 

if the loss mitigation application is 

incomplete, approved, or denied (and, 

for denials of loan modification 

requests, a more detailed notice of the 

specific reason for denial and appeal 

rights), (2) providing a notice of the 

appeal determination, and (3) providing 

servicers of senior or second liens 

encumbering the property that is the 

subject of the loss mitigation application 

copies of the loss mitigation application. 

The Bureau is also proposing two new 

information collection requirements, or 

changes to existing information 

collection requirements, in Regulation 

Z: 

7. Proposals requiring servicers to 

treat successors in interest as consumers 

for purposes of Regulation Z’s mortgage 

servicing rules. 

8. Requirement that servicers provide 

periodic statements to consumers in 

bankruptcy. 

These information collections would 

be required to provide benefits for 

consumers and would be mandatory. 

See 15 U.S.C. 1601 et seq.; 12 U.S.C. 

2601 et seq. Because the Bureau does 

not collect any information, no issue of 

confidentiality arises. The likely 

respondents would be federally insured 

depository institutions (such as 

commercial banks, savings banks, and 

credit unions) and non-depository 

institutions (such as mortgage brokers, 

real estate investment trusts, privateequity funds, etc.) that service consumer 

mortgages.318

Under the proposed rule, the Bureau 

accounts for the entire paperwork 

burden for respondents under 

Regulation X. The Bureau generally also 

accounts for the paperwork burden 

associated with Regulation Z for the 

following respondents pursuant to its 

administrative enforcement authority: 

Insured depository institutions with 

more than $10 billion in total assets, 

their depository institution affiliates, 

and certain nondepository institutions. 

The Bureau and the FTC generally both 

have enforcement authority over 

nondepository institutions for 

Regulation Z. Accordingly, the Bureau 

has allocated to itself half of the 

estimated burden to nondepository 

institutions. Other Federal agencies are 

responsible for estimating and reporting 

to OMB the total paperwork burden for 

the institutions for which they have 

administrative enforcement authority. 

They may, but are not required to, use 

the Bureau’s burden estimation 

methodology. 

Using the Bureau’s burden estimation 

methodology, the Bureau believes the 

total estimated industry burden under 

Regulation X for the approximately 

12,711 respondents subject to the 

proposed rule would be approximately 

67,000 hours for one time changes and 

64,000 hours annually. Using the 

Bureau’s burden estimation 

methodology, the total estimated 

industry burden under Regulation Z for 

the approximately 12,711 banks, savings 

institutions, credit unions, and mortgage 

companies subject to the proposed rule, 

including Bureau respondents,319 is 

approximately 2,900 hours for one-time 

changes and 8,300 hours annually. The 

estimates presented in this part VIII 

represent weighted averages across 

respondents. The Bureau expects that 

the amount of time required to 

implement each of the changes for a 

given institution may vary based on the 

size, complexity, and practices of the 

respondent. The estimated burdens in 

this PRA analysis represent averages for 

all respondents. The Bureau expects 

that the amount of time required to 

implement each of the proposed 

changes for a given institution may vary 

based on the size, complexity, and 

practices of the respondent. 

For purposes of this PRA analysis, the 

Bureau estimates that there are 11,323 

depository institutions and credit 

unions subject to the proposed rule, and 

an additional 1,388 non-depository 

institutions. Based on discussions with 

industry, the Bureau assumes that all 

depository respondents except for one 

large entity and 95% of non-depository 

respondents (and 100% of small nondepository respondents) use third-party 

software and information technology 

vendors. Under existing contracts, 

vendors would absorb the one-time 

software and information technology 

costs associated with complying with 

the proposal for large- and mediumsized respondents but not for small 

respondents. 

A. Information Collection 

Requirements—Regulation X 

The Bureau believes the following 

aspects of the proposed rule would be 

information collection requirements 

under the PRA. 

1. Successors in Interest 

Under the Bureau’s proposal, 

servicers would be required (1) to 

respond to a written request from a 

person that indicates that the person 

may be a successor in interest by 

providing that person with information 

regarding what documents the servicer 

requires to confirm the person’s identity 

and ownership interest in the property 

and (2) to have policies and procedures 

to ensure that the servicer can provide 

promptly upon request a description of 

what documents the servicer reasonably 

requires to confirm the person’s identity 

and ownership interest in the property, 

and, upon the receipt of such 

documents, notify the person promptly, 

as applicable, that the servicer has 

confirmed the person’s status, has 

determined that additional documents 

are required (and what those documents 

are), or has determined that the person 

is not a successor in interest. Servicers 

would also be subject to Regulation X’s 

requirements, including loss mitigation 

requirements, with respect to successors 

in interest. 

All respondents would have a onetime burden under this proposed 


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requirement associated with reviewing 

the regulation. Certain respondents will 

have one-time burden in hours from 

training personnel in compliance with 

the proposed requirement. The Bureau 

estimates that one-time hourly burden 

to comply with the proposed disclosure 

requirements to be four hours and forty 

minutes, on average, per respondent. 

Respondents would have ongoing 

burden in hours and/or vendor costs 

associated with the information 

technology used in producing the 

disclosure. All respondents would have 

ongoing vendor costs associated with 

distributing (e.g., mailing) the disclosure 

and some will have production costs 

associated with the new disclosure. The 

Bureau estimates this ongoing burden to 

be 10 minutes and $0.37, on average, for 

each respondent. 

2. Changes to Force-Placed Insurance 

Disclosures 

The proposed rule makes minor 

changes to the content of required forceplaced insurance notices, which are 

required before a servicer may charge a 

borrower for force-placed insurance. 

All respondents would have a onetime burden under this requirement 

associated with reviewing the 

regulation. All respondents will also 

have one-time burden in hours or 

vendor costs from changing existing 

systems to accommodate the required 

new disclosure. The Bureau estimates 

that one-time hourly burden to comply 

with the proposed disclosure 

requirements to be 20 minutes and $70, 

on average, per respondent. 

Because the content of the required 

notices would not change substantially 

under the proposed rule and the 

circumstances under which the 

disclosures are required would not 

change, there would not be an ongoing 

burden under the proposed rule. 

3. Early Intervention Written Notices 

The proposed rule requires that 

servicers send written early intervention 

notices to consumers in bankruptcy and 

consumers who have exercised their 

cease communication rights under the 

FDCPA. For consumers in bankruptcy, 

the servicer would be required to send 

the same early intervention notice that 

is required to be sent to other 

consumers. However, for notices sent to 

consumers who have exercised their 

FDCPA cease communication rights, the 

notices would be subject to certain 

additional requirements. Note that 

consumers have rights under the FDCPA 

only with respect to accounts that were 

delinquent at the time the servicer 

acquired the servicing rights. Therefore, 

servicers that do not acquire servicing 

rights in the course of their business 

would not be subject to the rule’s 

requirements. 

All respondents would have a onetime burden under this requirement 

associated with reviewing the 

regulation. Certain respondents will 

have one-time burden in hours or 

vendor costs from changing existing 

systems to accommodate the required 

new disclosure. The Bureau estimates 

that one-time hourly burden to comply 

with the proposed disclosure 

requirements to be one hour and 40 

minutes, on average, per respondent. 

Respondents would have ongoing 

burden in hours and/or vendor costs 

associated with the information 

technology used in producing the 

disclosure. All respondents would have 

ongoing vendor costs associated with 

distributing (e.g., mailing) the disclosure 

and some will have production costs 

associated with the new disclosure. The 

Bureau estimates this ongoing burden to 

be four hours and $446, on average, for 

each respondent. 

4. Notice of Complete Loss Mitigation 

Application 

The Bureau’s proposal requires a 

servicer to provide a written notice to a 

borrower promptly upon receiving the 

borrower’s complete application. The 

Bureau understands that the practice of 

providing borrowers with a written 

notice informing them that their loss 

mitigation application is complete is a 

common business practice (i.e., a ‘‘usual 

and customary’’ business practice) today 

for most mortgage servicers. However, 

the Bureau understands that the specific 

content of the proposed notices may not 

reflect common practices. 

All respondents would have a onetime burden under this requirement 

associated with reviewing the 

regulation. In addition, while the 

Bureau considers borrower notifications 

that loss mitigation applications are 

complete as the normal course of 

business, institutions may still have to 

incur one-time costs associated with 

modifying their existing disclosures to 

comply with the Bureau’s proposed 

disclosure provisions. As a result, the 

Bureau’s one-time burden incorporates 

these costs. The Bureau estimates this 

one-time burden to be three hours, on 

average, for each respondent. 

5. Notice Regarding Outstanding ThirdParty Information 

The proposed rule requires written 

notice to borrowers if, thirty days 

following submission of a complete loss 

mitigation application, the servicer has 

not received information from a party 

other than the servicer or the borrower 

and is necessary to evaluate the 

application. 

All respondents would have a onetime burden under this requirement 

associated with reviewing the 

regulation. Certain respondents will 

have one-time burden in hours or 

vendor costs from creating software and 

information technology capability to 

produce the proposed disclosure. The 

Bureau estimates that one-time hourly 

burden to comply with the proposed 

disclosure requirements to be three 

hours, on average, per respondent. 

Respondents would have ongoing 

burden in hours and/or vendor costs 

associated with the information 

technology used in producing the 

disclosure. All respondents would have 

ongoing vendor costs associated with 

distributing (e.g., mailing) the disclosure 

and some will have production costs 

associated with the new disclosure. The 

Bureau estimates this ongoing burden to 

be 10 minutes and $13, on average, for 

each respondent. 

6. Requirement To Evaluate Multiple 

Loss Mitigation Applications 

Currently, servicers (other than small 

servicers) are required to comply with 

the loss mitigation provisions of 

§ 1024.41 only once during the life of a 

loan, including the provision of up to 

three notices per loss mitigation 

application. Under the proposed rule, 

servicers would be required to comply 

with the loss mitigation provisions of 

§ 1024.41 for borrowers who have 

previously completed a loss mitigation 

application, so long as the borrower has 

become current in the period following 

the completion of the application. 

All respondents would have a onetime burden under this requirement 

associated with reviewing the 

regulation. Certain respondents would 

have one-time burden from revising 

their systems to provide for evaluation 

of borrowers for subsequent loss 

mitigation applications. The Bureau 

estimates this one-time burden to be 40 

minutes, on average, for each 

respondent. The Bureau estimates the 

ongoing burden to be 121 hours and 

$213, on average, for each respondent. 

B. Information Collection 

Requirements—Regulation Z 

1. Successors in Interest Under 

Regulation Z 

Under the Bureau’s proposal, 

servicers would be subject to Regulation 

Z’s requirements with respect to 

successors in interest. All respondents 

would have a one-time burden under 

this proposed requirement associated 

with reviewing the regulation. The 


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Bureau estimates that one- time hourly 

burden to comply with the proposed 

disclosure requirements to be 10 

minutes, on average, per respondent. 

Certain respondents would have 

ongoing vendor costs associated with 

distributing (e.g., mailing) the disclosure 

and some will have production costs 

associated with the new disclosure. The 

Bureau estimates this ongoing burden to 

be 10 minutes and $7, on average, for 

each respondent. 

2. Periodic Statements 

Under the proposed rule, all 

respondents would be required to 

provide periodic statements to certain 

borrowers in bankruptcy. 

All respondents would have a onetime burden under this requirement 

associated with reviewing the 

regulation. Certain respondents will 

have one-time burden in hours or 

vendor costs from changing existing 

systems to produce the required new 

disclosure. The Bureau estimates that 

one-time hourly burden to comply with 

the proposed disclosure requirements to 

be 18 hours, on average, per respondent. 

Respondents would have ongoing 

burden in hours and/or vendor costs 

associated with the information 

technology used in producing the 

disclosure. Certain respondents would 

have ongoing vendor costs associated 

with distributing (e.g., mailing) the 

disclosure and some will have 

production costs associated with the 

new disclosure. The Bureau estimates 

this ongoing burden to be 53 hours and 

$5,270, on average, for each respondent. 

C. Summary of Burden Hours— 

Regulation X 

The estimated burden on Bureau 

respondents from the proposed changes 

to Regulation X is summarized below. 

Under the proposed rule, the Bureau 

accounts for the entire paperwork 

burden for respondents under 

Regulation X. 

Respondents 

Disclosures 

per respondent 

Hours burden 

per disclosure 

Total burden 

hours 

Total vendor 

costs 

Ongoing ........................ ........................ .......................... ........................ ........................

Successors in Interest—Regulation X ........................ 12,711 6 0 .013 1,086 $4,731 

Force-Placed Insurance .............................................. 12,711 0 0 0 0 

Early Intervention Written Notices .............................. 502 1,487 0 .003 2,239 223,890 

Notice of Complete Loss Mitigation Application ......... 502 0 0 0 0 

Third-Party Information ............................................... 502 52 0 .003 67 6,681 

Loss Mitigation—Subsequent Applications ................ 502 837 0 .144 60,571 107,100 

One-Time ........................ ........................ .......................... ........................ ........................

Successors in Interest—Regulation X ........................ 12,711 1 4 .7 59,742 0 

Force-Placed Insurance .............................................. 12,711 1 0 .269 3,418 879,048 

Early Intervention Written Notices .............................. 502 1 1 .695 851 0 

Notice of Complete Loss Mitigation Application ......... 502 1 2 .640 1,326 0 

Third-Party Information ............................................... 502 1 2 .690 1,351 0 

Loss Mitigation—Subsequent Applications ................ 502 1 0 .578 290 0 

Totals may not be exact due to rounding. 

D. Summary of Burden Hours— 

Regulation Z 

The estimated burden on Bureau 

respondents from the proposed changes 

to Regulation Z is summarized below. 

The Bureau accounts for the paperwork 

burden associated with Regulation Z for 

the following respondents pursuant to 

its administrative enforcement 

authority: Insured depository 

institutions with more than $10 billion 

in total assets, their depository 

institution affiliates, and certain 

nondepository institutions. The Bureau 

and the FTC generally both have 

enforcement authority over 

nondepository institutions for 

Regulation Z. Accordingly, the Bureau 

has allocated to itself half of the 

estimated burden to nondepository 

institutions. 

Bureau respondents 

Disclosures 

per bureau respondent 

Hours burden 

per disclosure 

Total burden 

hours for bureau respondents 

Total vendor 

costs for bureau respondents 

Ongoing ........................ ........................ .......................... ........................ ........................

Successors in Interest—Regulation Z ........................ 814 24 0 .003 56 $5,678 

Periodic Statements in Bankruptcy ............................ 157 29,521 0 .002 8,247 $824,670 

One-Time ........................ ........................ .......................... ........................ ........................

Successors in Interest—Regulation Z ........................ 814 1 0 .05 41 $0 

Periodic Statements in Bankruptcy ............................ 157 1 17 .835 2,791 $0 

Totals may not be exact due to rounding. 

E. Comments 

Comments are specifically requested 

concerning: (1) Whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Bureau, including 

whether the information will have 

practical utility; (2) the accuracy of the 

estimated burden associated with the 

proposed collections of information; (3) 

how to enhance the quality, utility, and 

clarity of the information to be 

collected; and (4) how to minimize the 

burden of complying with the proposed 

collections of information, including the 

application of automated collection 

techniques or other forms of information 

technology. Comments on the collection 

of information requirements should be 

sent to the Office of Management and 

Budget (OMB), Attention: Desk Officer 

for the Consumer Financial Protection 

Bureau, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, or by the Internet to http://oira_

submission@omb.eop.gov, with copies 

to the Bureau at the Consumer Financial 


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Protection Bureau (Attention: PRA 

Office), 1700 G Street NW., Washington, 

DC 20552, or by the Internet to CFPB_

Public_PRA@cfpb.gov. 

List of Subjects 

12 CFR Part 1024 

Condominiums, Consumer protection, 

Housing, Mortgage servicing, Mortgages, 

Reporting and recordkeeping 

requirements. 

12 CFR Part 1026 

Advertising, Consumer protection, 

Credit, Credit unions, Mortgages, 

National banks, Reporting and 

recordkeeping requirements, Reporting, 

Savings associations, Truth in lending. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Bureau proposes to 

amend 12 CFR parts 1024 and 1026 as 

follows: 

PART 1024— 

REAL ESTATE SETTLEMENT 

PROCEDURES ACT (REGULATION X) 

■ 1. The authority citation for part 1024 

continues to read as follows: 

Authority: 12 U.S.C. 2603–2605, 2607, 

2609, 2617, 5512, 5532, 5581. 

Subpart C— 

Mortgage Servicing 

■ 2. Section 1024.30 is amended by 

adding paragraph (d) to read as follows: 

§ 1024.30 Scope. 

* * * * * 

(d) Successors in interest. A successor 

in interest shall be considered a 

borrower for the purposes of this 

subpart once a servicer confirms the 

successor in interest’s identity and 

ownership interest in a property that 

secures a mortgage loan covered by this 

subpart. 

■ 3. Section 1024.31 is amended by 

adding definitions of Delinquency and 

Successor in interest in alphabetical 

order to read as follows: 

§ 1024.31 Definitions. 

* * * * * 

Delinquency means a period of time 

during which a borrower and a 

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 became due and unpaid, until 

such time as the outstanding payment is 

made. 

* * * * * 

Successor in interest means a person 

to whom an ownership interest in a 

property securing a mortgage loan is 

transferred from a prior borrower, 

provided that the transfer falls under an 

exemption specified in section 341(d) of 

the Garn-St Germain Depository 

Institutions Act of 1982, 12 U.S.C. 

1701j-3(d). 

* * * * * 

■ 4. Section 1024.36 is amended by 

adding paragraph (i) to read as follows: 

§ 1024.36 Requests for information. 

* * * * * 

(i) Successors in interest. With respect 

to any written request from a person 

that indicates that the person may be a 

successor in interest and that includes 

the name of the prior borrower and 

information that enables the servicer to 

identify that borrower’s mortgage loan 

account, a servicer shall respond by 

providing the potential successor in 

interest with information regarding the 

documents the servicer requires to 

confirm the person’s identity and 

ownership interest in the property. With 

respect to the written request, a servicer 

shall treat the person as a borrower for 

the purposes of the requirements of 

paragraphs (c) through (g) of this 

section. If a servicer has established an 

address that a borrower must use to 

request information pursuant to 

paragraph (b) of this section, a servicer 

must comply with the requirements of 

this paragraph only for requests 

received at the established address. 

■ 5. Section 1024.37 is amended by 

revising paragraphs (c)(2)(v) and (c)(4), 

(d)(2)(ii) introductory text, (d)(2)(ii)(B), 

(d)(3) and (4), and (e)(4) to read as 

follows: 

§ 1024.37 Force-placed insurance. 

* * * * * 

(c) * * * 

(2) * * * 

(v) A statement that: 

(A) The borrower’s hazard insurance 

is expiring, has expired, or provides 

insufficient coverage, as applicable; 

(B) The servicer does not have 

evidence that the borrower has hazard 

insurance coverage past the expiration 

date or evidence that the borrower has 

hazard insurance that provides 

sufficient coverage, as applicable; and 

(C) If applicable, identifies the type of 

hazard insurance for which the servicer 

lacks evidence of coverage; 

* * * * * 

(4) Additional Information. Except for 

the mortgage loan account number, a 

servicer may not include any 

information other than information 

required by paragraphs (c)(2) of this 

section in the written notice required by 

paragraph (c)(1)(i) of this section. 

However, a servicer may provide such 

additional information to a borrower on 

separate pieces of paper in the same 

transmittal. 

(d) * * * 

(2) * * * 

(ii) Servicer not receiving 

demonstration of continuous coverage. 

A servicer that has received hazard 

insurance information after delivering to 

a borrower or placing in the mail the 

notice required by paragraph (c)(1)(i) of 

this section, but has not received, from 

the borrower or otherwise, evidence 

demonstrating that the borrower has had 

sufficient hazard insurance coverage in 

place continuously, must set forth in the 

notice required by paragraph (c)(1)(ii) of 

this section the following information: 

* * * * * 

(B) The information required by 

paragraphs (c)(2)(ii) through (iv), (ix) 

through (xi), and (d)(2)(i)(B) and (D) of 

this section; 

* * * * * 

(3) Format. A servicer must set the 

information required by paragraphs 

(d)(2)(i)(B) and (D) of this section in 

bold text. The requirements of 

paragraph (c)(3) of this section apply to 

the information required by paragraph 

(d)(2)(i)(C) of this section. A servicer 

may use form MS–3B in appendix MS– 

3 of this part to comply with the 

requirements of paragraphs (d)(1) and 

(d)(2)(i) of this section. A servicer may 

use form MS–3C in appendix MS–3 of 

this part to comply with the 

requirements of paragraphs (d)(1) and 

(d)(2)(ii) of this section. 

(4) Additional information. Except for 

the borrower’s mortgage loan account 

number, a servicer may not include any 

information other than information 

required by paragraph (d)(2)(i) or (ii) of 

this section, as applicable, in the written 

notice required by paragraph (c)(1)(ii) of 

this section. However, a servicer may 

provide such additional information to 

a borrower on separate pieces of paper 

in the same transmittal. 

* * * * * 

(e) * * * 

(4) Additional information. Except for 

the borrower’s mortgage loan account 

number, a servicer may not include any 

information other than information 

required by paragraph (e)(2) of this 

section in the written notice required by 

paragraph (e)(1) of this section. 

However, a servicer may provide such 

additional information to a borrower on 

separate pieces of paper in same 

transmittal. 

* * * * * 


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■ 6. Section 1024.38 is amended by 

revising paragraph (b)(1)(vi) and adding 

paragraph (b)(2)(vi) to read as follows: 

§ 1024.38 General servicing policies, 

procedures, and requirements. 

* * * * * 

(b) * * * 

(1) * * * 

(vi)(A) Upon notification of the death 

of a borrower or of any transfer of the 

property securing a mortgage loan, 

promptly identify and facilitate 

communication with any potential 

successors in interest regarding the 

property; 

(B) Upon identification of a potential 

successor in interest, including through 

any request made by a potential 

successor in interest under § 1024.36(i) 

or any loss mitigation application 

received from a potential successor in 

interest, promptly provide to the 

potential successor in interest a 

description of the documents the 

servicer reasonably requires to confirm 

that person’s identity and ownership 

interest in the property and how the 

person may submit a written request 

under § 1024.36(i) (including the 

appropriate address); and 

(C) Upon the receipt of such 

documents, promptly notify the person, 

as applicable, that the servicer has 

confirmed the person’s status, has 

determined that additional documents 

are required (and what those documents 

are), or has determined that the person 

is not a successor in interest. 

(2) * * * 

(vi) 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). 

* * * * * 

■ 7. Section 1024.39 is amended by 

revising paragraphs (a), (b)(1), and (d) to 

read as follows: 

§ 1024.39 Early intervention requirements 

for certain borrowers. 

(a) Live contact. A servicer shall 

establish or make good faith efforts to 

establish live contact with a delinquent 

borrower not later than the 36th day of 

a borrower’s delinquency, and again no 

later than 36 days after each payment 

due date so long as the borrower 

remains delinquent. Promptly after 

establishing live contact, the servicer 

shall inform such borrower about the 

availability of loss mitigation options if 

appropriate. 

(b) Written notice—(1) Notice 

required. Except as otherwise provided 

in this section, a servicer shall provide 

to a delinquent borrower a written 

notice with the information set forth in 

paragraph (b)(2) of this section not later 

than the 45th day of the borrower’s 

delinquency, and again no later than 45 

days after each payment due date so 

long as the borrower remains 

delinquent. However, a servicer is not 

required to provide the written notice 

more than once during any 180-day 

period. If the borrower is or becomes 45 

days delinquent after any 180-day 

period, a servicer must provide the 

written notice again no later than 45 

days after the payment due date. 

* * * * * 

(d) Exemptions—(1) Borrowers in 

bankruptcy—(i) Live Contact. A servicer 

is exempt from the requirements of 

paragraph (a) of this section for a 

borrower if: 

(A) The borrower is a debtor in 

bankruptcy; 

(B) Any borrower on the mortgage 

loan is a debtor in Chapter 12 or Chapter 

13 bankruptcy; or 

(C) The borrower has discharged 

personal liability for the mortgage loan 

through bankruptcy. 

(ii) Written notice. A servicer is 

exempt from the requirements of 

paragraph (b) of this section for a 

borrower if: 

(A) Any of the conditions identified 

in paragraph (d)(1)(i) of this section are 

satisfied and no loss mitigation options 

are available; 

(B) The borrower is a debtor in 

bankruptcy and the borrower’s 

confirmed plan of reorganization 

provides that the borrower will 

surrender the property 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; 

(C) The borrower is a debtor in 

bankruptcy and the borrower files with 

the court a Statement of Intention 

pursuant to 11 U.S.C. 521(a) identifying 

an intent to surrender the property 

securing the mortgage loan; or 

(D) The borrower is a debtor in 

bankruptcy and a court enters an order 

in the bankruptcy case providing for the 

avoidance of the lien securing the 

mortgage loan or lifting the automatic 

stay pursuant to 11 U.S.C. 362 with 

respect to the property securing the 

mortgage loan. 

(2) Fair Debt Collection Practices Act. 

With regard to a mortgage loan for 

which a borrower has sent a notification 

pursuant to the Fair Debt Collections 

Practices Act (FDCPA) section 805(c) 

(15 U.S.C. 1692c(c)), a servicer subject 

to the FDCPA with respect to that 

borrower’s loan: 

(i) Is exempt from the requirements of 

paragraph (a) of this section; and 

(ii) Is exempt from the requirements 

of paragraph (b) of this section if no loss 

mitigation options are available; but 

(iii) Must comply with the 

requirements of paragraph (b) of this 

section, as modified herein, if loss 

mitigation options are available: 

(A) In addition to the information 

required pursuant to paragraph (b)(2) of 

this section, the written notice must 

include a statement that the servicer 

may or intends to invoke its specified 

remedy of foreclosure. Model clause 

MS–4(D) in appendix MS–4 to this part 

may be used to comply with this 

requirement. 

(B) The written notice may not 

contain a request for payment. 

(C) A servicer is prohibited from 

providing the written notice more than 

once during any 180-day period. 

■ 8. Section 1024.41 is amended by 

revising paragraph (c)(1) introductory 

text and paragraphs (c)(2)(iii) and (iv), 

adding paragraphs (c)(3) and (4), 

revising paragraph (f)(1)(iii) and 

paragraph (i), and adding paragraph (k) 

to read as follows: 

§ 1024.41 Loss mitigation procedures. 

* * * * * 

(c) * * * 

(1) Complete loss mitigation 

application. Except as provided in 

paragraph (c)(4)(ii) of this section, if a 

servicer receives a complete loss 

mitigation application more than 37 

days before a foreclosure sale, then, 

within 30 days of receiving a borrower’s 

complete loss mitigation application, a 

servicer shall: 

* * * * * 

(2) * * * 

(iii) Payment forbearance. 

Notwithstanding paragraph (c)(2)(i) of 

this section, a servicer may offer a shortterm payment forbearance program or a 

short-term repayment plan to a borrower 

based upon an evaluation of an 

incomplete loss mitigation application. 

A payment forbearance program or a 

repayment plan offered under this 

paragraph must be provided to the 

borrower in writing before the program 

or plan begins and must clearly specify 

the payment terms and duration. A 

servicer shall not make the first notice 

or filing required by applicable law for 

any judicial or non-judicial foreclosure 

process, and shall not move for 

foreclosure judgment or order of sale, or 

conduct a foreclosure sale, if a borrower 

is performing pursuant to the terms of 

a payment forbearance program or 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74287 

repayment plan offered pursuant to this 

section. A servicer may offer a shortterm forbearance program in 

conjunction with a short-term 

repayment plan under this paragraph. 

(iv) Facially complete application. A 

loss mitigation application shall be 

considered facially complete when a 

borrower submits all the missing 

documents and information as stated in 

the notice required under paragraph 

(b)(2)(i)(B) of this section, no additional 

information is requested in such notice, 

or when the servicer is required under 

paragraph (c)(3) of this section to send 

the borrower a notice of complete 

application. If the servicer later 

discovers additional information or 

corrections to a previously submitted 

document are required to complete the 

application, the servicer must promptly 

request the missing information or 

corrected documents and treat the 

application as complete for the purposes 

of paragraphs (f)(2) and (g) of this 

section until the borrower is given a 

reasonable opportunity to complete the 

application. If the borrower completes 

the application within this period, the 

application shall be considered 

complete as of the date it first became 

facially complete, for the purposes of 

paragraphs (d), (e), (f)(2), (g), and (h) of 

this section, and as of the date the 

application was actually complete for 

the purposes of paragraph (c). A servicer 

that complies with this paragraph will 

be deemed to have fulfilled its 

obligation to provide an accurate notice 

under paragraph (b)(2)(i)(B). 

(3) Notice of complete application. (i) 

Subject to paragraph (c)(3)(ii) of this 

section, upon receiving a borrower’s 

complete loss mitigation application, 

the servicer shall promptly provide the 

borrower a written notice including the 

following information: 

(A) That the loss mitigation 

application is complete; 

(B) The date the servicer received the 

complete application; 

(C) Whether a foreclosure sale was 

scheduled as of the date the servicer 

received the complete application and, 

if so, the date of that scheduled sale; 

(D) The date the borrower’s 

protections began under paragraph (f)(2) 

and (g) of this section, as applicable, 

and a concise description of those 

protections; 

(E) That the servicer expects to 

complete its evaluation within 30 days 

of the date it received the complete 

application; 

(F) A statement that, although the 

application is complete, the borrower 

may need to submit additional 

information at a later date if the servicer 

determines that it is necessary; and 

(G) If applicable, that the borrower 

will have the opportunity to appeal the 

servicer’s determination to deny the 

borrower for any trial or permanent loan 

modification pursuant to paragraph (h) 

of this section. 

(ii) A servicer is not required to 

provide the notice under paragraph 

(c)(3)(i) of this section if: 

(A) The servicer has already provided 

the borrower a notice under paragraph 

(b)(2)(i)(B) of this section informing the 

borrower that the application is 

complete and the servicer has not 

subsequently requested additional 

information or a corrected version of a 

previously submitted document from 

the borrower pursuant to paragraph 

(c)(2)(iv) of this section; 

(B) The application was not complete 

or facially complete more than 37 days 

before a foreclosure sale; or 

(C) The servicer has already provided 

the borrower a notice under paragraph 

(c)(1)(ii) of this section. 

(4) Information not in the borrower’s 

control—(i) Reasonable diligence. If a 

servicer requires documents or 

information not in the borrower’s 

control to determine which loss 

mitigation options, if any, it will offer to 

the borrower, the servicer must exercise 

reasonable diligence in obtaining such 

documents or information. 

(ii) Effect in case of delay. (A) A 

servicer shall not deny a complete loss 

mitigation application solely because 

the servicer has not received documents 

or information not in the borrower’s 

control. 

(B) If, 30 days after a complete 

application is received, the servicer is 

unable to make a determination as to 

which loss mitigation options, if any, it 

will offer to the borrower because the 

servicer lacks documents or information 

from a party other than the borrower or 

the servicer, the servicer must promptly 

provide the borrower a written notice 

stating: 

(1) That the servicer has not received 

documents or information not in the 

borrower’s control that the servicer 

requires to determine which loss 

mitigation options, if any, the servicer 

will offer on behalf of the owner or 

assignee of the mortgage; 

(2) The specific documents or 

information that the servicer lacks; 

(3) The date on which the servicer 

first requested that documentation or 

information during the current loss 

mitigation application process; and 

(4) That the servicer will complete its 

evaluation of the borrower for all 

available loss mitigation options 

promptly upon receiving the 

documentation or information. 

(C) If, due to a lack of documents or 

information from a party other than the 

borrower or the servicer, a servicer is 

unable to determine which loss 

mitigation options, if any, to offer a 

borrower within 30 days of receiving a 

complete application, upon receiving 

such documents or information, the 

servicer must promptly provide the 

borrower written notice stating the 

servicer’s determination in accordance 

with paragraph (c)(1)(ii) of this section. 

* * * * * 

(f) * * * 

(1) * * * 

(iii) The servicer is joining the 

foreclosure action of a superior or 

subordinate lienholder. 

* * * * * 

(i) Duplicative requests. A servicer 

must comply with the requirements of 

this section for a borrower’s loss 

mitigation application, unless the 

servicer has previously complied with 

the requirements of this section for a 

complete loss mitigation application 

submitted by a borrower and the 

borrower has been delinquent at all 

times since the same borrower 

submitted the complete application. 

* * * * * 

(k) Servicing Transfers—(1) In 

general—(i) Timing of compliance. 

Except as provided in paragraphs (k)(2) 

through (4) of this section, if a transferee 

servicer acquires the servicing of a 

mortgage loan for which a loss 

mitigation application is pending as of 

the transfer date, the transferee servicer 

must comply with the requirements of 

this section for that loss mitigation 

application within the timeframes that 

were applicable to the transferor 

servicer based on the date the transferor 

servicer received the loss mitigation 

application. Any protections under 

paragraphs (e) through (h) of this section 

that applied to a borrower before a 

transfer continue to apply 

notwithstanding the transfer. 

(ii) Transfer date defined. For 

purposes of this paragraph (k), the 

transfer date is the date on which the 

transfer of the servicing responsibilities 

from the transferor servicer to the 

transferee servicer occurs. 

(2) Acknowledgement notices. If a 

transferee servicer acquires the servicing 

of a mortgage loan for which the period 

to provide the notice required by 

paragraph (b)(2)(i)(B) of this section has 

not expired as of the transfer date, the 

transferee servicer must provide the 

notice within 10 days (excluding legal 

public holidays, Saturdays, and 

Sundays) of the date the transferor 

servicer received the loss mitigation 

application. 


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(3) Complete loss mitigation 

applications pending at transfer—(i) In 

general. Except as provided in 

paragraph (k)(3)(ii) and (iii) of this 

section, if a transferee servicer acquires 

the servicing of a mortgage loan for 

which a complete loss mitigation 

application is pending as of the transfer 

date, the transferee servicer must 

comply with the applicable 

requirements of paragraphs (c)(1) and 

(4) of this section within 30 days of the 

date the transferor servicer received the 

complete loss mitigation application. 

(ii) Involuntary transfers—(A) Timing 

of evaluation. Except as provided in 

paragraph (k)(3)(iii) of this section, if a 

transferee servicer, as a result of an 

involuntary transfer, acquires the 

servicing of a mortgage loan for which 

a complete loss mitigation application is 

pending as of the transfer date, the 

transferee servicer must comply with 

the applicable requirements of 

paragraphs (c)(1) and (4) of this section 

within 30 days of the date the transferor 

servicer received the complete loss 

mitigation application or within 15 days 

of the transfer date, whichever is later. 

(B) Involuntary transfer defined. For 

purposes of § 1024.41(k)(3)(ii), a transfer 

is involuntary when an unaffiliated 

investor or a court or regulator with 

jurisdiction requires, with less than 30 

days advance notice, the transferor 

servicer to transfer servicing to another 

servicer and the transferor servicer is in 

breach of, or default under, its servicing 

agreement for loss mitigation relatedservicing performance deficiencies or is 

in receivership or bankruptcy. 

(iii) Compliance not practicable. If 

compliance with the time periods set 

forth in paragraph (k)(3)(i) or 

(k)(3)(ii)(A) of this section, as 

applicable, is not practicable under the 

circumstances, a transferee servicer 

must complete the evaluation of the 

complete loss mitigation application 

and provide the applicable notices 

required by paragraphs (c)(1) and (4) of 

this section within a reasonably prompt 

time after the expiration of the 

applicable time period in paragraph 

(k)(3)(i) or (k)(3)(ii)(A) of this section. 

(4) Applications subject to appeal 

process. If a transferee servicer acquires 

the servicing of a mortgage loan for 

which, as of the transfer date, a 

borrower’s appeal pursuant to paragraph 

(h) of this section is pending or a 

borrower’s time period to appeal 

pursuant to paragraph (h) of this section 

has not expired, the transferee servicer 

must evaluate the appeal if it is able to 

determine whether it should offer the 

borrower the loan modification options 

subject to the appeal. 

(i) Evaluating appeal. If a transferee 

servicer is able to evaluate the 

borrower’s appeal but compliance 

within 30 days of when the borrower 

made the appeal is not practicable 

under the circumstances, a transferee 

servicer must complete the evaluation 

and provide the notice required by 

paragraph (h)(4) of this section within a 

reasonably prompt time after expiration 

of the 30-day period. 

(ii) Servicer unable to evaluate 

appeal. A transferee servicer that is 

unable to evaluate an appeal must treat 

the borrower’s appeal as a pending 

complete loss mitigation application 

and comply with the requirements of 

this section for such application, 

including evaluating the borrower for all 

loss mitigation options available to the 

borrower from the transferee servicer. 

For purposes of paragraphs (c) or (k)(3) 

of this section, as applicable, such a 

pending complete loss mitigation 

application shall be considered 

complete as of the date the appeal was 

received. For purposes of paragraphs (e) 

through (h) of this section, the transferee 

servicer must treat such a pending 

complete loss mitigation application as 

facially complete as of the date it was 

facially complete with respect to the 

transferor servicer. 

(5) Pending loss mitigation offers. A 

transfer does not affect a borrower’s 

ability to accept or reject a loss 

mitigation option offered under 

§ 1024.41(c) or (h). If a transferee 

servicer acquires the servicing of a 

mortgage loan for which the borrower’s 

time period under § 1024.41(e) or (h) for 

accepting or rejecting a loss mitigation 

option offered by the transferor servicer 

has not expired as of the transfer date, 

the transferee servicer must allow the 

borrower to accept or reject the offer 

during the unexpired balance of the 

applicable time period. 

■ 9. In Appendix MS–3 to part 1024, 

MS–3(A), MS–3(B), MS–3(C), and MS– 

3(D) are revised to read as follows: 

Appendix MS—Mortgage Servicing 

Appendix MS–3 to Part 1024 

Model Force-Placed Insurance Notice Forms 

* * * * * 

MS–3(A)—Model Form for Force-Placed 

Insurance Notice Containing Information 

Required By § 1024.37(c)(2) 

[Name and Mailing Address of Servicer] 

[Date of Notice] 

[Borrower’s Name] 

[Borrower’s Mailing Address] 

Subject: Please provide insurance 

information for [Property Address] 

Dear [Borrower’s Name]: 

Our records show that your [hazard] 

[Insurance Type] insurance [is expiring] 

[expired] [provides insufficient coverage], 

and we do not have evidence that you have 

obtained new coverage. Because [hazard] 

[Insurance Type] insurance is required on 

your property, [we bought insurance for your 

property] [we plan to buy insurance for your 

property]. You must pay us for any period 

during which the insurance we buy is in 

effect but you do not have insurance. 

You should immediately provide us with 

your insurance information. [Describe the 

insurance information the borrower must 

provide]. [The information must be provided 

in writing.] 

The insurance we [bought] [buy]: 

• May be significantly more expensive 

than the insurance you can buy yourself. 

• May not provide as much coverage as an 

insurance policy you buy yourself. 

If you have any questions, please contact 

us at [telephone number]. 

[If applicable, provide a statement advising 

a borrower to review additional information 

provided in the same transmittal.] 

MS–3(B)—Model Form for Force-Placed 

Insurance Notice Containing Information 

Required By § 1024.37(d)(2)(i) 

[Name and Mailing Address of Servicer] 

[Date of Notice] 

[Borrower’s Name] 

[Borrower’s Mailing Address] 

Subject: Second and final notice — please 

provide insurance information for 

[Property Address] 

Dear [Borrower’s Name]: 

This is your second and final notice that 

our records show that your [hazard] 

[Insurance Type] insurance [is expiring] 

[expired] [provides insufficient coverage], 

and we do not have evidence that you have 

obtained new coverage. Because [hazard] 

[Insurance Type] insurance is required on 

your property, [we bought insurance for your 

property] [we plan to buy insurance for your 

property]. You must pay us for any period 

during which the insurance we buy is in 

effect but you do not have insurance. 

You should immediately provide us with 

your insurance information. [Describe the 

insurance information the borrower must 

provide]. [The information must be provided 

in writing.] 

The insurance we [bought] [buy]: 

• [Costs $[premium charge]] [Will cost an 

estimated $[premium charge]] annually, 

which may be significantly more expensive 

than insurance you can buy yourself. 

• May not provide as much coverage as an 

insurance policy you buy yourself. 

If you have any questions, please contact 

us at [telephone number]. 

[If applicable, provide a statement advising 

a borrower to review additional information 

provided in the same transmittal.] 

MS–3(C)—Model Form for Force-Placed 

Insurance Notice Containing Information 

Required By § 1024.37(d)(2)(ii) 

[Name and Mailing Address of Servicer] 

[Date of Notice] 

[Borrower’s Name] 

[Borrower’s Mailing Address] 

Subject: Second and final notice — please 

provide insurance information for 

[Property Address] 


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Dear [Borrower’s Name]: 

We received the insurance information you 

provided, but we are unable to verify 

coverage from [Date Range]. 

Please provide us with insurance 

information for [Date Range] immediately. 

We will charge you for insurance we 

[bought] [plan to buy] for [Date Range] unless 

we can verify that you have insurance 

coverage for [Date Range]. 

The insurance we [bought] [buy]: 

• [Costs $[premium charge]] [Will cost an 

estimated $[premium charge]] annually, 

which may be significantly more expensive 

than insurance you can buy yourself. 

• May not provide as much coverage as an 

insurance policy you buy yourself. 

If you have any questions, please contact 

us at [telephone number]. 

[If applicable, provide a statement advising 

a borrower to review additional information 

provided in the same transmittal.] 

MS–3(D)—Model Form for Renewal or 

Replacement of Force-Placed Insurance 

Notice Containing Information Required By 

§ 1024.37(e)(2) 

[Name and Mailing Address of Servicer] 

[Date of Notice] 

[Borrower’s Name] 

[Borrower’s Mailing Address] 

Subject: Please update insurance information 

for [Property Address] 

Dear [Borrower’s Name]: 

Because we did not have evidence that you 

had [hazard] [Insurance Type] insurance on 

the property listed above, we bought 

insurance on your property and added the 

cost to your mortgage loan account. 

The policy that we bought [expired] [is 

scheduled to expire]. Because 

[hazard][Insurance Type] insurance] is 

required on your property, we intend to 

maintain insurance on your property by 

renewing or replacing the insurance we 

bought. 

The insurance we buy: 

• [Costs $[premium charge]] [Will cost an 

estimated $[premium charge]] annually, 

which may be significantly more expensive 

than insurance you can buy yourself. 

• May not provide as much coverage as an 

insurance policy you buy yourself. 

If you buy [hazard] [Insurance Type] 

insurance, you should immediately provide 

us with your insurance information. 

[Describe the insurance information the 

borrower must provide]. [The information 

must be provided in writing.] 

If you have any questions, please contact 

us at [telephone number]. 

[If applicable, provide a statement advising 

a borrower to review additional information 

provided in the same transmittal.] 

■ 10. In Appendix MS–4 to part 1024, 

MS–4(D) is added to read as follows: 

Appendix MS–4—Model Clauses for the 

Written Early Intervention Notice 

MS–4(D)—Written Early Intervention Notice 

for Servicers Subject to FDCPA 

(§ 1024.39(d)(2)(iii)) 

This is a legally required notice sent to 

borrowers who are at least 45 days 

delinquent. We have a right to invoke 

foreclosure. Loss mitigation or other 

alternatives may be available to help you 

avoid losing your home. 

■ 11. In Supplement I to Part 1024— 

Official Bureau Interpretations: 

■ A. Under Section 1024.30—Scope: 

■ i. The heading 30(d) Successors in 

interest is added, and paragraphs 1 and 

2 under that heading are added. 

■ B. Under Section 1024.31— 

Definitions: 

■ i. The heading Delinquency is added, 

and paragraphs 1 through 3 under that 

heading are added. 

■ C. Under Section 1024.36—Requests 

For Information: 

■ i. Under 36(a) Information request, 

paragraph 2 is revised. 

■ ii. The heading 36(i) Successors in 

interest is added, and paragraph 1 under 

that heading is added. 

■ D. Under Section 1024.37—ForcePlaced Insurance: 

■ i. The heading 37(d)(4) Updating 

notice with borrower information is 

redesignated as heading 37(d)(5) 

Updating notice with borrower 

information. 

■ ii. Under 37(d)(5) Updating notice 

with borrower information, paragraph 1 

is revised. 

■ E. Under Section 1024.38— General 

Servicing Policies, Procedures, and 

Requirements: 

■ i. Under 38(b) Objectives: 

■ a. Under 38(b)(1) Accessing and 

providing timely and accurate 

information, the heading Paragraph 

38(b)(1)(vi) is added, and paragraphs 1 

through 3 under that heading are added. 

■ b. The heading 38(b)(3) Facilitating 

oversight of, and compliance by, service 

providers is added. 

■ c. Under 38(b)(3) Facilitating oversight 

of, and compliance by, service 

providers, the heading Paragraph 

38(b)(3)(iii) is added, and paragraph 1 

under that heading is added. 

■ F. Under Section 1024.39—Early 

Intervention Requirements for Certain 

Borrowers: 

■ i. Under 39(a) Live contact, 

paragraphs 1 and 2 are revised, 

paragraphs 3 and 4 are redesignated as 

paragraphs 4 and 5, respectively, and 

paragraphs 3 and 6 are added. 

■ ii. Under 39(b) Written notice: 

■ a. Under 39(b)(1) Notice required, 

paragraph 2 is revised, and paragraphs 

5 and 6 are added. 

■ b. Under 39(b)(2) Content of the 

written notice, paragraph 4 is added. 

■ iii. The heading 39(d) Exemptions is 

added. 

■ iv. Under 39(d) Exemptions: 

■ a. Under 39(d)(1) Borrowers in 

bankruptcy, paragraphs 1 and 3 are 

removed and paragraph 2 is 

redesignated as paragraph 1 and revised. 

■ b. The heading 39(d)(1)(i) Live contact 

is added, and paragraph 1 under that 

heading is added. 

■ c. The heading 39(d)(1)(ii) Written 

notice is added, and paragraphs 1 and 

2 under that heading are added. 

■ v. The heading 39(d)(2)(iii) Fair Debt 

Collection Practices Act is added, and 

paragraphs 1 and 2 under that heading 

are added. 

■ G. Under Section 1024.41—Loss 

Mitigation Procedures: 

■ i. Under 41(b) Receipt of a loss 

mitigation application, paragraph 1 is 

added. 

■ a. Under 41(b)(1) Complete loss 

mitigation application, paragraphs 1 

and 4.iii are revised. 

■ b. Under 41(b)(2) Review of loss 

mitigation application submission: 

■ c. Under 41(b)(2)(i) Requirements, 

paragraph 1 is added. 

■ d. Under 41(b)(2)(ii) Time period 

disclosure, paragraph 1 is revised, and 

paragraphs 2 and 3 are added. 

■ ii. Under 41(c) Evaluation of loss 

mitigation applications: 

■ a. Under 41(c)(2) Incomplete loss 

mitigation application evaluation: 

■ b. Under 41(c)(2)(iii) Payment 

forbearance, paragraphs 1 through3 are 

revised, and paragraph 4 is added. 

■ c. The heading 41(c)(3) Notice of 

complete application is added. 

■ d. The heading Paragraph 41(c)(3)(i) is 

added, and paragraphs 1 through 3 

under that heading are added. 

■ e. The heading 41(c)(4) Information 

not in the borrower’s control is added. 

■ f. The heading 41(c)(4)(i) Diligence 

requirements is added, and paragraphs 

1 and 2 under that heading are added. 

■ g. The heading 41(c)(4)(ii) Effect in 

case of delay is added, and paragraph 1 

under that heading is added. 

■ h. The heading 41(c)(4)(ii)(C) 

Providing notification of determination 

to borrower in case of delay is added, 

and paragraph 1 under that heading is 

added. 

■ iii. Under 41(g) Prohibition on 

foreclosure sale, paragraphs 1 and 3 are 

revised, and paragraph 5 is added. 

■ iv. Under 41(i) Duplicative requests, 

paragraph 1 is revised and paragraph 2 

is removed. 

■ v. The heading 41(k) Servicing 

transfers is added, and paragraph 1 

under that heading is added. 

■ a. The heading 41(k)(1) In general is 

added. 

■ b. The heading 41(k)(1)(i) Timing of 

compliance is added, and paragraphs 1 

through 3 under that heading are added. 

■ c. The heading 41(k)(1)(ii) Transfer 

date defined is added, and paragraph 1 

under that heading is added. 

■ d. The heading 41(k)(3) Complete loss 

mitigation applications pending at 

transfer is added. 


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■ e. The heading 41(k)(3)(i) In general is 

added, and paragraphs 1 and 2 under 

that heading are added. 

■ f. The heading 41(k)(3)(iii) 

Compliance not practicable is added, 

and paragraph 1 under that heading is 

added. 

■ g. The heading 41(k)(4) Applications 

subject to appeal process is added, and 

paragraphs 1 and 2 under that heading 

are added. 

■ h. The heading 41(k)(5) Pending loss 

mitigation offers is added, and 

paragraph 1 under that heading is 

added. 

The additions and revisions read as 

follows: 

Supplement I to Part 1024—Official 

Bureau Interpretations 

Subpart C—Mortgage Servicing 

Section 1024.30—Scope 

* * * * * 

30(d) Successors in interest. 

1. Treatment of successors in interest. 

Under § 1024.30(d), a successor in interest 

must be considered a borrower for the 

purposes of this subpart once a servicer 

confirms the successor in interest’s identity 

and ownership interest in the property. For 

example, if a servicer receives a loss 

mitigation application from a successor in 

interest after confirming the successor in 

interest’s identity and ownership interest in 

the property, the servicer must review and 

evaluate the application and notify the 

successor in interest in accordance with the 

procedures set forth in § 1024.41. However, 

see § 1024.36(i), which provides that a 

servicer must respond to written requests for 

certain information from a potential 

successor in interest in accordance with the 

requirements of § 1024.36(c) through (g) 

before confirming that person’s status. 

2. Treatment of prior borrowers. Even after 

a servicer’s confirmation of a successor in 

interest’s identity and ownership interest in 

the property, the servicer is still required to 

comply with the requirements of this subpart 

with respect to the prior borrower, unless 

that borrower also has either died or been 

released from the obligation on the mortgage 

loan. The prior borrower retains any rights 

under this subpart that accrued prior to the 

confirmation of the successor in interest to 

the extent these rights would otherwise 

survive the prior borrower’s death or release 

from the obligation. 

Section 1024.31—Definitions 

Delinquency. 

1. Length of delinquency. A borrower’s 

delinquency begins on the date an amount 

sufficient to cover a periodic payment of 

principal, interest, and, if applicable, escrow 

became due and unpaid, and lasts until such 

time as the payment is made, even if the 

borrower is afforded a period after the due 

date to pay before the servicer assesses a late 

fee. 

2. Application of funds. If a servicer 

applies payments to the oldest outstanding 

periodic payment, a payment by a delinquent 

borrower advances the date the borrower’s 

delinquency began. For example, assume a 

borrower’s mortgage loan obligation provides 

that a periodic payment sufficient to cover 

principal, interest, and escrow is due on the 

first of each month. The borrower fails to 

make a payment on January 1 or on any day 

in January, and on January 31 the borrower 

is 30 days delinquent. On February 1, the 

borrower makes a periodic payment. The 

servicer applies the payment it received on 

February 1 to the outstanding January 

payment. On February 2, the borrower is one 

day delinquent. 

3. Payment tolerance. For any given billing 

cycle for which a borrower’s payment is less 

than the periodic payment due, a servicer 

that elects to advance the missing funds to 

the borrower’s mortgage loan account may 

elect not to treat the borrower as delinquent. 

If a servicer chooses not to treat a borrower 

as delinquent for purposes of any section of 

subpart C, that borrower is not delinquent as 

defined in section 1024.31. 

* * * * * 

Section 1024.36–Requests for Information 

* * * * * 

36(a) Information request. 

* * * * * 

2. Owner or assignee of a mortgage loan. 

i. When a loan is not held in a trust for which 

an appointed trustee receives payments on 

behalf of the trust, a servicer complies 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. A servicer is 

not the owner or assignee for purposes of 

§ 1024.36(d) if the servicer holds title to the 

loan, or title is assigned to the servicer, solely 

for the administrative convenience of the 

servicer in servicing the mortgage loan 

obligation. 

ii. When the loan is held in a trust for 

which an appointed trustee receives 

payments on behalf of the trust, a servicer 

complies with § 1024.36(d) by responding to 

a borrower’s request for information 

regarding the owner, assignee, or trust of the 

mortgage loan with the following 

information, as applicable: 

A. If the request for information expressly 

requested the name or number of the trust or 

pool: the name of the trust, and the name, 

address, and appropriate contact information 

for the trustee. Assume, for example, a 

mortgage loan is owned by Mortgage Loan 

Trust, Series ABC–1, for which XYZ Trust 

Company is the trustee. The servicer 

complies with § 1024.36(d) by identifying the 

owner as Mortgage Loan Trust, Series ABC– 

1, and providing the name, address, and 

appropriate contact information for XYZ 

Trust Company as the trustee. 

B. If the request for information did not 

expressly request the name or number of the 

trust or pool: the name of the trust, and the 

name, address, and appropriate contact 

information for the trustee, as in comment 

36(a)–2.ii.A above, unless the Federal 

National Mortgage Association or the Federal 

Home Loan Mortgage Corporation is the 

investor, guarantor, or trustee. In that case, 

the servicer may respond to such a request 

by providing only the name and contact 

information for the Federal National 

Mortgage Association or the Federal Home 

Loan Mortgage Corporation, as applicable, 

without also providing the name of the trust. 

Other investors or guarantors, including the 

Government National Mortgage Association, 

are not the owners or assignees for purposes 

of such requests for information solely as a 

result of their roles as investors or guarantors. 

* * * * * 

36(i) Successors in interest. 

1. Other information. For the purposes of 

requests under § 1024.36(i), before the 

servicer has confirmed the identity and 

ownership interest of the potential successor 

in interest, a servicer is only required to 

provide information regarding the documents 

the servicer requires to confirm the person’s 

identity and ownership interest in the 

property. The servicer is not required to 

provide any other information that may also 

be requested by the person. 

Section 1024.37—Force-Placed Insurance 

* * * * * 

37(d)(5) Updating notice with borrower 

information. 

1. Reasonable time. A servicer may have to 

prepare the written notice required by 

§ 1024.37(c)(1)(ii) in advance of delivering or 

placing the notice in the mail. If the notice 

has already been put into production, the 

servicer is not required to update the notice 

with new insurance information received 

about the borrower so long as the written 

notice was put into production within a 

reasonable time prior to the servicer 

delivering or placing the notice in the mail. 

For purposes of § 1024.37(d)(5), five days 

(excluding legal holidays, Saturdays, and 

Sundays) is a reasonable time. 

* * * * * 

Section 1024.38—General Servicing Policies, 

Procedures, and Requirements 

* * * * * 

38(b) Objectives. 

* * * * * 

Paragraph 38(b)(1)(vi). 

1. Documents reasonably required. The 

documents a servicer requires to confirm a 

potential successor in interest’s identity and 

ownership interest in the property 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 the servicer’s 

possession. The required documents may, 

where appropriate, include, for example, a 

death certificate, an executed will, or a court 

order. 

2. Examples of reasonable requirements. 

Subject to the relevant law governing each 

situation, the following examples illustrate 

documents that a servicer may require to 

confirm a potential successor in interest’s 

identity and ownership interest in the 

property and that generally would be 

reasonable: 

i. Tenancy by the entirety or joint tenancy. 

A potential successor in interest indicates (or 

the servicer knows from its records or other 

sources) that the prior borrower and the 

potential successor in interest owned the 


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property as tenants by the entirety or joint 

tenants and that the prior borrower has died. 

To demonstrate that the potential successor 

in interest has sole interest in the property 

upon the death of the prior borrower, 

applicable law does not require a probate 

proceeding, but requires only that there be a 

prior recorded deed listing both the potential 

successor in interest and the prior borrower 

as tenants by the entirety (e.g., married 

grantees) or joint tenants. Under these 

circumstances, it would be reasonable for the 

servicer to require the potential successor in 

interest to provide documentation of the 

recorded instrument, if the servicer does not 

already have it, and the death certificate of 

the prior borrower. Because in this situation 

a probate proceeding is not required under 

applicable law, however, it would not be 

reasonable for the servicer to require 

documentation of a probate proceeding. 

ii. Affidavits of heirship. A potential 

successor in interest indicates that he or she 

acquired an ownership interest in the 

property upon the death of the prior 

borrower as a result of an affidavit of 

heirship. To demonstrate that the potential 

successor in interest has an interest in the 

property upon the death of the prior 

borrower, applicable law does not require a 

probate proceeding, but requires only an 

appropriate affidavit of heirship upon death. 

Under these circumstances, it would be 

reasonable for the servicer to require the 

potential successor in interest to provide the 

affidavit of heirship and the death certificate 

of the prior borrower. Because a probate 

proceeding is not required under applicable 

law, however, it would not be reasonable for 

the servicer to require documentation of a 

probate proceeding. 

iii. Divorce or legal separation. A potential 

successor in interest indicates that he or she 

acquired an ownership interest in the 

property from a spouse who is a borrower as 

a result of a property agreement incident to 

a divorce proceeding. Under applicable law, 

transfer from the borrower spouse is 

demonstrated by a final divorce decree and 

accompanying separation agreement 

executed by both spouses. Applicable law 

does not require a deed conveying the 

interest in the property. Under these 

circumstances, it would be reasonable for the 

servicer to require the potential successor in 

interest to provide documentation of the final 

divorce decree and an executed separation 

agreement. Because applicable law does not 

require a deed, however, it would not be 

reasonable for the servicer to require 

documentation of a deed. 

iv. Living spouses or parents. A potential 

successor in interest indicates that he or she 

acquired an ownership interest in the 

property from a living spouse or parent who 

is a borrower by quitclaim deed or act of 

donation. Under these circumstances, it 

would be reasonable for the servicer to 

require the potential successor in interest to 

provide the quitclaim deed or act of 

donation. It would not be reasonable, 

however, for the servicer to require 

additional documents. 

3. Prompt confirmation and loss 

mitigation. A servicer’s policies and 

procedures must be reasonably designed to 

ensure that the servicer can promptly notify 

the potential successor in interest that the 

servicer has confirmed the person’s status. 

Upon the receipt of documents required by 

a servicer to confirm a successor in interest’s 

identity and ownership interest in the 

property, the servicer’s confirmation and 

notification must be sufficiently prompt so as 

not to interfere with the successor in 

interest’s ability to apply for loss mitigation 

options according to the procedures provided 

in § 1024.41. In general, a servicer’s policies 

and procedures must be reasonably designed 

to ensure that the servicer confirms a 

successor in interest’s status and notifies the 

person of the servicer’s confirmation at least 

30 days before the next applicable milestone 

provided in comment 41(b)(2)(ii)-2. 

* * * * * 

38(b)(3) Facilitating oversight of, and 

compliance by, service providers. 

Paragraph 38(b)(3)(iii). 

1. Sharing information with service 

provider personnel handling foreclosure 

proceedings. A servicer’s policies and 

procedures must be reasonably designed to 

ensure that servicer personnel promptly 

inform service provider personnel handling 

foreclosure proceedings the servicer has 

received a complete loss mitigation 

application and to instruct promptly 

foreclosure counsel to take any step required 

by § 1024.41(g) sufficiently timely to avoid 

violating the prohibition against moving for 

judgment or order of sale, or conducting a 

foreclosure. 

* * * * * 

Section 1024.39—Early Intervention 

Requirements for Certain Borrowers 

39(a) Live contact. 

1. Delinquency. Section 1024.39 requires a 

servicer to establish or attempt to establish 

live contact not later than the 36th day of 

such a borrower’s delinquency. This 

provision is illustrated as follows: 

i. Assume a loan mortgage obligation with 

a monthly billing cycle and monthly 

payments of $2000 representing principal, 

interest and escrow due on the first of each 

month. 

A. The borrower fails to make a payment 

of $2000 on, and makes no payment during 

the 36-day period after, January 1. The 

servicer must establish or make good faith 

efforts to establish live contact not later than 

36 days after January 1—i.e., on or before 

February 6. 

B. The borrower fails to make a payment 

of $2000 on January 1, February 1, and March 

1, making the borrower 90 days delinquent 

as of April 1. The servicer can time its 

attempts to establish live contact such that a 

single attempt will meet the requirements of 

§ 1024.39(a) for two missed payments. To 

illustrate, the servicer complies with 

§ 1024.39(a) if the servicer makes a good faith 

effort to establish live contact with the 

borrower, for example, on February 5, and 

again on March 25. The February 5 attempt 

meets the requirements of § 1024.39(a) for 

both the January 1 and February 1 missed 

payments. 

2. Establishing live contact. Live contact 

provides servicers an opportunity to discuss 

the circumstances of a borrower’s 

delinquency. Live contact with a borrower 

includes telephoning or conducting an inperson meeting with the borrower, but not 

leaving a recorded phone message. A servicer 

may, but need not, rely on live contact 

established at the borrower’s initiative to 

satisfy the live contact requirement in 

§ 1024.39(a). Servicers may also combine 

contacts made pursuant to § 1024.39(a) with 

contacts made with borrowers for other 

reasons, for instance, by telling borrowers on 

collection calls that loss mitigation options 

may be available in accordance with the rule. 

3. Good faith efforts. Good faith efforts to 

establish live contact consist of reasonable 

steps under the circumstances to reach a 

borrower and may include telephoning the 

borrower on more than one occasion or 

sending written or electronic communication 

encouraging the borrower to establish live 

contact with the servicer. The length of a 

borrower’s delinquency, as well as a 

borrower’s failure to respond to a servicer’s 

repeated attempts at communication 

pursuant to § 1024.39(a), are relevant 

circumstances to consider. For example, 

whereas ‘‘good faith efforts’’ to establish live 

contact with regard to a borrower with two 

consecutive missed payments might require 

a telephone call, ‘‘good faith efforts’’ to 

establish live contact with regard to an 

unresponsive borrower with six or more 

consecutive missed payments might require 

no more than including a sentence requesting 

that the borrower contact the servicer with 

regard to the delinquencies in the periodic 

statement or in an electronic communication. 

Such efforts might be sufficient where there 

is little or no hope of home retention, such 

as may occur in the later stages of 

foreclosure. See additional examples set forth 

in comment 39(a)–6. 

4. Promptly inform if appropriate. i. 

Servicer’s determination. It is within a 

servicer’s reasonable discretion to determine 

whether informing a borrower about the 

availability of loss mitigation options is 

appropriate under the circumstances. The 

following examples demonstrate when a 

servicer has made a reasonable determination 

regarding the appropriateness of providing 

information about loss mitigation options. 

A. A servicer provides information about 

the availability of loss mitigation options to 

a borrower who notifies a servicer during live 

contact of a material adverse change in the 

borrower’s financial circumstances that is 

likely to cause the borrower to experience a 

long-term delinquency for which loss 

mitigation options may be available. 

B. A servicer does not provide information 

about the availability of loss mitigation 

options to a borrower who has missed a 

January 1 payment and notified the servicer 

that full late payment will be transmitted to 

the servicer by February 15. 

ii. Promptly inform. If appropriate, a 

servicer may inform borrowers about the 

availability of loss mitigation options orally, 

in writing, or through electronic 

communication, but the servicer must 

provide such information promptly after the 

servicer establishes live contact. A servicer 

need not notify a borrower about any 

particular loss mitigation options at this time; 

if appropriate, a servicer need only inform 


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borrowers generally that loss mitigation 

options may be available. If appropriate, a 

servicer may satisfy the requirement in 

§ 1024.39(a) to inform a borrower about loss 

mitigation options by providing the written 

notice required by § 1024.39(b)(1), but the 

servicer must provide such notice promptly 

after the servicer establishes live contact. 

5. Borrower’s representative. Section 

1024.39 does not prohibit a servicer from 

satisfying the requirements § 1024.39 by 

establishing live contact with and, if 

applicable, providing information about loss 

mitigation options to a person authorized by 

the borrower to communicate with the 

servicer on the borrower’s behalf. A servicer 

may undertake reasonable procedures to 

determine if a person that claims to be an 

agent of a borrower has authority from the 

borrower to act on the borrower’s behalf, for 

example, by requiring a person that claims to 

be an agent of the borrower provide 

documentation from the borrower stating that 

the purported agent is acting on the 

borrower’s behalf. 

6. Compliance with § 1024.41. A servicer 

complies with § 1024.39(a) and need not 

otherwise establish or make good faith efforts 

to establish live contact if the servicer has 

established and is maintaining ongoing 

contact with the borrower with regard to the 

borrower’s completion of a loss mitigation 

application or the servicer’s evaluation of the 

borrower’s complete loss mitigation 

application, or if the servicer has sent the 

borrower a notice pursuant to 

§ 1024.41(c)(1)(ii) that the borrower is not 

eligible for any loss mitigation options. 

However, the servicer must resume 

compliance with the requirements of 

§ 1024.39(a) for a borrower who cures a prior 

default but becomes delinquent again. 

39(b) Written notice. 

39(b)(1) Notice required. 

* * * * * 

2. Frequency of the written notice. A 

servicer need not provide the written notice 

under section 1024.39(b) more than once 

during a 180-day period beginning on the 

date on which the written notice is provided. 

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 and the 

servicer provides the written notice within 

45 days after March 1—i.e., by April 15. 

Assume the servicer provides the notice on 

April 15. If the borrower subsequently fails 

to make a payment due April 1 and the 

amount due is not fully paid during the 45 

days after April 1, the servicer need not 

provide the written notice again during the 

180-day period beginning on April 15—i.e., 

no sooner than on October 12. If the borrower 

is delinquent on October 12, however, the 

servicer must again provide the written 

notice 45 days from the date the most 

recently missed payment was due. For 

example, if the amount due on October 1 is 

not fully paid during the 45 days after 

October 1, the servicer will need to provide 

the written notice again 45 days after October 

1—i.e., by November 15. 

* * * * * 

5. Successors in interest. Where a servicer 

has already provided a written notice to a 

prior borrower under § 1024.39(b) before 

confirming a successor in interest’s identity 

and ownership interest in the property, the 

servicer is not required also to provide that 

notice to the successor in interest, but after 

confirming the successor in interest’s identity 

and ownership interest in the property, the 

servicer must provide the successor in 

interest with any additional written notices 

required under § 1024.39(b) after confirming 

the successor in interest’s identity and 

ownership interest in the property. 

6. Servicing transfers. A transferee servicer 

is required to comply with the requirements 

of § 1024.39(b) regardless of whether the 

transferor servicer provided a written notice 

to the borrower in the preceding 180-day 

period. However, a transferee servicer is not 

required to provide written notice under 

§ 1024.39(b) that the transferor servicer 

provided prior to the transfer. For example, 

a borrower has 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, the transferee 

servicer is not required to provide another 

written notice until 45 days after the next 

payment due date—i.e., by May 16. 

39(b)(2) Content of the written notice. 

* * * * * 

4. Availability of loss mitigation options. If 

loss mitigation options are available, a 

servicer must include in the written notice 

the disclosures set forth in § 1024.39(b)(2)(iii) 

and (iv). Loss mitigation options are available 

if the owner or assignee of a borrower’s 

mortgage loan offers an alternative to 

foreclosure that is made available through the 

servicer. The availability of loss mitigation 

options does not depend upon a borrower’s 

eligibility for those options, but simply 

depends upon whether the owner or assignee 

of a borrower’s mortgage loan generally offers 

loss mitigation options through the servicer. 

* * * * * 

39(d) Exemptions. 

39(d)(1) Borrowers in bankruptcy. 

1. Resuming compliance. i. With respect to 

a borrower who has not discharged the 

mortgage debt, a servicer must resume 

compliance with § 1024.39(a) and (b), as 

applicable, as of the first delinquency that 

follows the earliest of the following outcomes 

in the bankruptcy case: the case is dismissed, 

the case is closed, the borrower reaffirms the 

mortgage loan under 11 U.S.C. 524, or the 

borrower receives a discharge under 11 

U.S.C. 727, 1141, 1228, or 1328. However, 

this requirement to resume compliance with 

§ 1024.39 does not require a servicer to 

communicate with a borrower in a manner 

that would be inconsistent with applicable 

bankruptcy law or a court order in a 

bankruptcy case. To the extent necessary to 

comply with such law or court order, a 

servicer may adapt the requirements of 

§ 1024.39 as appropriate. 

ii. Compliance with § 1024.39(a) is not 

required for any borrower who has 

discharged the mortgage debt under 

applicable provisions of the U.S. Bankruptcy 

Code. If the borrower’s bankruptcy case is 

revived—for example if the court reinstates a 

previously dismissed case or reopens the 

case—the servicer is again exempt from the 

requirements of § 1024.39(a). 

39(d)(1)(i) Live contact. 

1. Live contact. The requirements of 

§ 1024.39(a) do not apply once a petition is 

filed under the U.S. Bankruptcy Code, 

commencing any case in which the borrower 

is a debtor or a Chapter 12 or Chapter 13 case 

in which any borrower on the mortgage loan 

is a debtor. The requirements of § 1024.39(a) 

also do not apply if the borrower has 

discharged personal liability for the mortgage 

loan under 11 U.S.C. 727, 1141, 1228, or 

1328. 

39(d)(1)(ii) Written notice. 

1. Plan of reorganization. For purposes of 

§ 1024.39(d)(1)(ii), ‘‘plan of reorganization’’ 

refers to a borrower’s plan of reorganization 

filed under the applicable provisions of 

Chapter 11, Chapter 12, or Chapter 13 of the 

U.S. Bankruptcy Code and confirmed by a 

court with jurisdiction over the borrower’s 

bankruptcy case. 

2. Fair Debt Collections Practices Act. If the 

FDCPA applies to a servicer’s 

communications with a borrower in 

bankruptcy and the borrower has sent a 

notification pursuant to FDCPA § 805(c), see 

comment 39(d)(2)(iii)–2. 

39(d)(2)(iii) Fair Debt Collection Practices 

Act. 

1. Communications under the FDCPA. To 

the extent the FDCPA applies to a servicer’s 

communications with a borrower, a servicer 

does not violate FDCPA section 805(c) by 

providing the written notice required by 

§ 1024.39(d)(2)(iii) after a borrower has sent 

a notification pursuant to FDCPA section 

805(c) with respect to that borrower’s loan. 

In providing the borrower the written notice, 

the servicer must continue to comply with all 

other applicable provisions of the FDCPA, 

including prohibitions on unfair, deceptive, 

and abusive practices as contained in FDCPA 

sections 805 through 808 (15 U.S.C. 1692c 

through 1692f). 

2. Borrowers in bankruptcy. To the extent 

the FDCPA applies to a servicer’s 

communications with a borrower and the 

borrower has sent a notification pursuant to 

FDCPA section 805(c), a servicer is not 

required to provide the written notice 

required by § 1024.39(d)(2)(iii) if the 

borrower is in bankruptcy and is not 

represented by a person authorized by the 

borrower to communicate with the servicer 

on the borrower’s behalf. If the borrower is 

represented by a person authorized by the 

borrower to communicate with the servicer 

on the borrower’s behalf, however, the 

servicer must provide the written notice 

required by § 1024.39(d)(2)(iii) to the 

borrower’s representative. See comment 

39(a)–4. 

Section 1024.41—Loss Mitigation Procedures 

* * * * * 

41(b) Receipt of a loss mitigation 

application. 

1. Successors in interest. i. If a servicer 

receives a loss mitigation application, 

including a complete loss mitigation 

application, from a potential successor in 

interest before confirming that person’s 

identity and ownership interest in the 

property, the servicer may, but is not 

required to, review and evaluate the loss 

mitigation application in accordance with the 


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procedures set forth in § 1024.41. If a servicer 

complies with the requirements of § 1024.41 

for a complete loss mitigation application 

submitted by a potential successor in interest 

before confirming that person’s identity and 

ownership interest in the property, 

§ 1024.41(i)’s limitation on duplicative 

requests applies to that person, provided that 

confirmation of the successor in interest’s 

status would not affect the servicer’s 

evaluation of the application. 

ii. If a servicer receives a loss mitigation 

application from a potential successor in 

interest and elects not to review and evaluate 

the loss mitigation application before 

confirming that person’s identity and 

ownership interest in the property, upon 

such confirmation the servicer must review 

and evaluate that loss mitigation application 

in accordance with the procedures set forth 

in § 1024.41. For purposes of § 1024.41, the 

servicer must treat the loss mitigation 

application as if it had been received on the 

date that the servicer confirmed the successor 

in interest’s status. 

41(b)(1) Complete loss mitigation 

application. 

1. In general. A servicer has flexibility to 

establish its own application requirements 

and to decide the type and amount of 

information it will require from borrowers 

applying for loss mitigation options. In the 

course of gathering documents and 

information from a borrower to complete a 

loss mitigation application, a servicer may 

stop collecting documents and information 

for a particular loss mitigation option after 

receiving information confirming that the 

borrower is ineligible for that option. For 

example, if a particular loss mitigation option 

is only available for military servicemembers, 

once a servicer receives documents or 

information confirming that the borrower is 

not a military servicemember, the servicer 

may stop collecting documents or 

information from the borrower that the 

servicer would use to evaluate the borrower 

for that loss mitigation option. Making such 

a determination does not affect the servicer’s 

obligation to exercise reasonable diligence in 

obtaining documents and information to 

complete a loss mitigation application; the 

servicer must continue its efforts to obtain 

documents and information from the 

borrower that pertain to all other available 

loss mitigation options. A servicer may not 

stop collecting documents and information 

for any loss mitigation option based solely 

upon the borrower’s stated preference for a 

particular loss mitigation option. 

* * * * * 

4. * * * 

iii. A servicer offers a borrower a shortterm payment forbearance program or a 

short-term repayment plan based on an 

incomplete loss mitigation application; the 

servicer notifies the borrower that he or she 

is being offered a payment forbearance 

program or repayment plan based on an 

evaluation of an incomplete application, and 

that the borrower has the option of 

completing the application to receive a full 

evaluation of all loss mitigation options 

available to the borrower. If a servicer 

provides such a notification, the borrower 

remains in compliance with the payment 

forbearance program or repayment plan, and 

the borrower does not request further 

assistance, the servicer could suspend 

reasonable diligence efforts until near the 

end of the payment forbearance program or 

repayment plan. Near the end of the program 

or plan, and prior to the end of the 

forbearance or repayment period, if the 

borrower remains delinquent, a servicer 

should contact the borrower to determine if 

the borrower wishes to complete the 

application and proceed with a full loss 

mitigation evaluation. 

* * * * * 

41(b)(2) Review of loss mitigation 

application submission. 

41(b)(2)(i) Requirements. 

1. Foreclosure sale not scheduled. For 

purposes of § 1024.41(b)(2)(i), if no 

foreclosure sale has been scheduled as of the 

date a loss mitigation application is received, 

a servicer must treat the application as 

having been received 45 days or more before 

any foreclosure sale. 

* * * * * 

41(b)(2)(ii) Time period disclosure. 

1. Affording the borrower a reasonable 

period of time. In setting a reasonable date for 

the return of documents and information 

under § 1024.41(b)(2)(ii), the servicer must 

allow a reasonable period of time for the 

borrower to obtain and submit documents 

and information necessary to make the loss 

mitigation application complete. Generally, a 

reasonable period of time would not be less 

than seven days. 

2. Maximizing protections. A servicer must 

preserve maximum borrower rights under 

§ 1024.41 in setting a reasonable date under 

§ 1024.41(b)(2)(ii). Subject to comment 

41(b)(2)(ii)–1, a servicer generally should not 

set a reasonable date that is further away than 

the nearest remaining milestone from the 

following list: 

i. 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; 

ii. The date that is the 120th day of the 

borrower’s delinquency; 

iii. The date that is 90 days before a 

foreclosure sale; 

iv. The date that is 38 days before a 

foreclosure sale. 

3. Flexibility in setting a reasonable date. 

Subject to comments 41(b)(2)(ii)–1 and 2, a 

servicer has flexibility in selecting a 

reasonable date for the return of documents 

and information under § 1024.41(b)(2)(ii). A 

servicer may select any date that it 

determines both maximizes borrower rights 

under § 1024.41 and allows the borrower a 

reasonable period of time to obtain and 

submit documents and information necessary 

to make the loss mitigation application 

complete. For example, a servicer may set a 

reasonable date that is earlier than the 

nearest remaining milestone listed in 

comment 41(b)(2)(ii)–2 and does not need to 

select that milestone as the reasonable date 

itself. 

* * * * * 

41(c) Evaluation of loss mitigation 

applications. 

41(c)(2) Incomplete loss mitigation 

application evaluation. 

* * * * * 

41(c)(2)(iii) Payment forbearance. 

1. Short-term payment forbearance 

program. The exemption in 

§ 1024.41(c)(2)(iii) applies to, among other 

things, short-term payment forbearance 

programs. A payment forbearance program is 

a loss mitigation option pursuant to which a 

servicer allows a borrower to forgo making 

certain payments or portions of payments for 

a period of time. A short-term payment 

forbearance program allows the forbearance 

of payments due over periods of no more 

than six months. Such a program would be 

short-term regardless of the amount of time 

a servicer allows the borrower to make up the 

missing payments. 

2. Payment forbearance and incomplete 

applications. Section 1024.41(c)(2)(iii) allows 

a servicer to offer a borrower a short-term 

payment forbearance program or a short-term 

repayment plan based on an evaluation of an 

incomplete loss mitigation application. Such 

an incomplete loss mitigation application is 

still subject to the other obligations in 

§ 1024.41, including the obligation in 

§ 1024.41(b)(2) to review the application to 

determine if it is complete, the obligation in 

§ 1024.41(b)(1) to exercise reasonable 

diligence in obtaining documents and 

information to complete a loss mitigation 

application (see comment 41(b)(1)–4.iii), and 

the obligation to provide the borrower with 

the § 1024.41(b)(2)(i)(B) notice that the 

servicer acknowledges the receipt of the 

application and has determined the 

application is incomplete. 

3. Payment forbearance and complete 

applications. Even if a servicer offers a 

borrower a short-term payment forbearance 

program or a short-term repayment plan 

based on an evaluation of an incomplete loss 

mitigation application, the servicer must still 

comply with all the requirements in 

§ 1024.41 if the borrower completes his or 

her loss mitigation application. 

4. Short-term repayment plan. The 

exemption in § 1024.41(c)(2)(iii) applies to, 

among other things, short-term repayment 

plans. A repayment plan is a loss mitigation 

option pursuant to which a servicer allows a 

borrower to repay past due payments over a 

specified period of time until the mortgage 

loan account is current. A short-term 

repayment plan allows for the repayment of 

no more than three months of payments due 

and allows a borrower to repay the arrearage 

over future payments for a period lasting no 

more than six months. 

* * * * * 

41(c)(3) Notice of complete application. 

Paragraph 41(c)(3)(i). 

1. Prompt notification. Section 

1024.41(c)(3)(i) requires that a servicer 

promptly provide a borrower with written 

notice that the servicer has received a 

complete loss mitigation application. 

Generally, a servicer complies with this 

requirement by providing the written notice 

within five days of receiving the complete 

application. 

2. Date that foreclosure protections began. 

Notifications sent under § 1024.41(c)(3)(i) 

must state, among other things, the date on 


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which the borrower’s protections began 

under § 1024.41(f)(2) and (g), as applicable. 

This date must be the date on which the 

application became either complete or 

facially complete, as applicable. 

3. Additional notices. Section 

1024.41(c)(3)(i) requires a servicer to provide 

a notification, subject to the exceptions under 

§ 1024.41(c)(3)(ii), every time a loss 

mitigation application becomes complete. If, 

after providing a notice under 

§ 1024.41(c)(3)(i), a servicer requests 

additional information or a corrected version 

of a previously submitted document required 

to complete the application in accordance 

with § 1024.41(c)(2)(iv), the servicer might 

have to provide an additional notice under 

§ 1024.41(c)(3)(i) if the borrower completes 

the application. For example, when a 

borrower submits a complete application and 

the servicer provides the notice under 

§ 1024.41(c)(3)(i), a servicer might later 

discover that it requires additional 

information regarding a source of income that 

the borrower previously identified to 

complete the application. In accordance with 

§ 1024.41(c)(2)(iv) (and subject to that 

section’s additional requirements), the 

servicer must request this additional 

information. If the borrower submits the 

additional information to complete the 

application, the servicer must provide 

another notice of complete application under 

§ 1024.41(c)(3)(i). 

41(c)(4) Information not in the borrower’s 

control. 

41(c)(4)(i) Diligence requirements. 

1. Within 30 days of receiving a complete 

application. A servicer must act with 

reasonable diligence to collect information 

not in the borrower’s control that the servicer 

requires to determine which loss mitigation 

options, if any, it will offer to the borrower. 

Further, a servicer must request such 

information from the appropriate person, at 

a minimum and without limitation: 

i. Promptly upon determining that the 

servicer requires the documents or 

information to determine which loss 

mitigation options, if any, the servicer will 

offer the borrower; and 

ii. To the extent practicable, by a date that 

will enable the servicer to complete the 

evaluation within 30 days of receiving the 

complete application as set forth under 

§ 1024.41(c)(1). 

2. After the first 30 days. If a servicer has 

not received documents or information not in 

the borrower’s control within 30 days of 

receiving a complete loss mitigation 

application, the servicer acts with reasonable 

diligence by attempting to obtain the 

documents or information from the 

appropriate person as quickly as possible. 

41(c)(4)(ii) Effect in case of delay. 

1. Third-party delay. Various third parties, 

such as mortgage insurance companies, 

guarantors, owners, or assignees, might 

impose requirements on servicers pertaining 

to the loss mitigation evaluation process. A 

servicer must complete all possible steps in 

the evaluation process within 30 days of 

receiving a complete application, including 

by taking all steps mandated by such 

requirements, notwithstanding delay in 

receiving information from any third party. 

For example, if a servicer can determine a 

borrower’s eligibility for all available loss 

mitigation options based upon the borrower’s 

complete application subject only to 

approval from the mortgage insurance 

company, it must do so within 30 days of 

receiving the complete application 

notwithstanding the need to obtain such 

approval before offering any loss mitigation 

options to the borrower. 

41(c)(4)(ii)(C) Providing notification of 

determination to borrower in case of delay. 

1. Timing. If, due to a lack of 

documentation or information from a party 

other than the borrower or the servicer, a 

servicer is unable to determine which loss 

mitigation options, if any, to offer a borrower 

within 30 days of receiving a complete 

application, the servicer should not provide 

the borrower a written notice stating the 

servicer’s determination until the servicer 

receives the documentation or information. 

* * * * * 

41(g) Prohibition on foreclosure sale. 

1. Dispositive motion. The prohibition on 

a servicer 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. A servicer that has made any such 

motion before receiving a complete loss 

mitigation application has not moved for a 

foreclosure judgment or order of sale if the 

servicer takes reasonable steps to avoid a 

ruling on such motion or issuance of such 

order prior to completing the procedures 

required by § 1024.41, even if the servicer’s 

reasonable steps are unsuccessful in avoiding 

a ruling on a dispositive motion or issuance 

of an order of sale. Where a servicer or 

counsel retained by the servicer fails to take 

reasonable steps to avoid a ruling on such 

motion that was pending at the time a 

complete loss mitigation application is 

received or issuance of an order with respect 

to such a motion, the servicer must dismiss 

the foreclosure proceeding if necessary to 

avoid the sale. 

* * * * * 

3. Interaction with foreclosure counsel. The 

prohibitions in § 1024.41(g) against moving 

for judgment or order of sale or conducting 

a sale may require a servicer to take steps 

through foreclosure counsel retained by the 

servicer in foreclosure proceedings. Thus, a 

servicer is not relieved of its obligations 

because the foreclosure counsel’s actions or 

inaction caused a violation. If a servicer has 

received a complete loss mitigation 

application, the servicer must promptly 

instruct counsel not to make a dispositive 

motion for foreclosure judgment or order of 

sale; to take reasonable steps, where such a 

dispositive motion is pending, to avoid a 

ruling on the motion or issuance of an order 

of sale; and to take reasonable steps to delay 

the conduct of a foreclosure sale until the 

servicer satisfies one of the conditions in 

§ 1024.41(g)(1) through (3). These 

instructions may include instructing counsel 

to move for a continuance with respect to the 

deadline for filing a dispositive motion or to 

move for or request that the foreclosure sale 

be stayed, otherwise delayed, or removed 

from the docket, or that the foreclosure 

proceeding be placed in any administrative 

status that stays the sale. 

* * * * * 

5. Conducting a sale. Section 1024.41(g) 

prohibits a servicer from conducting a 

foreclosure sale, even if a person other than 

the servicer administers or conducts the 

foreclosure sale proceedings. Where a 

foreclosure sale is scheduled, and none of the 

conditions under § 1024.41(g)(1) through (3) 

are applicable, the servicer must take 

reasonable steps to delay the foreclosure sale 

until one of the conditions under 

§ 1024.41(g)(1) through (3) is met. Reasonable 

steps include, but are not limited to, 

requesting that a court or the official 

conducting the sale re-schedule or delay the 

sale or remove the sale from the docket, or 

place the foreclosure proceeding in any 

administrative status that stays the sale. If a 

servicer, or counsel retained by the servicer, 

fails to take reasonable steps to delay the 

foreclosure sale, or if a servicer fails to 

instruct counsel retained by the servicer to 

take such reasonable steps to delay a sale (see 

comment 41(g)-3), the servicer must dismiss 

the foreclosure proceeding. 

* * * * * 

41(i) Duplicative requests. 

1. Servicing transfers. A transferee servicer 

is required to comply with the requirements 

of § 1024.41 regardless of whether a borrower 

received an evaluation of a complete loss 

mitigation application from a transferor 

servicer. 

* * * * * 

41(k) Servicing transfers. 

1. Pending loss mitigation application. For 

purposes of § 1024.41(k), a loss mitigation 

application is pending if it was subject to 

§ 1024.41 and had not been fully resolved 

before the transfer date. For example, a loss 

mitigation application would not be 

considered pending if a transferor servicer 

had denied a borrower for all options and the 

borrower’s time for making an appeal, if any, 

had expired prior to the transfer date, such 

that the transferor servicer had no continuing 

obligations under § 1024.41 with respect to 

the application. A pending application is 

considered a pending complete application if 

it was complete as of the transfer date under 

the transferor servicer’s criteria for evaluating 

loss mitigation applications. 

41(k)(1) In general. 

41(k)(1)(i) Timing of compliance. 

1. Obtaining loss mitigation documents 

and information. i. In connection with a 

transfer, a transferee servicer must obtain 

from the transferor servicer documents and 

information submitted by a borrower in 

connection with a loss mitigation 

application, consistent with policies and 

procedures adopted pursuant to § 1024.38. A 

transferee servicer must comply with the 

applicable requirements of § 1024.41 with 

respect to a loss mitigation application 

received as a result of a transfer, even if the 

transferor servicer was not required to 

comply with § 1024.41 with respect to that 

application (for example, because 

§ 1024.41(i) precluded applicability of 

§ 1024.41 with respect to the transferor 

servicer). If an application was not subject to 


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§ 1024.41 prior to a transfer, then for 

purposes of § 1024.41(b) and (c), a transferee 

servicer is considered to have received a loss 

mitigation application on the transfer date. 

ii. A transferee servicer must, in 

accordance with § 1024.41(b), exercise 

reasonable diligence to complete a loss 

mitigation application received as a result of 

a transfer. In the transfer context, reasonable 

diligence 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, as well as ensuring that the 

borrower is informed about which 

documents and information are necessary to 

complete the application. 

2. Determination of protections. For 

purposes of § 1024.41(e) through (h), a 

transferee servicer must consider documents 

and information that constitute a complete 

loss mitigation application for the transferee 

servicer to have been received as of the date 

such documents and information were 

received by the transferor servicer. An 

application that was facially complete with 

respect to the transferor servicer remains 

facially complete with respect to the 

transferee servicer as of the date it was 

facially complete with respect to the 

transferor servicer. If an application was 

complete with respect to the transferor 

servicer, but is not complete with respect to 

the transferee servicer, the transferee servicer 

must treat the application as facially 

complete as of the date the application was 

complete with respect to the transferor 

servicer. 

3. Duplicative notices not required. A 

transferee servicer is not required to provide 

notices under § 1024.41 with respect to a 

particular loss mitigation application 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, the 

transferee servicer is not required to provide 

the notice again for that application. For 

example, if the transferor servicer provided 

the notice required by § 1024.41(b)(2)(i)(B) 

prior to the transfer, the transferee servicer is 

not required to provide the notice again for 

that application. 

41(k)(1)(ii) Transfer date defined. 

1. Transfer date. Section 1024.41(k)(1)(ii) 

provides that the transfer date is the date on 

which the transfer of the servicing 

responsibilities from the transferor servicer to 

the transferee servicer occurs. The transfer 

date corresponds to the date the transferee 

servicer will begin accepting payments 

relating to the mortgage loan, which must be 

disclosed on the notice of transfer of loan 

servicing pursuant to § 1024.33(b)(4)(iv). The 

transfer date may not necessarily be the same 

date as the sale date identified in a servicing 

transfer agreement. 

41(k)(3) Complete loss mitigation 

applications pending at transfer. 

41(k)(3)(i) In general. 

1. Additional information or corrections to 

a previously submitted document. If a 

transferee servicer acquires the servicing of a 

mortgage loan for which a complete loss 

mitigation application is pending as of the 

transfer date and the transferee servicer 

determines that additional information or a 

correction to a previously submitted 

document is required based upon its criteria 

for evaluating loss mitigation applications, 

the application is considered facially 

complete under § 1024.41(c)(2)(iv) as of the 

date it was first facially complete or 

complete, as applicable, with respect to the 

transferor servicer. Once the transferee 

servicer receives the information or 

corrections necessary to complete the 

application, § 1024.41(c)(3) requires the 

transferee servicer to provide a notice of 

complete application. An application that 

was complete with respect to the transferor 

servicer remains complete even if the 

transferee servicer requests that a borrower 

resubmit the same information in the 

transferee servicer’s specified format or make 

clerical corrections to the application. A 

borrower’s failure to resubmit such 

information or make such clerical corrections 

does not extend the time in which the 

transferee servicer must complete the 

evaluation of the borrower’s complete 

application. 

2. Applications first complete upon 

transfer. If the borrower’s loss mitigation 

application was incomplete based on the 

transferor servicer’s criteria prior to transfer 

but the transferee servicer determines that 

the application is complete based upon its 

own criteria, the application is considered a 

pending loss mitigation application complete 

as of the transfer date for purposes of 

§ 1024.41(k)(3). For purposes of § 1024.41(e) 

through (h), the application is complete as of 

the date the transferor servicer received the 

documents and information constituting the 

complete application. See comment 41(k)(1)- 

2. In such circumstances, § 1024.41(c)(3) 

requires a transferee servicer to provide a 

notice of complete application. 

41(k)(3)(iii) Compliance not practicable. 

1. Reasonably prompt time. Section 

1024.41(k)(3)(iii) requires that if compliance 

with the time periods set forth in 

§ 1024.41(k)(3)(i) or (ii)(A), as applicable, is 

not practicable under the circumstances, a 

transferee servicer must complete the 

evaluation of the complete loss mitigation 

application and provide the applicable 

notices required by § 1024.41(c)(1) and (4) 

within a reasonably prompt time. In general, 

completing the evaluation and providing the 

applicable notices within an additional five 

days after the expiration of the time periods 

set forth in § 1024.41(k)(3)(i) or (ii)(A) would 

be considered reasonably prompt. 

41(k)(4) Applications subject to appeal 

process. 

1. Servicer unable to evaluate appeal. A 

transferee servicer may be unable to evaluate 

an appeal when, for example, the transferor 

servicer denied a borrower for a loan 

modification option that the transferee 

servicer does not offer or when the transferee 

servicer receives the mortgage loan through 

an involuntary transfer and the transferor 

servicer failed to maintain proper records 

such that the transferee servicer lacks 

sufficient information to evaluate the appeal. 

In that circumstance, the transferee servicer 

is required to treat the appeal as a pending 

complete application and it must permit the 

borrower to accept or reject any loss 

mitigation options offered by the transferor 

servicer, in addition to the loss mitigation 

options, if any, that the transferee servicer 

determines to offer the borrower based on its 

own evaluation of the borrower’s complete 

loss mitigation application. For example, 

assume a transferor servicer denied a 

borrower for all loan modification options 

but offered the borrower a short sale option, 

and assume that the borrower’s appeal of the 

loan modification denials was pending as of 

the transfer date. If the transferee servicer is 

unable to evaluate the borrower’s appeal, the 

transferee servicer must evaluate the 

borrower for all available loss mitigation 

options in accordance with § 1024.41(c) and 

(k)(3). At the conclusion of such evaluation, 

the transferee servicer must permit the 

borrower to accept the short sale option 

offered by the transferor servicer in addition 

to any loss mitigation options the transferee 

servicer determines to offer the borrower 

based upon its own evaluation. 

2. Reasonably prompt time. Section 

1024.41(k)(5) requires that if a servicer is able 

to determine the outcome of an appeal, but 

compliance within 30 days of when the 

borrower made the appeal is not practicable 

under the circumstances, a transferee servicer 

must complete the determination and 

provide the notice required by 

§ 1024.41(h)(4) within a reasonably prompt 

time. In general, completing the evaluation 

and providing the notice within an 

additional five days after the expiration of 

the original 30-day evaluation period would 

be considered reasonably prompt. 

41(k)(5) Pending loss mitigation offers. 

1. Obtaining evidence of borrower 

acceptance. A transferee servicer should 

expect that a borrower may provide an 

acceptance to the transferor servicer after the 

transfer date, and, in accordance with 

policies and procedures maintained pursuant 

to § 1024.38(b)(4), a transferee servicer must 

obtain information or documents reflecting 

such acceptances from the transferor servicer 

and provide the borrower with the accepted 

loss mitigation option. 

PART 1026—TRUTH IN LENDING 

(REGULATION Z) 

■ 12. The authority citation for part 

1026 continues to read as follows: 

Authority: 12 U.S.C. 2601, 2603–2605, 

2607, 2609, 2617, 5511, 5512, 5532, 5581; 15 

U.S.C. 1601 et seq. 

Subpart A—General 

■ 13. Section 1026.2 is amended by 

revising paragraph (a)(11) and adding 

paragraph (a)(27) to read as follows: 

§ 1026.2 Definitions and rules of 

construction. 

* * * * * 

(a) * * * 

(11) Consumer means a cardholder or 

natural person to whom consumer 

credit is offered or extended. However, 

for purposes of rescission under 

§§ 1026.15 and 1026.23, the term also 


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includes a natural person in whose 

principal dwelling a security interest is 

or will be retained or acquired, if that 

person’s ownership interest in the 

dwelling is or will be subject to the 

security interest; and for purposes of 

§§ 1026.20(c) through (e), 1026.36(c), 

and 1026.41, the term includes a 

successor in interest once a servicer 

confirms the successor in interest’s 

identity and ownership interest in the 

dwelling. 

* * * * * 

(27) Successor in interest means a 

person to whom an ownership interest 

in a dwelling securing a closed-end 

consumer credit transaction is 

transferred from a prior consumer, 

provided that the transfer falls under an 

exemption specified in section 341(d) of 

the Garn-St Germain Depository 

Institutions Act of 1982 (12 U.S.C. 

1701j-3(d)). 

* * * * * 

Subpart E—Special Rules for Certain 

Home Mortgage Transactions 

■ 14. Section 1026.36 is amended by 

revising paragraphs (c)(1) introductory 

text and (c)(2) introductory text to read 

as follows: 

§ 1026.36 Prohibited acts or practices and 

certain requirements for credit secured by 

a dwelling. 

* * * * * 

(c) * * * 

(1) Payment processing. In connection 

with a closed-end consumer credit 

transaction secured by a consumer’s 

principal dwelling: 

* * * * * 

(2) No pyramiding of late fees. In 

connection with a closed-end consumer 

credit transaction secured by a 

consumer’s principal dwelling, a 

servicer shall not impose any late fee or 

delinquency charge for a payment if: 

* * * * * 

■ 15. Section 1026.41 is amended by 

revising paragraphs (d)(8)(i) and 

(e)(4)(iii)(A), adding paragraph 

(e)(4)(iii)(D), revising paragraph (e)(5), 

and adding paragraphs (e)(6) and (f) to 

read as follows: 

§ 1026.41 Periodic statements for 

residential mortgage loans. 

* * * * * 

(d) * * * 

(8) * * * 

(i) The length of the consumer’s 

delinquency, as of the date of the 

periodic statement; 

* * * * * 

(e) * * * 

(4) * * * 

(iii) * * * 

(A) Mortgage loans voluntarily 

serviced by the servicer for a nonaffiliate of the servicer and for which 

the servicer does not receive any 

compensation or fees. 

* * * * * 

(D) Transactions serviced by the 

servicer for a seller financer that meet 

all of the criteria identified in 12 CFR 

1026.36(a)(5). 

(5) Certain Consumers in 

Bankruptcy—(i) Exemption. A servicer 

is exempt from the requirements of this 

section, except as provided in paragraph 

(e)(5)(ii) of this section, with respect to 

a consumer if: 

(A) The consumer is a debtor in a case 

under the U.S. Bankruptcy Code; the 

consumer is a primary obligor on a 

mortgage loan for which another 

primary obligor is a debtor in a Chapter 

12 or Chapter 13 case under the U.S. 

Bankruptcy Code; or the consumer has 

discharged personal liability for the 

mortgage loan pursuant to 11 U.S.C. 

727, 1141, 1228, or 1328; and 

(B) One of the following conditions is 

satisfied: 

(1) The consumer requests in writing 

that the servicer cease providing 

periodic statements or coupon books; 

(2) The consumer’s confirmed plan of 

reorganization provides that the 

consumer 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; 

(3) A court enters an order in the 

consumer’s 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 

respect to the dwelling securing the 

mortgage loan, or requiring the servicer 

to cease providing periodic statements 

or coupon books; or 

(4) The consumer files with the court 

overseeing the consumer’s bankruptcy 

case a Statement of Intention pursuant 

to 11 U.S.C. 521(a) identifying an intent 

to surrender the dwelling securing the 

mortgage loan. 

(ii) Resuming compliance—(A) 

Consumer request. Notwithstanding 

paragraph (e)(5)(i) of this section, a 

servicer must comply with the 

requirements of this section if the 

consumer requests in writing that the 

servicer continue providing periodic 

statements or coupon books, unless a 

court enters an order in the consumer’s 

bankruptcy case requiring the servicer 

to cease providing periodic statements 

or coupon books. A servicer must 

resume providing periodic statements or 

coupon books in compliance with 

paragraph (f) of this section within a 

reasonably prompt time after the next 

payment due date that follows a 

servicer’s receipt of a consumer’s 

written request. 

(B) Termination of bankruptcy case. 

With respect to any portion of the 

mortgage debt that is not discharged 

pursuant to 11 U.S.C. 727, 1141, 1228, 

or 1328, a servicer must resume 

providing periodic statements or 

coupon books in compliance with this 

section within a reasonably prompt time 

after the next payment due date that 

follows the earliest of the following 

outcomes in either the consumer’s or 

the joint obligor’s bankruptcy case, as 

applicable: the case is dismissed, the 

case is closed, the consumer reaffirms 

the mortgage loan under 11 U.S.C. 524, 

or the consumer receives a discharge 

under 11 U.S.C. 727, 1141, 1228, or 

1328. 

(6) Charged-off loans. A servicer is 

exempt from the requirements of this 

section for a mortgage loan if the 

servicer: 

(i) Has charged off the loan in 

accordance with loan-loss provisions 

and will not charge any additional fees 

or interest on the account; and 

(ii) Provides, within 30 days of charge 

off or the most recent periodic 

statement, a final periodic statement, 

clearly and conspicuously labeled 

‘‘Final Statement—Retain This Copy for 

Your Records.’’ The final periodic 

statement must explain in simple and 

clear terms that: the mortgage loan has 

been charged off and the servicer will 

not charge any additional fees or 

interest on the account; the lien on the 

property remains in place and the 

consumer remains liable for the 

mortgage loan obligation; the consumer 

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 cancelled or 

forgiven; and the loan may be 

purchased, assigned, or transferred. 

(f) Modified periodic statements and 

coupon books for certain consumers in 

bankruptcy. With respect to a consumer 

who is a debtor in a case under the U.S. 

Bankruptcy Code or has discharged 

personal liability for a mortgage loan 

under 11 U.S.C. 727, 1141, 1228, or 

1328, the requirements of this section 

are subject to the following 

modifications: 

(1) Requirements not applicable. The 

periodic statement may omit the 

information set forth in paragraphs 

(d)(1)(ii) and (d)(8)(i), (ii), and (v) of this 

section. The requirement in paragraph 

(d)(1)(iii) of this section to show the 


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amount due more prominently than 

other disclosures on the page shall not 

apply. 

(2) Bankruptcy notices. The periodic 

statement must include the following on 

the first page: 

(i) A statement identifying the 

consumer’s status as a debtor in 

bankruptcy or the discharged nature of 

the mortgage loan; and 

(ii) A statement that the periodic 

statement is for informational purposes 

only. 

(3) Chapter 12 and Chapter 13 

consumers. With respect to a consumer 

who is a debtor in a Chapter 12 or 

Chapter 13 bankruptcy case, the 

requirements of this section are subject 

to the following additional 

modifications: 

(i) Requirements not applicable. In 

addition to omitting the information set 

forth in paragraph (f)(1) of this section, 

the periodic statement may also omit 

the information set forth in paragraphs 

(d)(8)(iii), (iv), (vi), and (vii) of this 

section. 

(ii) Amount due. The amount due 

information set forth in paragraph (d)(1) 

of this section may be limited to the 

date and amount of the post-petition 

payments due and any post-petition fees 

and charges imposed by the servicer. 

(iii) Explanation of amount due. The 

explanation of amount due information 

set forth in paragraph (d)(2) of this 

section may be limited to the postpetition payments and any post-petition 

fees and charges imposed by the 

servicer. 

(iv) Past payment breakdown. The 

items required by paragraph (d)(3) of 

this section must include the following: 

(A) The total of all post-petition 

payments received since the last 

statement, including a breakdown 

showing the amount, if any, that was 

applied to principal, interest, and 

escrow, and the amount, if any, sent to 

any suspense or unapplied funds 

account; 

(B) The total of all post-petition 

payments received since the beginning 

of the current calendar year, including 

a breakdown of that total showing the 

amount, if any, that was applied to 

principal, interest, escrow, and the 

amount, if any, currently held in any 

suspense or unapplied funds account; 

(C) The total of all payments applied 

to post-petition fees or charges since the 

last statement; and 

(D) The total of all payments applied 

to post-petition fees or charges since the 

beginning of the current calendar year. 

(v) Transaction activity. The 

transaction activity information set forth 

in paragraph (d)(4) of this section must 

include any post-petition payments, 

pre-petition payments, and payments of 

post-petition fees or charges the servicer 

has received since the last statement. 

(vi) Pre-petition arrearage. If 

applicable, a servicer must include the 

following, grouped in close proximity to 

each other: 

(A) The total of all pre-petition 

payments received since the last 

statement; 

(B) The total of all pre-petition 

payments received since the beginning 

of the current calendar year; and 

(C) The current balance of the 

consumer’s pre-petition arrearage. 

(vii) Additional disclosures. The 

periodic statement must include the 

following, as applicable: 

(A) A statement that the amount due 

includes only post-petition payments 

and does not include other payments 

that may be due under the terms of the 

consumer’s bankruptcy plan; 

(B) A statement that, if the consumer’s 

plan of reorganization requires the 

consumer to make the post-petition 

mortgage payments directly to a 

bankruptcy trustee, the consumer 

should send the payment to the trustee 

and not to the servicer; 

(C) A statement that the information 

disclosed on the periodic statement may 

not reflect payments the consumer has 

made to the trustee and may not be 

consistent with the trustee’s records; 

and 

(D) A statement that encourages the 

consumer to contact the consumer’s 

attorney or the trustee with questions 

regarding the application of payments. 

(4) Multiple obligors. If a servicer is 

required to provide periodic statements 

with the modifications set forth in 

§ 1026.41(f) in connection with a 

mortgage loan with more than one 

primary obligor, the servicer may 

provide the modified statements to any 

or all of the primary obligors and need 

not provide any statements that do not 

include the modifications set forth 

paragraphs (f)(1) through (3) of this 

section, even if not all of the primary 

obligors are debtors in bankruptcy. 

(5) Coupon books. A servicer that 

provides a coupon book instead of 

regular periodic statement under 

paragraph (e)(3) of this section must 

include in the coupon book the 

disclosures set forth in paragraph (f)(2) 

and (f)(3)(vii) of this section, as 

applicable. The servicer may include 

these disclosures anywhere in the 

coupon book provided to the consumer 

or on a separate page enclosed with the 

coupon book. The servicer must make 

available upon request to the consumer 

by telephone, in writing, in person, or 

electronically, if the consumer consents, 

the information listed in paragraph 

(f)(3)(vi) of this section, as applicable. 

The modifications set forth in paragraph 

(f)(1) and (f)(3)(i) through (v) and (vii) of 

this section apply to coupon books and 

other information a servicer provides to 

the consumer under paragraph (e)(3) of 

this section. 

■ 16. Appendix H to part 1026 is 

amended by: 

■ A. Revising the entry for H–30(C) in 

the table of contents at the beginning of 

the appendix; 

■ B. Adding entries for H–30(E) and H– 

30(F) in the table of contents at the 

beginning of the appendix; 

■ C. Revising H–4(C); 

■ D. Revising H–14; 

■ E. Republishing H–30(C); and 

■ F. Adding H–30(E) and H–30(F). 

The additions, republication, and 

revisions read as follows: 

Appendix H to Part 1026— Closed-End 

Model Forms and Clauses 

* * * * * 

H–30(C) Sample Form of Periodic Statement 

for a Payment-Option Loan (§ 1026.41) 

* * * * * 

H–30(E) Sample Form of Periodic Statement 

for Consumer in Chapter 7 or Chapter 11 

Bankruptcy 

H–30(F) Sample Form of Periodic Statement 

for Consumer in Chapter 12 or Chapter 13 

Bankruptcy 

* * * * * 

H–4(C)—Variable Rate Model Clauses 

This disclosure describes the features of 

the adjustable-rate mortgage (ARM) program 

you are considering. Information on other 

ARM programs is available upon request. 

How Your Interest Rate and Payment Are 

Determined 

• Your interest rate will be based on [an 

index plus a margin] [a formula]. 

• Your payment will be based on the 

interest rate, loan balance, and loan term. 

—[The interest rate will be based on 

(identification of index) plus our margin. Ask 

for our current interest rate and margin.] 

—[The interest rate will be based on 

(identification of formula). Ask us for our 

current interest rate.] 

—Information about the index [formula for 

rate adjustments] is published [can be found] 

lll. 

—[The initial interest rate is not based on 

the (index) (formula) used to make later 

adjustments. Ask us for the amount of 

current interest rate discounts.] 

How Your Interest Rate Can Change 

• Your interest rate can change 

(frequency). 

• [Your interest rate cannot increase or 

decrease more than ll percentage points at 

each adjustment.] 

• Your interest rate cannot increase [or 

decrease] more than ll percentage points 

over the term of the loan. 


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74298 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

How Your Payment Can Change 

• Your payment can change (frequency) 

based on changes in the interest rate. 

• [Your payment cannot increase more 

than (amount or percentage) at each 

adjustment.] 

• [You will be notified at least 210, but no 

more than 240, days before first payment at 

the adjusted level is due after the initial 

interest rate adjustment of the loan. This 

notice will contain information about the 

adjustment, including the interest rate, 

payment amount, and loan balance.] 

• [You will be notified at least 60, but no 

more than 120, days before first payment at 

the adjusted level is due after any interest 

rate adjustment resulting in a corresponding 

payment change. This notice will contain 

information about the adjustment, including 

the interest rate, payment amount, and loan 

balance.] 

• [For example, on a $10,000 [term] loan 

with an initial interest rate of ll [(the rate 

shown in the interest rate column below for 

the year 19 ll)] [(in effect (month) (year)], 

the maximum amount that the interest rate 

can rise under this program is ll 

percentage points, to ll%, and the monthly 

payment can rise from a first-year payment 

of $ll to a maximum of $ll in the ll 

year. To see what your payments would be, 

divide your mortgage amount by $10,000; 

then multiply the monthly payment by that 

amount. (For example, the monthly payment 

for a mortgage amount of $60,000 would be: 

$60,000 ÷ $10,000 = 6; 6 × ll = $ll per 

month.)] 

[Example 

The example below shows how your 

payments would have changed under this 

ARM program based on actual changes in the 

index from 1982 to 1996. This does not 

necessarily indicate how your index will 

change in the future. 

The example is based on the following 

assumptions: 

Amount ................................... $10,000 

Term .......................................

Change date ..........................

Payment adjustment .............. (frequency) 

Interest adjustment ................ (frequency) 

[Margin]* .................................

Caps ll [periodic interest rate cap] 

ll [lifetime interest rate cap 

ll [payment cap] 

[Interest rate carryover] 

[Negative amortization] 

[Interest rate discount]** 

Index(identification of index or formula) 

*This is a margin we have used recently, 

your margin may be different. 

**This is the amount of a discount we have 

provided recently; your loan may be discounted by a different amount.] 

Year Index 

(%) 

Margin 

(percentage points) 

Interest rate 

(%) 

Monthly payment 

($) 

Remaining balance 

($) 

1982 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1983 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1984 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1985 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1986 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1987 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1988 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1989 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1990 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1991 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1992 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1993 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1994 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1995 ............ ...................................... ...................................... ...................................... ...................................... ......................................

1996 ............ ...................................... ...................................... ...................................... ...................................... ......................................

Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then multiply the monthly 

payment by that amount. (For example, in 1996 the monthly payment for a mortgage amount of $60,000 taken out in 1982 would be: $60,000 ÷ 

$10,000 = 6; 6 × ll = $ll per month.) 

* * * * * 

H–14—Variable-Rate Mortgage Sample 

This disclosure describes the features of 

the adjustable-rate mortgage (ARM) program 

you are considering. Information on other 

ARM programs is available upon request. 

How Your Interest Rate and Payment Are 

Determined 

• Your interest rate will be based on an 

index rate plus a margin. 

• Your payment will be based on the 

interest rate, loan balance, and loan term. 

—The interest rate will be based on the 

weekly average yield on United States 

Treasury securities adjusted to a constant 

maturity of 1 year (your index), plus our 

margin. Ask us for our current interest rate 

and margin. 

—Information about the index rate is 

published weekly in the Wall Street Journal. 

• Your interest rate will equal the index 

rate plus our margin unless your interest rate 

‘‘caps’’ limit the amount of change in the 

interest rate. 

How Your Interest Rate Can Change 

• Your interest rate can change yearly. 

• Your interest rate cannot increase or 

decrease more than 2 percentage points per 

year. 

• Your interest rate cannot increase or 

decrease more than 5 percentage points over 

the term of the loan. 

How Your Monthly Payment Can Change 

• Your monthly payment can increase or 

decrease substantially based on annual 

changes in the interest rate. 

• [For example, on a $10,000, 30-year loan 

with an initial interest rate of 12.41 percent 

in effect in July 1996, the maximum amount 

that the interest rate can rise under this 

program is 5 percentage points, to 17.41 

percent, and the monthly payment can rise 

from a first-year payment of $106.03 to a 

maximum of $145.34 in the fourth year. To 

see what your payment is, divide your 

mortgage amount by $10,000; then multiply 

the monthly payment by that amount. (For 

example, the monthly payment for a 

mortgage amount of $60,000 would be: 

$60,000÷$10,000=6; 6×106.03=$636.18 per 

month.)] 

• [You will be notified at least 210, but no 

more than 240, days before first payment at 

the adjusted level is due after the initial 

interest rate adjustment of the loan. This 

notice will contain information about the 

adjustment, including the interest rate, 

payment amount, and loan balance.] 

• [You will be notified at least 60, but no 

more than 120, days before first payment at 

the adjusted level is due after any interest 

rate adjustment resulting in a corresponding 

payment change. This notice will contain 

information about the adjustment, including 

the interest rate, payment amount, and loan 

balance.] 

[Example 

The example below shows how your 

payments would have changed under this 

ARM program based on actual changes in the 

index from 1982 to 1996. This does not 

necessarily indicate how your index will 

change in the future. The example is based 

on the following assumptions: 

Amount ................................... $10,000 

Term ....................................... 30 years 

Payment adjustment .............. 1 year 

Interest adjustment ................ 1 year 

Margin .................................... 3 percentage 

points 

Capsll2 2 percentage points annual interest rate 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74299 

ll5 5 percentage points lifetime interest rate IndexllW Weekly average yield on U.S. 

Treasury securities adjusted to a constant 

maturity of one year. 

Year 

(as of 1st week ending in July) 

Index 

(%) 

Margin * 

(percentage 

points) 

Interest rate 

(%) 

Monthly payment 

($) 

Remaining 

balance 

($) 

1982 ..................................................................................... 14.41 3 17.41 145.90 9,989.37 

1983 ..................................................................................... 9.78 3 ** 15.41 129.81 9,969.66 

1984 ..................................................................................... 12.17 3 15.17 127.91 9,945.51 

1985 ..................................................................................... 7.66 3 ** 13.17 112.43 9,903.70 

1986 ..................................................................................... 6.36 3 *** 12.41 106.73 9,848.94 

1987 ..................................................................................... 6.71 3 *** 12.41 106.73 9,786.98 

1988 ..................................................................................... 7.52 3 *** 12.41 106.73 9,716.88 

1989 ..................................................................................... 7.97 3 *** 12.41 106.73 9,637.56 

1990 ..................................................................................... 8.06 3 *** 12.41 106.73 9,547.83 

1991 ..................................................................................... 6.40 3 *** 12.41 106.73 9,446.29 

1992 ..................................................................................... 3.96 3 *** 12.41 106.73 9,331.56 

1993 ..................................................................................... 3.42 3 *** 12.41 106.73 9,201.61 

1994 ..................................................................................... 5.47 3 *** 12.41 106.73 9,054.72 

1995 ..................................................................................... 5.53 3 *** 12.41 106.73 8,888.52 

1996 ..................................................................................... 5.82 3 *** 12.41 106.73 8,700.37 

* This is a margin we have used recently; your margin may be different. 

** This interest rate reflects a 2 percentage point annual interest rate cap. 

*** This interest rate reflects a 5 percentage point lifetime interest rate cap. 

Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then multiply the monthly 

payment by that amount. (For example, in 1996 the monthly payment for a mortgage amount of $60,000 taken out in 1982 would be: 

$60,000÷$10,000=6; 6×$106.73=$640.38.)] 

• [You will be notified at least 210, but no 

more than 240, days before first payment at 

the adjusted level is due after the initial 

interest rate adjustment of the loan. This 

notice will contain information about the 

adjustment, including the interest rate, 

payment amount, and loan balance.] 

• [You will be notified at least 60, but no 

more than 120, days before first payment at 

the adjusted level is due after any interest 

rate adjustment resulting in a corresponding 

payment change. This notice will contain 

information about the adjustment, including 

the interest rate, payment amount, and loan 

balance.] 

* * * * * 

H–30(C) Sample Form of Periodic Statement 

for a Payment-Option Loan 

BILLING CODE 4810–AM–C 


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74300 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

* * * * * H–30(E) Sample Form of Periodic Statement 

for Consumer in Chapter 7 or Chapter 11 

Bankruptcy 


rfrederick on DSK6VPTVN1PROD with PROPOSALSEP15DE14.000</GPH>

Springside Mortgage 

Customer Service: 1-800-555-1234 

www.springsidemortgage.com 

Jordan and Dana Smith 

4 700 Jones Drive 

Memphis, TN 38109 

Principal 

Interest 

~-~~~w {Tax~-~~~~-~~ 

Fees 

Total 

Springside Mortgage 

Mortg.age 

11111 

los Ang<!les, CA 90010 

$384.93 $1,150.25 

$1,049.60 $3,153.34 

$235.18 $705.54 ----------------

$0.00 $0.00 

$1,669.71 $5,009.13 

Mortgage Statement 

Statement Date: 3/20/2012 

Account Number 

Payment Due Date 

Amount Due Option 1 (Full): 

1234567 

4/1/2012 

$1,829.71 

Option 2 (Interest-Only): $1,443.25 

Option 3 (Minimum): $1,156.43 

Jj payment fs received after 4/15/12, $160 late fee will be charged. 

Q Option l(full): 

Due By 4/1/2012: Q Option 2 (lnterest·Only): 

Q Opti~>n 3{M!nimum): 

$1,829.11 

$1,443.25 

$1,1Sll.43 

1234567 34571892 342359127 p 
Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74301 

H–30(F) Sample Form of Periodic Statement 

for Consumer in Chapter 12 or Chapter 13 

Bankruptcy 


rfrederick on DSK6VPTVN1PROD with PROPOSALSEP15DE14.001</GPH>

Springside Mortg•ge 

11111 

Lo~ !lnl(e!IOs, CA 90010 
74302 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

BILLING CODE 4810–AM–P 

* * * * * 

■ 17. In Supplement I to part 1026: 

■ A. Under Section 1026.2—Definitions 

and Rules of Construction: 

■ i. Under 2(a)(11) Consumer, paragraph 

4 is added. 

■ B. Under Section 1026.36—Prohibited 

Acts or Practices and Certain 

Requirements for Credit Secured by a 

Dwelling: 

■ i. Under 36(c) Servicing practices: 

■ a. Under Paragraph 36(c)(1)(i), 

paragraphs 4 and 5 are added. 

■ C. Under Section 1026.41—Periodic 

Statements for Residential Mortgage 

Loans: 

■ i. Under 41(a) In general, paragraph 5 

is added. 

■ ii. Under 41(d) Content and layout of 

the periodic statement, paragraph 1 is 

revised and paragraphs 4 and 5 are 

added. 

■ a. The heading 41(d)(1) Amount due 

is added, and paragraphs 1 through 3 

under that heading are added. 

■ b. The heading 41(d)(2) Explanation 

of amount due is added, and paragraphs 

1 and 2 under that heading are added. 


rfrederick on DSK6VPTVN1PROD with PROPOSALSEP15DE14.002</GPH>

Ae<:ount Numb11r 

f'ost·PI!tition Payment Olit" 

Po•t·l'etitiort P8'1fm!ll!t Amount 

1234567 

4/1/2015 

$1,93!1,94 
Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74303 

■ c. The heading 41(d)(8) Delinquency 

information is added, and paragraphs 1 

and 2 under that heading are added. 

■ iii. Under 41(e)(5) Consumers in 

bankruptcy, the heading is revised. 

■ iv. Under revised heading 41(e)(5) 

Certain consumers in bankruptcy, 

paragraph 1 is revised and paragraphs 2 

and 3 are removed. 

■ a. The heading 41(e)(5)(i) Exemption 

is added, and paragraphs 1 and 2 under 

that heading are added. 

■ b. The heading Paragraph 

41(e)(5)(i)(B)(4) is added, and paragraph 

1 under that heading is added. 

■ c. The heading 41(e)(5)(ii) Resuming 

compliance is added, and paragraphs 1 

through 3 under that heading are added. 

■ v. The heading 41(e)(6) Charged-off 

loans is added, and paragraphs 1 and 2 

under that heading are added. 

■ vi. The heading 41(f) Modified 

periodic statements and coupon books 

for certain consumers in bankruptcy is 

added, and paragraphs 1 through 3 

under that heading are added. 

■ a. The heading 41(f)(3) Chapter 12 

and Chapter 13 consumers is added, 

and paragraphs 1 through 4 under that 

heading are added. 

■ c. The heading 41(f)(3)(ii) Amount due 

is added, and paragraph 1 under that 

heading is added. 

■ d. The heading 41(f)(3)(iii) 

Explanation of amount due is added, 

and paragraph 1 under that heading is 

added. 

■ e. The heading 41(f)(3)(v) Transaction 

activity is added, and paragraph 1 under 

that heading is added. 

■ f. The heading 41(f)(3)(vi) Pre-petition 

arrearage is added, and paragraph 1 

under that heading is added. 

■ g. The heading 41(f)(4) Multiple 

obligors is added, and paragraph 1 

under that heading is added. 

The additions and revisions read as 

follows: 

Supplement I to Part 1026—Official 

Interpretations 

* * * * * 

Subpart A—General 

* * * * * 

Section 1026.2— Definitions and Rules of 

Construction 

* * * * * 

2(a)(11) Consumer. 

* * * * * 

4. Successors in interest. Even after a 

servicer’s confirmation of a successor in 

interest’s identity and ownership interest in 

the dwelling, the servicer is still generally 

required to comply with the requirements of 

§§ 1026.20(c) through (e), 1026.36(c), and 

1026.41 with respect to the prior consumer. 

However, a servicer is not required to comply 

with the requirements of §§ 1026.20(c) 

through (e) and 1026.41 if the prior consumer 

also has either died or has been released from 

the obligation on the mortgage loan, and a 

servicer is not required to comply with the 

requirements of § 1026.36(c) if the prior 

consumer also has been released from the 

obligation on the mortgage loan. The prior 

consumer retains any rights under 

§§ 1026.20(c) through (e), 1026.36(c), and 

1026.41 that accrued prior to the 

confirmation of the successor in interest to 

the extent these rights would otherwise 

survive the prior consumer’s death or release 

from the obligation. 

* * * * * 

Subpart E—Special Rules for Certain Home 

Mortgage Transactions 

* * * * * 

Section 1026.36—Prohibited Acts or 

Practices and Certain Requirements for 

Credit Secured by a Dwelling 

* * * * * 

36(c) Servicing practices. 

Paragraph 36(c)(1)(i). 

* * * * * 

4. Temporary loss mitigation programs. If 

the loan contract has not been permanently 

modified but the consumer has agreed to a 

temporary loss mitigation program, a 

periodic payment under § 1026.36(c)(1)(i) is 

the amount sufficient to cover principal, 

interest, and escrow (if applicable) for a given 

billing cycle under the loan contract, 

irrespective of the payment due under the 

temporary loss mitigation program. 

5. Permanent loan modifications. If the 

loan contract has been permanently 

modified, a periodic payment under 

§ 1026.36(c)(1)(i) is an amount sufficient to 

cover principal, interest, and escrow (if 

applicable) for a given billing cycle under the 

modified loan contract. 

* * * * * 

Section 1026.41—Periodic Statements for 

Residential Mortgage Loans 

* * * * * 

41(a) In general. 

* * * * * 

5. Successors in interest. 

i. Treatment of successors in interest. 

Under § 1026.2(a)(11), a successor in interest 

is a consumer for purposes of this section 

once a servicer confirms the successor in 

interest’s identity and ownership interest in 

the dwelling. Accordingly, a servicer of a 

transaction subject to this section must 

provide a successor in interest with a 

periodic statement meeting the requirements 

of this section once the servicer confirms the 

successor in interest’s identity and 

ownership interest in the dwelling. 

ii. Multiple periodic statements 

unnecessary. If a servicer sends a periodic 

statement meeting the requirements of 

§ 1026.41 to another consumer, the servicer 

need not also send a periodic statement to a 

successor in interest; a single statement may 

be sent. Also, if a servicer confirms more 

than one successor in interest’s identity and 

ownership interest in the dwelling, the 

servicer need not send periodic statements to 

more than one of the successors in interest. 

* * * * * 

41(d) Content and layout of the periodic 

statement. 

1. Close proximity. Paragraph (d) requires 

several disclosures to be provided in close 

proximity to one another. To meet this 

requirement, the items to be provided in 

close proximity must be grouped together, 

and set off from the other groupings of items. 

This could be accomplished in a variety of 

ways, for example, by presenting the 

information in boxes, or by arranging the 

items on the document and including 

spacing between the groupings. 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. 

* * * * * 

4. Temporary loss mitigation programs. If 

the consumer has agreed to a temporary loss 

mitigation program, the disclosures required 

by § 1026.41(d)(2), (3), and (5) regarding how 

payments will be and were applied should 

identify how payments are applied according 

to the loan contract, irrespective of the loss 

mitigation program. 

5. First statement after exemption 

terminates. Section 1026.41(d)(2)(ii), (d)(3)(i), 

and (d)(4) require the disclosure of the total 

sum of any fees or charges imposed, the total 

of all payments received, a breakdown of 

how payments were applied, and a list of all 

transaction activity ‘‘since the last 

statement.’’ For purposes of the first periodic 

statement provided to the consumer 

following termination of an exemption under 

§ 1026.41(e), the disclosures required by 

§ 1026.41(d)(2)(ii), (d)(3)(i), and (d)(4) may be 

limited to account activity since the last 

payment due date that occurred while the 

exemption was in effect. For example, if 

mortgage loan payments are due on the first 

of each month and the servicer’s exemption 

under paragraph (e) terminated on January 

15, the first statement provided to the 

consumer after January 15 may be limited to 

the total sum of any fees or charges imposed, 

the total of all payments received, a 

breakdown of how the payments were 

applied, and a list of all transaction activity 

since January 1. 

41(d)(1) Amount due. 

1. Acceleration. If the balance of a 

mortgage loan has been accelerated but the 

servicer will accept a lesser amount to 

reinstate the loan, the amount due under 

§ 1026.41(d)(1) should identify only the 

lesser amount that will be accepted to 

reinstate the loan. 

2. Temporary loss mitigation programs. If 

the consumer has agreed to a temporary loss 

mitigation program, the amount due under 

§ 1026.41(d)(1) may identify either the 

payment due under the temporary loss 

mitigation program or the amount due 

according to the loan contract. 

3. Permanent loan modifications. If the 

loan contract has been permanently 

modified, the amount due under 

§ 1026.41(d)(1) should identify only the 

amount due under the modified loan 

contract. 

41(d)(2) Explanation of amount due. 

1. Acceleration. If the balance of a 

mortgage loan has been accelerated but the 

servicer will accept a lesser amount to 


rfrederick on DSK6VPTVN1PROD with PROPOSALS
74304 Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 

reinstate the loan, the explanation of amount 

due under § 1026.41(d)(2) should include 

both the reinstatement amount and the 

accelerated amount, but not the monthly 

payment amount that would otherwise be 

required under § 1026.41(d)(2)(i). The 

statement should also include an explanation 

that the reinstatement amount will be 

accepted to reinstate the loan. The 

explanation should be on the front page of 

the statement or, alternatively, may be 

included on a separate page enclosed with 

the periodic statement or in a separate letter. 

2. Temporary loss mitigation programs. If 

the consumer has agreed to a temporary loss 

mitigation program and the amount due 

identifies the payment due under the 

temporary loss mitigation program, the 

explanation of amount due under 

§ 1026.41(d)(2) should include both the 

amount due according to the loan contract 

and the payment due under the temporary 

loss mitigation program. The statement 

should also include an explanation that the 

amount due is being disclosed as a different 

amount because of the temporary loss 

mitigation program. The explanation should 

be on the front page of the statement or, 

alternatively, may be included on a separate 

page enclosed with the periodic statement or 

in a separate letter. 

* * * * * 

41(d)(8) Delinquency information. 

1. Length of delinquency. For purposes of 

§ 1026.41(d)(8), a consumer’s delinquency 

begins on the date an amount sufficient to 

cover a periodic payment of principal, 

interest, and escrow (if applicable) became 

due and unpaid, even if the consumer is 

afforded a period after the due date to pay 

before the servicer assesses a late fee. A 

consumer is delinquent if one or more 

periodic payments of principal, interest, and 

escrow (if applicable) are due and unpaid. 

2. Application of funds. For purposes of 

§ 1026.41(d)(8), if a servicer applies 

payments to the oldest outstanding periodic 

payment, a payment by a delinquent 

consumer advances the date the consumer’s 

delinquency began. For example, assume a 

mortgage loan obligation under which a 

consumer’s periodic payment sufficient to 

cover principal, interest, and escrow is due 

on the first of each month. A consumer fails 

to make a payment on January 1, but makes 

a periodic payment on February 1. The 

servicer applies the payment received on 

February 1 to the outstanding January 

payment. On February 2, the consumer is one 

day delinquent, and the following periodic 

statement should disclose the length of the 

consumer’s delinquency using February 2 as 

the first day of delinquency. 

* * * * * 

41(e)(5) Certain consumers in bankruptcy. 

1. Consumer’s representative. If an agent of 

the consumer submits a request under 

§ 1026.41(e)(5)(i)(B)(1) or (ii), the request is 

deemed to be submitted by the consumer. 

41(e)(5)(i) Exemption. 

1. Multiple obligors. When two or more 

consumers are primarily liable on a mortgage 

loan, an exemption under § 1026.41(e)(5)(i) 

with respect to one of the primary obligors 

does not affect the servicer’s obligations to 

comply with § 1026.41 with respect to the 

other primary obligors. For example, assume 

that two spouses jointly own a home and are 

both liable on the note, and one of the 

spouses files Chapter 7 bankruptcy. That 

spouse files a Statement of Intention in the 

bankruptcy case identifying an intent to 

surrender the home. The servicer is exempt 

under § 1026.41(e)(i) from providing periodic 

statements with respect to the spouse in 

bankruptcy, but the servicer is required to 

comply with § 1026.41 with respect to the 

other spouse. As a result, the other spouse 

would continue to receive regular periodic 

statements, which would not include any of 

the modifications set forth in § 1026.41(f). On 

the other hand, if the spouse in bankruptcy 

had instead filed a Statement of Intention 

identifying an intent to retain the property 

and reaffirm the mortgage loan, the servicer 

would not be exempt under § 1026.41(e)(i) 

with respect to that spouse. In that case, the 

servicer would have to provide periodic 

statements with the modifications required 

under § 1026.41(f)(1) and (2). As comment 

41(f)(4)-1 explains, the servicer could provide 

a periodic statement with the modifications 

set forth in § 1026.41(f)(1) and (2) to either of 

the two spouses, even though only one of the 

spouses is in bankruptcy. 

2. Plan of reorganization. For purposes of 

§ 1026.41(e)(5), ‘‘plan of reorganization’’ 

refers to a consumer’s plan of reorganization 

filed under the applicable provisions of 

Chapter 11, Chapter 12, or Chapter 13 of the 

U.S. Bankruptcy Code, and confirmed by a 

court with jurisdiction over the consumer’s 

bankruptcy case. 

Paragraph 41(e)(5)(i)(B)(4). 

1. Statement of intention. A servicer must 

rely on the consumer’s most recently filed 

Statement of Intention to determine whether 

the exemption under § 1026.41(e)(5)(i) 

applies. For example, if a consumer files a 

Statement of Intention on June 1 identifying 

an intent to retain the dwelling securing the 

mortgage loan, but the consumer files an 

amended Statement of Intention on June 15 

identifying an intent to surrender the 

dwelling, the servicer must rely on the June 

15 Statement of Intention to determine that 

it is exempt under § 1026.41(e)(5)(i) with 

respect to that consumer. 

41(e)(5)(ii) Resuming compliance. 

1. Multiple requests. A servicer must 

comply with a consumer’s most recent 

written request to cease or to continue, as 

applicable, providing periodic statements or 

coupon books. 

2. Reasonably prompt time. Section 

1026.41(e)(ii) requires that a servicer resume 

providing periodic statements or coupon 

books within a reasonably prompt time after 

the next payment due date that follows a 

servicer’s receipt of a consumer’s written 

request, the closing or dismissal of a 

bankruptcy case, the consumer’s 

reaffirmation of the mortgage loan, or the 

consumer’s discharge of the mortgage loan. 

Delivering, emailing or placing the periodic 

statement or coupon book in the mail within 

four days after the next payment due date, or 

within four days of the close of any 

applicable courtesy period, generally would 

be considered reasonably prompt. 

3. Bankruptcy case revived. If the 

consumer’s bankruptcy case is revived—for 

example if the court reinstates a previously 

dismissed case or reopens the case— 

§ 1026.41(e)(5) may be applicable again. 

41(e)(6) Charged-off loans. 

1. Change in ownership. If a charged-off 

mortgage loan is subsequently purchased, 

assigned, or transferred, a covered person, as 

defined in § 1026.39(a)(1), must provide the 

transfer disclosure required by § 1026.39. A 

covered person, who would otherwise be 

subject to the requirements of § 1026.41, may 

take advantage of the exemption in 

§ 1026.41(e)(6) as long as it treats the 

mortgage loan as charged off and will not 

charge any additional fees or interest on the 

account. If the consumer previously received 

a final periodic statement, a covered person 

is not also required to provide a final 

periodic statement, unless it began sending 

the consumer periodic statements and then 

later met the criteria under § 1026.41(e)(6). 

2. Resuming compliance. If a servicer or a 

covered person, as defined in § 1026.39(a)(1), 

who would otherwise be subject to the 

requirements of § 1026.41, fails to treat the 

mortgage loan as charged off at any time or 

charges any additional fees or interest on the 

account, the obligation to provide a periodic 

statement pursuant to § 1026.41 resumes. The 

servicer or covered person may not 

retroactively assess fees or interest on the 

account for the period of time during which 

the exemption in § 1026.41(e)(6) applied. 

41(f) Modified periodic statements and 

coupon books for certain consumers in 

bankruptcy. 

1. Application of 41(f) if case is closed or 

dismissed. A servicer must resume providing 

regular periodic statements or coupon books 

in accordance with § 1026.41 if the 

consumer’s bankruptcy case is closed or 

dismissed or the consumer reaffirms the 

mortgage loan. However, the requirements of 

§ 1026.41(f) continue to apply if the 

consumer has discharged personal liability 

for the mortgage loan. 

2. Terminology. With respect to a periodic 

statement provided under § 1026.41(f), a 

servicer 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. See 

comment 41(d)-3. For example, a servicer 

may take into account terminology 

appropriate for consumers in bankruptcy and 

refer to the ‘‘amount due’’ identified in 

§ 1026.41(d)(1), as the ‘‘payment amount,’’ 

‘‘voluntary payment amount,’’ or ‘‘regular 

payment amount.’’ Similarly, a servicer may 

refer to amounts past due as ‘‘unpaid postpetition payments’’ or ‘‘prior unpaid 

amounts.’’ Additionally, a servicer may refer 

to the delinquency information required by 

§ 1026.41(d)(8) as an ‘‘account history,’’ and 

to the amount needed to bring the loan 

current, referred to in § 1026.41(d)(8)(vi) as 

‘‘the total payment amount needed to bring 

the account current,’’ as ‘‘unpaid amounts.’’ 

3. Further modifications. A periodic 

statement or coupon book provided under 

§ 1026.41(f) may be modified as necessary to 

facilitate compliance with the U.S. 

Bankruptcy Code, Federal Rules of 

Bankruptcy Procedure, court orders, and 

local rules, guidelines, and standing orders. 

A periodic statement or coupon book may 


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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Proposed Rules 74305 

include additional disclosures or disclaimers 

not required under § 1026.41(f) but that are 

related to the consumer’s status as a debtor 

in bankruptcy or that advise the consumer 

how to submit a written request under 

§ 1026.41(e)(5)(i)(B)(1). 

41(f)(3) Chapter 12 and Chapter 13 

consumers. 

1. Plan of reorganization. For purposes of 

§ 1026.41(f)(3), ‘‘plan of reorganization’’ 

refers to a consumer’s plan of reorganization 

filed under the applicable provisions of 

Chapter 12 or Chapter 13 of the U.S. 

Bankruptcy Code, and confirmed by a court 

with jurisdiction over the consumer’s 

bankruptcy case. 

2. Pre-petition payments and post-petition 

payments. For purposes of § 1026.41(f)(3), 

pre-petition payments are payments made 

under a plan of reorganization to cure the 

consumer’s pre-bankruptcy defaults, if any. 

Post-petition payments are payments made 

under a plan of reorganization to satisfy the 

mortgage loan’s periodic payments as they 

come due after the bankruptcy case is filed. 

For example, assume a consumer has $3,600 

in arrears as of the bankruptcy filing date 

with respect to a mortgage loan requiring 

monthly periodic payments of $2,000. The 

consumer’s plan of reorganization requires 

the consumer to make payments of $100 each 

month for 36 months to pay the prebankruptcy arrearage, and $2,000 each month 

to satisfy the monthly periodic payments. In 

this example, the $100 payments are the prepetition payments and the $2,000 payments 

are the post-petition payments. 

3. Post-petition fees and charges. For 

purposes of § 1026.41(f)(3), post-petition fees 

and charges are those fees and charges 

imposed after the bankruptcy case is filed. To 

the extent that the court overseeing the 

consumer’s bankruptcy case requires such 

fees and charges to be included as an 

amendment to a servicer’s proof of claim, 

such fees and charges are not considered 

post-petition fees and charges for purposes of 

§ 1026.41(f)(3) but should be included in the 

balance of the pre-petition arrearage under 

§ 1026.41(f)(3)(vi)(C). 

4. First statement after exemption 

terminates. Section 1026.41(f)(3)(iii) through 

(vi) requires the disclosure of the total sum 

of any post-petition fees or charges imposed, 

the total of all post-petition payments 

received and how they were applied, the 

total of all payments applied to post-petition 

fees or charges imposed, a list of all 

transaction activity, and the total of all prepetition payments received ‘‘since the last 

statement.’’ For purposes of the first periodic 

statement provided to the consumer 

following termination of an exemption under 

§ 1026.41(e), the disclosures required by 

§ 1026.41(f)(3)(iii) through (vi) may be 

limited to account activity since the last 

payment due date that occurred while the 

exemption was in effect. See comment 41(d)- 

5. 

41(f)(3)(ii) Amount due. 

1. Amount due. The amount due under 

§ 1026.41(d)(1) is not required to include any 

amounts other than the post-petition 

payments the consumer is required to make 

under the terms of plan of reorganization and 

post-petition fees and charges that a servicer 

has imposed. The servicer is not required to 

include in the amount due any pre-petition 

payments due under the plan of 

reorganization or other amounts payable 

pursuant to a court order. With respect to 

post-petition fees and charges, the amount 

due may be limited to including those postpetition fees and charges that a servicer has 

imposed. A servicer that defers collecting a 

fee or charge until after complying with the 

Federal Rule of Bankruptcy Procedure 3002.1 

procedures, and thus after a potential court 

determination on the allowability of the fee 

or charge, is not required to disclose the fee 

or charge until complying with such 

procedures. However, a servicer may include 

in the amount due other amounts due to the 

servicer, such as amount due under an agreed 

order, provided those amounts are also 

disclosed in the explanation of amount due 

and transaction activity. 

41(f)(3)(iii) Explanation of amount due. 

1. Explanation of amount due. The 

explanation of amount due under 

§ 1026.41(d)(2) is not required to include any 

amounts other than the post-petition 

payments and post-petition fees and charges 

that a servicer has imposed. Consistent with 

§ 1026.41(d)(3)(i), the post-petition payments 

must be broken down by the amount, if any, 

that will be applied to principal, interest, and 

escrow. The servicer is not required to 

disclose, as part of the explanation of amount 

due, any pre-petition payments or the 

amount of the consumer’s pre-bankruptcy 

arrearage. However, a servicer may identify 

other amounts due to the servicer provided 

those amounts are also disclosed in the 

amount due and transaction activity. See 

comment 41(d)(4)–1. 

41(f)(3)(v) Transaction activity. 

1. Transaction activity. The transaction 

activity under § 1026.41(d)(4) must include 

all payments the servicer has received since 

the last statement that constitute postpetition payments, pre-petition payments, 

and payments of post-petition fees or 

charges. The brief description of the activity 

does not need to identify the source of the 

payments. 

41(f)(3)(vi) Pre-petition arrearage. 

1. Pre-petition arrearage. To the extent that 

the amount of the pre-petition arrearage is 

subject to dispute or has not yet been 

determined, the periodic statement may 

include a statement acknowledging the 

unresolved amount of the pre-petition 

arrearage. 

41(f)(4) Multiple obligors. 

1. Modified statements. When more than 

one consumer is primarily obligated on a 

closed-end consumer credit transaction 

secured by a dwelling, subject to § 1026.41, 

the periodic statement may be sent to any 

one of the primary obligors. See comment 

41(a)–1. Section 1026.41(f)(4) specifies that, 

if a servicer is required to provide periodic 

statements with the modifications set forth in 

§ 1026.41(f) in connection with a mortgage 

loan with multiple obligors, the servicer may 

provide the modified statements to any or all 

of the primary obligors instead of any 

statements not including the modifications, 

even if not all primary obligors are debtors 

in bankruptcy. For example, assume two 

spouses own a home, and only one spouse 

files for Chapter 13 bankruptcy. That 

spouse’s Chapter 13 plan of reorganization 

provides that the same spouse will retain the 

home by making pre-petition and postpetition payments. The servicer is thus 

required to provide periodic statements with 

the modifications set forth in § 1026.41(f)(1) 

though (3). The servicer may provide 

periodic statements with the modifications 

set forth in § 1026.41(f)(1) through (3) to 

either of the two spouses, even though only 

one of the spouses is in bankruptcy. On the 

other hand, if the spouse in bankruptcy had 

a plan of reorganization providing for that 

spouse to surrender the home, the servicer 

would be exempt under § 1026.41(e)(5)(i) 

from providing periodic statements to that 

spouse. In this circumstance, the servicer 

would be required to provide regular 

periodic statements, without any of the 

modifications set forth in § 1026.41(f), to the 

spouse not in bankruptcy. See comment 

41(e)(5)(i)–1. 

Dated: November 19, 2014. 

Richard Cordray, 

Director, Bureau of Consumer Financial 

Protection. 

[FR Doc. 2014–28167 Filed 12–12–14; 8:45 am] 

BILLING CODE 4810–AM–P 


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