June 11, 2012 

Richard Cordray 

Director 

Consumer Financial Protection Bureau 

1700 G Street, NW 

Washington, DC 20552 

Dear Director Cordray: 

 Enclosed for your consideration is the Report of the Small Business Review Panel 

(“Panel”) that was convened on April 10, 2012, for the rulemaking by the Consumer Financial 

Protection Bureau (“Bureau”) on Mortgage Loan Servicing under the Dodd-Frank Wall Street 

Reform and Consumer Protection Act. 

 Pursuant to section 609(b) of the Regulatory Flexibility Act (5 U.S.C. 609(b)), the Panel 

was convened by Dan Sokolov, the Bureau’s Panel Chair and Deputy Associate Director for the 

Bureau’s Division of Research, Markets, and Regulations. In addition to its Chair, the Panel 

consists of Dr. Winslow Sargeant, Chief Counsel for Advocacy of the Small Business 

Administration; Cass Sunstein, Administrator of the Office of Information and Regulatory 

Affairs in the Office of Management and Budget; and David Stein, Managing Counsel in the 

Bureau’s Office of Regulations. 

 The Panel met with representatives of small entities that would be subject to the rule on 

April 24, 2012, to obtain their feedback on proposals that the Bureau is considering for Mortgage 

Loan Servicing. Before the meeting, the Bureau provided the representatives of the small 

entities with materials outlining the proposals under consideration and alternatives considered. 

In addition to meeting with the Panel, many of the representatives subsequently provided the 

Panel with written comments. 

 The Panel is appreciative of the thoughtful contributions made by the representatives of 

small entities who participated in this Panel process. The Panel recognizes that the time required 

for the participants to review materials, prepare for and participate in the meeting, and provide 

additional written comments was significant. While this participation at an early stage of the 

rulemaking is important, public participation and input during subsequent stages of the 

rulemaking will also assist in the development of a final rule. Therefore, the Panel hopes the 

participants will continue to be engaged in this rulemaking through the public comment process 

following publication of the proposed rule. 

The Panel’s findings and recommendations are based on the information available at the 

time the final Panel Report was prepared. The Bureau is continuing to conduct analyses and 

gather information as part of the rule development process. Any options identified by the Panel 

for reducing the rule’s economic impact on small entities may require further consideration, 

analysis, and data collection by the Bureau to ensure that the options are practicable, enforceable, 

and consistent with TILA, RESPA, the Dodd-Frank Act, and their statutory purposes. 
2 

The complete Panel Report is attached, including background information on the 

proposals and significant alternatives under consideration by the Bureau that were reviewed by 

the Panel; a description of the types, and an estimate of the number, of small entities that would 

be subject to those proposals; a summary of the comments and recommendations of the small 

entity participants; the Panel’s findings and recommendations; and attachments including certain 

materials presented to the small entity representatives. In this report, the Panel recommends that 

the Bureau seek additional information on potential impacts and consider certain alternatives that 

would reduce the burden on small entities. 

[signatures to follow] 

1

FINAL REPORT

of the

Small Business Review Panel on

CFPB’s Proposals Under Consideration for

Mortgage Servicing Rulemaking

June 11, 2012
2

Table of Contents

1. Introduction

2. Background

2.1 Market Background

2.2 The Dodd Frank Act

2.3 Additional Proposals

2.4 Related Federal Rules

3. Overview of Proposals and Alternatives Under Consideration 

3.1 Periodic Statements

3.2 ARM Notice – 6 Months Prior to Initial Interest Rate Reset

3.3 Force-Placed Insurance Notice

3.4 Prompt Crediting and Request for Payoff Amounts

3.5 Error Resolution and Response to Inquiries

3.6 Reasonable Information Management Policies and Procedures

3.7 Early Intervention for Troubled or Delinquent Borrowers

3.8 Continuity of Contact

4. Applicable Small Entity Definitions

5. Small Entities That May Be Subject to the Proposals Under Consideration

6. Summary of Small Entity Outreach

6.1 Summary of Panel’s Outreach Meeting with Small Entity Representatives

6.2 Other Outreach Efforts, Including to Small Entities

7. List of Small Entity Representatives

8. Summary of Small Entity Representative Comments

8.1 Periodic Statement and Coupon Book Exemption

8.2 ARM Disclosures

8.3 Force-Placed Insurance

8.4 Error Resolution and Responses to Inquiries

8.5 Reasonable Information Management Policies

8.6 Early Intervention and Continuity of Contact

8.6.1 Early Intervention

8.6.2 Continuity of Contact

8.7 Prompt Crediting and Payoff Amounts

8.7.1 Prompt Crediting

8.7.2 Payoff Amount

8.8 Impact on the Cost of Business Credit

9. Panel Findings and Recommendations

Appendix A: Written Comments Submitted by SERs

Appendix B: List of Materials Shared with SERs

Appendix C: Outline of Proposals Under Consideration and Alternatives Considered

Appendix D: Panel Outreach Meeting PowerPoint Slides
3

1. Introduction

Under the Regulatory Flexibility Act (“RFA”),1 the Consumer Financial Protection 

Bureau (“CFPB” or the “Bureau”) must convene and chair a Small Business Review Panel 

(“Panel”) to consider the impact of considered rules and obtain feedback from representatives of 

the small entities that would be subject to the rule unless the CFPB plans to certify that the

proposals under consideration will not have a significant economic impact on a substantial 

number of small entities.2 The Panel consists of representatives from the CFPB, the Chief 

Counsel for Advocacy of the Small Business Administration (“SBA”), and the Administrator of 

the Office of Information and Regulatory Affairs within the Office of Management and Budget 

(“OMB”).

This Panel Report addresses the CFPB’s upcoming proposal concerning the mortgage 

servicing rulemaking. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. 

L. 111-203, approved July 21, 2010) (“Dodd-Frank Act,” “DFA,” or the “Act”)3 imposes certain 

requirements concerning mortgage servicing that become self-executing and enforceable on 

January 21, 2013, unless final rules are issued on or before that date. The CFPB is also 

considering whether to propose additional standards to improve servicer information 

management and communications with troubled or delinquent borrowers.

This report includes the following:

• Background information on the proposals that are being considered by the CFPB and 

that were reviewed by the Panel;

• Information on the types of small entities that would be subject to those proposals and 

on the small entity representatives (“SERs”) who were selected to advise the Panel;

• A summary of the Panel’s outreach to obtain the advice and recommendations of 

those SERs; 

• A discussion of the comments and recommendations of the SERs; and

• A discussion of the Panel findings and recommendations, focusing on the following 

statutory elements:4

 1 RFA (Pub. L. 96-354, approved September 19, 1980; 94 Stat. 1164) is codified at 5 U.S.C. 601-612 

(http://143.231.180.80/view.xhtml?path=/title5/part1/chapter6). 2 Under section 609(b) of the RFA, as amended by the Small Business Regulatory Enforcement Fairness Act of 

1996 (“SBREFA”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, a Panel is required to be 

convened prior to the publication of the initial regulatory flexibility analysis (“IRFA”) that the CFPB may be 

required to prepare under the RFA. 3 Dodd-Frank Act, secs. 1418, 1420, 1463(a), and 1464(a) (http://www.gpo.gov/fdsys/pkg/PLAW111publ203/pdf/PLAW-111publ203.pdf). 4 See RFA section 603 (5 U.S.C. 603); RFA section 609(b)(5) (5 U.S.C. 609(b)(5)).
4

o A description of and, where feasible, an estimate of the number of small entities 

to which the proposals under consideration will apply;

o A description of projected reporting, recordkeeping, and other compliance 

requirements of the proposals under consideration, including an estimate of the 

classes of small entities which will be subject to the rule’s requirements and the 

type of professional skills necessary for preparation of the report or record;

o An identification, to the extent practicable, of all relevant Federal rules which 

may duplicate, overlap, or conflict with the proposals under consideration; and

o A description of any significant alternatives to the proposals under consideration

which accomplish the stated objectives of applicable statutes and which minimize 

any significant economic impact of the proposals under consideration on small 

entities.

This Panel Report will be included in the public rulemaking record. The CFPB will 

consider the Panel’s findings when preparing the proposed rule and IRFA.

It is important to note that the Panel makes its report at a preliminary stage of rule 

development and this report should be considered in that light. The Panel’s findings and 

discussion are based on the information available at the time the final Panel Report was prepared. 

Additional analyses may be conducted and additional information may be obtained by the CFPB 

during the remainder of the rule development process. At the same time, the Panel Report 

provides the Panel and the CFPB with an opportunity to identify and explore potential ways of 

shaping the proposals under consideration to minimize the burden of the rule on small entities 

while achieving the rule’s purposes.

Any options identified by the Panel for reducing the rule’s regulatory impact on small 

entities may require further consideration, analysis, and data collection by the CFPB to ensure 

that the options are practicable, enforceable, and consistent with the Truth in Lending Act 

(“TILA”), the Real Estate Settlement Procedures Act of 1974 (“RESPA”), the Dodd-Frank Act, 

and their statutory purposes.

2. Background

2.1. Market Background

Congress enacted the Dodd-Frank Act in the wake of the greatest financial crisis since the 

Great Depression. At the epicenter of this crisis was the mortgage meltdown. The serious and 

widespread deficiencies in the mortgage market damaged American homeowners, financial 

institutions, and the wider economy.

Pervasive and profound consumer protection problems have been reported across major 

segments of the mortgage servicing industry, particularly among large and specialty servicers.5

 

 5 See e.g., Testimony of John Walsh, Acting Comptroller of the Currency, before the U.S. Senate Committee on 

Banking, Housing and Urban Affairs at p. 16 (February 17, 2011); Testimony of Mike Calhoun, President, Center 
5

In a report on examinations of fourteen major servicers, the Comptroller of the Currency, the 

Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision

concluded that those servicers were “emphasiz[ing] speed and cost efficiency over quality and 

accuracy” in their foreclosure processes.6

 This report did not include information on 

examinations of any small servicers.

2.2. The Dodd Frank Act

The Dodd-Frank Act mandates several protections for homeowners in the servicing of 

their loans, including:

(1) new disclosures (periodic statements, notice prior to reset of adjustable rate mortgages 

(“ARMs”), and force-placed insurance notices)7 that will help provide consumers with 

comprehensive and comprehensible information, when they need it, in a form they can 

use, so they can better manage their obligations and avoid unnecessary problems;

(2) new requirements for servicers to respond in a timely way to borrowers who complain to 

their servicer about a potential mistake;

8

(3) prompt crediting of payments, so consumers are not wrongly penalized with late fees or 

other fees because a servicer did not credit their payments quickly; 9 and

(4) timely response to requests for payoff information, so consumers can get their balance 

information when they need it.10

These new statutory requirements will take effect automatically in January 2013, as 

written in the statute, unless final rules are issued on or before that date. The statute authorizes 

the CFPB to adopt implementing regulations and, by doing so, extend the effective date for up to 

one year. The Bureau intends to use these authorities to adopt regulations that provide servicers 

with clarity about their statutory obligations and provide servicers with sufficient time to come 

into compliance. The Bureau will also consider adjusting servicers’ statutory obligations to ease 

burden where consistent with adequate protection of homeowners, and appropriate under the 

Bureau’s limited exemption authority.

2.3. Additional Proposals

 

for Responsible Lending, before the House Financial House Financial Services Committee’s Subcommittee on 

Financial Institutions and Consumer Credit and Subcommittee on Oversight and Investigations on Mortgage 

Servicing (July 7, 2011); United States of America et al. v. Bank of America Corporation et al., Compl. ¶¶ 47-101 

(D.C. Cir.), available at: www.nationalmortgagesettlement.com. 6 Federal Reserve System, Office of the Comptroller of the Currency, and Office of Thrift Supervision, “Interagency 

Review of Foreclosure Policies and Practices,” p. 5, (April 2011), http://www.occ.gov/news-issuances/newsreleases/2011/nr-occ-2011-47a.pdf. 7 Periodic statements are addressed in DFA 1420. The notice prior to reset of adjustable rate mortgages is addressed 

in DFA 1418. The force-placed insurance notices are addressed in DFA 1463. 8 Error resolution is addressed in DFA 1463.

9 Prompt Crediting is addressed in DFA 1464(a).

10 Payoff information is addressed in DFA 1464(b).
6

The CFPB is also considering whether to propose additional standards to improve 

servicer information management and communications with troubled or delinquent borrowers. 

Some servicers can make it very difficult for troubled or delinquent borrowers to explore and 

take advantage of potential ways to avoid a foreclosure. For example, some servicers have 

frequently neglected to reach out or respond to distressed borrowers sufficiently early to allow 

the parties to find an alternative to foreclosure, lost documents of borrowers who have sought 

modifications or other relief, failed to track communications with borrowers, and forced 

borrowers who have invested substantial time communicating with an employee of the servicer 

to “start over” with a different employee.11

To address these concerns, the CFPB is considering proposing new servicing operations 

standards in three areas:

(1) servicers would have to maintain reasonable information management policies and 

procedures;

(2) servicers would have to intervene early with troubled and delinquent borrowers; and

(3) servicers would have to assure that staff who deal with borrowers have access to records 

about that borrower, including records of the borrower’s previous communications with 

the servicer.

2.4. Related Federal Rules 

The Dodd-Frank Act codified certain requirements contained in existing regulations and 

in some cases imposed new requirements that expand or vary the scope of existing regulations. 

The CFPB is working to eliminate conflicts and to harmonize the earlier rules with the new 

statutory requirements. A detailed description of these rules can be found in Appendix C. In 

general, the existing and expanded regulations cover the following topics:

• New Regulation Z ARM disclosures, as required by DFA 1418, will be provided six to seven 

months prior to the initial reset of interest rates. These disclosures will provide similar 

information to existing Regulation Z 1026.20(c) notices, however there are timing 

differences, and the new notice is only required for the first rate reset. The DFA 1418 notice 

is intended to be sent early enough for the borrower to take action (i.e. refinance or apply for 

a loan modification) before the monthly payment increases.

• Regulation Z 1026.36(c)(1)(i) contains a prompt crediting provision that is generally codified 

by the prompt crediting provision in DFA 1464(a).

• Regulation Z 1026.36(c) addresses the application of payments. The Bureau is considering 

 11 See e.g. Larry Cordell, Karen Dynan, Andreas Lehnert, Nellie Liang and Eileen Mauskopf, “The Incentives of 

Mortgage Servicers: Myths and Realities,” Finance and Economics Discussion Series, Divisions of Research & 

Statistics and Monetary Affairs, Federal Reserve Board, Working Paper 2008-46, at p. 9 (2008); Testimony of 

Diane Thompson, National Consumer Law Center, before the United States Senate Subcommittee on Housing, 

Transportation and Community Development of the United States Senate Committee on Banking, Housing & Urban 

Affairs, at 52, (May 12, 2011).
7

modifying this rule to mandate the application of funds if a full contractual payment has 

accrued in any suspense or unapplied funds account.

• Regulation Z 1026.36(c)(1)(iii) contains a provision regarding payoff amount requests that is 

generally codified by the Dodd Frank Act .

• RESPA 6(e) contains procedures for qualified written requests overlap with the DFA 1463

RESPA amendment providing additional procedures for resolving errors and responding to 

inquiries. The CFPB is considering proposing broader, more consumer-friendly procedures 

that cover wider topics than the current qualified written request procedures, which it 

believes will have substantial benefit to borrowers.

The CFPB is currently developing other proposed or final rules under Title XIV of the 

Dodd-Frank Act, including rules addressing ability-to-pay standards for qualified mortgages,12

mortgage loan originator compensation,13 mortgage loans subject to the Homeownership and 

Equity Protection Act (HOEPA),14 consolidation of the disclosures consumers receive under 

TILA and RESPA15 and, jointly with other agencies, appraisal practices.16

The Panel is not aware of any other Federal regulations that currently duplicate, overlap, 

or conflict with the proposals under consideration. 

3. Overview of Proposals and Alternatives Under Consideration 

In addition to other requirements, the Dodd-Frank Act requires several new disclosures: a 

periodic statement, notices prior to charging for any force-placed insurance, and a notice prior to 

the first reset of hybrid adjustable rate mortgages.

The new disclosure requirements will take effect with or without a Bureau regulation. 

The Bureau believes a regulation will aid consumers and servicers by clarifying legal rights and 

obligations and specifying disclosure requirements and formatting based on empirical testing. 

The CFPB is considering proposing model forms for the periodic statement, ARM reset notices, 

and force-placed insurance notices. Generally, model forms benefit servicers by providing them 

with safe harbors for complying with disclosure obligations, while preserving flexibility for 

servicers to vary from the model so long as they adhere to the regulation. With regard to the 

periodic statement and the ARM notices, the CFPB is considering a proposal that would require 

the notices to contain certain items and to group some of those items together for clarity and 

emphasis, but would permit servicers and creditors to customize the forms in other respects.

A more detailed description of the proposals under consideration can be found in 

Appendix C.

 12 DFA 1411 13 DFA 1403 14 DFA Subtitle C 15 DFA 1032 16 DFA Subtitle F
8

The CFPB has conducted extensive outreach efforts to consumers, industry members, and 

representative groups - including small entities and representative organizations - regarding the 

development of proposals and forms. The CFPB began meeting with industry stakeholders 

regarding the proposed servicing regulations in December 2011 and has conducted additional 

meetings and industry roundtables throughout 2012. Through these efforts, the CFPB has 

obtained information regarding the potential impacts of the proposed regulations from consumers 

and industry members, including small entities. The CFPB will continue to collect information 

from stakeholders, including small entities, as the rule is developed. 

In addition, the CFPB has conducted three rounds of consumer testing in three different 

parts of the country.17 The CFPB is testing the optimal amount, content, and presentation of 

information to include in each of the disclosures through one-on-one interviews with consumers. 

Between February 13 - 23, 2012, the CFPB posted a draft model periodic statement on its 

website for general comment. A fourth round of testing may take place after the proposal is 

issued. The selection of testing locations took into account geographic, economic, and size 

diversity as well as diversity of consumer demographics, such as age, race, and mortgage 

experience. The CFPB will publish a report summarizing the results of the cognitive interviews, 

along with publication of its proposed mortgage servicing rules.

3.1. Periodic Statements

DFA Section 1420 amends TILA by adding a new requirement that a creditor, assignee, 

or servicer of any residential mortgage loan – a closed-end credit transaction secured by a 

dwelling – provide a periodic statement to the borrower for each billing cycle. As discussed 

above, this new requirement will take effect with or without a Bureau regulation; the Bureau 

believes a regulation will provide clarity aiding both consumers and servicers. The Bureau is 

considering proposing a rule which would require certain items to be on the form, and for these 

items to be grouped together for clarity and emphasis, but would allow servicers and creditors to 

customize the form in other respects.

The proposals under consideration would require both the content listed in the statute, 

and additional billing information, as well as general loan information. The statement would 

also include information that may be helpful to troubled or delinquent borrowers. In accordance 

with the statute, the proposals under consideration would have a coupon book exemption for 

fixed rate loans when the borrower is given a coupon book with substantially the same 

information as required by the periodic statement. 

3.2 ARM – Notice 6 Months Prior to Initial Interest Rate Reset

DFA Section 1418 amends TILA by adding a new requirement that a creditor or servicer 

provide a notice regarding the initial interest rate reset or adjustment of a hybrid adjustable rate 

mortgage at the end of the introductory period either (a) between 6 and 7 months prior to such 

reset, or (b) at consummation of the mortgage if the first reset occurs during the first 6 months 

after consummation. As discussed above, this new requirement will take effect with or without a 

 17The first round of testing took place in Towson, Maryland on February 1-2, 2012. The second round took place in 

Memphis, Tennessee on February 29 and March 1, 2012. The third round took place in the Los Angeles, California 

area on April 3-4, 2012. 
9

Bureau regulation; the Bureau believes a regulation will provide clarity aiding both consumers 

and servicers.

The proposed form would require the content listed in the statute; additionally the CFPB 

is considering requiring information including details about the loan, key terms of the ARM, and 

information about the upcoming payment. Much of this additional content was proposed by the 

Federal Reserve Board in its 2009 proposed rule to amend Regulation Z’s ARM reset notice.

The statute defines a “hybrid adjustable rate mortgage” as a consumer credit transaction 

secured by the consumer’s principal residence with a fixed interest rate for an introductory 

period that adjusts or resets to a variable interest rate after such period. The CFPB understands 

the term hybrid ARM too generally encompass any ARM product with an introductory period of 

longer duration than its ensuing periods of adjustment.

18 The CFPB is considering proposing to 

use its discretionary authority to require this notice for ARMS that are not hybrid (1/1, 3/3, 5/5, 

etc.).19 It is considering soliciting comments on whether this disclosure would be helpful to 

borrowers with these ARMs.

The CFPB is considering proposing changes to existing Regulation Z §1026.20(c), which 

requires creditors to send disclosures for all ARMs prior to each interest rate adjustment that 

effects a change in payment. Proposed changes the CFPB is considering include changes to the 

timeframe and content of the current disclosures, the logistics of sending the notice, and 

eliminating the requirement when borrowers will receive the earlier Section 1418 notice for a 

rate reset.

The CFPB has also considered proposing limiting the initial reset notice to hybrid ARMs 

-- and not requiring it for all ARMs. However, the Bureau opted for its currently considered 

proposal because all ARMs, not just hybrid ARMs, are subject to the same “payment shock” 

after the introductory period expires, and because Congress expressly authorized the CFPB to 

extend the Section 1418 (or other) notice to ARMs that are not hybrid.

3.3 Force-Placed Insurance

DFA Section 1463 amends RESPA to prohibit a servicer of a federally related mortgage 

from obtaining force-placed hazard insurance unless there is a reasonable basis to believe the 

borrower has failed to comply with the loan contract’s requirements to maintain property 

insurance. Additionally, the statute requires certain notices be sent to the borrower, and process 

requirements about charging for, and terminating, force-placed insurance. As discussed above, 

this new requirement will take effect with or without a Bureau regulation; the Bureau believes a 

regulation will provide clarity aiding both consumers and servicers.

The CFPB is considering proposing forms for the notices to be sent to borrowers;

additionally, the CFPB is considering proposing requirements concerning: charges related to 

force-placed insurance, payment of insurance from escrow, amount of coverage and a 

 18A 3/1 hybrid ARM, for example, maintains a fixed rate of interest for the three-year introductory period and then 

converts to an adjustable rate for successive one-year periods. Hybrid ARM includes the once-popular 2/28 and 

3/27 mortgages, which often adjusts every six months after the introductory period.

19ARMs, unlike hybrid ARMs, start with an adjustable rate and that rate readjusts at even intervals.
10

clarification that the requirements do not apply where servicers renew consumers’ existing 

insurance policies.

3.4 Prompt Crediting and Request for Payoff Amounts

DFA Section 1464 requires that servicers must credit consumer payments as of the date 

of receipt in connection with a consumer credit transaction secured by the consumer’s principal 

dwelling, except if the delay does not result in any charge to the consumer or in the reporting of 

negative information to a consumer reporting agency. The servicer may, however, specify in 

writing requirements that the consumer must follow to make conforming payments. If nonconforming payments are accepted, the servicer must credit the payment five days after receipt. 

The prompt crediting provision generally codifies the current Regulation Z requirements 

on prompt crediting that for payments received from borrowers that fall short of a complete 

payment, the CFPB is considering proposing retention of the current rule in Regulation Z 

permitting partial payments be treated in accordance with the legal obligation as determined by 

applicable state or other law. As such, servicers generally would be allowed to hold partial 

payments in a non-interest bearing suspense account until an amount equal to a full payment is 

received. Servicers also would have the option of returning the non-conforming payment to the 

borrower. Alternatively, the CFPB is considering proposing a new requirement that as soon as 

the amount in the suspense account equals a full contractual payment, the servicer must credit 

that payment to the earliest delinquent payment. This proposal under consideration would have 

the effect of rolling forward the borrower’s date of delinquency by 30 days.

The statute requires a creditor or servicer of a home loan to send an accurate payoff 

balance within a reasonable time, but no more than seven business days, after receipt of a written 

request for such balance from or on behalf of the borrower. Regulation Z currently addresses 

payoff amount requests, but creates a safe harbor for responses sent within five business days. 

The proposal generally would follow the statute and require an accurate payoff balance to be 

provided no later than seven business days (excluding holidays and weekends) after receipt of a 

written request from the borrower. The prompt crediting provision generally codifies the current 

Regulation Z.

3.5 Error Resolution and Response to Inquiries

DFA Section 1463 amends Section 6 of RESPA by adopting a number of servicer 

prohibitions with respect to handling alleged errors and inquiries, including revising the 

timeframe to respond to qualified written requests, and prohibiting the charging of fees in 

connection with error resolution.

Section 6 of RESPA and Regulation X currently contain procedures for handling alleged 

errors and inquiries. Section 6 of RESPA provides that when a servicer of a federally related 

mortgage loan receives a “qualified written request” from a borrower for information relating to 

the servicing of the borrower’s loan, the servicer must respond within certain timeframes. 

Regulation X limits application of the qualified written request provisions to “mortgage servicing 

loans,” which includes only first-lien, closed-end mortgages.
11

The CFPB is considering proposing a comprehensive set of requirements for 

investigating and correcting errors and for responding to borrower inquiries. This approach 

would incorporate, but not be limited to, RESPA’s use of the qualified written request to address 

“servicing” issues, as defined by RESPA. Specifically, servicers would be required to correct 

errors relating to allocation of payments, provision of final balances for purposes of paying off 

the loan, avoiding foreclosures, or other standard servicer’s duties. Servicers also would be 

required to respond to inquiries about certain topics.

The CFPB is considering proposing a timeframe for error resolution and responding to 

inquiries that generally tracks the timeframe for qualified written requests, as amended by the 

DFA, subject to certain explicit exceptions. See Attachment E for a detailed description of these 

procedures.

3.6 Reasonable Information Management Policies and Procedures

DFA Section 1463 requires servicers to comply with any obligation the CFPB finds 

appropriate to carry out the consumer protection purposes of RESPA. The CFPB is considering 

using this authority to propose three rules in addition to those discussed above. These rules 

address Reasonable Information Management Policies and Procedures, Early Intervention for 

Troubled or Delinquent Borrowers, and Continuity of Contact, as discussed below. Potential 

civil liability would arise from violations of these regulations under RESPA.

The CFPB is considering a proposal to address wide-spread problems reported across 

major segments of the mortgage servicing industry, particularly among larger and specialty 

servicers, with regard to management of borrower documents and information. Reasonable 

policies and procedures for managing borrower documents and information would facilitate 

development of systems and operational processes for tracking and storing borrower documents 

and information with respect to borrower communications, error resolution, information 

requests, loss mitigation (including, without limitation, loan modification actions), foreclosure, 

and other servicer operations. 

The CFPB further envisions a servicing industry capable of achieving mortgage loan 

servicing transfers without negatively impacting loss mitigation communications with borrowers. 

Through reasonable policies and procedures, servicers should be capable of transferring all 

relevant and accurate documents and information to (1) a subsequent servicer when servicing 

rights are transferred in a form and manner that enables the subsequent servicer to comply with 

the requirements of this subpart and (2) a forum addressing foreclosure.

The CFPB is considering proposing that the reasonableness of a servicer’s information 

management policies and procedures would depend upon the size of the servicer and the nature 

and scope of its activities. Additionally, the CFPB is considering proposing to explain that a 

violation would occur if a servicer: (a) fails to establish reasonable information management 

policies and procedures or (b) demonstrates a pattern or practice of failing to comply with its 

procedures. However, an occasional failure to follow established policies and procedures would 

not constitute a violation of this part of the regulation. Potential civil liability would arise from 

violation of the regulation under RESPA.
12

3.7 Early Intervention for Troubled or Delinquent Borrowers

Additionally, under DFA Section 1463, the CFPB is considering proposing early 

intervention procedures for troubled and delinquent borrowers to address mortgage servicing 

problems experienced by such borrowers. For this purpose, the CFPB is considering proposing a 

rule requiring servicers to make good faith efforts to contact delinquent borrowers no later than 

45 days after the onset of delinquency and to respond promptly to troubled borrowers who 

contact their servicers.20 The proposal the CFPB is considering would require servicers to 

provide delinquent borrowers with written information about (1) options to help avoid 

foreclosures, such as loss mitigation programs available to them and how to access a housing 

counselor, and (2) the foreclosure process.

The Bureau is also considering proposing a requirement that servicers provide this 

written information to any borrower who contacts the servicer about having or expecting to have 

difficulty making payments within five days of the borrower making such contact. The CFPB is 

considering proposing an exemption from the written disclosure requirements for small servicers 

for loans they hold in portfolio if they make good faith efforts to contact borrowers no later than 

45 days after they first become delinquent.

3.8 Continuity of Contact

Additionally, under DFA Section 1463, the CFPB is considering proposing to require 

servicers to provide delinquent and troubled borrowers with specific servicer points of contact. 

This is intended to address wide-spread problems reported with regard to inconsistent and faulty 

servicer contact with borrowers. The proposals under consideration would require servicers to 

provide all borrowers who become 45 days delinquent or who request assistance in avoiding 

delinquency with direct and on-going access to a staff of the servicer’s customer service 

employees dedicated to serving troubled or delinquent borrowers. The proposal would require 

that these employees have ready access to files related to these borrowers.

The CFPB is considering proposing that a servicer does not violate the rule if ready 

access is temporarily unavailable as a result of computer systems issues, weather emergencies 

and similar force majeure events, or if records have been received too recently to be readily 

accessible to the customer service employees.

If the CFPB finds that certain classifications of small servicers already maintain 

consistent, albeit less formal, contact with their financially challenged clients, the CFPB may 

consider proposing adjustments to this rule for such servicers.

4. Applicable Small Entity Definitions 

For purposes of assessing the impacts of the proposals under consideration on small 

entities, “small entities” is defined in the RFA to include small businesses, small nonprofit 

organizations, and small government jurisdictions. 5 U.S.C. 601(6). A “small business” is 

 20The CFPB is considering permitting servicers, at their option, to initiate contact by telephone, mail, or other means 

generally used by the servicer to communicate with borrowers.
13

determined by application of SBA regulations and reference to the North American Industry 

Classification System (“NAICS”) classifications and size standards.21 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). 

5. Small Entities That May be Subject to the Proposals Under Consideration

The CFPB identified five categories of small entities that may be subject to the proposals 

under consideration for purposes of the RFA. These are the categories of servicers that may be 

subject to the proposed regulations. The categories and the SBA small entity thresholds for those 

categories are:

CATEGORY THRESHOLD FOR “SMALL” 

Commercial Banks22 $175,000,000 in assets

Credit Unions $175,000,000 in assets

Real Estate Credit $7,000,000 in revenue

Other Activities Related to Credit 

Intermediation

$7,000,000 in revenue

Nonprofit Organizations Not for profit; independently owned, 

operated; not dominant in field

6. Summary of Small Entity Outreach 

6.1. Summary of Panel’s Outreach Meeting with Small Entity Representatives 

The CFPB convened the Panel on April 10, 2012. The Panel held an outreach 

meeting/teleconference with small entity representatives on April 20, 2012 (the “Panel Outreach 

Meeting”). To help the small entity representatives (“SERs”) prepare for the Panel Outreach 

Meeting, the CFPB sent to each of the SERs the materials described in Appendix B as 

“Materials Circulated in Advance of Panel Outreach Meeting.” In addition, the CFPB posted 

these materials on its website and invited the public to email remarks on the materials.

Representatives from 16 companies and organizations were selected as small entity 

representatives for this SBREFA process and participated in the Panel Outreach Meeting (either 

 21 The current SBA size standards are found on SBA’s website at http://www.sba.gov/content/table-small-businesssize-standards. 22 For the purposes of this Report, the categories of commercial banks and savings institutions are combined under 

the label “commercial banks.” 
14

in person or by phone). The PowerPoint slides forming the basis of discussion are attached as 

Appendix D. 

The CFPB also provided the SERs with an opportunity to submit written feedback until 

May 1, 2012. The CFPB received written comments from five of the representatives. Copies of 

these written comments are attached as Appendix A.

6.2. Other Outreach Efforts, Including to Small Entities

In addition to conducting the SBREFA process, the CFPB has conducted extensive 

outreach efforts to consumers, industry members, and representative groups, as discussed above 

in Section 3. Additionally, as discussed above, the CFPB has conducted three rounds of testing 

in three different parts of the country.23 Between February 13 - 23, 2012, the CFPB posted a 

draft model periodic statement on its website for general comment. A fourth round of testing 

may take place after the proposal is issued. The CFPB will publish a report summarizing the 

results of the cognitive interviews, along with publication of its proposed mortgage servicing 

rules.

7. List of Small Entity Representatives

The following 16 small entity representatives were selected to participate in the Panel 

process: 

NAME/TITLE BUSINESS NAME/LOCATION

Brian Barkdull American Southwest Credit Union, Sierra Vista AZ

Erica Fischer Sunset Bank and Savings, Waukesha, WI

Randy McElwee Security Savings Bank, Monmouth IL

Tiffany Michel Omaha Police Federal Credit Union, Omaha NE

Victor Petroni First New England FCU, East Hartford CT

Glen Thurman The First National Bank of Moody, Moody TX

Ralph Vinciguerra Northern Ohio Investment Company, Sylvania OH

David Wright Services Center, Yankton SD

 23The first round of testing took place in Towson, Maryland on February 1-2, 2012. The second round took place in 

Memphis, Tennessee on February 29 and March 1, 2012. The third round took place in the Los Angeles, California 

area on April 3-4, 2012. The OMB Control Number for this testing is: 3170-0018.
15

Frank Altman Community Reinvestment Fund, USA, Minneapolis, MN

Edward Fay Fay Financial, LLC, Chicago IL

Kevin Kanouff Statebridge Company, Denver CO

Royce Lewis Capital Mortgage Services, Lubbock TX

Cindy Moberly Spencer Farmers and Merchants Bank, Miamisburg OH

Mark Ross Cumberland Security Bank, Somerset KY

Mark Warshal Fairway Consumer Discount Company, Luzerne PA

Christine Wiley Rocky Mountain Law Enforcement, Denver CO

These small entity representatives were selected from the following five industry 

categories:

Commercial Banks 5

Credit Unions 5

Real Estate Credit 3

Other Activities Related to Credit Intermediation 2

Nonprofit Housing Organizations 1

The following is a breakdown of SERs by geographic region:

• Two SERs are from the Northeast and Mid-Atlantic regions.

• Eight SERs are from the Midwest.

• Three SERs are from the South and Southwest regions.

• Three SERs are from the West.

The following is a breakdown of SERs by type of locality (i.e., rural, urban, suburban, or 

metropolitan areas):

• Six SERs are located in small and/or rural areas with populations of less than 20,000.24

• Seven SERs are located in mid-sized urban or suburban communities with populations of 

less than 500,000.

 24 The one additional individual identified as a potential SER who ultimately did not participate in the panel 

discussion (noted in the immediately prior footnote) was located in a small and/or rural area.
16

• Three SERs are located in larger urban or metropolitan areas with populations of more 

than 500,000. 

8. Summary of Small Entity Representative Comments 

This Chapter summarizes the feedback provided by SERs during the Panel Outreach 

Meeting.

As discussed above, the SERs consisted of representatives from the following industry 

categories: non-profit, commercial banks, credit unions, and other non-depository servicers 

(classified under NAICS codes for Real Estate Credit and Other Activities Related to Credit 

Intermediation).

In general, the SERs stated that their companies, and small lenders and servicers 

generally, did not engage in many of the practices that contributed to the mortgage market crisis. 

With regard to the problems reported in the servicing industry generally, they emphasized that 

small companies generally use a “high-touch” model that involves constant customer contact and 

high levels of service in order to ensure that loans perform well. The SERs stated that a number 

of these proposals do not reflect their current business practices, and would be expensive to 

implement. They expressed concern about the Dodd-Frank Act’s extensive regulation of 

mortgage servicing, stating that the new compliance burdens would make it increasingly difficult 

for small firms to stay in the market and to provide choices to consumers.

8.1. Periodic Statements and Coupon Book Exception

In General. As discussed below, SERs expressed concerns about the cost of providing periodic 

statements: both about the large initial investment that they say would be required to set up the 

system, and the on-going cost of sending statements. The SERs did not object to offering the 

majority of the information; they stated this information was easily available on request, but they

objected to the cost of sending out what they believed were often unnecessary, and at times, 

unwanted, statements.

Compliance Costs. SERs identified the following costs associated with providing the periodic 

statement:

One-time Costs. Some SERs do not issue periodic statements and would need to 

purchase a system or set up a vendor contract to create them. Other SERs do issue a periodic 

statement already, often using a vendor. These SERs explained they would incur large costs in 

reformatting the statement to meet the proposed requirements for both organization and content. 

The SERs explained that these initial costs would be incurred even if they only had to provide a 

periodic statement to one customer. Because the SERs used a variety of vendors and systems, 

different SERs would need to make different changes to comply with the CFPB’s requirements. 

• One commercial bank SER explained that its periodic statement includes information on 

the breakdown of payments applied to principal and interest, insurance (if applicable), 

and late payments, but does not provide counseling information, transaction history, and 

information about escrow because they do not use escrow accounts.
17

• One credit union SER explained that its periodic statement is provided as part of a 

member’s overall periodic account statement. The mortgage portion of that statement 

includes information on fees charged during the year, interest rate, amount of interest 

owed, total interest charged for the year, payment balance, the next payment amount

owed and due date, any amount past due, the previous month’s payment, the amount 

escrowed and the escrow balance, as well as the breakdown of principal and interest. 

This SER explained that it provides this statement through a third-party core processor.

• One non-depository SER said that its statements already includes most of the information 

that would be required under the Bureau’s proposal, except for information on maturity 

date, prepayment penalties, counseling, and delinquency. This SER also explained that 

mortgage counseling information would be difficult to keep track of because it changes 

frequently and would increase the length of the statement, resulting in greater aggregate 

printing and postage costs. 

Several SERs explained that they currently provide some information that would be required 

under the Bureau’s proposal in separate notices rather than as part of a monthly statement.

• Two SERs explained that they generate delinquency notices separately, instead of 

including the information on a periodic statement. One commercial bank SER explained 

that it automatically generates a late charge notice one day after the grace period, and 

provides follow-up delinquency notices every 30 days (30, 60, 90, and 120 days out). 

The SER also explained that it engages in frequent phone contact with delinquent 

borrowers.

• Another commercial bank SER explained that it provides monthly periodic statements 

that contain most of the information that would be required by the Bureau’s proposal, 

except interest rate reset dates, which it currently discloses to borrowers in a separate 

advance notice. 

While some SERs could not provide an exact estimate of vendor costs, they all stated that 

implementing the periodic statement requirement would be expensive. The SERs explained that 

they were too small to have in-house expertise and thus generally use third-party vendors to 

develop their statements and notices. Additionally, because of their small size, they believe they 

had no control over these vendor costs.

• One commercial bank SER explained that it uses a vendor to develop its forms, but could 

not provide an estimate of how much a vendor would charge to update its form.

• One non-depository SER explained it uses a third-party vendor to process periodic 

statements for borrowers. This SER explained, however, that providing borrowers a 

periodic statement with a borrower’s delinquency information would require it to devote 

time and resources to transmitting its delinquency history data to the vendor’s processor. 

• Another non-depository SER estimated that it would cost $150,000 to $500,000 to 

convert to a new periodic statement system, depending on the software selected. This 

SER did not give the basis for this estimate.
18

• One commercial bank SER explained that it does not issue periodic statements. This 

SER reported that it would have to pay vendors one-time costs to develop a periodic 

statement because it does not have in-house expertise, but expressed concern that, 

because of its small size, it does not have leverage over vendor costs.

• However, the SERs did agree that these costs might be partially mitigated if such changes 

were part of a regulatory compliance initiative – because the vendor would be making

changes to serve a large segment of its customers, the expense could be distributed across 

those customers. One credit union SER explained that servicers would probably not face 

direct costs for global vendor processor updates, but that they would face indirect costs, 

as reflected in overall pricing for the vendor’s product and in ongoing annual 

maintenance fees charged to vendor clients.

Some SERs attempted to estimate the costs based on past changes to their systems.

• One SER explained that some servicers may choose to create a parallel system, which 

would impose new licensing and other costs. This non-depository SER, citing past 

experience with implementing changes to Ginnie Mae’s servicing guidelines, estimated

that it would have cost approximately $150,000 to $200,000 to make its existing system 

compliant with the Ginnie Mae requirements. The SER explained that it chose instead to 

create a parallel system.

• One credit union SER, whose institution prints its own statements, estimated that the last

time it made minor changes to its statements the cost was approximately $20,000.

• One credit union SER expected that switching to a periodic statement system would cost 

approximately $30,000 to $40,000 in startup costs, not counting the time involved in 

making this adjustment. This SER did not give the basis for this estimate.

Ongoing Costs. SERs also expressed concerns about ongoing costs, both in the form of 

vendor annual and maintenance fees and in the cost of printing and shipping. The SERs stated

that the more pages in the statement, the greater the overall printing and postage costs.

• One non-depository SER that uses a third-party vendor to process periodic statements 

explained that it would face ongoing statement-by-statement quality control costs to 

ensure the vendor is transmitting accurate information to borrowers. 

• One non-depository SER and one non-profit SER indicated that providing housing 

counseling information on the statement would impose on-going monitoring and 

adjustment costs. Information about counseling programs and contact information 

changes from time-to-time. The SERs indicated that servicers would be required to 

monitor them and continuously update them to make sure their statements remain 

accurate. 

Although they did not state the basis for these estimates, SERs provided the following estimate 

of monthly vendor costs:
19

• One non-depository SER estimated that it would cost an additional $11,000 per month in 

ongoing support.

• Another non-depository SER estimated that a vendor might charge $1,000 – $2,000 a 

month in fees for a periodic statement system. 

• One commercial bank SER estimated monthly costs at $2,200, at a cost of approximately 

$1 per statement (the SER explained that it has about 4,200 loans, half of which are 

mortgage loans).

Other complications could increase the cost of this requirement. One credit union SER 

explained that because it uses different processing systems for first and second mortgages, its

costs could double in order to make both systems compliant with the Bureau’s proposal.

Coupon Book Exception. SERs agreed that the ongoing costs of the proposed periodic statement 

disclosure are mitigated to some extent by the exemption for fixed rate residential mortgage 

loans where the borrower is given a coupon book with substantially the same information as 

required by the periodic statement. Different SERs reported varying degrees of borrower use of 

the coupon book. One credit union SER reported that only 1% of borrowers actually mail in the 

coupons, while another credit union SER explained that 50% of borrowers requested coupon 

books at closing. A non-depository SER claimed a vast majority of its borrowers use coupon 

books, however many of these coupon books are used for ARM loans; while the statutory 

exemption for coupon books is limited to fixed rate loans.

• One commercial bank SER explained that it does not issue coupon books but rather a

cardboard tri-fold “passbook” that is stamped each time a payment is made. The 

passbook contains some of the information that would be required by the Bureau’s 

proposal (payment amount, and contact information), but does not contain information on 

current principal and interest, the date of an interest rate reset, prepayment penalties, and 

late fees. The SER explained, however, that this information could be added to the 

passbook. The SER explained that it would be more problematic for the passbook to 

provide year-to-date information in one place, but noted that customers could derive this 

information themselves by totaling past activity on the passbook.

• One non-depository SER explained that it uses coupon books that have less information 

than what would be required by the Bureau’s proposal.

• Another non-depository SER noted that even with this exemption, it would still be 

required to issue periodic statements if a borrower who uses coupon books becomes 

delinquent. 

Making Information Available, Rather than Providing It on a Periodic Statement. During the 

conversation, the SERs were asked if they would prefer the idea of providing certain information 

through a method other than the periodic statement – for example, making information available 

by telephone or online. The SERs were generally supportive of these alternatives as a way to 

mitigate costs. The SERs commented that such alternatives would avoid having to re-state static 

information (such as the property address), and would allow them to more easily provide 
20

dynamic information (such as account balances, or contact information for housing counselors). 

Furthermore, a non-profit SER suggested that the CFPB or HUD could host housing counseling 

information. One non-depository SER indicated that it might be expensive to provide this 

information on web site, but it would be possible to provide the information on a telephone call.

Safe Harbor Period for Updating Dynamic Information. Several SERs expressed concern that 

their reliance on third-party vendors can make it difficult to update their statements quickly. 

According to the SERs, their vendors issue major updates to their systems on varying 

frequencies, ranging from once every 18 months, to sporadically, as needed. One non-depository

SER suggested a safe-harbor time for compliance – for example, if a housing counselor went out 

of business, the servicer would have a set period of time to remove that housing counselor from 

the periodic statement. This SER explained that this would provide some relief from the 

compliance risk.

Difficult Information. SERs expressed concern about certain pieces of information. One nondepository SER identified year-to-date payment history as a potentially significant cost. Another

non-depository SER suggested that providing a segregated field for aggregated information on 

each statement was unnecessary and redundant because borrowers could determine relevant 

information through their payment history. 

Prepayment Penalty Information. One non-depository SER suggested that requiring a field for 

prepayment penalty information was unnecessary because prepayment penalties are rarely 

enforced in the current market and that information on prepayment penalties is available in the 

underlying loan document. The SER suggested only requiring that it appear on the periodic 

statement if the investor chooses to enforce them. 

Electronic Statements. Several SERs expressed support for an exemption if a borrower has an 

ACH automatic bill payment system in effect, although they recognized that a written statement 

may be necessary if a borrower becomes delinquent. Separately, one credit union SER expressed 

concern that the rule would require servicers to issue paper statements. 

Other Exemptions. Several SERs offered suggestions for exemptions for servicers of GSE loans

and for quarterly or semi-annual statements (rather than monthly).

Machine-Readable Format. One credit union SER requested clarification on what type of 

machine-readable format CFPB would require and how it would ensure confidentiality of the 

information. The machine readable format reference in the SBREFA materials addressed the 

concept that disclosures should be presented in a form that could be compared and contrasted. 

Often this is done by presenting information in a table. The CFPB considered machinereadability in designing the model disclosure requirements, but will not be including a machinereadability requirement in the proposed rule..

8.2 ARM Disclosures

In General. As discussed below, SERs expressed concerns about the one-time development 

costs and on-going maintenance costs from vendors associated with providing the initial ARM 

adjustment disclosures and the subsequent adjustment notices. They also expressed doubt that 
21

the estimated numbers that would be required in the initial ARM disclosures would be beneficial 

to consumers.

Compliance Costs. SERs identified the following costs associated with providing the initial and 

subsequent ARM adjustment disclosures:

• One-time Costs. SERs generally explained that the proposed initial ARM disclosures 

would be a new, separate notice for them. Their typical practice is to notify borrowers of 

a rate adjustment when the small servicer knows the exact amount of the interest rate 

adjustment. 

• The proposed initial ARM adjustment disclosures may require some servicers or their 

vendors to develop a new form or to reformat an existing form. One commercial bank 

SER explained that the initial adjustment good faith estimate notice would require a 

major programming change, but that vendors have not provided cost quotes at this point. 

This SER also explained that the more a notice has to be customized to a particular 

borrower, the more expensive it is to produce.

• On-going Costs. Sending the proposed initial and subsequent ARM adjustment 

disclosures may impose new mailing and other costs on servicers or vendors. Two SERs 

indicated that their annual vendor processor fees would increase. One credit union SER 

asserted that even after they paid the expensive initial cost, the annual maintenance fees

would continue to be a problem.

Other Comments. Several SERs expressed concern that the proposed initial reset disclosure 

would confuse consumers because it would only provide an estimate that would not accurately 

reflect the actual reset rate. SERs believe their existing practices with regard to the 45-day look 

back period required in most notes provides sufficient advance notice for consumers who know 

at the time they take out the loan what the adjustments periods are. One commercial bank SER 

was concerned that sending an estimated reset notice too far out in advance would cause some 

borrowers to miss a payment. This SER expressed support for an alternative that the servicer 

issue a notice 60 or 90 days before the reset to notify the borrower of the index to which the rate 

will eventually adjust (the SER believed its core processor would be able to support this change 

easily).

8.3. Force-Placed Insurance

Advance Notice of Force-Placed Insurance Coverage. Under the proposal, servicers would be 

required to provide borrowers with two written notices before charging borrowers for forceplaced insurance. SERs did not raise major concerns with this requirement.25

• One credit union SER explained that it currently provides two notices that are very 

similar to the ones that would be required by the Bureau’s proposal.

 25 Written comments submitted by the SERs suggested that there may have been some confusion about the 45 day 

period during which the servicer may not charge for force-placed insurance. The proposal under consideration does 

not require that the borrower may not place insurance during this 45 day period, only that the borrower may not be 

billed for this insurance until the end of the 45 days.
22

• Another credit union SER explained that it currently exceeds the number of notices that 

would be required by the proposal.

Refunds for Overlapping Coverage. Under the proposal, servicers would be required to 

terminate the force-placed insurance and refund any premiums applicable to any period during 

which the borrower had coverage after the servicer receives confirmation of a borrower’s 

existing coverage.

• SERs generally explained that the insurance providers typically refund premiums back to 

the borrower for periods of overlapping coverage.

• One credit union SER explained that the insurance provider it is currently using will not 

refund premiums back to the borrower if the creditor is not protected under the borrowerobtained coverage.

Escrow Advances. The CFPB is considering amending Regulation X by proposing that the 

servicer must make timely disbursements from escrow funds to pay for a borrower’s insurance 

premium even if the borrower is delinquent, absent cancellation of the policy by the borrower or 

the insurance company (for any reason other than non-payment of premiums). The amendment 

to the escrow disbursement rules, while potentially limiting the frequency with which servicers 

force place insurance, would require servicers to advance funds for maintaining pre-existing 

insurance for borrowers who are more than 30 days overdue.

• Most SERs did not raise specific concerns with this proposal, but two SERs explained 

that they have on occasion been unable to obtain from borrowers the unused premium 

refund that they advanced. This problem has arisen when borrowers facing imminent 

foreclosure cancel their policies and collect the unused premium refund for themselves.

On-Going Monitoring Costs. SERs provided mixed responses to the Bureau’s question about 

monitoring costs associated with force-placed insurance. Some SERs explained that forceplaced insurance providers absorb or pass on to the consumer costs related to providing notices, 

tracking borrower coverage, and placing the insurance, but others reported that they incur these 

costs themselves.

• One credit union SER explained that some insurance providers, depending on their loss 

ratios, have charged for these on-going costs.

• One commercial bank SER explained that it prepares force-place insurance notices inhouse.

Documenting Compliance. One commercial bank SER pointed out that the servicers were not 

only concerned about the new obligations these rules would impose, but also about the costs they

would incur in documenting compliance to prepare for regulatory examinations.
23

8.4. Error Resolution and Responses to Inquiries

In General. The SERs expressed that errors were rare, but when they did occur, they were 

quickly resolved. The SERs felt they have a high-touch customer service model, which made it 

very easy for borrowers to report errors or make inquiries, and to receive a real-time response. 

The SERs reported not having problems resolving errors, and expressed due to reputational 

concerns they preferred to correct them quickly. However, the SERs expressed some concerns 

about error resolution procedures being used as a weapon against them, and about the burden 

imposed by tracking the responses to errors and inquiries.

Current conditions. The SERs explained that most inquiries and problems were presented orally 

or through an informal process – i.e. walking in to the bank, calling, writing a note in the margin 

of payment. The vast majority of issues were resolved during the conversation. The few 

remaining errors were handled through informal escalation systems depending on the entity –

requesting to speak with a manager, or simply walking into the company president’s office. 

Additionally, should these informal systems not be sufficient, the borrower has recourse to 

existing formal systems, such as filing a complaint with state or federal regulators. The SERs 

had no objection to the proposed response timeframes.

Qualified Written Requests (QWRs). The SERs expressed some concerns about abuse of the 

QWR process; most had received very few, if any, QWRs (single-digits numbers over their 

careers). The SERs were happy to provide specific information on request, but felt that often

QWRs were either vague forms found online, or lawyers using the forms as fishing expeditions. 

Such vague requests require large amounts of documents, which are expensive to produce. The 

SERs asserted that QWRs are sometimes used not for informational purposes, but as a 

foreclosure avoidance tactic by attorneys, and requested some sort of exemption for abusive 

requests, or if the intent of the request is to harass the servicer.

Written Responses. The SERs expressed concerns about the burden of providing a written 

response to all inquiries, particularly ones that were resolved during the conversation with the 

customer. They felt this added little, if any, benefit to the consumer, and was a large burden for 

the servicer. One SER suggested that the borrower should have to submit a request in writing to 

receive a response in writing. This would formally document the request, avoid disagreements 

about whether or not a request was actually made, and could help deter frivolous requests.

Tracking. The SERs expressed concerns about the cost of tracking errors. Several explained 

that notes were kept in the consumer’s file: while these are available on a case-by-case basis, it 

would be difficult to produce a list of all errors and inquiries. Additionally, the SERs explained 

that due to the immediate response to most errors and their reputational motivations for resolving 

errors, it is unnecessary to have a system to track errors.

• Some SERS expressed concerns about monitoring compliance with this provision, as it 

would be difficult to determine if bad actors were not recording phone calls, and the 

potential incentives to not report errors. 

Costs. While the SERs had no objections to providing information in the proposed timelines, 

they expressed concerns about the cost of written responses and tracking of responses. 
24

Additionally, one SER stated concerns about the cost of responding to anything that might be a 

QWR: SERs will default to the more burdensome formal process for everything that looks like it 

might be a QWR, rather than risk a RESPA violation. This additional cost is an expense that is 

passed on to borrowers.

Specific Information. With one exception (the investor information), the SERs felt fairly 

comfortable with the types of information subject to the error resolution requirements, saying 

this information would be found in the loan files. 

• Information from a Prior Servicer. The SERs felt that they would be able to track down 

information from prior servicers, if given additional time.

• Investor Information. The SERs objected to the requirement of providing investor 

information, explaining that (1) servicers are hired to handle customers so that investors 

don’t have to; (2) investors are not prepared to handle calls from borrowers; and (3) there 

may not be contact information for the investors, (for example, if the loans were in a 

trust).

8.5. Reasonable Information Management Policies

Reasonable Information Management Policies. The SERs had no objections to the requirement 

of establishing reasonable policies to achieve objectives. They appreciated the flexibility of the

proposals under consideration, and thought it was good that “reasonable” depends on the size, 

nature and scope of the entity. They emphasized that small firms do not necessarily use 

automated and/or online systems to record and track all borrower communications and 

interactions, and urged the Bureau to avoid structuring the requirement in such a way as to 

require expensive system upgrades.

Information Management for Loss Mitigation. The SERs appeared to be handling a relatively 

low number of delinquencies and foreclosures, making a complex process management system 

unnecessary. One servicer explained foreclosures were discussed at a weekly meeting. SERs 

with higher numbers of delinquencies had loss mitigation departments to manage the process.

Document Management. The SERs mentioned that papers and conversation notes were tracked 

through their systems, which would allow employees easy access to the information.

8.6. Early Intervention and Continuity of Contact

8.6.1 Early Intervention

In General. The SERs generally already have contacted borrowers long before the 45 day 

timeline, but the content of the information is usually more tailored to the individual. 

Additionally, some SERs do not provide foreclosure information until after loss mitigation 

options have been explored. One SER stated that while the proposal under consideration was 

generally in line with what they are already doing, his company objected to an unnecessary 

process that would require sending yet another notice to the consumer.
25

• Time of Contact. The SERs explained that contact with delinquent borrowers was 

usually established well ahead of the 45 days proposed timeline, often within 10 days of 

the delinquency. One SER mentioned that the GSEs require contact at day 16, and 

possibly as early as day 5 if there is a history of delinquency. The SERs agreed that if 

information was delayed until day 60, there might not be time to process loss mitigation 

options before foreclosure.

• Form of Contact. The SERs used a mixture of formal and informal methods of contact, 

which included a soft reminder phone call, more formal phone calls, notices being sent, 

and certified letters being sent to the borrower. 

• Content of the Contact. The SERs also described a range of information provided to the 

borrowers, but often the content was tailored to the specific situation. The SERs report 

they were able to sort out which borrowers simply had forgotten to mail in a payment 

from borrowers who were having trouble making payments. The SERs stated that they 

wanted to try to work with the borrower and explore loss mitigation options before 

discussing foreclosure.

• Frequent Contact. The SERs stated they are very high-touch in dealing with delinquent

borrowers, reaching out to the borrowers early in the delinquency process and trying to 

help the borrower with any paperwork required.

Dealing with Delinquent Borrowers. The SERs stated they had relatively low numbers of 

delinquent borrowers. Because of the low numbers, the SERs say they were able to provide 

flexible responses and tailor solutions to the borrower’s needs, and were often able to get the 

borrower current. The SERs stated that generally the only time they were not able to help was 

when a borrower refused to talk to them. 

• Chronically Delinquent. One SER expressed concerns about borrowers who were 

constantly delinquent – usually running a month or two late on payments. This SER did 

not want to have to send the information under consideration for early intervention to 

such borrowers every month. The SER felt that limiting such information to twice a year 

would be very helpful.

Agency Loans. The SERs who service for Fannie Mae and Freddie Mac loans expressed that the 

strict rules and tight timeframe requirements of Fannie and Freddie drove that aspect of their 

business. These SERs stated that they were required to follow these timelines, even when they 

felt a slower timeline would make a modification feasible.

8.6.2 Continuity of Contact

In General. SERs generally stated that with their small staffs, everyone had access to files and

would be able to assist borrowers in delinquency, so that a special dedicated staff was not 

required to handle the loss mitigation process. Some of these SERs had committees that would 

meet to discuss what should happen if loss mitigation efforts were unsuccessful; such 

committees make the decision whether to refer a file to foreclosure.
26

Foreclosure. Several SERs explained that once a decision to foreclose was made, the file would 

be handed off to a separate team, or to outside foreclosure counsel. The SERs explained they 

would still be willing to communicate with the borrower during the foreclosure process, and one 

SER said they would be willing to bring the file back to consider a modification if the 

circumstances were appropriate.

Natural Disasters. The SERs liked the idea of an exception for natural disasters or unforeseen 

disruptions. One SER explained his company had had two problems in the past year, once when 

a hurricane knocked out power for 5 days, and again when an October snow storm took out 

power for a week. This SER appreciated the agency’s understanding and being flexible about 

timelines in light of these disasters.

8.7 Prompt Crediting and Payoff Amounts

8.7.1 Partial Payments

Current Handling of Partial Payments. The SERs were split as to current practices, with about 

half of the SERs saying they post partial payments, while the other half held partial payments in 

suspense accounts, and posted when a full payment was received. 

Definition of Full Payment. The SERs’ definition of a full payment varied depending if escrow 

was applicable, but none of the SERs would consider a payment not complete if the only 

deficiency was a late fee.

Negative Amortization of Interest. While one SER did say his company used daily simple 

interest accounting, he said they did not capitalize unpaid interest. Partial payments would be 

applied to interest first, and if that was not sufficient, the deficiency would be taken out of the 

next month’s payment. 

Auto-Debit. The SERs generally said that if an account were set up for automatic payments, and 

there were insufficient funds in the account, the borrower would be notified of the deficiency. 

Different SERs would handle the situation in different ways – the funds may be deducted from 

escrow, or the system may continue to check for new funds being deposited in the linked 

account.

De Minimus. The SERs were asked if there was a de minimus amount – if there was a 

deficiency so small they would credit the payment anyway. While no SER said his or her 

company had such an amount, one SER said her company would ask the borrower for permission 

to withdraw the deficiency from escrow.

Foreclosure. One SER expressed concern about the rule on partial payments, particularly in the 

foreclosure context. This SER stated that many of the borrowers are frequently behind, and 

would prefer to have the servicer take their money, even a partial payment, to ensure that the

money was not spent on other things. This SER did not want to be in a position of being forced 

to return these funds.

Expense. When asked about the expense of changing to a prompt crediting system, the SERs 

stated that it would depend on their current system. Some have already set up to make this 
27

change, while others have a more complicated situation if their current software can’t be adapted 

to accommodate these changes.

8.7.2 Pay-off Statements

Timing. The SERs stated they provide payoff statements quickly, i.e. immediately, within the 

hour, or within 24 hours. One SER cautioned that there could be complications in a foreclosure / 

bankruptcy situation which could take additional time to produce the pay-off statement.

Fees. None of the SERs charged a fee for providing a pay-off statement, but mentioned that they 

have seen other servicers that do charge a fee. The example cited was a $50 fee with a $35 fax 

fee added on top.

Accuracy. When asked what happens if there is an inaccuracy in a statement received from 

another lender, all the SERs replied they use a title insurance to protect themselves.

8.8. Impact on the Cost of Business Credit

The SERs had few comments on the impact on the cost of business credit. While they 

took this time to express concerns that these regulations would increase their costs, they said 

these regulations would have little to no impact on the cost of business credit. When asked, one 

SER mentioned that at times people may use a home-secured loan to finance a business, which 

was corroborated by a different SER based on his personal experience with starting a business. 

9. Panel Findings and Recommendations

9.1 Number and Type of Entities Affected

For purposes of assessing the impacts of the proposals under consideration on small 

entities, “small entities” are defined in the RFA to include small businesses, small nonprofit 

organizations, and small government jurisdictions. 5 U.S.C. 601(6). A “small business” is 

determined by application of SBA regulations and reference to the North American Industry 

Classification System (“NAICS”) classifications and size standards.26 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).

During the Small Business Review Panel process, the Bureau identified five categories of 

small entities that may be subject to the proposed rule for purposes of the RFA: commercial 

banks/savings institutions27 (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 $175 million or less in 

 26 The current SBA size standards are found on SBA’s website at http://www.sba.gov/content/table-small-businesssize-standards. 27 Savings institutions include thrifts, savings banks, mutual banks, and similar institutions.
28

assets. Firms providing real estate credit and firms engaged in other activities related to credit 

intermediation are small businesses if average annual receipts do not exceed $7 million. 

A small non-profit organization is any not-for-profit enterprise which is independently 

owned and operated and is not dominant in its field. Small non-profit organizations engaged in 

mortgage servicing typically perform a number of activities directed at increasing the supply of 

affordable housing in their communities. Some non-profit organizations originate and service 

mortgage loans for low and moderate income individuals, while others purchase loans or the 

servicing rights on loans originated by local community development lenders. Servicing income 

is a substantial source of revenue for some small non-profit organizations while others receive 

most of their income from grants or investments.28

The following table provides the Bureau’s estimate of the number and types of entities 

that may be affected by the proposals under consideration:

Estimated number of affected entities and small entities by NAICS code and engagement in 

closed-end mortgage loan servicing

Category NAICS

Small entity

threshold

Total 

entities

Small 

entities

Entities 

engaged in 

mortgage loan 

servicing

Small entities 

engaged in 

mortgage loan 

servicing

Commercial banks 

& savings institutions

522110, 

522120

$175,000,000 assets 7,724 4,250 7,502 4,098

Credit unions 522130 $175,000,000 assets 7,491 6,568 5,190 4,270

Real estate credit 522292 $7,000,000 revenues 5,791 5,152

1,388 800 Other activities related to

credit intermediation

(includes loan servicing)

522390 $7,000,000 revenues 5,494 5,319

For commercial banks, savings institutions and credit unions, the number of entities and 

asset sizes were obtained from December 2010 Call Report data as compiled by SNL Financial. 

Banks and savings institutions are counted as engaging in mortgage loan servicing if they hold 

closed-end loans secured by 1 to 4 family residential property or they are servicing mortgage 

loans for others. Credit unions are counted as engaging in mortgage loan servicing if they have 

closed-end 1-4 family mortgages on portfolio, or hold real estate loans that have been sold but 

remain serviced by the institution.

For firms providing real estate credit and firms engaged in other activities related to 

credit intermediation, the total number of entities and small entities comes from the 2007 

Economic Census. The total number of these entities engaged in mortgage loan servicing is 

based on a special analysis of data from the Nationwide Mortgage Licensing System and 

Registry and is as of Q1 2011. The total equals the number of non-depositories that engage in 

mortgage loan servicing, including tax exempt entities, except for those mortgage loan servicers 

 28 The CFPB is continuing to refine its description of small non-profit organizations engaged in mortgage loan 

servicing and working to estimate the number of these entities, but it is not possible to estimate the number of these 

entities at this time. Non-profits and small non-profits engaged in mortgage loan servicing would be included under 

real estate credit if their primary activity is originating loans and under other activities related to credit 

intermediation if their primary activity is servicing. 
29

(if any) that do not engage in any mortgage-related activities that require a state license. The 

estimated number of small entities engaged in mortgage loan servicing is based on predicting the 

likelihood that an entity’s revenue is less than the $7 million threshold based on the relationship 

between servicer portfolio size and servicer rank in data from Inside Mortgage Finance.29

9.2 Related Federal Rules

The CFPB is currently developing other proposed or final rules under Title XIV of the 

Dodd-Frank Act, including rules addressing ability-to-pay standards and qualified mortgages, 

mortgage loan originator compensation and qualification, mortgage loans subject to the 

Homeownership and Equity Protection Act, consolidation of the disclosures consumers receive 

under the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974, and, 

jointly with other agencies, appraisal practices. Except for the overlaps discussed in 2.4 above, 

the Panel is not aware of any other Federal regulations that currently duplicate, overlap, or 

conflict with the proposals under consideration.

9.3 Panel Findings and Recommendations

As discussed earlier in this report, the SERs stated that their companies, and small lenders 

and servicers generally, did not engage in many of the practices that contributed to the mortgage 

market crisis. The SERs indicated that some of the proposals under consideration are not 

consistent with their current business practices. The SERs expressed concerns that having to 

change their business practices to comply with the proposals under consideration could be costly 

and burdensome and may impact their ability to continue to service mortgages for their 

customers. The SERs urged the Bureau to broadly exempt them from new 

requirements. However, Congress has placed limits on the Bureau’s exemption authority. The 

Panel recommends that the CFPB consider using its authority, consistent with the provisions of 

the relevant statutes and adequate protection of consumers, to provide flexibility to small 

servicers so that they can continue to service mortgage loans for their customers.

9.3.1 Periodic Statements and the Coupon Book Exemption.

In general, SERs expressed concerns about the costs of providing periodic statements: 

both about the initial investment that would be required to set up the system, and the on-going 

cost of sending statements. While SERs did not object to offering the majority of the 

information in the statement, they indicated that much or all of this information was already 

provided through existing communications or easily available on request, and objected to the 

cost of sending out statements, which they felt were often unnecessary.

The Panel recommends the CFPB consider creating an exemption from the periodic 

requirement for certain small servicers. Such an exemption would be limited to servicers who 

meet certain conditions, including providing certain information to borrowers.

9.3.2 Adjustable Rate Mortgage Disclosures

 29 The CFPB is continuing to refine its estimate of the number of firms providing real estate credit and engaging in 

other activities related to credit intermediation that are small and which engage in mortgage loan servicing.
30

In general, SERs expressed concerns about the one-time development costs and on-going 

maintenance costs associated with providing the initial ARM adjustment disclosures and the 

subsequent adjustment notices. They also expressed doubt that the estimated numbers that 

would be provided in the initial ARM disclosures would be beneficial to consumers. The SERs 

suggested the Bureau should create a small servicer exemption from this requirement.

The Panel recognizes while there are some concerns about providing estimates six 

months or more in advance, the statute established this time frame to give consumers adequate 

time to consider alternatives. To ease the regulatory burden, the Panel recommends the CFPB 

consider not requiring compliance with the current ARM adjustment disclosure (which is 

required to be issued 25-120 days before each rate and payment change), when the new ARM 

disclosure (which is required to be issued six – seven months before each rate and payment 

change) is provided.

9.3.3 Force-Placed Insurance

The SERs had no major objections to the notices for force-placed insurance, other than 

restating concerns about compliance costs. The SERs did express concerns about renewing an 

existing policy with advanced funds, because the borrower could cancel the policy and pocket 

the refund.

The Panel recommends the CFPB avoid or mitigate the potential for unjust enrichment by 

proposing to allow servicers to advance funds in 30 day installments, rather than in annual 

installments. This would reduce the incentive for consumers to cancel their policies and the 

potential loss to the servicers in the event of such a cancellation.

9.3.4 Error Resolution and Responses to Inquiries

The SERs indicated that errors were rare, but when they did occur, they were quickly 

resolved. The SERs stated that small lender/servicers have a high-touch customer service model, 

which made it very easy for borrowers to report errors or make inquiries, and to receive real-time 

responses. The SERs stated that, for reputational reasons, they preferred to correct errors 

quickly. The SERs expressed some concerns about the error resolution procedures being used in 

litigation, and about the burden imposed by having to track the responses to errors and inquiries

to prove compliance with the regulatory requirements.

The Panel recommends that the CFPB seek comment on whether or not to include a 

catch-all to the enumerated list of errors to limit the liability of the servicers. Additionally, the 

Panel recommends the CFPB consider the following alternatives: 

• Adopting a more flexible process for tracking errors and demonstrating compliance for 

small servicers.

• Requiring small servicers to comply with the error resolution procedures only when 

borrowers provide error notices in writing.

9.3.5 Reasonable Information Management Policies and Procedures
31

In general, the SERs had no objections to the requirement of establishing reasonable 

policies and procedures to achieve certain objectives, for example, providing accurate and timely 

disclosures and other information to borrowers, facilitate prompt correction of errors, and 

facilitate loss mitigation efforts, as specified at pages 21-22 of Appendix C to this report. They 

appreciated the fact that the Bureau is considering defining “reasonable” as depending upon the 

size, nature and scope of the entity – such that a policy considered reasonable for a small servicer 

may be very different from a policy considered reasonable for a large servicer. This approach 

would provide inherent flexibility for small servicers.

The Panel recommends the CFPB use the public comment process to solicit comment on 

further guidance that the CFPB may provide to clarify the types of policies and procedures that 

would be reasonable for small servicers.

9.3.6 Early Intervention and Continuity of Contact

Early Intervention

The SERs said they generally contact borrowers who fail to make payments long before 

the 45 day time period in the proposal under consideration. However, the content of the 

information that is currently provided by the SERs varies from the information outlined in the 

CFPB materials, and is often tailored to the individual borrower and his or her particular 

circumstances. Additionally, some SERs do not provide foreclosure information until after loss 

mitigation options have been explored.

The Panel recommends the CFPB consider more flexible early intervention requirements 

for small servicers or providing them with more flexibility in complying with the early 

intervention requirements in light of their existing practices. 

Continuity of Contact

The SERs generally stated that with their small staffs, every employee has access to all 

the files and anyone would be able to assist borrowers in delinquency. Thus a special staff may 

not be required to handle the loss mitigation process. 

The Panel recommends the CFPB include sufficient flexibility in the proposal under 

consideration to allow the successful current models of handling consumer contact to continue.

9.3.7 Prompt Crediting and Payoff Statements

Prompt Crediting

About half of the SERs indicated that they post partial payments, while the other half 

indicated that they held partial payments in suspense accounts, and posted the funds to the 
32

borrower’s account when a full payment had accumulated. None of the SERs included late fees 

in calculating what constituted a full payment.

The Panel recommends the CFPB consider whether additional flexibility can be provided 

in the proposal for small servicers, to the extent that their current practices differ from the 

proposal and provide appropriate consumer protections.

Payoff Statements

The SERs stated they provide payoff statements quickly – immediately, within the hour, 

or within 24 hours. One SER noted there could be complications in a foreclosure or bankruptcy 

situation which may require additional time.

The Panel recommends the CFPB consider whether additional flexibility can be provided 

in the proposal for small servicers, to the extent that their current practices differ from the 

proposal and provide appropriate consumer protections.

9.3.8 Impact on the Cost of Business Credit

This question caused some confusion. The SERs stated generally that while the 

proposals could provide value to customers of large servicers who do not take a high-touch 

approach; the proposals under consideration would provide minimal additional benefit to such 

borrowers, while raising costs which would have to be passed on to borrowers. However, other 

than general concerns about overhead and compliance burden, the SERs did not identify any 

specific impacts on the cost of business credit.
Appendix A

Written Comments Submitted by SERs

[See attached]
‐‐‐‐‐Original Message‐‐‐‐‐

From: Erica Fischer [mailto:ericaf@sunsetbank.net]

Sent: Tuesday, May 01, 2012 1:46 PM

To: Ross, Rachel (CFPB)

Subject: RE: Reminder ‐ Mortgage Servicing SBREFA Comments

Rachel,

I've attached a word document where I've answered the questionsfrom one of the original documents we received with 

questions on each category (also attached). I hope this will be helpful and maybe address items not talked about last 

week. Thank you for the opportunity to give you the smaller bank's feedback on these important rule‐making issues.

Erica R. Fischer

SVP Lending Operations

NMLS ID #747033

Sunset Bank & Savings

521 W Sunset Dr, Waukesha, WI 53189

Direct: 262‐522‐1154; fax 262‐970‐9090

This Message is intended only for the personal and confidential use of the designated recipient(s) named above. If you 

are not the intended recipient of this message you are hereby notified that any review, dissemination, distribution or 

copying of this message is strictly prohibited. Please notify the sender that you have received this email in error by

replying via email. Please then delete the email and any copies of it.
RESPONSES TO DISCUSSION ISSUES FOR SERS

Topic A: Periodic Statements and Coupon Book Exception

1. We currently provide monthly billing statements and they are mailed out.

2. We currently do not provide the following on the statements: the current interest 

rate, the date on which the interest rate may reset, the amount of any prepayment 

fees to be charged, a description of any late payment fee (we do indicate the date 

after which any late fees will be assessed but do not provide the amount), contact 

information for housing counseling agencies or programs by HUD, loan maturity 

date, breakdown of year-to-date payments by principal, interest, escrow, fees and 

partial payment, policy regarding application of any additional payment received 

from borrower, policy regarding application of partial payments, foreclosure 

warning, summary of delinquency history and information about loss mitigation 

alternatives. Most of this information is readily available for us to add to the 

monthly statement except for calculations of prepayment penalties. We have 3 

different calculation types depending on when the loan originated so this will be a 

manual process each month since our servicing system isn’t capable of calculating 

the penalty. Rather, just a statement indicating that there is a prepayment penalty 

on the loan and a number to call for the amount would be a viable alternative. The 

housing counseling information is always included on any late/delinquent notices 

so this would be a duplication of information already provided for those who need 

it. 

3. For the many small banks in Wisconsin that aren’t currently able to produce 

monthly statements, this would entail roughly $150,000-$200,000 in one-time set 

up for new software, printers and paper supplies and $5,000-$6,000 in on-going 

monthly maintenance fees plus the cost of postage for mailing those statements.

This additional cost could equate to 15-20% of the bank’s monthly profits.

4. We do not currently store the information that will be required in a machine 

readable form. The data is stored in our mortgage servicing system through which 

we are able to request reports containing all of the data required – such as a data 

download for exams and audits. To make the forms machine readable would 

entail purchase of new mortgage servicing software/system that would print the 

machine readable forms and scanning equipment and software ranging in price 

from $200,000 to $250,000 one-time cost. Because all of the data is already 

stored in our mortgage data system we feel that this would be a duplication of 

efforts both in cost and in data availability. 

5. Updates to our servicing system are done when needed, not on a regular schedule

but typically at least quarterly.
6. We provide monthly billing statements but many banks in Wisconsin use coupon 

books as well as mortgage passbooks for fixed rates and ARMs. For those banks, 

100% of their borrowers get the coupon book or the mortgage passbook even if 

they choose to do online banking which is an option at many small banks. One of 

your concerns with a coupon book or mortgage passbook is “how do the borrowers 

know when to make their payments if they don’t receive monthly billing 

statements?” The small bank’s response is that 99% of our customers are 

responsible borrowers who know when their bills are due whether or not they get a 

monthly reminder. For them, this is no different than paying their monthly rents 

before they owned the home. The landlord didn’t send the tenant a monthly 

reminder to pay their bill. They knew that the payment was due on the 1st and that 

is the same situation with the monthly mortgage payment. For the remaining 1%, a 

phone call prior to the expiration of the grace days is usually all it takes and in a 

small bank, this is standard procedure. As far as the additional information that is 

going to be required, currently the small bank customer knows that all of this 

information can be obtained by either a simple phone call to their banker or a 

knock on the door of their banker on one of their weekly visits to the branch. As an 

alternative, it may be less costly for some small banks to provide this additional 

information on their websites with an e-signature indicating acknowledgement 

rather than through monthly billing statements. 

Topic B: Adjustable Rate Mortgage Disclosures

1. We send out ARM rate adjustment disclosures 44 days prior to the rate 

adjustment date and 74 days before the payment adjustment date. Per the 

ARM closing documents, the rate is set 45 days prior to the actual rate 

adjustment date. The same timeframe is in place for both initial disclosures as 

well as annual ARM disclosures.

2. We currently do not provide the following on our statements: a good faith 

estimate of the rate and payment (only the actual rate and payment), a list of 

alternatives, contact info for HUD, contact info for the State housing finance 

authority, key terms of the ARM, prepayment penalty info, rate or payment 

limits and amortization info.

3. We are on the Fiserv core servicing system and they would be required to 

modify the form to the CFPB’s required form. Because we are currently doing 

the annual disclosure after initial adjustment, no additional cost to prepare. 

There would be added postage costs for the initial disclosure proposed 6-7 

months before the actual rate change because we would also continue to send 

out the actual rate change notice 74 days prior regardless if Reg Z no longer 

requires the initial reset notice. This is a document our borrowers are already 

familiar with and know that the rate is adjusting when they see this form. They 

do not look to the monthly billing statement for those same changes. We don’t 

feel that the 6-7 month notice is neither necessary nor beneficial to the 
borrower. In fact, it will only confuse most borrowers when they get their actual 

rate change notice and it may be different. (Once rates start rising steadily – it 

will be different). Since the disclosure will become mandatory, a notice 

indicating that their rate may adjust in 6-7 months as a heads-up rather than an 

estimate of what it will adjust to would be a better alternative.

4. See answer to # 5 above.

5. We have done 1/1, 2/1, 3/1, 4/1, 5/1 and 7/1 ARMs at various periods in our 12 

year existence. In our experience, none of the adjustments have been 

problematic because in the past 8 years, the rate has only gone down or stayed 

the same. Prior to that, when the rate did adjust up, we had no problems with 

our borrowers, primarily because they were qualified at the 2% cap rate and 

none of our loans have ever gone up the full cap rate at the first adjustment. I 

believe the other reason we’ve never had a problem is because when our 

borrower gets this loan, they fully understand the type of loan they are applying 

for and all of the potential changes that could occur. We and most SERS do a 

very good job of explaining the loan to the borrower so there are no surprises

and also of making sure the borrower fully understands the loan.

 

Topic C: Force-Placed Insurance

1. We do not have any vendor costs at this time. All of the insurance monitoring, 

communications with borrowers and force-placing insurance is done by inhouse loan staff.

2. Our current notice does not include an estimate of force-placed costs. We also 

do not send the borrower a notice after we’ve force-placed the insurance. We 

have force-placed insurance on 2 properties in 12 years and in both cases, we 

ended up taking the property back in foreclosure so were never able to collect 

the premium from the borrower. The problem is not prevalent in the SER world. 

If a borrower stops paying their HO insurance, they probably aren’t paying their 

mortgage either. When we receive a cancelation notice from the insurance 

agency or find in our tracking spreadsheet that we never received a renewal, a 

call is placed to the borrower and the problem is usually quickly resolved with 

the borrower paying the premium due or we discover that a new insurance 

policy is in place from a different agency. If we are unable to reach the 

borrower, we do send them a notice asking for evidence of insurance or the 

agent name and number so we can track it directly with the agent. The 

problem with the bank paying the premium for the borrower to avoid high cost 

force-place insurance is that if the policy is cancelled by the borrower, the 

premium paid by the bank is returned to the borrower.

3. We do not have any force-placed insurance policies in place currently so have 

not established any practices in respect to renewals. I don’t believe we would 
incur any costs other than postage to send out written disclosures to borrowers 

prior to renewing their force-placed insurance.

4. We would need to put a written procedure in place for force-placed insurance

and required disclosures. If the intent is to provide it to all borrowers in the 

event of insurance disruption, we would provide the disclosure at closing. If 

only to the borrowers whose polices lapse, then we would document the file 

with copies of disclosures and dates of mailing. The costs would definitely 

increase due to postage, supplies and additional staff hours needed to send out 

the disclosures and track those with force-placed insurance.

5. We are in the process of changing insurance companies for force-placed 

insurance and I don’t know the answer to that question. 

6. We currently to do not collect escrow for hazard insurance unless the borrower 

requests it. If the borrower is escrowing and does not make a required monthly 

payment, thereby leaving the account short for payment of 1 year of insurance, 

we would advance the money to pay and collect the shortfall through the 

escrow analysis. I don’t believe we would ever force-place the insurance since 

we are in control of the premium being paid to the borrower’s own insurance 

agency so the rules would not apply in this situation.

Topic D: Prompt Crediting and Payoff Amounts

1, 2 & 3. For first mortgages, the partial payments are held in a suspense account 

on the loan until the full payment (excluding late charges) is made. The system 

then automatically applies the payment to the earliest delinquency and bumps the 

due date. For 2nd mortgages (simple interest loans), the partial payment is applied 

and will satisfy the outstanding interest first. Once the amount of the scheduled 

payment is received, the due date is bumped to the following month. Depending 

on when the rest of the payment is received will determine whether any principal is 

reduced or if all of that month’s payment goes to interest. If a borrower is 

consistently late, this in turn can make the balloon payment larger at maturity. 

Because the Fiserv servicing system does this automatically, there would be no 

additional cost to the bank. I am unaware of how other banks in the area post 

these partial transactions. As far as requests for payoff amounts, all requestswhether written or verbal or responded to within 3 business days so any changes 

made will not be a burden to follow.

Topic E: Error Resolution and Responses to Inquires

1. When a customer contacts us regarding an error, if the contact is verbal 

(typical), the error is addressed and usually resolved that same day with 

contact made back to the customer verbally that the error has been corrected. 

If the request is in writing via email, we will respond back in writing via email. 

To date, we have never had a qualified written request at this bank. If we did, 
we would follow the regulatory requirements for response. The error list does 

contain all errors that we have encountered and appears complete. We would 

not agree that a catch-all category should be included on the list. Catch-all 

categories are too vague for banks to follow to stay in compliance and for 

training purposes. The list you provide does appear to be complete.

2. The only issue we see with the time frames is the method of acknowledgement 

if the borrower request is verbal. We, as a SER, have never had a problem 

with resolving errors and responding to complaints or inquiries because of the 

sheer size of our staff. When a call comes, there are only 2 people that would 

handle the call but both of these people wear multiple hats. If that problem isn’t 

resolved before the end of the day, the customer will contact the CEO the next 

day for resolution. This rarely happens since, as I stated before, most errors, 

complaints and inquiries are handled the same day they come in, if not in the 

same phone call. Since the proposal is also looking at inquiries, it would be a 

burden to our small staff to have to respond in writing to every inquiry, 

complaint, error, etc. The exclusion for routine inquires would be a viable 

alternative for us but would like this list expanded to include corrections to 

accounts where the borrower didn’t provide direction so the correction of the 

payment is at the borrowers request after the payment has already been 

posted. For instance the borrower sends $100 additional payment with their 

monthly payment with no direction as to where to apply it. The teller posts it as 

a regular payment and the extra gets applied to principal but the borrower 

wanted it applied to next month’s payment. In this case, the verbal call is 

made, we make the correction and no written acknowledgement would need to 

go to the borrower. Your concern is that the customers are not being 

responded to by the banks but that is just not the case with the SERs where all 

staff members are very involved and concerned about the customer service we 

give. Plus the potential for fraudulent lawsuits where the bank does not 

respond in writing to a supposed “verbal request” becomes greater. How does 

the bank prove they never got the verbal request to respond to it in the first 

place? By requiring the customer to put that request in writing, you are laying 

the groundwork for better response time back to the customer if banks are 

required to respond in writing to that provable request. I believe part of the 

ongoing cost to this written response is additional staffing.

Topic F Reasonable Information Management Policies

1. Yes, the way we currently manage information allows us to meet most of the duties 

stated in the proposed policies and procedures. Our documents are stored on site 

in locked, fire proof filing cabinets. Once the loan is paid off, the file is scanned 

and stored electronically.

2. The only duty I feel that would be a burden and potential regulatory violation would 

be the record maintenance of borrower contact. Many times, in the bank lobby, 

the borrower will stop one the 2 people servicing the loans to ask a question. 
Typically the question is answered and that employee continues on their way to 

whatever task they were in the process of performing and that leaves us open to 

non-compliance if the employee doesn’t immediately document the customer’s file.

I believe that SERs should be exempt from this specific portion of the rule due to 

the small staff that maintains contact with the customers. 

Topic G: Early Intervention and Continuity of Contact

1, 2 & 3. In all aspects of this rule, the SERs (including us) are contacting the 

customers well before the 45 days specified. Our delinquency and collections policies 

and procedures are more restrictive than the proposal so I don’t see any additional 

costs to comply with the rules. The only issue would be for those SERs that sell to the 

agencies. The agencies have recently modified their collection procedure 

requirements to be much more restrictive and the additional requirements (duplication) 

would be burdensome to the staff as well as add additional cost in the way of postage, 

staffing and training. An alternative would be that an exemption would apply for loans 

that are sold to the agencies. Regarding contacting the delinquent borrower in writing, 

due to the smaller staffs and the customer familiarity, the SERs are also more 

proactive in working with their customers to provide relief (either immediate or longterm) in hardship cases such as job loss, divorce or death. When a loan goes 

delinquent, if phone contact isn’t able to be made, a personal visit to that borrower’s 

home or workplace is made. We typically do not have a specific written policy in place 

that could be sent to the borrowers as an alternative to foreclosure because we 

approach each delinquency differently, depending on the situation, looking at the best 

alternative for the borrower.

Topic H: Impact of the Cost of Business Credit

1. Of course there will be an impact on the cost of business credit since most

SERs operate as a whole entity not divided up between departments. If the 

costs are increased on the mortgage loan side, the fees would probably go up 

on the commercial side of the bank to attempt to make up some of the losses. 

If the cost of the periodic statement is too significant for the SER to continue 

offering portfolio loans and servicing sold loans, the SER would then have to 

make up that loss through their commercial loans through increased rates and 

fees. Many SERs that are in outlying areas strictly offer the mortgage loans as 

a convenience to the customers that aren’t able to qualify for secondary market 

loans so if the cost of the periodic statement requirement can’t be met, those 

customers will not be able to get a local loan to fund the purchase of their 

homes unless they travel to the bigger cities. Margins are extremely slim now 

for the banks and the safety and soundness regulators (both state & fed) have 

indicated to us that they are looking for increased margins in future exams. The 

additional regulatory costs will only reduce those margins.
First National Bank of Moody

Glen C.Thurman Telephone (254)853-2115

President

P.O.Box 128

7th and Avenue D 

Moody,Texas 76557

May 1, 2012

The Honorable Richard Cordray

Director

Consumer Financial Protection Bureau

1700 G Street NW 

Washington, D.C. 20552

Re: SBREFA Panel for Mortgage Servicing Rulemaking

Dear. Mr. Cordray:

Fox (254)853-2955

I would like to thank you for the opportunity to participate with other small financial firms on the 

recent SBREFA panel for Mortgage Servicing Rulemaking. My bank, First National Bank of Moody

Texas is a $42 million asset community bank located in Moody Texas, a community of just over 1300

in population. First National Bank of Moody is a family owned community bank with a single location

dedicated to serving our community. We make mortgage loans which are held in portfolio, and we

service all mortgages we originate.

As a small institution with only 13 employees, we all wear many hats, have multiple duties, and work

very hard to meet our customers' needs and support our community. As discussed during the meeting

our primary focus is on helping our customers make good financial decisions, and working with them

when they have difficulty meeting their obligations. In fact, we explore every possible avenue to help

a struggling customer through a difficult period and work out their mortgage loan so they can remain

in their home. Since we generally know our customers on a personal basis, doing anything other than

what's in the best interest for the borrower would jeopardize our reputation in our community and put

my bank at risk. The last thing we ever want to do is to foreclose on a neighbor's home. Unlike the

large national servicers, customers are more important to us than high volumes of transactions. This is

a very important distinction between community banks and the large national servicers. We know our

customers, they know us, and in fact transact much of their business with the bank in person. So they

always know where to go if there is a problem. We resolve issues quickly, and work hard to help our

customers when they have problems. Over the last 5 years, First National Bank of Moody has only

had to foreclose on two mortgage loans, and in both cases the foreclosures were due to divorce.

In developing the final rules for mortgage servicing, I hope the CFPB will recognize the very 

important difference in our business model compared to the large national servicers. I urge the

CFPB to fully utilize its authority to exempt or modify these rules for community banks, so that 
they do not impose unnecessary, excessive and expensive burdens on us which may lead to my bank

and others like mine, to exit the mortgage lending business. This unfortunate outcome would harm

consumers by further restricting credit in small towns and rural communities along with driving

further consolidation of the mortgage business to the largest national mortgage lenders which caused

the financial crisis and committed the mortgage servicing abuses that you are now trying to address.

The following comments are offered for your consideration.

1. Periodic Statements. Do not require additional periodic statements/billing 

statements beyond what a community bank currently provides. My bank currently 

provides a monthly statement which gives the borrower all of the critical information regarding

their account and the payment that is due. We provide the borrower with the phone number of

our office if they have a question or a problem in making their payments. As stated earlier

many of borrowers make their mortgage payments in person at the bank where they can always

get up to date information on their account. Having to produce and mail additional statements,

or add additional language regarding specific housing counselors will require a significant and

costly upgrade from my core system provider. Those costs will be passed on to the consumer.

2. Adjustable Rate Mortgage Disclosures. Do not require an additional notice of 

adjustment 6 months prior to the initial adjustment. We currently provide a notice of 

adjustment which includes the index value, margin, total new interest rate, total new payment

and the effective date of the new payment amount. The interest rate and new payment amount

on that notice is accurate. However, issuing a similar statement 6 months prior to adjustment

date would require us to issue an estimated interest rate and payment, which is likely to be

different than the borrower's interest rate and payment amount at adjustment. This will only

create confusion with the borrower and will not help them plan for the rate change. Creating

an additional disclosure will also require a system upgrade from our vendor, which will be

costly. The current timeline for adjustment notices is adequate to permit the borrower to plan

and if necessary seek a refinance to avoid the rate change. First National Bank of Moody has

been writing an in house ARM for over 25 years, and the notice sent to our customer and the

procedures used by the bank to make the adjustment has never caused a problem with our

mortgage customers. Please do not provide a costly fix to a problem that does not exist in the 

community bank business model.

3. Forced Placed Insurance. Permit community banks to purchase forced place

insurance as soon as they are notified of a lapse in coverage by the borrower's 

carrier for non-payment. Unlike the large national mortgage servicers, the commission 

earned by community banks on forced place insurance is negligible. For all of 2011 total 

commission earned by First National Bank of Moody on all forced place insurance (mortgage,

commercial and consumer) was only $221.95. If forced placed insurance is required, it's

because the homeowner has let the insurance lapse, causing both the bank's collateral for the

loan and any equity the homeowner has in the property to be at risk. This presents safety and

soundness risks for the bank. We always try to get the coverage placed with the original

carrier if possible, but if not, we will use another provider. If the borrower subsequently gets
coverage, we only ask for the agent's name and contact information. Once the borrower's

coverage is confirmed, we cancel the forced place policy and refund any premiums charged to

the borrower pro rata. We are concerned that the CFPB's proposal requiring the bank to wait

45 days to purchase this coverage puts the bank and the customer at risk of something

happening to the collateral for the loan. Weather events can cause significant damage causing

big losses to the consumer and the bank. While a $30,000 loss isn't significant to a large

national servicer, it has a big impact on our bank. Providing coverage quickly protects both

the bank and the consumer.

4. Error Resolution and Responses to Inquiries. Permit community banks flexibility

in tracking and documenting responses. As discussed during the session, the majority of 

errors (if any) or inquiries from customers are handled and resolved immediately, usually while

the borrower is on the phone or at the bank. We have never received a QWR but if we do we

would respond immediately as well. We do not have an automated tracking system for these

requests and request that community banks be exempted from implementing one. We do not

send out a written statement to borrower confirming that we have resolved their issue or

answered their inquiry. Such statements would be wasteful in terms of time to produce them,

and the postage to mail them. We would request that community banks be exempt from

having to provide these statements.

5. Reasonable Information Management Policies. Permit community banks flexibility 

in complying with this policy. Community banks generally do not have robust loan 

servicing systems that permit on line collaboration, or have the ability to record and track all

borrower communications and interactions. First National Bank of Moody does not have any

such system and can not afford the expense to put such a system in place and does not require 

such a system to provide excellent service to our customers. Many times notes are hand written 

by the bank staff, or there may be copies of email exchanges placed in the file. We would

request that community banks be permitted to continue these practices which are effective for

our bank and not be required to make expensive and unnecessary system upgrades.

6. Early Intervention and Continuity of Contact. The CFPB should work with the 

FHFA to align these policies with those required by the GSEs for servicing 

mortgages. For mortgage loans serviced by community banks for the GSEs, we have to 

comply with similar standards on early intervention and continuity of contact. There is no

reason to have an additional set of rules in this area and we urge the CFPB to work with the

FHFA on aligning their policies. Loans that we hold in portfolio are generally serviced the

same way. We have a small staff that service mortgage loans, and they service all types of

loans for the bank. We contact borrowers usually by the 16th of the month, and sometimes

sooner. Our borrowers will work with the same person throughout the collection process and

loss mitigation process. Many times, they come into the bank to meet with that person or the

loan officer who made loan. We would ask that the proposed rules recognize this difference

between community banks and large national servicers by permitting flexibility for

community banks on their implementation of this policy.
7. Prompt Crediting and Payoff Amounts. The CFPB should work with the FHFA to 

align these policies with those required by the GSEs for the crediting of payments 

and for providing payoffs. We always credit payments immediately, usually while the 

borrower is standing at the teller window. In all cases, payments (partial payments included)

are credited on the day received. We provide payoffs promptly when requested, as part of

good customer service.

8. Impact on the cost of business credit. The CFPB should recognize that all changes, 

especially those that require system upgrades, increase the overall cost of all types of 

credit. We are a small organization and while pricing for business loans is different than 

mortgage credit, increased costs for one do get spread across all lines of credit. We urge the

CFPB to carefully consider this when writing rules that require technology upgrades or could

require additional staff to manage and monitor.

In conclusion, I appreciate the opportunity to participate in the SEBRFA process on the proposed

mortgage servicing rulemaking. I urge the CFPB to exempt or permit flexibility for community banks

like mine when writing rules that would require changes to our current processes, or require expensive

upgrades to our servicing systems to accommodate new changes. As stated earlier in this letter, we

deliver high quality personal service to all our customers, and work to resolve problem loans quickly.

Our customers come into the bank to see us when an issue arises, and we work with them on a personal

basis to resolve it. Highly prescriptive and redundant procedures and requirements will not result in any 

improvement in our customer service, but will unnecessarily increase our costs and the costs to our

borrowers. For many community banks, the cumulative effect of additional regulatory burden in the

mortgage arena may lead them to exit the business, further concentrating the industry to the detriment of

consumers. Our servicing business model is very different than the large national servicers and I urge the

CFPB to recognize these differences in its rulemaking.

If you have any questions, please feel free to contact me.
Ross, Rachel (CFPB)

From: Brian Barkdull <bbarkdull@ascu.org>

Sent: Tuesday, May 01, 2012 3:51 PM

To: Ross, Rachel (CFPB)

Subject: RE: Reminder - Mortgage Servicing SBREFA Comments

Attachments: image002.png

Thanks Rachel.

I do not have any written commentsto submit.

Regards,

Brian

Brian J. Barkdull

President/CEO

520‐452‐3099

NOTICE: This electronic mail message and any files transmitted with it are intended exclusively for the

individual or entity to which it is addressed.

The message, together with any attachment, may contain confidential and/or privileged information. Any

unauthorized review, use, printing, saving, copying, disclosure or distribution is strictly prohibited. If you

have received this message in error, please immediately advise the sender by reply email and delete all

copies.

From: Rachel.Ross@cfpb.gov

[mailto:Rachel.Ross@cfpb.gov] Sent: Tuesday,

May 01, 2012 10:21 AMTo: bbarkdull@ascu.org

Subject: Reminder ‐ Mortgage Servicing SBREFA Comments

Dear Mr. Barkdull ,

Thank you for taking the time to participate in our panel meeting last week.

As a reminder, to the extent you have any; comments are due by close of business today.

Sincerely,

Rachel

Rachel Ross

Research, Markets & Regulations

<mailto:rachel.ross@cfpb.gov> rachel.ross@cfpb.gov

Tel: 202 435‐7635 | Mob: 

202 591‐6915 

consumerfinance.gov

Confidentiality Notice: The information contained in this transmittal, including attachmentsif any, may be

confidential or privileged under applicable law, or otherwise may be protected from disclosure to anyone

other than the intended recipient(s). Any review, use, distribution, or copying of the contents of this e‐mail

or its attachments by any person other than the intended recipient for any purpose other than its intended

use, is strictly prohibited and may be unlawful. This communication is not intended as a waiver of the

confidential, privileged or exempted status of the information transmitted. If you have received this e‐mail in

error, you should permanently delete the e‐mail and any attachments.

Do not save, copy, disclose, or rely on any part of the information contained in this e‐mail or its

attachments. Also immediately notify the sender of the misdirection of this transmittal. Your

cooperation is appreciated.
Ross, Rachel (CFPB)

From: Frank Altman <Frank@crfusa.com>

Sent: Tuesday, May 01, 2012 1:42 PM

To: Ross, Rachel (CFPB)

Subject: Re: Reminder - Mortgage Servicing SBREFA Comments

I appreciated the opportunity to participate, but I will not have any written

comments.

Thanks. Sent from my iPhone

On May 1, 2012, at 1:20 PM, "Rachel.Ross@cfpb.gov<mailto:Rachel.Ross@cfpb.gov>"

<Rachel.Ross@cfpb.gov<mailto:Rachel.Ross@cfpb.gov>> wrote:

Dear Mr. Altman,

Thank you for taking the time to participate in our panel meeting last week. As a reminder, to the extent you

have any; comments are due by close of business today.

Sincerely,

Rachel

Rachel Ross

Research, Markets & Regulations 

rachel.ross@cfpb.gov

<mailto:rachel.ross@cfpb.gov>

Tel: 202 435‐7635

Mob: 202 591‐6915 

consumerfinance.gov<http://consumerfi

nance.gov>

Confidentiality Notice: The information contained in this transmittal, including attachmentsif any, may be

confidential or privileged under applicable law, or otherwise may be protected from disclosure to anyone

other than the intended recipient(s). Any review, use, distribution, or copying of the contents of this e‐mail

or its attachments by any person other than the intended recipient for any purpose other than its intended

use, is strictly prohibited and may be unlawful. This communication is not intended as a waiver of the

confidential, privileged or exempted status of the information transmitted. If you have received this e‐mail in

error, you should permanently delete the e‐mail and any attachments.

Do not save, copy, disclose, or rely on any part of the information contained in this e‐mail or its

attachments. Also immediately notify the sender of the misdirection of this transmittal. Your

cooperation is appreciated.
Cumberland

SECURITY BANK

April 27, 2012

The Honorable Richard Cordray,Director

Consumer Financial Protection Bureau

1700 G Street NW 

Washington, D.C. 20552

Re: SBREFA Panel for Mortgage Servicing Rulemaking

Dear.Mr. Cordray:

I would like to thank you for the opportunity to participate with other small financial firms on the recent

SBREFA panel for Mortgage Servicing Rulemaking. My bank Cumberland Security Bank is a $163,000,000 Asset

community bank located in Somerset,KY. We make mortgage loans which are held in portfolio,as well as sold

in the secondary market to both Freddie Mac and Fannie Mae. We service all mortgages we originate.

As a small institution with only 67 (59FTE and 7 PT) employees, we all wear many hats,have multiple duties,

and work very hard to meet our customers' needs and help our community. And as discussed during the

meeting our primary focus is on helping our customers make good financial decisions,and working with them

when they have difficulty meeting their obligations. In fact, we explore every possible avenue to help a

struggling customer through a difficult period and work out their mortgage loan so they can remain in their

home. Since we generally know our customers on a personal basis, doing anything other than what's in the

best interest for the borrower would jeopardize our reputation in our community and put my bank at risk.

Unlike the large national servicers, customers are more important to us than high volumes of transactions.

This is a very important distinction between community banks and the large national servicers. We know our 

customers, they know us, and in fact transact much of their business with the bank in person. So they always

know where to go if there is a problem. We resolve issues quickly, and work hard to help our customers

when they have problems.

In developing the finalrules for mortgage servicing, I hope the CFPB will r ecognize this very important 

difference in our business model compared to the large national servicers. I urge the CFPB to fully utilize its

authority to exempt, or modify these rules for community banks, so that they do not impose

P.O.Box 70 · Somerset, KY

42502-0070 · 606-679-9361
Hon. Richard Cordray, Director 

Consumer Financial Protection Bureau 

April 27,2012

Page 2

unnecessary, excessive and expensive burdens on us which may lead to my bank and others like mine, 

to exit the mortgage lending business. This unfortunate outcome would harm consumers more by 

further restricting credit in small towns and rural communities along with driving further consolidation 

of the mortgage business to the largest national mortgage lenders which caused the financial crisis and 

committed the mortgage servicing abuses that you are now trying to address.

The following comments are offered for your consideration.

1. Periodic Statements. Do not require additional periodic statements/billing statements 

beyond what a community bank currently provides. My bank currently provides a coupon 

book which gives the borrower all of the critical information regarding their account and the 

payment that is due. We provide the borrower with the phone number of our office if they 

have a question or a problem in making their payments. As stated earlier many of borrowers 

make their mortgage payments in person at the bank where they can always get up to date 

information on their account. Having to produce and mail additional statements, or add 

additionallanguage regarding specific housing counselors will require a significant and costly 

upgrade from my core system provider. Those costs will be passed on to the consumer.

2. Adjustable Rate Mortgage Disclosures. Do not require an additional notice of adjustment

6 months prior to the initial adjustment. We currently provide a notice of adjustment which 

includes the index value, margin, total new interest rate,total new payment and the effective 

date of the new payment amount. The interest rate and new payment amount on that notice is 

accurate. However, issuing a similar statement 6 months prior to adjustment date would

require us to issue an estimated interest rate and payment, which is likely to be different than 

the borrower's interest rate and payment amount at adjustment. This will only create confusion 

with the borrower and will not help them plan for the rate change. Creating an additional 

disclosure will also require a system upgrade from our vendor, which will be costly. The current 

timeline for adjustment notices is adequate to permit the borrower to plan and if necessary

seek a refinance to avoid the rate change.

3. Forced Placed Insurance. Permit community banks to purchase forced place insurance as

soon as they are notified of a lapse in coverage by the borrower's carrier for non-payment.

Unlike the large national mortgage servicers,community banks don't receive commissions on

forced placed insurance. If forced placed insurance is required, it's because the homeowner has

let the insurance lapse,and now the bank's collateral for the loan is at risk. This presents safety

and soundness risks for the bank. We always try to get the coverage placed with the original

carrier if possible,but if not, we will use another provider. If the borrower subsequently gets

coverage,
Hon.Richard Cordray,Director 

Consumer FinancialProtection Bureau 

April 27,2012

 Page 3

we only ask for the agent's name and contact information. Once the borrower's coverage is 

confirmed, we cancel our policy and refund any premiums collected from the borrower. We are 

concerned that the CFPB's proposal requiring the bank to wait 45 days to purchase this coverage 

puts the bank and the customer at risk of something happening to the collateral for the loan. 

Weather events can cause significant damage causing big losses to the consumer and the bank. 

While a $30,000 loss isn't significant to a large national servicer,it has a big impact on our bank. 

Providing coverage quickly protects both the bank and the consumer.

4. Error Resolution and Responses to Inquiries. Permit community banks flexibility in

tracking and documenting responses. As discussed during the session, the majority of

errors (if any) or inquiries from customers are handled and resolved immediately, usually while

the borrower is on the phone or at the bank branch. I cannot recall receiving a QWR but if we

do we would respond immediately as well. We do not have an automated tracking system for

these requests and request that community banks be exempted from implementing one. We

do not send out a written statement to borrower confirming that we have resolved their issue

or answered their inquiry. Such statements would be wasteful in terms of time to produce

them,and the postage to mail them. As stated prior we know our customers and our

reputation is at risk if we do not handle this promptly. We would request that community

banks be exempt from having to provide these statements.

5. Reasonable Information Management Policies. Permit community banks flexibility in 

complying with this policy. Community banks generally do not have robust loan servicing 

systems that permit on line collaboration, or have the ability to record and track all borrower 

communications and interactions. Many times notes are hand written by the bank staff, or there 

may be copies of email exchanges placed in the file. We would request that community banks

be permitted to continue these practices which are effective for our bank and not be required to

make expensive and unnecessary system upgrades.

6. Early Intervention and Continuity of Contact. The CFPB should work with the FHFA to

align these policies with those required by the GSEs for servicing mortgages. For

mortgage loans serviced by community banks for the GSEs,we have to comply with similar

standards on early intervention and continuity of contact. There is no reason to have an

additional set of rules in this area and we urge the CFPB to work with the FHFA on aligning their

policies. Loans that we hold in portfolio are generally serviced the same way. We have a small

staff that service mortgage loans,and they service all types of loans for the bank. Our lenders

contact borrowers usually by the 16th of the month, and sometimes sooner. The borrowers 

will work with the same person throughout the collection process and loss mitigation 

process. Many times, they
1

Hon.Richard Cordray, Director 

Consumer FinancialProtection Bureau 

April 27, 2012

Page 4

come into the bank to meet with that person or the loan officer who made loan. We would ask 

that the proposed rules recognize this difference between community banks and large national 

servicers by permitting flexibility for community banks on their implementation of this policy.

7. Prompt Crediting and Payoff Amounts. The CFPB should work with the FHFA to align

these policies with those required by the GSEs for the crediting of payments and for

providing payoffs. We always credit payments immediately,usually while the borrower is

standing at the teller window. We provide payoffs promptly when requested, as part of good

customer service.

8. Impact on the cost of business credit. The CFPB should recognize that all changes,

especially those that require system upgrades, increase the overall cost of all types of

credit. We are a small organization and while pricing for business loans is different than

mortgage credit, increased costs for one do get spread across all lines of credit. We urge the

CFPB to carefully consider this when writing rules that require technology upgrades or could

require additional staff to manage and monitor.

In conclusion,Iappreciate the opportunity to participate in the SEBRFA process on the proposed 

mortgage servicing rulemaking. I urge the CFPB to exempt or permit flexibility for community banks like 

mine when writing rules that would require changes to our current processes, or require expensive 

upgrades to our servicing systems to accommodate new changes. As stated earlier in this letter, we 

deliver high quality personal service to all our customers,and work to resolve problem loans quickly.

Our customers come into the bank to see us when an issue arises,and we work with them on a personal 

basis to resolve it. Highly prescriptive and redundant procedures and requirements will not result in any 

improvement in our customer service,but will unnecessarily increase our costs and the costs to our 

borrowers. For many community banks,the cumulative effect of additional regulatory burden in the 

mortgage arena may lead them to exit the business,further concentrating the industry to the detriment 

of consumers. Our servicing business model is very different than the large national servicers and I urge 

the CFPB to recognize these differences in its rulemaking.

If you have any questions, please feel free to contact me. 

Sincerely,

CUMBERLAND SECURITY BANK

Mark Ross

Executive Vice President
2

Ross, Rachel (CFPB)

From: Mark Warshal <mwarshal@epix.net>

Sent: Friday, April 27, 2012 12:36 PM

To: Ross, Rachel (CFPB)

Subject: Follow-up from SBREFA Outreach Session - Please Make Part of Public 

Record

April 27, 2012

Ms. Rachel Ross

CFPB

Research, Markets & Regulations

Dear Ms. Ross:

Please accept my thanks for being given the opportunity to participate in the SBREFA Outreach Session

which took place on April 24, 2012. This being my first contact with the CFPB, I came away from the

meeting extremely impressed with the professionalismof the bureau. The use of technology that

allowed me to participate remotely was terrific. The distribution of written materials well prior to the

meeting date, including a detailed agenda, was most appreciated. The straightforward and logical

manner in which the meeting was conducted was refreshing. I have to say, the level of both organization

and execution was superb. I am certain that the CFPB is a shinning example of how a government 

organization can and should be run.

The purpose of this letter to the CFPB is to address an issue which was brought up several times by David

Stein, Esq., the CFPB representative who moderated the outreach session. While discussing several of the

discretionary areas where the CFPB has the authority to make exemptionsfor small loan servicers who

make and service their own fixed term, fixed rate loans, Mr. Stein expressed his concern that any

exemptionsfrom regulation would create two classes of consumers‐‐ consumers with different rights

based upon the size of their loan servicer.

It is my belief that when Congress enacted the Dodd‐Frank Act, it was not intending to create new

additional rights for consumers as much as it was intending to regulate different classes of loan servicers.

The difference is in the focus. Congress was focused on regulating bad actors in the loan servicing

business, while providing exemptionsto the smallest loan servicers who were doing things the right way

already.

The fact is, all loan servicers are not the same. As a consumer myself, I can attest that the largest loan

servicers are extremely difficult to deal with. One must traverse endless telephone menu systems just

to get to a customerservice representative who will inevitably indicate that you have reached the

wrong department and must call a different toll‐ free number. I would concede that the largest loan

servicers might need additional regulationsso that they better respond to the needs of their customers.

But for a small, family owed company like Fairway Consumer Discount Co., and the hundreds of other

companieslike us, the ability of the consumer to speak with his loan servicer is absolutely never an issue.

As owner operators, we have every incentive to communicate continually with our borrowers. We are not

dealing with an OPM situation, OPM meaning "other people's money". We are lending our own money,
3

retaining ownership, and servicing the loans. When a loan goes bad, it is our own money that is being

lost. Consequently, we have every incentive to speak with our customers whenever they are having a 

problem. Customers knowing the statuses of their accounts is absolutely never an issue.

I am hopeful that you now understand that the customer experience with a small loan servicer is, and

always has been, much different and much better than that which a customer experiences at a large

servicer.

Unfortunately,the costs of additional regulations will disproportionately injure the smallest loan

servicerslike mine, while most likely not even marginally improving our customers' experiences. We are

small businesses. We do not have IT staff. We don't have compliance officers. Every new regulation is a 

major problem for us to procedurally implement, even though we have been complying with the spirit of

the regulation already. Above all, every new regulation has costs, and the additional costs imposed by

the new regulations being proposed by the CFPB are significant. Small loan servicers like Fairway

Consumer Discount Co. are the ones that are least able to handle these increased costs.

My great fear is that the CFPB's new regulations will push the smallest loan servicers like mine out of

business, thereby eliminating the servicers who were giving the absolute best customerservice.

Ultimately, only large servicers will exit and consumers will no longer have the choice of going to their

local finance company to get the money they need. This is not in the best interest of consumers.

The issue is not different classes of consumer rights. The issue is different classes of loan servicers.

There already exist several laws relating to the lending business, including RESPA itself, which are

dependent upon the size of the lender. This is further evidence of the long held belief of Congress that

the size of the entity being regulated does matter.

Congress, in the Dodd‐Frank Act, spelled out several areas where it intended that the smallest loan

servicers be exempted from regulation. These areas were well identified during the outreach session. I 

urge you to cautiously use the CFPB's discretionary powers to implement regulationsthat will unduly

harm the smallest loan servicers, particularly small companiesthat make, retain and service fixed term,

fixed rate loans using their own money. We are not the businessesthat created the mortgage mess. It

seems particularly unjust to punish us with regulationsthat are costly and burdensome to comply with,

especially given the clear intent of Congressto spare us this terrible burden.

I urge you to provide to the smallest loan servicers, at every opportunity that you are statutorily able, an

exemption from costly and burdensome regulationsthat do not give our customers even a marginally

better customer experience.

Thank you again for having allowed me to participate in the outreach panel. If I can be of any additional

service to you, please do not hesitate to let me know.

Mark Warshal

NMLS ID 106231

Fairway Finance

8 Marion St.

PO Box 12

Luzerne, PA 18709

570-288-4535

www.FairwayLoans.com
4

220 East Broadway, PO Box 800

Monmouth, IL 61462

309-734-9333

May 1, 2012

By electronic delivery to: 

Dan.Sokolov@cfpb.gov

Mr. Dan Sokolov

Deputy Associate Director

Research, Markets & Regulations Division

Consumer Financial Protection Bureau

1700 G Street, N.W., 

Washington, D.C. 20006

Re: Comments of Small Entity Representative Randy McElwee to the small business review panel for 

the rule making on mortgage servicing disclosures

Mr. Sokolov:

I appreciate having the opportunity to serve as a small entity representative (SER) to the Small Business

Regulatory Enforcement Fairness Act Review Panel (SBREFA Panel or Panel) assembled to provide

input on the costs and benefits of proposals to implement new mortgage servicing disclosures required by 

sections 1418, 1420, 1463(a), and 1464(a) of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act). I want to acknowledge the outstanding work of the staff that organized 

the April 24, 2012 meeting of SERs. The hearing was well managed and made very efficient use of the 

time available. As requested at the close of the meeting, I offer the following written comments about the 

proposals under consideration.

I am a Vice President of Security Savings Bank located in Monmouth, Illinois with responsibility for 

overseeing our Consumer, Mortgage, and Commercial Lending and loan servicing department. Security 

Savings Bank is a 130 year old mutual savings bank with approximately $173M in assets. Our bank has 

two branch offices and employs forty full-time staffers, including six loan officers and three loan 

processors. Security Savings Bank holds eighty percent of the mortgages we originate in portfolio, and 

we retain servicing on all loans sold in the secondary market; we currently service $30M in residential 

mortgage loans.

I preface my comments by urging the Panel to recognize that an unintended consequence of the current 

mortgage reform effort may be to seriously limit the ability of small banks to serve their communities. 

Indeed, in the rural Midwestern Illinois market we serve, there are no branch offices of large banks with 

full time mortgage originators or servicers on staff. There are only are five small community banks, our 

size and smaller, headquartered in the two county market, and it is my understanding that at least two of 

our competitors are currently evaluating whether they can continue to underwrite and service mortgage 

loans in light of the anticipated compliance costs resulting from Dodd-Frank Act implementation.

My experience with the only two mortgage loans that have become delinquent in the last several years is 

a good example of the highly responsive community bank servicing model. A few months after closing on 

a mortgage loan, one of our customers had a stroke that left him disabled and unable to return to work in 

his job with the U.S. Postal Service. He became past due on his mortgage within a few months. Another 

servicer might have initiated foreclosure proceedings as the delinquency dragged on, but we worked with 

our customer, waiting fourteen months until his postal service disability benefits started and he was able 

to resume making his monthly payment. Since then, the customer has never missed a mortgage payment.

Similarly, when a couple, became 180 days delinquent on their mortgage loan, we asked them

to come into the bank to discuss the delinquency. During a review of the couple’s finances, we discovered 

that one of the individuals had developed a gambling problem. We offered personal counseling and
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worked with them to bring the loan current when other banks may have found it more expedient to 

foreclose. The couple has not missed a payment for over three years.

I hope that these examples and those provided by other SERs during the April 24th meeting demonstrate 

that the standards for servicing being considered by the Consumer Financial Protection Bureau (Bureau) 

are being met voluntarily today by community banks. Imposing a highly prescriptive servicing regimen on 

small institutions will not advance consumer protection; rather, it may force more and more small banks to 

exit the mortgage lending and servicing business to the detriment of consumer protection, choice, and 

access to credit.

Responses to Specific Questions:

A. PERIODIC STATEMENTS

1. Do you currently provide borrowers with a periodic statement? If so, how do you distribute it

(mail, email, website, portal, other)?

We provide 70% of our borrowers with a loan passbook; the other 30% have elected to use online 

banking. The loan passbook is a tri-fold payment card which contains basic loan payment details, contact 

information, and it also serves as a record of previous transaction activity, recording how each payment 

was allocated to principal and interest, escrows, late charges, and fees. A payment and passbook can be 

presented at the teller line or drive-through for immediate posting, or a customer can mail the payment 

and passbook to the bank. Each transaction is imprinted in the loan passbook when the payment and 

passbook are presented for payment; approximately 55 transactions can be imprinted in each book.

Because each passbook contains a record of previous loan payments, our customers prefer passbooks to 

paper or electronic statements or payment coupons. In fact, during our 2009 change of core processors, 

customer demand required us to work with the new core processor to accommodate the continued use of 

loan passbooks. (A sample payment passbook is attached.)

2. Take a look at the information that may be required on the proposed periodic statement 

disclosure. If you provide a periodic statement disclosure, what information on this list do you 

not currently provide? Why not?

I am concerned that the proposed list of information to be included on periodic statements will prevent our 

continued use of passbooks. Rather than forcing all banks to use a model paper or electronic statement 

that includes non-payment specific information (i.e., information about the servicer’s policies for

application of additional payments, partial payments, and amortization for payment option loans), I believe 

that banks like mine that use passbooks or coupons should be permitted to post this information on the 

bank website for customers to access as needed.

Similarly, I believe that information about loss mitigation and consumer counseling should not be required 

to be printed on periodic statements, coupons, or passbooks. This information can be made available on 

the website and a web address link to that information can be included in the delinquency statements 

mailed to delinquent customers. Alternatively, if the Bureau believes that it is important to provide this 

information directly to customers, I suggest that we do so with an annual disclosure issued, on paper or 

electronically, simultaneous with the annual escrow analysis.

Finally, if periodic statements are required, I urge you to permit customers to opt-out of receiving them as 

we permit our customers to forgo a passbook and instead use our electronic and online banking services. 

More and more of our customers are choosing to “go green” and to use electronic banking services. 

These customers recognize that they can find all the information they need on either our website or our 

online banking site. They will not want monthly statements.
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3. What actions would you need to take to develop, produce and send a periodic statement 

disclosure with all of the proposed information? What would these actions cost? Which costs 

would be one-time costs and which would be ongoing costs?

We estimate that producing the statements monthly, stuffing them in envelopes, and mailing them would 

cost an estimated $1.00 per loan per month1 While this may not seem great on the surface, when you 

multiply it by every loan and consider that proposals are pending to likely reduce servicing income on 

secondary market loans, it is clear that our margins will continue to shrink – and this does not account for

increased vendor costs.

Indeed, these costs are minimal compared to what our increased vendor costs could be for establishing a 

statement system that does not exist today. However, it is difficult to determine vendor costs. Our vendors 

are almost as overwhelmed with the pace of regulatory change as we are; they are unwilling at this time

to consider pre-proposal alternatives under consideration, and given our small size, we are powerless to 

get them to do so. We can only anticipate either a one-time assessment in the thousands of dollars, a 

significant increase in our contract rates at renewals, or some combination of both – the most likely 

scenario.

I also want to note that although model statement formats provided by the CFPB may be helpful, they are 

not expected to mitigate cost increases. It is the programming to place data in specific fields within any 

form that creates the expense, not designing the form itself. In addition, the form itself can increase our 

costs due to changes in formatting. For example, existing envelope stock we use currently to send

notices may have to be discarded and new envelope stock may have to be purchased if the location of the

address block on the statement does not fit within the existing address window. Similarly, please note that

if we could no longer use payment passbooks, we would be forced to dispose of our stock of passbooks

as well as many recently purchased passbook printers that each cost $500-$600, or more,

and required considerable IT time to program and set up.

Finally, we estimate that we would need to spend an initial two to three hours training time for each loan 

department employee to ensure they can answer basic questions about the regulatory changes. Ongoing 

training would likely be around two hours per year for each staff member. Frontline staff would receive 

many additional and more detailed questions that they are not trained to answer currently. We estimate 

spending four hours annually with each frontline employee to ensure they can answer questions 

accurately. Adding time expended by Compliance and Training staff, we estimate our total training budget 

would increase by $5000 to $6000 per year.

4. What format do you store the information that would be provided in a periodic statement?

What format do you store records of your periodic statements, if you already provide them? What 

actions would you need to take to store the information in a machine-readable form (not a PDF,

but rather an electronic form in which the information contained in the disclosures could be 

analyzed automatically)? What would these actions cost?

Our core processor stores the data and produces the data in a text file format. I am unaware of any 

program or technology that would allow the storage of statement text files in a machine-readable format. 

However, based on research into the cost of document imaging (as a pdf), the cost is likely to be 

prohibitive for small institutions. In addition, the cost, which will ultimately be borne by the consumer, 

would not improve customer service. Whenever one of our loan customers contacts us with a question, I 

or a member of my staff can pull the loan file that is stored less than thirty steps down the hall.

1 If the Bureau determines that electronic delivery is acceptable, it must understand that a very small percentage of our customer 

base (30%) has accepted the electronic statement delivery for checking accounts. We believe that this is consistent with other 

banks that operate in rural areas across the country.
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5. If you provide a periodic statement disclosure, what would your normal schedule be for the 

next update of the processes and systems through which you generate the disclosure?

Given the pace of regulatory change in the last several years, “updates” are neither regular nor timely. 

For example, we converted to our core processor in June of 2009. A scheduled update was planned for 

the fall of 2010. It was delayed due to various issues – primarily to roll out a number of regulatory 

changes in a coordinated manner – so the update was re-scheduled for August 2011. This update was 

scrapped at the last minute due to more regulatory changes. In February 2012, we finally received our 

update. Based on this experience, I believe that it could take up to 18-24 months for our core provider to 

update our system generate the new disclosure.

Given the inherent delays, we urge the Bureau to reconsider the inclusion of information about the name 

and address of consumer credit counseling services. In our rural market, we have seen consolidations 

and closures with these agencies, not to mention address and phone number changes. Providing this 

information on periodic statements would not only require compliance officer time and effort to ensure 

each monthly statement contains the correct consumer information, regular system updates would be 

required to keep agency information accurate. The Bureau should also note that the effectiveness of 

consumer counseling agencies in our market is diminished due to the fact that the nearest approved 

agency is over 60 miles away.

6. Do you provide borrowers with coupon books for making payments? To what fraction of 

borrowers do you provide coupon books?

As mentioned previously, we use passbooks for about 70% of our mortgage customers. Approximately

30% of the customers set up an automatic payment transfer and use online banking for tracking the 

payment details. We believe that payment passbooks are more beneficial to the consumer than coupon 

books because they show the actual imprinted payment and loan balance information as the transaction 

is processed. We believe we can provide more specific loan information on a payment passbook for all 

loan types, adjustable and fixed rate loans, than we could on a coupon book, and we urge the Bureau to 

include both passbooks (for both fixed rate and ARM loans) in any exemption from the requirement to 

provide periodic statements.

I urge the Bureau to consider the following alternatives for providing the required information:

1. Payment Passbooks could include (* Existing data in our passbooks):

o Loan account number*

o Loan maturity date,

o Monthly payment amount and date due each month*

o Current principal balance*

o Current interest rate

o Date of the next interest rate adjustment

o The amount of any prepayment, if any, or statement that there is no prepayment penalty

o A description of how late payments will be assessed, including late fee amounts

o Contact information for the lender/servicer, including addresses and web site links for

additional information*

o Recent payment activity which includes a monthly breakdown of how each payment was 

applied to principal, interest, escrows, and late charges.*
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2. Bank website Information, available 24 hours a day, could include:

• Contact information for the borrower to obtain information about the mortgage

• Contact information for housing counseling agencies or programs

• The servicer’s policy with regard to additional payment application

• The servicer’s policy with regard to partial payments

• Delinquent borrower information, foreclosure information, and loss mitigation alternatives 

that may be available.

3. Delinquency notices could include:

• Instructions directing the borrower to the information located on the website as mentioned

above.

Information about year-to-date payments of principal, interest, escrow, fees, and partial payments would 

not be able to be printed on a passbook. However, this information can be calculated easily from the 

payment history data imprinted on the passbook. In addition, this information could also be viewed 

through most online banking applications, and we could encourage borrowers to enroll in the online 

banking to view this information. Finally, small community banks do most of their servicing face-to-face 

with our customers during which we can provide them in-person all of this information on a moment’s 

notice.

B. ADJUSTABLE RATE MORTGAGE STATEMENT

1. If you currently provide ARM interest rate adjustment disclosures, how much in advance of the 

first adjustment do you send the disclosure? Is the timeframe different for adjustments that are 

subsequent to the first?

Typically, the new rate is calculated 45 days prior to the rate change date. Change processing takes 

approximately 3 days, and then the notice is mailed. We provide the notice a minimum of 25 days, and 

typically 42 days, prior to the new interest rate becoming effective and 55-72 days prior to the due date of 

new payment. We follow this procedure for all adjustable rate loans and for all interest rate adjustments. 

Our bank averages 22 days from application to loan closing on our mortgage loans – thus, we allow 

plenty of time for borrowers to refinance, if necessary, prior to reset.

I urge the Bureau to consider the unintended consequences likely to flow from the proposed requirement 

to send a notice that provides a “good faith estimate, based on accepted industry standards, of the 

creditor or servicer of the amount of the monthly payment that will apply after the date of the adjustment 

or reset” (the Notice) six to seven months prior to the initial interest rate reset or adjustment of a hybrid

adjustable rate mortgage.

2 First, I believe that providing the Notice six to seven months prior to the reset 

may confuse customers about when the new payment begins, and may, in some cases, result in

unintended consumer delinquencies. It has been my experience that customers notified of payment 

amount adjustments frequently assume that the change is effective on the next payment date.3 Thus, 

customers receiving the Notice may begin making the estimated payment the next month, and in the case

of a reduced interest rate, customers may tender a partial payment, resulting in an unintended 

delinquency, late fees, and a credit score downgrade.

Second, a “good faith estimate” of the adjusted payment amount provided six to seven months before the

2 See Dodd-Frank Act §1418. 3 Every year after Security Savings bank mails the annual escrow analysis to customers, we have customers that immediately adjust 

their payment amount. This happens with such regularity that we alert our lenders to begin watching for incorrect payment amounts 

so that they can call the customer to alert them to the mistake before it is too late and a partial payment results in an unintended

delinquency.
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reset date may not reflect the actual payment amount in effect on the reset date, and yet it may invite

false reliance. For example, in a rising rate environment, the Notice may show an estimated new payment 

that the customer can afford; however, if interest rates continue to increase during the six months

between the Notice and the reset date, the customer could be subject to payment shock. Similarly, a 

Notice could cause the customer to refinance – and incur refinance fees – unnecessarily. For example, if 

the Notice shows that the interest rate may adjust upward, but before reset it falls again, customers

relying on the initial Notice may refinance unnecessarily. In both scenarios, I have serious concerns about 

the negative impact on our customer relationship and even worry that the bank could be subject to legal 

liability.

To avoid these unintended consequences, I urge the Bureau to shorten the proposed Notice period. 

Under this approach, rather than a good faith estimate of the new payment, the Notice could set the 

actual new payment amount, in effect locking in the interest rate and payment amount. Although under 

this scenario both the bank and the consumer would forgo the possibility of further, possibly favorable, 

interest rate changes, both would also gain from the certainty provided. Consumers would benefit by

having exact information about their payment reset well in advance of the change, and banks would avoid 

customer dissatisfaction and the threat of liability.

In addition, this alternative could be implemented with more limited system programming changes and 

expense than the good faith estimate being considered by the Bureau. Existing reset notices now 

provided can be revised and core processes can be adjusted to ensure that the notice is provided to the 

customer 60 days prior to reset. Note contracts can be adjusted relatively easily to reflect the exact 

payment/date reset. In contrast, to implement the Bureau’s Notice will require significant, and expensive, 

programming changes. Core processing systems are generally designed to create the existing rate 

change notices when an “official” rate change takes place. It is my understanding that that intense 

rewriting of programming code will be required to in essence “trick” the system into producing a notice 

with an estimated rate change that does not drive an actual rate change. Effecting this change could cost 

lenders thousands of dollars and take at least 18 to 24 months to implement.

2. Take a look at the information that may be required on the proposed ARM reset notice. If you 

currently provide ARM reset notices, what information on the list do you not currently provide? 

Why not?

Our current notices provide all of the information required by Regulation Z, but do not contain the list of 

alternatives that consumers may pursue or contact information for counseling services.

3. What actions would you need to take to develop, produce and send an ARM reset notice with

all of the proposed information? What would these actions cost? Which costs would be one-time 

costs and which would be ongoing costs?

We would likely incur a one-time, up-front cost to redesign our current notice to include the additional 

required information. Sometimes we can perform this redesign in-house, at a cost of two to four days of IT 

support for design and testing; however, to accommodate the proposed changes, our core processor may 

need to redesign their notice templates to allow for multiple pages per notice. In addition, as discussed 

above, the major cost would be in the intense programming code changes required to create an estimate 

that does not drive an actual rate change on the system. Making these changes could take 18-24 months 

to implement at a cost that would certainly be passed onto the bank from our core processor.
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4. If you provide ARM reset notices, what is your normal schedule for the next update of the 

processes and systems through which you generate the disclosure?

There is no scheduled update planned by us or the core processor. Any changes would result in 

additional charges to our bank.

5. Some ARMs provide borrowers with years of fixed payments before an initial reset may occur. 

Others provide borrowers with only a short period of fixed payments before an initial reset may 

occur. In your experience, is the first interest rate reset generally more problematic for borrowers 

than subsequent resets?

We do not see any difference between the first reset and subsequent resets.

C. FORCED PLACE INSURANCE

1. Do you have any vender costs associated with force-placed insurance (e.g., providing 

disclosures to borrowers, communicating with borrowers, monitoring the insurance coverage on 

properties in your portfolio, placing force-placed insurance). If so, which ones?

We incur costs associated with monitoring to ensure continuous insurance coverage; we employ one

part-time staff member – at a cost of $15,000 per year – to do this monitoring for us. The proposals under 

consideration could have the effect of increasing our part-time staff member to full time, requiring an 

additional $15,000 per year in labor costs.

In our bank, monitoring is done manually by a part-time employee who thoroughly investigates the cause 

of the lapse in coverage and attempts to resolve, in person, the issues long before we get to a complete 

termination beyond the reinstatement period for coverage. We send reminders about premiums coming 

due and request that borrowers provide proof of insurance. In addition, we contact the insurer ourselves 

on behalf of the borrower to inquire as to the status, and there are only two cases where we are unable to 

resolve the issues before force placing insurance: if the home has become uninsurable or the insurer is

no longer renewing policies in that market, or if the borrower does not have the available funds to pay the 

premium. (In that case, our bank usually initiates mitigation counseling and sets up escrows.)

We do not charge a fee for these services. However, the costs to track and document compliance with the

mandatory process under consideration might require us to look for ways to offset the additional costs,

probably by imposing reasonable fees. The assumption that forced place insurers will bear the added

costs for disclosures, tracking insurance, and placing the insurance is incorrect. The added costs will

either be borne banks, like ours, that perform all of these duties, or be passed on to consumers in the 

form of higher premiums.

3. What are your current practices with respect to notifying borrowers whose force-placed 

insurance policies are coming up for renewal? What costs would be imposed on you by a 

proposal that required you to provide written disclosures to borrowers prior to renewing their 

force-placed insurance policies?

First, the Bureau should understand that for some borrowers, we are forced to consistently force-place 

insurance. Every quarter, their insurance lapses despite our continuing efforts to contact these borrowers 

to remind them that having hazard insurance in place is a requirement of the loan. Often the lapse in 

coverage is due to their inability to obtain insurance coverage due to the structure’s condition or location. 

Throughout the period that force placed insurance is in place, we continue to deliver reminder notices to 

the borrower to obtain their own insurance and notify us of such coverage. At each renewal period for the
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force placed insurance, which for us is monthly, we attempt contact the borrower to explain the 

disadvantages of force placed insurance. The increased costs we would incur as a result of this proposal 

are not just associated with preparing and delivering a notice. There will be additional labor costs to 

manage the process – to ensure that notices are delivered at the required intervals, to set up escrows for 

the force placed insurance premium, to refund premiums, and to repeat the process the next quarter

when certain borrowers do not pay their premiums again. We estimate that our costs would increase by at 

least $15,000 annually with no corresponding benefit to consumers or bank safety and soundness.

4. What actions would you need to take to ensure that a force placed insurance disclosure with all 

of the proposed information is provided to borrowers? What would these actions cost you?

Which costs would be one-time costs and which would be ongoing costs?

Because we use a Microsoft Word document to create these notices, we can easily change the notice 

format. We estimate that doing so would require approximately 8 hours of compliance time to ensure that 

our notice meets all regulatory requirements.

5. Do you (or your provider) currently refund premiums paid by homeowners for all periods in 

which hazard insurance is also in place?

Yes, but our existing procedures are to act proactively to ensure coverage does not lapse, so we rarely 

have overlapping policies.

D. PROMPT CREDITING AND REQUESTS FOR PAYOFF AMOUNTS

1. How do you currently handle partial payments from borrowers?

For portfolio loans, we accept partial payments and apply the partial payment as follows: interest is 

collected first, then principal, and finally fees. For secondary market loans, we require a full payment and 

alert the customer of that fact at the time they attempt to make a partial payment. We utilize a suspense 

account if necessary; however, our system requires manual intervention to apply the payment when the 

full amount has been paid. Please note that all of our secondary market loans are set up to have 

automatic payments made prior to the end of the grace period.

2. If you currently place partial payments in suspense accounts, when do you credit the borrower 

with a payment?

We credit the borrower only when we have a full payment amount and the payment is credited on the 

date the full payment is received. Accepting partial payments for loans sold to the secondary market 

would create significant accounting and reporting issues. While we appreciate concerns about partial

payments not being credited to the loan, it should be understood that a partial payment does not eliminate 

late fees or reporting to credit bureaus if the borrower does not pay the remainder of the payment on time. 

Also, mortgage loans are scheduled interest calculations, not simple interest, so the crediting of a partial 

payment does not necessarily create an interest savings to the customer. Moreover, the alternative being 

considered that would allow a bank to return the partial payment to the consumer is not always the best 

answer; many customers ask us to hold the partial payment in a suspense account in order to ensure that

the funds are not consumed by daily expenses.

Further, please note that in most community banks, including Security Savings Bank, a customer can walk

in to any branch and obtain an accurate payoff statement within minutes. The proposal to require a bank

to send an accurate payoff balance within seven days (excluding holidays and weekends) would 

negatively affect our ability to serve our customers and to close loans quickly. Community banks succeed
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by being efficient, often closing loans within 21 – 30 days of having a completed application. The 

allowance of seven days for a bank to provide an accurate payoff could delay the closing by up to 10 

days.

E. ERROR RESOLUTION AND RESPONSE TO INQUIRIES

1. Take a look at the list of errors that the CFPB may propose. If a borrower contacts you in 

writing and claims that one of these errors has occurred, how do you currently respond? If a 

borrower contacts you orally, is your response different? Does your response depend on the type 

of loan the borrower has? What consumer matters or errors do you currently respond to that are 

not on the list?

2. Take a look at the time frames that the CFPB may propose for responding to alleged errors

from consumers. Are there any alleged errors to which you do not currently respond in the stated 

time frames? If so, what actions would you need to take in order to respond within these time 

frames? What would those actions cost? Which costs would be one-time and which would be 

ongoing?

In the 14 years I have worked at Security Savings Bank, I have not received one written customer 

complaint about loan servicing. That does not mean that we do not have customers with complaints; 

however, typical customers of small banks simply come into the bank to discuss their concern in person 

or if time does not permit a trip to the bank, they use the phone. The key point is that we are available to 

discuss the issues, and ninety-nine percent of the concerns are resolved to the customer’s satisfaction 

before he or she leaves the bank or hangs up the phone, not in writing five days later as proposed. We 

cannot stay in business without providing this level of service which is far superior to the level of service 

that the Bureau is attempting to mandate with the proposed error and inquiry resolution process.

Requiring community banks to establish the prescriptive error resolution process proposed by the Bureau 

would impose a burdensome compliance exercise without consumer benefit. We would have to establish 

a procedure just to ensure that we have provided a written response to the customer about issues that 

have already been resolved on the spot. This would require us to draft template notices of resolution; to 

create manual logs or tracking systems to document compliance with prescribed response times; and 

finally, to audit the process to ensure compliance. We estimate this will require approximately 24 hours of 

compliance staff time and at least 12 hours of staff training time—a one-time expense to the bank of at 

least $4000 to $6000. Ongoing costs would include about an hour of employee time per complaint just to 

document compliance with an (unnecessary) error resolution “process.”

F. REASONABLE INFORMATION MANAGEMENT POLICIES AND PROCEDURES

1. Would you say that the way you currently manage information allows you to meet the duties 

stated in the policies and procedures?

2. If there are certain duties you cannot meet because of the way you currently manage 

information, what actions would you need to take in regards to how you manage information to 

meet these duties? What would these actions cost? Which costs would be one-time and which 

would be ongoing?

Current practices at our bank would satisfy the proposed requirements for information management 

policies and procedures. As previously discussed, we are proud of our track record for resolving servicing 

errors and loss mitigation. Documenting these practices as formal policies and procedures would add
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one-time costs for their development, compliance review, and board approvals. In addition, 

implementation would require initial training at a cost of approximately $2000 to $3000 and annual 

training at a cost of approximately $1000.

While we generally support the proposal for the development of information management policies and 

procedures that reflect the size of the servicer and the nature and scope of its activities, we continue to be 

very concerned that examiner opinions of what is “reasonable” can vary widely. It has been our

experience that expectations for small community banks are far too often influenced by the policies and 

procedures put in place at larger institutions, a concern exacerbated by the fact that civil liability can arise 

for failure to establish a “reasonable” information management policy and procedure.

G. EARLY INTERVENTION FOR TROUBLED OR DELINQUENT BORROWERS

1. How long after delinquency do you currently attempt to contact borrowers? Would you ever 

wait longer than 45 days before attempting to contact the borrower? Why?

We are a strong supporter of early intervention for all delinquent loans. The first contact occurs within 2 

days after the end of the grace period. Additional contact is made by phone if possible before a payment 

is 30 days late. Another notice is delivered within 2 days of becoming 30 days past due. Until the loan is 

current again, the customer receives written notices at the following intervals: 30, 60, 90, & 120 days late 

as well as phone contacts or certified letters for borrowers unavailable by phone. The 30 and 60 day 

notices include mandatory credit counseling and Servicemember Civil Relief Act disclosures to assist the 

debtor.

2. If your procedure is different from the proposed early intervention procedure, what actions 

would you need to take in order to comply with the proposed procedure? What would those 

actions cost? Which costs would be one-time and which would be ongoing?

The Bureau is considering requiring servicers to provide delinquent borrowers with written information 

about loss mitigation programs, requirements for qualifying and necessary documents, the foreclosure 

process, and housing counselors. This disclosure would have to be provided to the customer within 45 

days of the date of delinquency and within five days of contact by a customer experiencing financial 

hardship. The proposal, like the proposed error resolution proposal, would impose a burdensome 

compliance exercise without consumer benefit. It would require the drafting of the notice, establishment of 

procedures to ensure timely delivery, and tracking systems to document compliance.

Community banks, like ours, service all loans equally and have the same early intervention procedures for

both portfolio and secondary market loans. Indeed, given the complications of HAMP and HARP as well

as the risk of loan re-purchase from the GSE, small servicers like Security Savings Bank concentrate more

early intervention efforts on secondary market loans than on portfolio loans. As a result, since 2008, our

bank has not had a single late payment on any loan sold to the secondary market.

Implementing this system just for non-portfolio loans will erode the small profit secondary market loans 

provide. Proposed mortgage loan compensation changes along with the added costs of additional 

disclosures may result in small banks exiting the mortgage market – thus doing more harm to the 

consumer. We recommend that the proposed additional information be posted on the bank website for 24 

hour access and a simple link to this information be placed in late notices. This would decrease our 

compliance costs and would make it relatively easy to update and maintain accurate information, 

especially, housing counseling information that is ever changing.
3. The proposed procedure may require servicers to contact a delinquent borrower in writing. 

Would the costs of complying be substantially mitigated if you did not have to contact a 

delinquent borrower in writing if you originated the delinquent loan and held it in portfolio?

No, we would continue our current procedures – notifying customers by mail with notices and letters, and 

by phone when possible.

H. CONTINUITY OF CONTACT

1. How much staff do you currently provide to work with troubled borrowers? How do you 

provide access to this staff?

Our originating loan officers handle the collections for the loans they originated. They have full access to all

loan documents and payment history and are best suited to provide necessary information and guidance to

the delinquent borrower. Borrowers have ready access to their loan officer in person, by mail, email,

telephone, and voice mail.

2. If you do not currently provide troubled borrowers with direct and ongoing access to staff (e.g., a

dedicated phone number that is staffed during business hours), what actions would you have to 

take to do so? What would these actions cost?

I am unaware of any small community bank that does not provide direct and ongoing access.

3. Does the staff that works with troubled borrowers have ready access to the information 

described in the proposal? If not, what information is not readily available? What actions would 

you need to take in order to make sure that staff has access to this information? How much 

would these actions cost?

Yes, they have full access; the loan file is right down the hall.

CONCLUSION

Thank you again for the opportunity to provide small entity input on the proposed servicing rules. Please 

feel free to contact me at rmcelwee@securitysavings.com or 309-734-9333 ext. 2310 if you have any 

additional questions.

Respectfully submitted,

Randy D. McElwee

Vice President,

Commercial, Mortgage, & Consumer Lending Department

Cc. Jennifer Smith, SBA Office of Advocacy

Shagufta Ahmed, Policy Analyst, OIRA
Security

Savings

ACCT #

BANK

MORTGAGE LOAN PASSBOOK

Loan payments must be accompanied by the account number, loan passbook or loan bill.

Loan payments received in person or by mail on business days during hours of operation will be credited 

the same business day. All other payments delivered when the bank is closed will be credited on the next 

business day. Payments may be delivered to either addressshown below.

Payment Amount $ 4_8_1_.3_5 _ Due Date: 1st -----------------

1st Mortgage

Security Savings Bank

220 East Broadway

PO Box 800

Monmouth, IL 61462

309-734-9333

www.securitysavings.com 

BANKLINE -Bank by 

Phone

1-888-329-6559

Broadway at Nichols

PO Box 7

Stronghurst, IL 61480

309-924-1172

Customer

Name &

Address

L _j

Please present this book when making payments

 GE<li.W. HO:

US

rING

LENDER
1

61,600.00 61,600.00

(243.83) (19.52) 61,580.48

04 4 04-07-11 (1,102.00) 742.56

05 5 04-08-11 205.32 947.88 (58.03) 61,522.45

06 6 04-22-11 (243.57) (19.78) 61,502.67

07 7 04-27-11 731.87 1,679.75

08 8 04-27-11 300.00 1,979.75

09 9 05-03-11 (767.52) 1,212.23

10 10 05-03-11 (48.78) 1,163.45

11 11 05-05-11 11.28 1,174.73

12 12 05-06-11 216.60 1,391.33 (58.03) 61,444.64

13 13 05-16-11 16.07

14 14 05-17-11 (16.07)

15 15 05-20-11 (243.24) (31.39) 61,413.25

16 16 06-03-11 227.88 1,619.21 (46.75) 61,366.50

17 17 06-17-11 (242.88) (31.75) 61,334.75

18 18 07-01-11 227.88 1,847.09 (46.75) 61,288.00

19 19 07-29-11 (242.54) (32.09) 61,255.91

20 20 08-02-11 (767.52) 1,079.57

21 21 08-02-11 (48.78) 1,030.79

22 22 08-12-11 227.88 1,258.67 (46.75) 61,209.16

23 23 08-26-11 (242.35) (32.28) 61,176.88

24 24 09-09-11 227.88 1,486.55 (46.75) 61,130.13

25 25 09-23-11 (242.01) (32.62) 61,097.51

26 26 10-07-11 227.88 1,714.43 (46.75) 61,050.76

27 27 10-21-11 (241.66) (32.97) 61,017.79

28 28 11-04-11 227.88 1,942.31 (46.75) 60,971.04

29 29 11-18-11 (241.31) (33.32) 60,937.72

30 30 12-02-11 227.88 2,170.19 (46.75) 60,890.97

31 31 12-09-11 (13.79) 2,156.40

32 32 12-30-11 (240.98) (33.65) 60,857.32

33 33 01-13-12 227.88 2,384.28 (46.75) 60,810.57

34 34 01-27-12 (240.79) (33.84) 60,776.73

35 35 02-10-12 227.88 2,612.16 (46.75) 60,729.98

36 36 02-22-12 (1,034.00) 1,578.16

37 37 02-24-12 (240.42) (34.21) 60,695.77

38 38 03-09-12 227.88 1,806.04 (46.75) 60,649.02

39 39 03-23-12 (240.09) (34.54) 60,614.48

40 40 04-06-12 227.88 2,033.92 (46.75) 60,567.73

41 41 04-20-12 (239.74) (34.89) 60,532.84

42

43

44

45

46

47

48

49

50

51

52

53

54

55

Escrow Late Charges Loan Number

Date Payments Escrow Assessed Loan

(Payouts) Balance (Paid/Waive) Interest Principal Balance

01 1 03-01-11

02 2 03-01-11 827.60 1,844.56

03 3 03-25-11
2

Ross, Rachel (CFPB)

From: Victor Petroni <VPetroni@firstnewengland.org>

Sent: Tuesday, May 01, 2012 4:43 PM

To: Ross, Rachel (CFPB)

Subject: RE: Reminder - Mortgage Servicing SBREFA Comments

Attachments: image001.gif; image002.jpg

Rachel,

I had hoped to put something together for the panel on the mortgage servicing issues, especially to address my concern 

for small credit unions and the impact that the mortgage servicing rules will have on their servicing of closed end second 

lien mortgages.

As usual I ran out of time (typical problem for small bank & credit union staff) I guess that I will have to use the comment 

period once the proposed rules as published to try and address the issue.

Thank you for the opportunity to participate. I enjoyed meeting the CFPB team and my fellow panel participants. If I

can ever be of any further assistance please do not hesitate to call upon me. 

Victor

Victor H. Petroni

SVP Lending, First New England FCU 

President, Mortgage Markets CUSO, LLC

616 Burnside Avenue

East Hartford, CT 06108

860‐282‐0001, ext. 106 

vpetroni@firstnewengland.org<mailto:vpetroni@firstnewengland.org> 

[cid:image001.gif@01CD27B9.78FCF850]

[cid:image002.jpg@01CD27B9.78FCF850]

From: Rachel.Ross@cfpb.gov [mailto:Rachel.Ross@cfpb.gov]

Sent: Tuesday, May 01, 2012 1:21 PM

To: Victor Petroni

Subject: Reminder ‐ Mortgage Servicing SBREFA Comments

Dear Mr. Petroni ,

Thank you for taking the time to participate in our panel meeting last week. As a reminder, to the extent you have any;

comments are due by close of business today.

Sincerely, 

Rachel

Rachel Ross

Research, Markets & Regulations 

rachel.ross@cfpb.gov <mailto:rachel.ross@cfpb.gov>
Tel: 202 435‐7635 | Mob: 

202 591‐6915 

consumerfinance.gov

Confidentiality Notice: The information contained in this transmittal, including attachmentsif any, may be

confidential or privileged under applicable law, or otherwise may be protected from disclosure to anyone

other than the intended recipient(s). Any review, use, distribution, or copying of the contents of this e‐mail

or its attachments by any person other than the intended recipient for any purpose other than its intended

use, is strictly prohibited and may be unlawful. This communication is not intended as a waiver of the

confidential, privileged or exempted status of the information transmitted. If you have received this e‐mail in

error, you should permanently delete the e‐mail and any attachments.

Do not save, copy, disclose, or rely on any part of the information contained in this e‐mail or its

attachments. Also immediately notify the sender of the misdirection of this transmittal. Your

cooperation is appreciated.
-----Original Message----From: Kevin Kanouff [mailto:KevinKanouff@statebridgecompany.com]

Sent: Wednesday, May 02, 2012 9:03 AM

To: Ross, Rachel (CFPB)

Subject: RE: Reminder - Mortgage Servicing SBREFA Comments

Thank you for the reminder Rachel. Unfortunately, we were unable to secure the data from our providers in 

time. Kevin

4600 S. Syracuse Street

Suite 700

Denver, Colorado 80237

T: (720) 931-6200

kevin@statebridgecompany.com<mailto:kkanouff@statebridgecompany.com>

[SB Logo RGB 72dpi]

From: Rachel.Ross@cfpb.gov [mailto:Rachel.Ross@cfpb.gov]

Sent: Tuesday, May 01, 2012 11:21 AM

To: Kevin Kanouff

Subject: Reminder - Mortgage Servicing SBREFA Comments

Dear Mr. Kanouff,

Thank you for taking the time to participate in our panel meeting last week. As a reminder, to the extent you 

have any; comments are due by close of business today.

Sincerely,

Rachel

Rachel Ross

Research, Markets & Regulations

rachel.ross@cfpb.gov <mailto:rachel.ross@cfpb.gov>

Tel: 202 435-7635 | Mob: 202 591-6915

consumerfinance.gov

Confidentiality Notice: The information contained in this transmittal, including attachments if any, may be 

confidential or privileged under applicable law, or otherwise may be protected from disclosure to anyone 

other than the intended recipient(s). Any review, use, distribution, or copying of the contents of this e-mail or 

its attachments by any person other than the intended recipient for any purpose other than its intended use, 

is strictly prohibited and may be unlawful. This communication is not intended as a waiver of the confidential, 

privileged or exempted status of the information transmitted. If you have received this e-mail in error, you 

should permanently delete the e-mail and any attachments. Do not save, copy, disclose, or rely on any part of 

the information contained in this e-mail or its attachments. Also immediately notify the sender of the 

misdirection of this transmittal. Your cooperation is appreciated.

________________________________

"This message and any accompanying communications are covered by the Electronic Communications Privacy 

Act, 18 U.S.C. 2510.2521, and contain information intended for the specified individual(s) only. The 

information is confidential. If you are not the intended recipient or an agent responsible for delivering the 

communication to the intended recipient, you are hereby notified that you have received this communication 

in error and that any review, dissemination, copying, or the taking of any action based upon the contents of 

this communications strictly prohibited. If you have received this communication in error, please notify us 

immediately by email and delete the original message. Please note that any views or opinions presented in 

this e-mail are solely those of the author and do not necessarily represent those of The Company. Finally, the 

recipient should check this e-mail and any attachments for the presence of viruses. The Company accepts no 

liability for any damage caused by any virus transmitted by this e-mail."
Appendix B

List of Materials Shared with SERs

Materials Circulated in Advance of Panel Outreach Meeting:

• Outline of Proposals under Consideration and Alternatives Considered

• Discussion Issues for Small Entity Representatives

• Fact Sheet: Small Business Review Panel Process

Panel Outreach Meeting Materials:

• PowerPoint slides 

Appendix C

Outline of Proposals Under Consideration and Alternatives Considered

[See attached]
April 9, 2012

2

SMALL BUSINESS REVIEW PANEL FOR

MORTGAGE SERVICING RULEMAKING

OUTLINE OF PROPOSALS UNDER CONSIDERATION AND

ALTERNATIVES CONSIDERED

I. INTRODUCTION

• Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. 

L. 111-203, approved July 21, 2010) (“Dodd-Frank Act,” “DFA,” or the “Act”)

1 in the 

wake of the greatest financial crisis since the Great Depression. At the epicenter of this 

crisis was the mortgage meltdown. The serious and widespread deficiencies in the 

mortgage market damaged American homeowners, financial institutions, and the wider 

economy.

• Mortgage servicing in particular has been marked by pervasive and profound consumer 

protection problems.2 In examinations of fourteen major servicers, the Comptroller of 

the Currency, the Board of Governors of the Federal Reserve System, and the Office of 

Thrift Supervision concluded that servicers were “emphasiz[ing] speed and cost 

efficiency over quality and accuracy” in their foreclosure processes.3

 

• The Dodd-Frank Act mandates several protections for homeowners in the servicing of 

their loans, including:

(1) new disclosures (periodic statements, notice prior to reset of adjustable rate 

mortgages (“ARMs”), and force-placed insurance notices) that will help provide 

consumers with comprehensive and comprehensible information, when they need 

it, in a form they can use, so they can better manage their obligations and avoid 

unnecessary problems;

(2) new requirements for servicers to respond in a timely way to homeowners who 

complain to their servicer about a potential mistake, and for responses that tell the 

homeowner how the complaint was resolved and why;

(3) prompt crediting of payments, so consumers are not wrongly penalized with late 

fees or other fees because a servicer did not credit their payments quickly; and

(4) timely response to requests for payoff information, so consumers can get their 

balance information when they need it.

• These new statutory requirements will take effect automatically in January 2013, as 

 1 Dodd-Frank Act, secs. 1418, 1420, 1463(a), and 1464(a) (http://www.gpo.gov/fdsys/pkg/PLAW111publ203/pdf/PLAW-111publ203.pdf). See Attachment A. 2 See e.g., Testimony of John Walsh, Acting Comptroller of the Currency, before the U.S. Senate Committee on 

Banking, Housing and Urban Affairs at p. 16 (February 17, 2011; United States of America et al. v. Bank of America 

Corporation et al., Compl. ¶¶ 47-101 (D.C. Cir.), available at: www.nationalmortgagesettlement.com. 3 Federal Reserve System, Office of the Comptroller of the Currency, and Office of Thrift Supervision, “Interagency 

Review of Foreclosure Policies and Practices,” p. 5, (April 2011), http://www.occ.gov/news-issuances/newsreleases/2011/nr-occ-2011-47a.pdf.
April 9, 2012

3

written in the statute, unless final rules are issued first. The statute authorizes the CFPB 

to adopt implementing regulations and, by doing so, extend the effective date. The 

Bureau intends to use these authorities to adopt regulations that provide servicers with 

clarity about their statutory obligations and permit servicers sufficient time to come into 

compliance. The Bureau will also consider adjusting servicers’ statutory obligations to 

ease burden where consistent with adequate protection of homeowners. 

• The CFPB is also considering whether to propose additional standards to improve the 

way servicers treat homeowners in distress. Servicers, in particular the larger ones, can

make it very difficult for distressed homeowners to explore and take advantage of 

potential ways to avoid a foreclosure. For example, servicers have frequently neglected 

to reach out or respond to a distressed homeowner in time, lost documents of 

homeowners who have sought modifications or other relief, failed to track 

communications with homeowners, and forced homeowners who have invested 

substantial time communicating with an employee of the servicer to “start over” with a 

different employee.4

 

• To address these concerns, the CFPB is considering proposing new servicing operations 

standards in three areas:

(1) servicers would have to maintain reasonable information management policies 

and procedures, 

(2) servicers would have to intervene early with troubled and delinquent borrowers, 

and

(3) servicers would have to assure that staff who deal with homeowners have access 

to records about that homeowner, including records of the homeowner’s previous 

communications with the servicer.

• The Bureau recognizes that a one-size-fits-all approach may not be optimal with regard to 

either the mandated or additional requirements. In convening a Small Business Review 

Panel, the CFPB seeks input to help it determine to what extent it may be appropriate to 

consider adjusting these standards for small servicers, to the extent the statute allows 

adjustments. This document provides the small servicers that will consult with the panel, 

and the broader public, details about the proposals under consideration. These details 

will help servicers provide the CFPB useful feedback before the CFPB proposes a 

regulation. The CFPB is particularly interested in learning whether adjustments may be 

called for in the case of small servicers that originate loans for their customers and selfservice those loans either while held in portfolio or after selling the loans (servicing 

retained) to Government-Sponsored Enterprises (“GSEs”) or other investors. The CFPB 

seeks to understand how consumers would be protected in those cases where adjustments 

may be appropriate.

• Consistent with SBREFA, this summary provides a preliminary assessment of the 

 4 See e.g. Larry Cordell, Karen Dynan, Andreas Lehnert, Nellie Liang and Eileen Mauskopf, “The Incentives of 

Mortgage Servicers: Myths and Realities,” Finance and Economics Discussion Series, Divisions of Research & 

Statistics and Monetary Affairs, Federal Reserve Board, Working Paper 2008-46, at p. 9 (2008).
April 9, 2012

4

potential benefits and costs to the types of small businesses and other small entities that 

would be subject to the proposals under consideration—namely, mortgage servicers (such 

as community banks, credit unions, independent servicers, small non-profit organizations

and possibly small government jurisdictions). Without making an official data request, 

the CFPB states that it welcomes any quantitative information Small Entity 

Representatives may choose to provide with regard to the costs and benefits of the rules 

the CFPB is considering proposing. Drawing in part on information gained through the 

SBREFA panel process, the CFPB will publish with the proposed rule an analysis of the 

benefits and costs to consumers and industry and of the impacts on small entities 

specifically. Comments received during the notice and comment period after the 

publication of the proposed rule will further inform the CFPB during the rulemaking 

process

II. STATEMENT OF OBJECTIVES AND LEGAL BASIS

• The Dodd-Frank Act imposes certain requirements concerning mortgage servicing that 

become self-executing and enforceable on January 21, 2013, unless final rules are issued 

on or before that date. Final rules must take effect no later than 12 months after the date 

of issuance (i.e., not later than January 21, 2014). The CFPB plans to implement the 

mandatory statutory provisions by proposing amendments to Regulation Z and 

Regulation X, which implement TILA and RESPA respectively.

• DFA TILA Amendments

o Section 1418: ARM notice provided 6 months prior to the initial reset of the 

interest rate for closed-end credit transactions secured by a consumer’s principal 

residence. This rulemaking also would amend the timeframe and content of the 

periodic ARM adjustment notices required under current regulations.5

o Section 1420: Periodic statement provided each billing cycle for closed-end credit 

transactions secured by a dwelling, except not required for fixed rate loans with 

coupon books containing substantially the same information.

o Section 1464: Prompt crediting of mortgage payments in connection with 

consumer credit transactions secured by a consumer’s principal dwelling and 

accurate response to requests for payoff amounts for home loans.

• DFA RESPA Amendments

o Section 1463 requires the following for federally related mortgages:

 Two notices must be sent to borrowers with lapsing or lapsed hazard 

insurance policies alerting them to the servicer obtaining force-placed

insurance policies and setting forth requirements and procedures servicers 

 5 See TILA’s Regulation Z 1026.20(c) (formerly 226.20(c)).
April 9, 2012

5

must follow before charging consumers for such coverage. Servicers must 

terminate such coverage and reimburse borrowers for premiums charged 

during any period of overlapping coverage.

 Timely response to borrowers’ requests to correct certain types of errors

and to respond to borrowers’ inquiries.

 Responding within ten business days to a borrower’s request for the 

identity, address, and other relevant contact information about the owner 

or assignee of the loan.

 A prohibition on charging fees for responding to valid qualified written 

requests.

 Servicers must “comply with any other obligation found by the [CFPB], 

by regulation, to be appropriate to carry out the consumer protection 

purposes of this Act.” In light of the systemic problems identified in the 

servicing industry, the CFPB believes it may be appropriate to exercise 

this authority by amending Regulation X to mandate processes and 

services intended to prevent avoidable foreclosures. To this end, the 

CFPB is considering proposing that servicers:

• Establish reasonable policies and procedures for managing 

borrower information,

• Undertake early intervention with troubled and delinquent 

borrowers, and

• Provide troubled and delinquent borrowers with continuity of 

contact with staff equipped to assist them.

III. OUTLINE OF PROPOSALS UNDER CONSIDERATION

A. MORTGAGE SERVICING DISCLOSURES6

• The Dodd-Frank Act requires the following new disclosures: a periodic statement, notices

prior to charging for any force-placed insurance, and a notice prior to the first reset of 

 6

The CFPB is accumulating information about the one-time and ongoing costs of new disclosures for small entities, 

but the CFPB does not currently have information that is clearly applicable to the disclosures in this rulemaking. 

Small Entity Representatives recently provided the Bureau with information about the cost of integrating the Truth 

in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) mortgage loan origination forms. 

However, the integrated TILA/RESPA form is distinctive in both the amount of information that is both required 

from and provided to consumers. The costs of software, training, and fees (including attorney fees) associated with 

developing and providing the TILA/RESPA form may not be directly applicable to the simpler disclosures in this 

rulemaking. The CFPB is therefore asking Small Entity Representatives for information about the one-time and 

ongoing costs for developing and providing the new disclosures in this rulemaking.
April 9, 2012

6

hybrid adjustable rate mortgages. The new disclosure requirements will take effect with 

or without a Bureau regulation. The Bureau believes a regulation will aid consumers and 

servicers by clarifying legal rights and obligations and specifying disclosure requirements 

based on empirical testing. 

• The CFPB is conducting outreach to both industry and consumer groups regarding DFA’s 

mortgage servicing disclosure amendments, including small business servicers. In 

addition, between February 13 - 23, 2012, the CFPB posted a draft model periodic 

statement on its website for general comment.

• The CFPB is considering proposing a model form for the periodic statement, ARM reset

notices, and force-placed insurance notices. Generally, model forms benefit servicers by 

providing them with safe harbors for complying with disclosure obligations, while 

preserving flexibility for servicers to vary from the model so long as they adhere to the 

regulation. With regard to the periodic statement and the ARM notices, the CFPB is 

considering a proposal that would require them to contain certain items and to group 

some of those items together for clarity and emphasis, but would permit servicers and 

creditors to customize the form in other respects.

• Through one-on-one interviews with consumers, the CFPB is testing the optimal amount, 

content, and presentation of information to include in each of the disclosures. The CFPB 

has conducted three rounds of testing in three different parts of the country.

7

 A fourth

round of testing may take place after the proposal is issued. The selection of testing 

locations took into account geographic, economic, and size diversity as well as diversity 

of consumer demographics, such as age, race, and mortgage experience. The CFPB will 

publish a report summarizing the results of the cognitive interviews, along with

publication of its proposed mortgage servicing rules. 

(1) Periodic Statement

• DFA Section 1420 amends TILA by adding a new requirement that a creditor, assignee, 

or servicer of any residential mortgage loan – a closed-end credit transaction secured by a 

dwelling -- provide a periodic statement to the borrower for each billing cycle. 

• Required Content: According to the statute, the statement may be provided electronically

and must include: 

o the amount of the principal obligation,

o the current interest rate in effect,

o the date on which the interest rate may next reset,

 7

The first round of testing took place in Towson, Maryland on February 1-2, 2012. The second round took place in 

Memphis, Tennessee on February 29 and March 1, 2012. The third round took place in the Los Angeles, California 

area on April 3-4, 2012. See Attachments B, C, and D for prototypes tested to date.
April 9, 2012

7

o the amount of any prepayment fee to be charged,

o a description of any late payment fees,

8

o contact information for the borrower to obtain information about the mortgage,

o contact information for housing counseling agencies or programs 

approved/certified by the Secretary of Housing and Urban Development (“HUD”) 

or a State housing finance authority, and

o such other information as the CFPB may prescribe. 

• Additional Content: The required content does not include the billing information 

servicers generally provide to borrowers but instead consists of general loan information 

and other information that may be helpful to troubled borrowers. The CFPB is 

considering proposing an integrated periodic statement that includes both types of 

information as well as how to dispute and resolve errors. The CFPB is considering 

proposing the following additional content in the periodic statement: 

o Loan account number and property address; 

o Servicer name and address; 

o Amount and due date of next payment; 

o Amount of, and date after which, any late fees will be assessed; 

o Loan maturity date; 

o Recent transaction activity, including itemization of fees and charges;

o Breakdown of current, most recent, and year-to-date payments by principal, 

interest, escrow, fees, and partial payment; 

o The servicer’s policy with regard to application of any additional payment

received from the borrower;

o The servicer’s policy with regard to partial payments received from the borrower;

o Amortization information for Payment Option loans; and

o Delinquent borrower alerts, such as foreclosure warning, a summary of the 

delinquency history, and information about loss mitigation alternatives.

 8

The CFPB understands “prepayment fee” to mean pre-payment penalty. 
April 9, 2012

8

• Timing: In keeping with current industry practice, the CFPB is considering proposing 

that the servicer send the periodic statement no later than four days after the end of the 

late fee grace period.

• Scope: 

o Exemptions: 

 Coupon Book for Fixed Rate Residential Mortgages: The periodic 

statement requirement exempts fixed rate residential mortgage loans

where the borrower is given a coupon book with substantially the same 

information as required by the periodic statement. The CFPB is 

considering proposing different methods of presenting the DFA required 

and additional content in light of the constraints inherent in the coupon 

book format, such as size and the inability to provide updated information 

for each billing cycle. The CFPB is considering seeking comment on (1) 

whether certain dynamic information (such as payments received, 

breakdown of payments, and results of late or delinquent payments) could 

be made available through a website or voice-response unit (or left off 

entirely in the case of certain information not statutorily mandated) and (2) 

the circumstances under which the exemption should cease to apply, such 

as when the borrower becomes delinquent.

 Reverse Mortgages: The CFPB is considering exempting reverse 

mortgages from the periodic statement requirement. Reverse mortgages 

are unique and better off addressed separately at an appropriate time.

• Consumer Testing: The CFPB is testing a model periodic statement in the field. The first 

round of testing focused on a statement for borrowers current in their mortgage 

payments; the second and third rounds emphasize distressed borrowers and those with 

Payment Option loans.

9

 See n.7 regarding dates and locations of consumer testing.

• Potential Impacts on Small Entities

The CFPB is not yet aware of any data or reports on how common it is for small servicers 

to provide borrowers with periodic statements. For servicers that do provide periodic 

statements, the CFPB does not yet have information on how much of the proposed 

content is already included in the statements. A question to the SERs asks about current 

practices in providing periodic statements and the content of those statements.

Benefits

 9

See Attachment B-1 for the draft periodic statement tested in the first round. See Attachment B-2 for the draft 

periodic statement tested in the second round. See Attachment B-3 for a draft periodic statement tested in the third

round.
April 9, 2012

9

o Providing the proposed content on a regular basis to both current and delinquent 

borrowers may reduce the frequency with which borrowers contact the servicer 

for information and reduce the time servicers spend answering borrower 

questions.

Costs

o The proposed periodic statement disclosure may require some servicers or their 

vendors to develop a new form or to reformat an existing form. These are onetime costs. The CFPB is mitigating the one-time costs by providing servicers 

with a tested form. A question to the SERS asks about the costs of developing a 

statement with the required content.

o Producing the proposed statement, which includes calculations specific to each 

loan, may require servicers or their vendors to acquire new or updated software, 

provide training to staff, use additional staff time, and incur paper, printing, and 

other production costs. Routine systems updates may mitigate the software costs 

since improved software would, in part, already be budgeted. The possibility of 

producing only electronic statements for certain borrowers, consistent with the ESIGN Act, may mitigate the paper and printing costs. A question to the SERs 

asks about the one-time and ongoing costs of producing the proposed statement.

o The CFPB is considering the optimal form of record keeping for periodic 

statements and the financial information contained within them. In connection 

with another project focusing on integration of mortgage loan origination 

disclosures required under the Truth in Lending Act and Real Estate Settlement 

Procedures Act, the CFPB learned through another small business review panel 

that many participants retained PDFs or similar electronic archives of disclosures 

but did not maintain them in a machine readable form in which the information 

contained in the disclosures could be analyzed automatically. The participants 

believed that it might be expensive to change the record-keeping format. The 

CFPB believes that much or all of the financial data contained on a periodic 

statement is likely being maintained electronically by servicers as part of their 

ongoing accounting systems. A question to the SERs asks about existing recordkeeping formats and the potential costs of different alternatives. 

 

o Sending the proposed periodic statement disclosure may impose new mailing and 

other costs on servicers or vendors. The possibility of sending only electronic 

statements for certain borrowers may mitigate the mailing costs. A question to 

the SERs asks about the ongoing costs associated with sending the disclosure.

o The ongoing costs of the proposed periodic statement disclosure may be mitigated 

to some extent by the exemption for fixed rate residential mortgage loans where 

the borrower is given a coupon book with substantially the same information as 

required by the periodic statement. A question to the SERs asks about the 

provision of coupon books to borrowers.
April 9, 2012

10

(2) ARM – Notice 6 Months Prior to Initial Interest Rate Reset

• DFA Section 1418 amends TILA by adding a new requirement that a creditor or servicer 

provide a notice regarding the initial interest rate reset or adjustment of a hybrid

adjustable rate mortgage at the end of the introductory period either (a) between 6 and 7 

months prior to such reset, or (b) at consummation of the mortgage if the first reset 

occurs during the first 6 months after consummation. The notice must be separate and 

distinct from all other correspondence. Additional discretionary authority in the statute

permits the CFPB to require creditors or servicers to provide the hybrid ARM notice or 

other notice for adjustable rate mortgages that are not hybrid ARMs.

• Required Content: According to the statute, the notice must include:

o Any index or formula used in adjusting or resetting the interest rate and a source 

of information about the index or formula;

o An explanation of how the new rate and payment would be determined, including 

how the index may be adjusted, such as by the addition of a margin;

o A good faith estimate, based on accepted industry standards, of the amount of the 

resulting monthly payment after the adjustment or reset and the assumptions on 

which the estimate is based;

o A list of alternatives that the consumers may pursue, including refinancing, 

renegotiation of loan terms, payment forbearance, and pre-foreclosure sales, and 

descriptions of actions the consumer must take to pursue these alternatives;10

o Contact information for HUD- or State housing agency- approved housing 

counselors or programs reasonably available; and

o Contact information for the State housing finance authority for the State where the 

consumer resides.

Except for the contact information and list of alternatives, all of DFA 1418’s required 

content is currently required by existing regulations.

11 

• Additional Content: The CFPB is considering proposing to include the following loan 

information in the disclosure: account number and property address; servicer name and 

 10Based on results from consumer testing, the proposal under consideration would substitute “loan modification” for 

“renegotiation of loan terms.” The CFPB is also considering adding “deed in lieu” as an alternative, expressed 

simply as “transfer of ownership to the lender.” 

11 The first two disclosures under Section 1418’s required content are the same as those required under Regulation Z 

226.19(b) (now 1026.19(b)), which must be provided to consumers around the time of application. The third 

disclosure currently must be provided to consumers 25-120 days prior to the due date of any payment change caused 

by an interest rate adjustment. See Regulation Z 1026.20(c) (1), (2), and (3). (That same regulation requires a 

similar notice sent annually to consumers if no interest rate adjustment during that time period effected a change in 

payment.) Note that Regulation Z applies to all ARMs (not just hybrid ARMs).
April 9, 2012

11

address; key terms of the ARM such as length of the introductory period and when future 

interest rate adjustments will take place; and date of upcoming interest rate adjustment

and due date of the first payment after the adjustment. The CFPB is also considering 

including, if applicable, the amount and expiration date of any pre-payment penalty, any 

interest rate or payment limits, and amortization information for negatively amortizing 

and Interest-Only loans. (Much of this additional content was proposed by the Federal 

Reserve Board in its 2009 proposed rule to amend Regulation Z’s ARM reset notice.)

• Scope: The statute defines a “hybrid adjustable rate mortgage” as a consumer credit 

transaction secured by the consumer’s principal residence with a fixed interest rate for an 

introductory period that adjusts or resets to a variable interest rate after such period. 

o The CFPB understands the statutory definition of hybrid ARM to encompass the 

following loan products: 2/1, 3/1, 5/1, 7/1, and 10/112 (or any ARM product with 

an introductory period of longer duration than its ensuing periods of adjustment). 

This is consistent with how the banking industry refers to hybrid ARMs. The 

CFPB is considering proposing that these loan products receive the notice under 

DFA 1418.

o The CFPB is considering proposing to use its discretionary authority to require 

this notice for ARMS that are not hybrid (1/1, 3/3, 5/5, etc.).

13 It is considering 

soliciting comments on whether this disclosure will be helpful to borrowers with 

these ARMs.

o Regulation Z 1026.20(c) requires creditors to send disclosures for all ARMs prior 

to each interest rate adjustment that effects a change in payment. The CFPB is 

considering proposing changes to the timeframe and content of these current 

disclosures.

14 It is also considering proposing this disclosure as a notice separate 

from the periodic statement, but may propose allowing servicers to decide this 

issue. Note that the new rule would apply to servicers and assignees as well as 

creditors. 

 With regard to changing the timeframe, Regulation Z currently requires 

that notice be given 25 to 120 days prior to the date on which the adjusted 

payment is due and annually, without a change in payment. The CFPB is 

considering proposing that the revised notices under Regulation Z 

1026.20(c) must be provided with every interest rate adjustment two to 

four months before payment at the new level is due (remaining annually, 

where there is no change in payment).15 It is also considering soliciting 

 12A 3/1 hybrid ARM, for example, maintains a fixed rate of interest for the three-year introductory period and then 

converts to an adjustable rate for successive one-year periods. Hybrid ARM includes the once-popular 2/28 and 

3/27 mortgages, which often adjusts every six months after the introductory period. 13ARMs, unlike hybrid ARMs, start with an adjustable rate and that rate readjusts at even intervals. 14Authority for this may be found in DFA 1420 (periodic statement), allowing the CFPB to require periodic 

disclosure of “[s]uch other information as the Board may prescribed in regulations." DFA §§ 1405, 1032 and TILA 

§105(a) may also provide bases for authority. 

15Under this timeframe, similar to the Section 1418 notice, the servicer likely will have to provide an estimate of the 
April 9, 2012

12

comments regarding the timing of the notice itself and in relation to the 

timing of the Section 1418 initial reset notice. 

 The CFPB is considering proposing content for the revised 1026.20(c)

notices that is identical to or that closely tracks the content it is 

considering proposing for the Dodd-Frank Act ARM initial reset notices

(which, in turn, closely tracks the content of the Board’s 2009 proposed 

rule). The CFPB is considering proposing that this recurring notice not 

include the contact information for counselors and the state housing 

finance authority since each periodic statement will include the counselor

information. The CFPB is also considering soliciting comments on 

whether to include the Section 1418 list of alternatives. Finally, the CFPB 

is considering proposing to eliminate the 1026.20(c) notice for initial 

resets of any ARM because borrowers will receive the earlier Section 

1418 notice for those resets. 

• Consumer Testing: In order to assure the effectiveness of the DFA 1418 disclosure, the 

CFPB is conducting three rounds of consumer testing prior to issuing its proposal. With 

its testing contractor, the CFPB is working to determine the optimal content and format 

of information in the notice. The CFPB does not anticipate issuing a highly prescriptive 

format, but to require the content and the grouping of certain items together to maximize 

clarity.

16 See n.7 regarding dates and locations of consumer testing.

• Potential Impacts on Small Entities

The CFPB is not yet aware of any data or reports that describe when small servicers 

generally provide the initial reset ARM disclosure or how much of the proposed content 

is already included in the disclosure. A question to the SERs asks about current practices 

in providing initial reset ARM disclosures and the content of those disclosures.

Benefits

o Servicers benefit when distressed borrowers contact them well in advance of a 

possible jump in interest rate and payment; this allows them more time to work 

together constructively. Borrowers with correct information about loss mitigation 

alternatives and the availability of housing counseling may be more likely to work 

quickly and constructively with their servicers.

o Better disclosures about the new rate and payment may benefit servicers by 

reducing the need for borrowers to contact the servicer.

 

new interest rate and payment, rather than exact figures. The consumer will be provided with the exact figures in 

the first periodic statement sent out after the interest rate adjustment goes into effect.

16See Attachment C-1 for the model ARM reset notice tested in Round 1 of testing. See Attachment C-2 for the 

model ARM reset notice tested in Round 2 of testing. See Attachment C-3 for the model ARM reset notice tested in 

Round 3 of testing.
April 9, 2012

13

o The CFPB may modify the content and timing of the Regulation Z 1026.20(c) 

notice, which is given prior to each interest rate adjustment that effects a change 

in payment. The proposed notice would provide more information to the 

borrower. The proposed changes in timeframe, from 25 to 120 days to two to 

four months before payment at a new level is due, would give borrowers more 

time to make any necessary adjustments in household budgeting. Servicers 

benefit to the extent that these households are less likely to need forbearance 

plans or other loss mitigation work. 

Costs

o The proposed initial reset ARM disclosure may require some servicers or their 

vendors to develop a new form or to reformat an existing form. These are onetime costs. The CFPB is mitigating the one-time costs by providing servicers 

with a tested model form. A question to the SERS asks about the costs of 

developing a form with the required content.

o Producing the proposed initial reset ARM disclosure for a particular borrower, 

which includes calculations specific to each loan, may require servicers or their 

vendors to acquire new or updated software, provide training to staff, allocate

additional staff time, and incur other costs. Routine systems updates may mitigate 

the software costs since improved software would, in part, already be budgeted. 

A question to the SERs asks about the one-time and ongoing costs of producing 

the proposed form.

o Sending the proposed initial reset ARM disclosure may impose new mailing and 

other costs on servicers or vendors. The CFPB may mitigate these costs by no 

longer requiring the Regulation Z 1026.20(c) notice for the initial reset. A 

question to the SERs asks about the ongoing costs associated with sending the 

proposed initial reset ARM disclosure.

o The proposed modifications to the Regulation Z 1026.20(c) notice raise similar 

issues to those stated above. A question to the SERs asks about the one-time 

costs of developing a new 1026.20(c) form and the ongoing costs of providing 

any new information in the form.

Alternatives Considered:

The CFPB has also considered proposing limiting the initial reset notice to hybrid ARMs -- and 

not requiring it for all ARMs. However, the Bureau opted for its currently considered proposal 

because all ARMs, not just hybrid ARMs, are subject to the same “payment shock” after the 

introductory period expires, and because Congress expressly authorized the CFPB to extend the 

Section 1418 (or other) notice to ARMs that are not hybrid. 

(3) Force-Placed Insurance
April 9, 2012

14

• DFA Section 1463 amends RESPA to prohibit a servicer of a federally related mortgage 

from obtaining force-placed hazard insurance unless there is a reasonable basis to believe 

the borrower has failed to comply with the loan contract’s requirements to maintain 

property insurance. The CFPB is considering proposing examples to illustrate reasonable 

bases.

• Required Processes under DFA: The statute sets forth a mandatory process servicers 

must follow before imposing any charge on a borrower for force-placed insurance and for 

terminating force-placed insurance upon receipt from the borrower of evidence 

confirming borrower-purchased hazard insurance coverage:

o Before charging a borrower for force-placed insurance,

17 a servicer must:

 Send, via first-class mail, up to two notices to the borrower:

• If the servicer has not received from the borrower any 

demonstration of insurance coverage 30 days after sending the first 

notice, the servicer must mail a second notice to the borrower.

• No charge may be imposed until 15 days after the servicer has sent 

the second notice.

 Accept any reasonable form of written confirmation from the borrower, 

including the borrower’s existing insurance policy number along with the 

identity of, and contact information for, the insurance company or agency 

– or any other method required by the CFPB. The CFPB is considering 

proposing examples to illustrate what constitutes a sufficient 

demonstration of coverage by the consumer.

o Termination of force-placed insurance and refunding of costs. Within 15 days of 

a servicer’s receipt of confirmation of a borrower’s existing coverage, whenever 

that occurs, the servicer must terminate the force-placed insurance and refund any 

premiums applicable to any period during which the borrower had coverage. The 

CFPB is considering a proposal that would track the statute with regard to 

termination and refunds.

• Required Content under DFA: The two notices must contain the following information:

o A reminder of the borrower’s contractual obligation to maintain hazard insurance 

on the secured property,

o A statement that the servicer does not have evidence of borrower’s existing 

coverage,

 17Note that the servicer may force place insurance during any actual or apparent lapse in coverage; it may not charge 

the borrower for this service until after the 45-day waiting period and only for any period of actual lapse in the 

borrower’s hazard insurance coverage.
April 9, 2012

15

o A clear and conspicuous statement of how the borrower may demonstrate existing 

coverage, and

o A statement that the servicer may obtain coverage at the borrower’s expense if the 

borrower fails to provide such demonstration to the servicer in a timely manner.

• Additional Content: The CFPB is considering proposing the following additional 

information to alert consumers to the possible disadvantages of force-placed insurance

and to give a general timeframe for when such policies may be imposed.

o A good faith estimate of the force-placed insurance premium that the borrower

may be charged,

o A statement that force-placed insurance may not provide as much coverage and 

may cost significantly more than a hazard insurance policy purchased by the 

borrower, and

o A statement of whether the servicer has placed or plans on force placing 

insurance.

• Force-Placed Insurance Notice Form: The CFPB is conducting three rounds of consumer 

testing prior to issuing its proposal. With its testing contractor, the CFPB will determine 

the optimal content and presentation of information in the notices. The CFPB anticipates 

issuing two sets of model forms.18 The first set will reflect the case where the servicer 

already has obtained force-placed insurance and the second set will reflect the case where 

the servicer plans on force-placing insurance.

• Charges Related to Force-Placed Insurance: The statute provides that all charges -- apart 

from charges subject to State regulation as the business of insurance -- related to forceplaced insurance imposed on the consumer by or through the servicer must be bona fide 

and reasonable. Through outreach, servicers have informed the Bureau that they 

typically do not charge consumers additional fees other than the force-placed insurance 

premium. The proposal would generally track the statute and provide that charges

covered by the statute, to be bona fide and reasonable, must be for actual services 

rendered and not include any unearned fees to the servicer or any charges prohibited by 

applicable state law as rebates or inducements.

• Borrower’s Pre-Existing Insurance Policy: Force-placed insurance is expensive relative 

to privately-obtained property insurance. The CFPB is considering clarifying that the 

term “force-placed insurance,” and thus the rule, does not apply to servicers who, with 

express consent from the borrower -- including express consent to any fees or charges --

re-purchase a borrower’s pre-existing policy.

• Payment of Insurance from Escrow: The CFPB is considering amending Regulation X, 

Section 1024.17(k)(1) and (2) by proposing that the servicer must make timely 

 18See Attachments D-1 and D-2(a) and (b) for prototypes tested to date.
April 9, 2012

16

disbursements from escrow funds to pay for a borrower’s insurance premium even if the 

borrower is delinquent, absent cancellation of the policy by the borrower or the insurance 

company (for any reason other than non-payment of premiums). The servicer’s 

continued payment through an escrow account for the borrower’s existing policy would 

not constitute force-placed insurance. A question to the SERs asks about the impact that 

this amendment to the escrow disbursement rules would have on them.

• Amount of Coverage: The statute does not require that force-placed insurance cover in 

excess of the investor’s collateral in the property; the CFPB is considering proposing that 

the servicer must inform the borrower that the force-placed coverage may not be as 

comprehensive as that provided under the consumer’s own hazard insurance policy.

• Potential Impacts on Small Entities

Benefits

o The proposed force-placed insurance disclosures will make borrowers more aware 

of the pending placement of force-placed insurance so that they can better manage 

their obligation to maintain continuous coverage with hazard insurance. The 

disclosures may benefit servicers by reducing the frequency with which borrowers 

contact servicers to ask questions or to dispute or resolve fees and charges that 

could have been avoided if the borrower were more aware of the pending 

placement of force-placed insurance.

o Comprehensive standards for managing force-placed insurance provide certainty 

to servicers with regard to their legal obligations.

Costs

o Based on discussions with industry, the CFPB understands that providers of forceplaced insurance may not charge servicers, including small servicers, for 

providing disclosures to borrowers, tracking hazard insurance coverage, and 

placing the insurance. If this is correct, then force-placed insurance providers 

may also absorb the costs associated with the proposed disclosures and they will 

not impose any one-time or ongoing costs on small servicers. Questions to the 

SERs ask about vendor charges associated with force-placed insurance and the 

new costs they expect to incur to ensure that a force placed insurance disclosure 

with all of the proposed information is provided to borrowers.

o The CFPB understands that providers of force-placed insurance generally refund 

force-placed insurance premiums paid by the borrower during periods in which 

the borrower’s insurance coverage and the force-placed insurance coverage are 

both in effect. If this is correct, then the proposed provision requiring these 

refunds will not impose any one-time or ongoing costs on servicers. If this is not 

correct, then servicers may incur costs from the proposed provision, although the 

costs may be mitigated by the proposed disclosures notifying borrowers that the 

servicer needs written confirmation that coverage is in place. A question to the 

SERs asks about current practices for refunding force-placed insurance premiums.
April 9, 2012

17

o The amendment to the escrow disbursement rules, while potentially limiting the 

frequency with which servicers force place insurance, would require servicers to 

advance funds for maintaining pre-existing insurance for longer than the 30 days 

currently required by Regulation X. A question to the SERs asks about the

impact that this change would have on them.

B. PROMPT CREDITING AND REQUESTS FOR PAYOFF AMOUNTS

• Under DFA Section 1464, servicers must credit consumer payments as of the date of 

receipt in connection with a consumer credit transaction secured by the consumer’s 

principal dwelling, except if the delay does not result in any charge to the consumer or in 

the reporting of negative information to a consumer reporting agency. The servicer may, 

however, specify in writing requirements that the consumer must follow to make 

conforming payments. If non-conforming payments are accepted, the service must credit 

the payment five days after receipt. 

• The prompt crediting provision generally codifies the current Regulation Z. The proposal 

would provide examples of the types of conforming payment requirements that are 

reasonable. 

• Partial Payments: For payments received from borrowers that fall short of a complete 

payment, the CFPB is considering proposing retention of the current rule in Regulation Z 

requiring partial payments be treated in accordance with the legal obligation as 

determined by applicable state or other law. As such, servicers generally would be 

allowed to hold partial payments in a non-interest bearing suspense account until an 

amount equal to a full payment is received, in accordance with the contract or applicable 

state law. Servicers also would have the option of returning the non-conforming payment

to the borrower. Additionally, the CFPB is considering proposing a new requirement that 

as soon as the amount in the suspense account equals a full contractual payment, the 

servicer must credit that payment to the earliest delinquent payment. A full contractual 

payment includes principal, interest, taxes, and insurance. The CFPB would seek 

comment on whether it should include other amounts, such as late fees and other 

servicer-imposed fees, in the full contractual payment. This proposal under consideration 

would have the effect of rolling forward the borrower’s date of delinquency by 30 days. 

• Payoff Request: The statute requires a creditor or servicer of a home loan to send an 

accurate payoff balance within a reasonable time, but no more than seven business days, 

after receipt of a written request for such balance from or on behalf of the borrower. 

Regulation Z currently addresses payoff amount requests, but creates a five business day 

safe harbor. The proposal generally would follow the statute and require an accurate 

payoff balance to be provided no later than seven days (excluding holidays and 

weekends) after receipt of a written request from the borrower. The CFPB is considering 

proposing that the term “home loan” be construed broadly but that it exclude reverse 

mortgages. The exclusion for reverse mortgages would be based on CFPB’s belief that 
April 9, 2012

18

the unique features of reverse mortgages should be addressed together in a 

comprehensive rule focused exclusively on that product. 

• Potential Impact on Small Entities

Costs

o The requirements to credit a payment once the suspense account contains the 

required amount and to apply the funds to the first delinquency may impose a cost 

on servicers who have different crediting practices. These servicers may lose 

some fee income and some float income, and they may need new or updated 

software to meet the new requirements. A question to the SERs asks about the 

extent to which servicers currently comply with the prompt crediting proposal and 

the cost of coming into compliance for servicers with different crediting practices. 

Alternatives Considered:

The CFPB also has considered proposing an alternative approach that would require creditors 

and servicers to credit all partial payments, or those partial payments above a certain minimum 

threshold, to a borrower’s account as they are received or else return the partial payment to the 

borrower. The CFPB identified certain possible drawbacks to this alternative approach including

increased accounting costs for the servicer and, for the consumer, prolonging the length of 

delinquency and increasing the amount of the periodic payment.

C. ERROR RESOLUTION AND RESPONSE TO INQUIRIES

• Current Error Resolution Procedures: Section 6 of RESPA and Regulation X contain 

procedures for handling alleged errors and inquiries. Section 6 of RESPA provides that 

when a servicer of a federally related mortgage loan receives a “qualified written request” 

from a borrower for information relating to the servicing of the borrower’s loan, the 

servicer must respond within certain timeframes. Regulation X limits application of the 

qualified written request provisions to “mortgage servicing loans,” which includes only 

first-lien, closed-end mortgages.

• DFA Amendments to Error Resolution and Inquiry Procedures:

o Statutory Prohibitions: DFA Section 1463 amends Section 6 of RESPA by 

adopting a number of servicer prohibitions with respect to handling alleged errors 

and inquiries, including revising the timeframe to respond to qualified written 

requests. Among other things, DFA Section 1463 prohibits a servicer of a 

federally related mortgage from: 

 Charging fees for responding to valid qualified written requests, as defined 

by the CFPB;

 Failing to respond within ten business days to a borrower’s request for the 

identity and contact information for the owner or assignee of the loan; and 
April 9, 2012

19

 Failing to take timely action to respond to a borrower’s request to correct 

errors relating to 

• allocation of payments, 

• final balances for purposes of paying off the loan, 

• avoiding foreclosure, or 

• other standard servicer’s duties.

o Other Requirements: Section 1463 contains a provision that allows the CFPB to 

require servicers to comply with any other obligation it finds appropriate to carry 

out the consumer protection purposes of RESPA.

• Tracking Statutory Language: The CFPB is considering proposing tracking the statutory 

language with regard to:

o Applying the error resolution and inquiry response procedures to “federally 

related mortgages,” not just “mortgage servicing loans,” as currently provided in 

Regulation X with regard to qualified written requests. Thus, residential 

mortgage loans, including first and second liens, would be subject to this rule. 

o Prohibiting servicers from charging fees for responding to valid qualified written 

requests. 

o Requiring servicers to respond within ten days (excluding weekends and 

holidays)19 to a borrower’s request for the identity and contact information for the 

owner or assignee of the loan. The CFPB is also considering proposing that 

contact information include an address and a telephone number. 

• Defining “Error”:

o The CFPB is considering proposing a comprehensive set of requirements for 

investigating and correcting errors and for responding to borrower inquiries. This 

approach would incorporate, but not be limited to, RESPA’s use of the qualified 

written request to address “servicing” issues, as defined by RESPA. Specifically, 

servicers would be required to correct errors relating to allocation of payments, 

final balances for purposes of paying off the loan, avoiding foreclosures, or other 

standard servicer’s duties. Servicers also would be required to respond to 

inquiries about these topics. 

o In order to cover each of the areas for which servicers must correct errors, the 

CFPB is considering proposing to define “errors” with the following exclusive 

list:

 19Hereinafter, “business days” means excluding weekend and holidays.
April 9, 2012

20

 Computation errors (including with respect to calculating the interest rate 

and escrow account balance),

 An incorrect allocation of payments,

 The failure to credit payments in a timely manner,

 The failure to make timely payments of taxes and insurance from an 

escrow account,

 The refusal to accept a conforming payment,

 The failure to provide an accurate final payoff amount,

 The failure to provide accurate disclosures to borrowers,

 The failure to provide accurate information to borrowers about home 

retention or loss mitigation options and the foreclosure process,

 The failure to suspend foreclosure proceedings while the borrower is 

performing as agreed under a loss mitigation option or other alternative to 

foreclosure or otherwise meeting the borrower’s obligations, and

 The failure to provide the borrower with relevant document in response to 

an inquiry or following an investigation of an alleged error.

o The CFPB is considering seeking comments on whether additional or different 

conduct should be treated as errors. It is also considering seeking comments on 

whether it should propose a catch-all category for errors related to the four areas 

described in the statute but that may not be captured by the list included in the 

proposed rule.

• Error Resolution and Responding to Inquiries: The CFPB is considering proposing a 

timeframe for error resolution and responding to inquiries that generally tracks the 

timeframe for qualified written requests, as amended by the DFA, subject to certain 

explicit exceptions. See Attachment E for a detailed description of these procedures. 

Briefly, under the error resolution procedures the CFPB is considering proposing (inquiry 

procedures are similar):

o The borrower

 can assert an error in writing (including electronically if the servicer 

provides a web site or similar means of submission specifically for 

handling complaints) or orally (by telephone); and
April 9, 2012

21

 must provide information that enables servicers to identify the name and 

account, type of error the borrower believes has occurred, and when the 

servicer believes that error occurred.

o The servicer

 within five business days, must acknowledge receipt of the complaint in 

writing, whether a qualified written request or not -- unless resolved 

earlier and the servicer already sent written notification of resolution;

 within 30 business days after a reasonable investigation, must provide the 

borrower with written notification of (1) correction of that or another error 

or (2) the servicer’s conclusion that no error occurred;

 must respond within shorter timeframes for errors relating to providing an 

accurate final payoff statement and errors related to suspending 

foreclosure proceedings while the borrower is performing under a trial or 

permanent modification;

 may request supporting documentation from the borrower, but must 

investigate the error with or without such documentation;

 within the 30 business days, may extend the investigation time period by 

15 business days -- with notification and explanation to the borrower; and

 within 15 business days of a borrower’s request after the conclusion of an 

error investigation, must provide without charge the relevant documents 

used in that investigation.

• Exemptions: 

o HELOCs: The CFPB is considering proposing to exclude open-end lines of 

credit, such as HELOCs, from the error resolution and qualified written request 

provisions because these products are subject to distinct error resolution 

procedures under TILA and Regulation Z.

o Routine Inquiries: The CFPB is considering proposing to exclude routine 

inquiries about the borrower’s account, request for information for taxes or other 

recordkeeping purposes, and requests for duplicate copies of documents from the 

term “error.”

• Potential Impact on Small Entities

Benefits

o The rule the CFPB is considering clarifies servicer duties for handling alleged 

errors and inquiries relating to the defined topics.
April 9, 2012

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o By providing an exclusive list of errors that trigger the error resolution 

requirements, servicers can more effectively control the costs of investigating 

alleged errors and better allocate firm resources.

Costs

o The proposed error resolution and inquiry provisions require servicers to respond 

(a) to inquiries and requests that are not “qualified written requests,” (b) regarding 

issues beyond those defined as “servicing” by RESPA, and (c) for loans that are 

not first-lien, closed-end mortgages. Small servicers may already comply with the 

proposed provisions, perhaps as part of good customer service. Servicers that are 

not in compliance may need new or updated software and hardware and they may 

need to devote additional staff time to error resolution and provide additional 

training to staff. 

The CFPB does not know the extent to which small servicers are already in 

compliance with the proposed provisions or the cost of coming into compliance. 

A question for the SERs asks about how servicers currently address the listed 

errors and whether the response depends on how the borrower communicates with 

the servicer and the type of loan the borrower has. Another question for the SERs 

asks about the actions required to address the listed errors within the proposed 

time frames and the one-time and ongoing costs of those actions.

Alternatives Considered:

The CFPB also has considered proposing an open-ended enumeration of errors related to the four 

areas identified in the statute, as opposed to creating an exclusive list of what constitutes an 

error. However, this alternative had several drawbacks. Without a clear definition of what 

constitutes an error, uncertain compliance standards may lead servicers to treat all claims they 

receive as errors, thereby limiting the time and attention spent investigating errors the CFPB has 

identified as key. Clear and definitive compliance standards reduce the costs and burdens for all 

servicers, but especially small servicers. 

D. REASONABLE INFORMATION MANAGEMENT POLICIES AND PROCEDURES.

DFA Section 1463 requires servicers to comply with any obligation the CFPB finds appropriate 

to carry out the consumer protection purposes of the Act. The CFPB is considering proposing a 

rule to address wide-spread problems reported across the mortgage servicing industry with 

regard to management of borrower documents and information.

20 Reasonable policies and 

procedures for managing borrower documents and information would facilitate development of 

systems and operational processes for tracking and storing borrower documents and information 

with respect to borrower communications, error resolution, information requests, loss mitigation 

(including, without limitation, loan modification actions), foreclosure, and other servicer 

operations. Further, such reasonable policies and procedures would assure that servicers have 

access to records noting key actions taken with respect to borrower communications, error 

 20See pp. 1-2 above.
April 9, 2012

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resolution, information requests, loss mitigation (including, without limitation, loan modification 

actions), foreclosure, borrower bankruptcy actions, and other relevant actions with respect to a 

borrower’s account.

Under DFA Section 1463, the CFPB is considering proposing that servicers establish reasonable 

policies and procedures that:

• Provide accurate and timely disclosures and other information to borrowers;

• Minimize errors and facilitating prompt error correction;

• Maintain records of borrower contact, with a possible exception for some small servicers; 

• Facilitate loss mitigation by 

o accepting, organizing, and managing documents and information submitted by or 

about borrowers in connection with loss mitigation requests,

o ensuring reasonable and timely access to such documents and information by all 

appropriate loss mitigation personnel, and

o identifying additional documents and information the borrower must provide to be 

considered for loss mitigation options and notifying the borrower promptly of 

such deficiencies.

The CFPB further envisions a servicing industry capable of achieving mortgage loan servicing 

transfers without negatively impacting loss mitigation communications with borrowers. Through 

reasonable policies and procedures, servicers should be capable of transferring all relevant and 

accurate documents and information to (1) a subsequent servicer when servicing rights are 

transferred in a form and manner that enables the subsequent servicer to comply with the 

requirements of this subpart and (2) a forum addressing foreclosure. Such documents and 

information would include, among other things, documents and information that reflect 

communications with borrowers, documents and information memorializing actions to correct 

account errors, documents and information that were received from borrowers with respect to 

consideration for loss mitigation options, and documents and information that set forth trial or 

permanent modification agreements.

The CFPB is considering proposing that the reasonableness of a servicer’s information 

management policies and procedures would depend upon the size of the servicer and the nature 

and scope of its activities. Additionally, the CFPB is considering proposing to explain that a 

violation would occur if a servicer: (a) fails to establish reasonable information management 

policies and procedures or (b) demonstrates a pattern or practice of failing to comply with its 

procedures. However, an occasional failure to follow established policies and procedures would 

not constitute a violation of this part of the regulation. Note: potential civil liability arises from 

violation of the regulation.
April 9, 2012

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• Potential Impacts on Small Entities

Benefits

o The proposed information management policies and procedures focus on desired 

outcomes and avoid prescription. A servicer’s policies and procedures are 

reasonable if they facilitate important servicer duties like error correction and loss 

mitigation.

o The proposed reasonable information management policies and procedures may 

benefit borrowers and servicers by clarifying the obligations on servicers for 

managing borrower information. Clearer obligations may protect servicers from 

legal liability.

o In themselves, improved information management policies and procedures may

reduce servicer time spent managing consumer information and documents and 

responding to consumer information requests and queries; enhance consumers’ 

ability to understand and manage their mortgages; and reduce preventable 

delinquency and foreclosure.

Costs

o Servicers that maintain reasonable information management policies and 

procedures may incur a cost to review and document their policies and 

procedures, obtain legal advice, train their staff to follow the policies and 

procedures, and monitor staff adherence to the policies and procedures.

o The proposal mitigates all of these costs for small servicers through the provision 

that the “reasonableness” of a servicer’s policies and procedures would depend 

upon the size of the servicer and the nature and scope of its activities.

o Depository institutions already are subject to interagency guidelines relating to 

safeguarding the institution’s safety and soundness.21 These guidelines provide 

that depository institutions should establish and maintain loan documentation 

practices that, among other things, ensure that any claim against a borrower is 

legally enforceable and that demonstrate appropriate administration and 

monitoring of a loan. These existing practices focus on desired outcomes that are 

related to those that the proposal specifies for mortgage servicing, and so these 

existing practices may facilitate reasonable information management for purposes 

of mortgage servicing. The proposed policies and procedures may therefore not 

impose a significant additional burden on depository institutions that are also 

small servicers.

o A question to the SERs asks them to consider whether the way they currently 

manage information allows them to meet the duties stated in the policies and 

procedures. Another question asks about the costs of changing how they manage 

information in order meet those duties.

 21See Inter agency Guidelines Establishing Standards for Safety and Soundness, 60 Fed. Reg. 35674 (July 10, 1995).
April 9, 2012

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Alternatives Considered:

The CFPB also has considered proposing to prescribe specifically how servicers should manage 

borrower information. The CFPB believes, however, that articulating the objectives and 

allowing the servicer to choose the policies and procedures that meet the objective may better 

serve consumers.

E. EARLY INTERVENTION FOR TROUBLED OR DELINQUENT BORROWERS.

Under DFA Section 1463, the CFPB is considering proposing early intervention procedures for 

troubled and delinquent borrowers to address mortgage servicing problems experienced by such 

borrowers.

22 For this purpose, the CFPB is considering proposing a rule requiring servicers to 

make good faith efforts to contact delinquent borrowers no later than 45 days after the onset of 

delinquency and to respond promptly to troubled borrowers who contact their servicers.

23 

The proposal the CFPB is considering would require servicers to provide delinquent borrowers 

with written information, no later than 45 days after the date of delinquency, about (1) options to 

help avoid foreclosures, such as loss mitigation programs available to them and how to access a 

housing counselor, and (2) the foreclosure process, including:

• A brief description of any loss mitigation programs available to the borrower; 

• A brief outline of the requirements for qualifying for any available loss mitigation 

programs, including documents and other information the borrower must provide, and 

any timelines that apply;

• A brief explanation of the foreclosure process and possible foreclosure timelines; and 

• Contact information for housing counselors who may be able to assist the borrower.

The Bureau is also considering proposing to require that servicers provide this written 

information to any borrower who contacts the servicer about having or expecting to have 

difficulty making payments within five days of the borrower making such contact. 

The CFPB is considering proposing an exemption from the written disclosure requirements for 

small servicers for loans they hold in portfolio if they make good faith efforts to contact 

borrowers no later than 45 days after they first become delinquent.

• Potential Impacts on Small Entities

Benefits

o The proposed early intervention procedure may benefit servicers who do not 

 22See pp. 1-2 above. 23The CFPB is considering permitting servicers, at their option, to initiate contact by telephone, mail, or other means 

generally used by the servicer to communicate with borrowers.
April 9, 2012

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already perform the specified activities by improving the information they have 

about troubled borrowers, reducing servicer costs associated with loss mitigation, 

and reducing servicer costs associated with preventable foreclosure.

Costs

o Servicers generally make good faith efforts to contact delinquent borrowers, but 

servicers that do so by telephone may incur one-time and ongoing costs associated 

with providing written information to such borrowers. Questions to the SERs ask

about the timing and methods of their current efforts to contact delinquent 

borrowers and the costs of any changes they would need to make to comply with 

the proposal.

F. CONTINUITY OF CONTACT

Also under Section 1463, the CFPB is considering proposing to require servicers to provide 

delinquent and troubled borrowers with specific servicer points of contact to address wide-spread 

problems reported with regard to inconsistent and faulty servicer contact with borrowers.24 The 

proposed rule under consideration would require servicers to provide all borrowers who become 

45 days delinquent or who request assistance in avoiding delinquency with direct and on-going 

access to a staff of the servicer’s customer service employees dedicated to serving troubled or 

delinquent borrowers. The proposal would require that these employees have ready access to:

• a complete record of the borrower’s payment history,

• a complete record of previous communications between the servicer and the 

borrower or any authorized third parties from the earlier of the date of

delinquency or the date when the borrower first requested assistance,

• all borrower-submitted documentation,

• underwriters with the ability to evaluate the borrower for loss mitigation options 

and the authority to approve or recommend approval of loss mitigation options,

and 

• information on the status of any on-going or pending foreclosure actions.

The CFPB is considering proposing that a servicer does not violate the rule if ready access is 

temporarily unavailable as a result of computer systems issues, weather emergencies and similar 

force majeure events, or if records have been received too recently to be readily accessible to the 

customer service employees.

If the CFPB finds that certain classifications of small servicers already maintain consistent, albeit

less formal, contact with their financially challenged clients, the CFPB may consider proposing 

adjustments to this rule for such servicers.

 24See pp. 1-2 above.
April 9, 2012

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• Potential Impact on Small Entities

Benefits

o The provision for streamlined access to underwriters for assessment for loss 

mitigation may reduce preventable delinquency and foreclosure and servicer costs 

associated with these activities.

Costs

o Servicers may incur additional information management costs associated with 

accessing the borrower’s payment history and communications between the 

servicer and borrower. A question to the SERs asks about these additional 

information management costs.

o Servicers may need to devote additional staff time to communicating with 

borrowers and provide additional training to staff in accessing and using borrower 

information. A question to the SERs asks about these additional staffing and 

training costs.

IV. OTHER FEDERAL RULES

• The Dodd-Frank Act codified certain requirements contained in existing regulations and in 

some cases imposed new requirements that expand or vary the scope of existing regulations. 

As discussed above, the CFPB is working to eliminate conflicts and to harmonize the earlier 

rules with the new statutory requirements.

• As discussed above, the content of certain current Regulation Z ARM disclosures issued 

before, around the time of, or after consummation of the mortgage replicate the content of the 

new DFA ARM notice provided to consumers six to seven months prior to the initial reset of 

their interest rates. The varied timing of these Regulation Z notices evidences their distinct 

purposes, despite any replication of content. Moreover, this reuse of the same content may 

reduce the burden on servicers since it reduces the need for the production of new materials 

and information. Also, the content of the DFA notice provided six to seven months prior to 

the initial reset of the ARM’s interest rate that the CFPB is considering proposing will be the 

same or similar to the Regulation Z 1026.20(c) notice sent closer to the date of the reset or 

adjustment.

• As discussed above, Regulation Z contains a prompt crediting provision generally codified 

by DFA’s prompt crediting provision. 

• Regulation Z addresses the issue of partial payments. As discussed above, the Bureau is 

considering following the current rule in Regulation Z and permitting partial payments to be 

treated in accordance with the legal obligation as determined by applicable state or other law. 

• As discussed above, Regulation Z currently addresses payoff amount requests, but creates a

safe harbor of five business days. Additionally, the current regulation applies to loans 

secured by a consumer’s principal dwelling. The proposal would follow the DFA and 
April 9, 2012

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require an accurate payoff balance to be provided no later than seven business days 

(excluding weekends and holidays) after the receipt of a written request from the borrower. 

The proposal would also construe the term “home loan” broadly and seek comments on 

whether certain types of loans, such as reverse mortgages, should be excluded from coverage.

• As discussed above, Regulation Z rules governing open-ended credit may provide the basis 

for exemption of HELOCs from rules that the CFPB is considering proposing. Specifically, 

the CFPB is considering exempting HELOCs from the error resolution rule, as TILA and 

Regulation Z provides error resolution procedures for these loan products.

• As discussed above, RESPA’s procedures for qualified written requests overlap with DFA’s 

RESPA amendment providing additional procedures for resolving errors and responding to 

inquiries. The CFPB is considering proposing broader, more consumer-friendly procedures 

that cover wider topics than the current qualified written request, which it believes will have 

substantial benefit to borrowers. 

• The CFPB is not aware of any other federal regulations that duplicate, overlap, or conflict 

with the proposals under consideration. 

V. POTENTIAL IMPACT ON COST OF CREDIT TO SMALL ENTITIES

• Section 603(d) of the Regulatory Flexibility Act requires the CFPB to consult with small 

entities regarding the potential impact of the proposals under consideration on the cost of 

credit for small entities and related matters.25

• At this time, there is no evidence that the proposals under consideration would result in an 

increase in the cost of credit for small entities. The proposals under consideration would 

apply only to mortgage loans obtained by consumers primarily for personal, family, or 

household purposes. They would not apply to loans obtained primarily for business 

purposes. 

• The CFPB, however, will seek the advice and recommendations of SER participants during 

the SBREFA outreach session regarding this issue. 

 25 See 5 U.S.C. § 603(d). 
April 9, 2012

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ATTACHMENT A

Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”)

(Pub. L. 111-203, approved July 21, 2010)

DFA EXCERPTS ON MORTGAGE SERVICING

Truth in Lending Act (“TILA”) (15 U.S.C. 1601 et seq.)Amendments

• DFA Section 1418: ARM Notice Prior to Initial Reset

(a) Hybrid adjustable rate mortgages defined

For purposes of this section, the term “hybrid adjustable rate mortgage” means a consumer credit 

transaction secured by the consumer's principal residence with a fixed interest rate for an introductory 

period that adjusts or resets to a variable interest rate after such period.

(b) Notice of reset and alternatives

During the 1-month period that ends 6 months before the date on which the interest rate in effect during 

the introductory period of a hybrid adjustable rate mortgage adjusts or resets to a variable interest rate or, 

in the case of such an adjustment or resetting that occurs within the first 6 months after consummation of 

such loan, at consummation, the creditor or servicer of such loan shall provide a written notice, separate 

and distinct from all other correspondence to the consumer, that includes the following:

(1) Any index or formula used in making adjustments to or resetting the interest rate and a source of 

information about the index or formula.

(2) An explanation of how the new interest rate and payment would be determined, including an 

explanation of how the index was adjusted, such as by the addition of a margin.

(3) A good faith estimate, based on accepted industry standards, of the creditor or servicer of the amount 

of the monthly payment that will apply after the date of the adjustment or reset, and the assumptions on 

which this estimate is based.

(4) A list of alternatives consumers may pursue before the date of adjustment or reset, and descriptions of 

the actions consumers must take to pursue these alternatives, including--

(A) refinancing;

(B) renegotiation of loan terms;

(C) payment forbearances; and

(D) pre-foreclosure sales.

(5) The names, addresses, telephone numbers, and Internet addresses of counseling agencies or programs 

reasonably available to the consumer that have been certified or approved and made publicly available by 
April 9, 2012

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the Secretary of Housing and Urban Development or a State housing finance authority (as defined in 

section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989).

(6) The address, telephone number, and Internet address for the State housing finance authority (as so 

defined) for the State in which the consumer resides.

(c) Savings clause

The Board may require the notice in paragraph (b) or other notice consistent with this Act for adjustable 

rate mortgage loans that are not hybrid adjustable rate mortgage loans.

• DFA Section 1420: Periodic Statement

(f) Periodic statements for residential mortgage loans

(1) In general

The creditor, assignee, or servicer with respect to any residential mortgage loan shall transmit to the 

obligor, for each billing cycle, a statement setting forth each of the following items, to the extent 

applicable, in a conspicuous and prominent manner:

(A) The amount of the principal obligation under the mortgage.

(B) The current interest rate in effect for the loan.

(C) The date on which the interest rate may next reset or adjust.

(D) The amount of any prepayment fee to be charged, if any.

(E) A description of any late payment fees.

(F) A telephone number and electronic mail address that may be used by the obligor to obtain information 

regarding the mortgage.

(G) The names, addresses, telephone numbers, and Internet addresses of counseling agencies or programs 

reasonably available to the consumer that have been certified or approved and made publicly available by 

the Secretary of Housing and Urban Development or a State housing finance authority (as defined in 

section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989).

(H) Such other information as the Board may prescribe in regulations.

(2) Development and use of standard form

The Board shall develop and prescribe a standard form for the disclosure required under this subsection, 

taking into account that the statements required may be transmitted in writing or electronically.

(3) Exception

Paragraph (1) shall not apply to any fixed rate residential mortgage loan where the creditor, assignee, or 

servicer provides the obligor with a coupon book that provides the obligor with substantially the same 

information as required in paragraph (1).
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• DFA Section 1464: Prompt Crediting

(a) In general

In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer 

shall fail to credit a payment to the consumer's loan account as of the date of receipt, except when a delay 

in crediting does not result in any charge to the consumer or in the reporting of negative information to a 

consumer reporting agency, except as required in subsection (b).

(b) Exception

If a servicer specifies in writing requirements for the consumer to follow in making payments, but accepts 

a payment that does not conform to the requirements, the servicer shall credit the payment as of 5 days 

after receipt.

• DFA Section 1464: Requests for Payoff Amounts

A creditor or servicer of a home loan shall send an accurate payoff balance within a reasonable time, but 

in no case more than 7 business days, after the receipt of a written request for such balance from or on 

behalf of the borrower.

 

Real Estate Settlement Procedures Act (“RESPA”) (12 U.S.C. 2601-1617) Amendments

• Section 1463: Force-Placed Insurance Notices, Procedures for Error Resolution and 

Inquiries, and Catch-All Provision.

(k) Servicer prohibitions

1) In general

A servicer of a federally related mortgage shall not--

(A) obtain force-placed hazard insurance unless there is a reasonable basis to believe the borrower has 

failed to comply with the loan contract's requirements to maintain property insurance;

(B) charge fees for responding to valid qualified written requests (as defined in regulations which the 

Bureau of Consumer Financial Protection shall prescribe) under this section;

(C) fail to take timely action to respond to a borrower's requests to correct errors relating to allocation of 

payments, final balances for purposes of paying off the loan, or avoiding foreclosure, or other standard 

servicer's duties;

(D) fail to respond within 10 business days to a request from a borrower to provide the identity, address, 

and other relevant contact information about the owner or assignee of the loan; or
April 9, 2012

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(E) fail to comply with any other obligation found by the Bureau of Consumer Financial Protection, by 

regulation, to be appropriate to carry out the consumer protection purposes of this Act.

(2) Force-placed insurance defined

For purposes of this subsection and subsections (l) and (m), the term “force-placed insurance” means 

hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has 

failed to maintain or renew hazard insurance on such property as required of the borrower under the terms 

of the mortgage.

(l) Requirements for force-placed insurance

A servicer of a federally related mortgage shall not be construed as having a reasonable basis for 

obtaining force-placed insurance unless the requirements of this subsection have been met.

(1) Written notices to borrower

A servicer may not impose any charge on any borrower for force-placed insurance with respect to any 

property securing a federally related mortgage unless--

(A) the servicer has sent, by first-class mail, a written notice to the borrower containing--

(i) a reminder of the borrower's obligation to maintain hazard insurance on the property securing the 

federally related mortgage;

(ii) a statement that the servicer does not have evidence of insurance coverage of such property;

(iii) a clear and conspicuous statement of the procedures by which the borrower may demonstrate that the 

borrower already has insurance coverage; and

(iv) a statement that the servicer may obtain such coverage at the borrower's expense if the borrower does 

not provide such demonstration of the borrower's existing coverage in a timely manner;

(B) the servicer has sent, by first-class mail, a second written notice, at least 30 days after the mailing of 

the notice under subparagraph (A) that contains all the information described in each clause of such 

subparagraph; and

(C) the servicer has not received from the borrower any demonstration of hazard insurance coverage for 

the property securing the mortgage by the end of the 15-day period beginning on the date the notice under 

subparagraph (B) was sent by the servicer.

(2) Sufficiency of demonstration

A servicer of a federally related mortgage shall accept any reasonable form of written confirmation from a 

borrower of existing insurance coverage, which shall include the existing insurance policy number along 

with the identity of, and contact information for, the insurance company or agent, or as otherwise required 

by the Bureau of Consumer Financial Protection.

(3) Termination of force-placed insurance

Within 15 days of the receipt by a servicer of confirmation of a borrower's existing insurance coverage, 

the servicer shall--
April 9, 2012

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(A) terminate the force-placed insurance; and

B) refund to the consumer all force-placed insurance premiums paid by the borrower during any period 

during which the borrower's insurance coverage and the force-placed insurance coverage were each in 

effect, and any related fees charged to the consumer's account with respect to the force-placed insurance 

during such period.

(4) Clarification with respect to Flood Disaster Protection Act

No provision of this section shall be construed as prohibiting a servicer from providing simultaneous or 

concurrent notice of a lack of flood insurance pursuant to section 102(e) of the Flood Disaster Protection 

Act of 1973.

(m) Limitations on force-placed insurance charges

All charges, apart from charges subject to State regulation as the business of insurance, related to forceplaced insurance imposed on the borrower by or through the servicer shall be bona fide and reasonable.

****************************************
April 9, 2012

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ATTACHMENT B-1

Periodic Statement 

Tested in Towson, Maryland

February 1-2, 2012
April 9, 2012

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April 9, 2012

36
April 9, 2012

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ATTACHMENT B-2

Periodic Statement 

Tested in Memphis, Tennessee

February 29 – March 1, 2012
April 9, 2012

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April 9, 2012

39
April 9, 2012

40

ATTACHMENT B-3

Periodic Statement – Delinquent Borrower

Tested in Los Angeles, California

April 3-4, 2012
April 9, 2012

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April 9, 2012

42
April 9, 2012

43

ATTACHMENT C-1

Adjustable Rate Mortgage Reset Notice 

Tested in Towson, Maryland

February 1-2, 2012
April 9, 2012

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April 9, 2012

45
April 9, 2012

46

ATTACHMENT C-2

Adjustable Rate Mortgage Reset Notice 

Tested in Memphis, Tennessee

February 29 – March 1, 2012
April 9, 2012

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April 9, 2012

48
April 9, 2012

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ATTACHMENT C-3

Adjustable Rate Mortgage Reset Notice – Interest-Only Feature

Tested in Los Angeles, California

April 3-4, 2012
April 9, 2012

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April 9, 2012

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April 9, 2012

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ATTACHMENT D-1

Force-Placed Insurance Notice

Tested in Towson, Maryland

February 1-2, 2012
April 9, 2012

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April 9, 2012

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ATTACHMENT D-2(a) and (b)

Force-Placed Insurance Notices 

Tested in Memphis, Tennessee

February 29 – March 1, 2012
April 9, 2012

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D-2(a)
April 9, 2012

56

D-2(b)
April 9, 2012

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ATTACHMENT D-3

Force-Placed Insurance Notice - Renewal

Tested in Los Angeles, California

April 3-4, 2012
April 9, 2012

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April 9, 2012

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ATTACHMENT E

Error Resolution and Inquiry Procedures

Error Inquiry

Method of 

Contact

Written (or electronic if the servicer 

provides a website or similar means 

of submitting alleged errors);

Oral (by telephone)

Written (or electronic if the servicer 

provides a website or similar means 

of submitting inquiries);

Oral (by telephone)

Borrower Must 

Provide

Information that enables servicer to 

identify the borrower’s name and 

account, the type of error the 

borrower believes to have occurred, 

and when the error occurred

Information that enable servicer to 

identify the borrower’s name and 

account, and sufficient detail to 

enable the servicer to understand 

what information the borrower seeks

Within 5 Days 

(excluding 

weekends and 

holidays) after 

receipt 

For all assertions of error, whether 

qualified written request or not, the 

servicer must acknowledge receipt 

of the complaint in writing, unless 

the error or is resolved and a written 

explanation is provided to the 

borrower in less than five days

For inquiries, whether qualified 

written request or not, must 

acknowledge receipt of the 

correspondence in writing, unless 

the requested information is 

provided to the borrower in less than 

five days

Within 30 Days

(excluding 

weekends and 

holidays) after 

receipt

Unless the type of error is subject to 

a shorter designated time frame for 

resolution,26 complete investigation; 

and either:

• Correct the error and provide 

the borrower with written 

notification of the correction, 

the date of the correction, 

and contact information for 

further assistance;

• If the servicer concludes that 

a different error occurred, 

provide the borrower with 

written notification that 

includes a statement 

explaining the error 

identified, the corrective 

action taken, the date of the 

Unless otherwise provided in the 

regulation, provide to the borrower 

without charge either:

• The information requested; 

or

• Explain why the requested 

information is unavailable or 

cannot be obtained by the 

servicer; and

Contact information for further 

assistance.

 26For errors related to providing an accurate final payoff statement, the CFPB is considering proposing limiting the 

error correction time frame to five days (excluding weekends and holidays). With respect to errors related to 

suspending foreclosure proceedings while the borrower is performing under a trial or permanent modification, the 

error correction time frame would be the earlier of a scheduled foreclosure sale or 30 days (excluding weekends and 

holidays).
April 9, 2012

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corrective action, a statement 

of the borrower’s right to 

request documents relied 

upon by the servicer in 

reaching its decision within 

30 days (excluding weekends 

and holidays) of the date of 

the written notification and 

how the borrower can request 

such documents, and contact 

information for further 

assistance; or

• If the servicer concludes that 

no error occurred, provide 

the borrower with written 

notification that includes a 

statement of reasons as to 

why the servicer believes that 

no error occurred, a 

statement of the borrower’s 

right to request documents 

relied upon by the servicer in 

reaching its decision and how 

the borrower can request 

such documents, and contact 

information for further 

assistance such as follow up 

questions;

Standard for 

Investigation

Reasonable N/A

Exceptions to 

Duty to 

Investigate 

Errors/Respond to 

Inquiries

• The borrower did not provide 

sufficient information to 

investigate the alleged error 

(e.g., if the servicer cannot 

determine what error the 

borrower is alleging) 

• The alleged error is 

substantially the same as a

previously-submitted alleged 

error for which the servicer 

has complied with the 

applicable error resolution 

provisions unless the 

borrower provides new, 

material supporting 

information.

The borrower makes a frivolous or 

irrelevant inquiry that:

• does not pertain to the

borrower or the borrower’s 

account;

• does not pertain to any 

standard servicer duty;

• seeks information about the 

servicer’s financial data, 

personnel, trade secrets or 

other confidential 

information; or 

• requires the servicer to 

review lengthy, mostly 

irrelevant text to find a valid 

inquiry
April 9, 2012

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In these situations, the servicer 

may terminate the error 

resolution process by notifying 

the borrower in writing not later 

than five business days of 

making its determination.

Servicer Rights • Request supporting 

documentation from 

borrower so long as it is not a 

condition of investigating the 

alleged error or concluding 

no error has occurred 

because the borrower failed 

to provide any requested

documentation

• For errors subject to the 

standard 30 day (excluding 

weekends and holidays) 

investigation timeframe, 

extend the investigation by 

15 days (excluding weekends 

and holidays) if servicer 

notifies borrower of the 

extension and reasons for the 

delay before the end of the 

30 days (excluding weekends 

and holidays) period, or the 

end of the designated 

response time frame for the 

type of error).

For inquiries subject to the standard 

30 day (excluding weekends and 

holidays) timeframe for responding, 

extend time period for responding to 

an inquiry by an additional 15 days 

(excluding weekends and holidays) 

if the servicer notify the borrower of 

the extension and the reasons for the 

delay before the end of the 30 day

(excluding weekends and holidays)

period (or a period provided in the 

regulation). 

Post-Investigation Upon borrower request, provide 

relevant documents to borrower 

without charge within 15days

(excluding weekends and holidays). 
Appendix D

Panel Outreach Meeting PowerPoint Slides

[See attached]
Note: This document was used in support of a live discussion. As such, it does not necessarily 

express the entirety of that discussion nor the relative emphasis of topics therein.

Mortgage Servicing Rulemaking

SBREFA Panel Outreach

April 24, 2012

Note: This document was used in support of a live discussion. As such, it does not necessarily 

express the entirety of that discussion nor the relative emphasis of topics therein.

Mortgage Servicing Rulemaking

SBREFA Panel Outreach

April 24, 2012

WELCOME AND INTRODUCTIONS

 CFPB Welcome and Opening Remarks

 SBA Opening Remarks

 Introduction of SBREFA Panel

 Introduction of SERs and Agency Staff

SBREFA Panel Outreach - Apr. 24, 2012 1

WELCOME AND INTRODUCTIONS

 CFPB Welcome and Opening Remarks

 SBA Opening Remarks

 Introduction of SBREFA Panel

 Introduction of SERs and Agency Staff

SBREFA Panel Outreach - Apr. 24, 2012 1
OUTREACH AGENDA/SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 2

OUTREACH AGENDA/SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 2

WHAT IS SBREFA?

 The Small Business Regulatory Enforcement Fairness Act (SBREFA) 

of 1996 requires the CFPB to form a Small Business Review Panel to 

seek input directly from small financial service providers for any 

proposed rule that may have a significant economic impact on a 

substantial number of small providers.

 A Small Business Review Panel consists of the representatives from:

• the CFPB, 

• the Chief Counsel for Advocacy of the Small Business 

Administration (SBA), and

• the Office of Management and Budget’s Office of Information and 

Regulatory Affairs (OMB).

SBREFA Panel Outreach - Apr. 24, 2012 3

WHAT IS SBREFA?

 The Small Business Regulatory Enforcement Fairness Act (SBREFA) 

of 1996 requires the CFPB to form a Small Business Review Panel to 

seek input directly from small financial service providers for any 

proposed rule that may have a significant economic impact on a 

substantial number of small providers.

 A Small Business Review Panel consists of the representatives from:

• the CFPB, 

• the Chief Counsel for Advocacy of the Small Business 

Administration (SBA), and

• the Office of Management and Budget’s Office of Information and 

Regulatory Affairs (OMB).

SBREFA Panel Outreach - Apr. 24, 2012 3
YOUR ROLE IN THE SBREFA PROCESS

You have been selected as a small entity representative (SER) 

for the mortgage servicing rulemaking.

 A SER is a representative of a small entity that likely will be subject 

to the requirements of a proposed rule under consideration by the 

CFPB.

 SERs’ participation in the rulemaking process helps to ensure that 

the CFPB is made aware of the concerns and issues specific to small 

entities. 

 The Panel (CFPB, SBA, & OMB) uses your input to prepare a report 

that includes the Panel’s findings on alternatives to minimize the 

burden on small entities. 

 The report is made part of the rulemaking record and is considered 

by CFPB decisionmakers. 

SBREFA Panel Outreach - Apr. 24, 2012 4

YOUR ROLE IN THE SBREFA PROCESS

You have been selected as a small entity representative (SER) 

for the mortgage servicing rulemaking.

 A SER is a representative of a small entity that likely will be subject 

to the requirements of a proposed rule under consideration by the 

CFPB.

 SERs’ participation in the rulemaking process helps to ensure that 

the CFPB is made aware of the concerns and issues specific to small 

entities. 

 The Panel (CFPB, SBA, & OMB) uses your input to prepare a report 

that includes the Panel’s findings on alternatives to minimize the 

burden on small entities. 

 The report is made part of the rulemaking record and is considered 

by CFPB decisionmakers. 

SBREFA Panel Outreach - Apr. 24, 2012 4

YOUR ROLE IN THE SBREFA PROCESS

Review CFPB 

proposals 

under 

consideration

Respond to 

discussion 

points

Provide 

supporting 

information, 

as available

Suggest 

alternatives

Submit 

written 

comments 

by 

5/01/2012 

(optional)

SBREFA Panel Outreach - Apr. 24, 2012 5

YOUR ROLE IN THE SBREFA PROCESS

Review CFPB 

proposals 

under 

consideration

Respond to 

discussion 

points

Provide 

supporting 

information, 

as available

Suggest 

alternatives

Submit 

written 

comments 

by 

5/01/2012 

(optional)

SBREFA Panel Outreach - Apr. 24, 2012 5
BACKGROUND

 The Truth in Lending Act (TILA) and the Real Estate Settlement 

Procedures Act (RESPA) currently impose certain requirements on 

mortgage servicers.

 As the current crisis revealed, this limited regulatory scheme proved 

insufficient to prevent deficient servicing practices, consumer confusion, 

or consumer harm. 

 The Dodd-Frank Act empowers the CFPB to address these problems 

by: 

• Requiring servicers to provide new consumer disclosures, including 

with respect to periodic statements, interest rate adjustments and 

force-placed insurance,

• Requiring prompt crediting of consumer payments and provision of 

payoff statements,

• Expanding consumer rights to dispute errors and obtain information 

from servicers, and

• Authorizing the CFPB to enact other regulatory requirements 

appropriate for consumer protection purposes.

SBREFA Panel Outreach - Apr. 24, 2012 6

BACKGROUND

 The Truth in Lending Act (TILA) and the Real Estate Settlement 

Procedures Act (RESPA) currently impose certain requirements on 

mortgage servicers.

 As the current crisis revealed, this limited regulatory scheme proved 

insufficient to prevent deficient servicing practices, consumer confusion, 

or consumer harm. 

 The Dodd-Frank Act empowers the CFPB to address these problems 

by: 

• Requiring servicers to provide new consumer disclosures, including 

with respect to periodic statements, interest rate adjustments and 

force-placed insurance,

• Requiring prompt crediting of consumer payments and provision of 

payoff statements,

• Expanding consumer rights to dispute errors and obtain information 

from servicers, and

• Authorizing the CFPB to enact other regulatory requirements 

appropriate for consumer protection purposes.

SBREFA Panel Outreach - Apr. 24, 2012 6

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 7

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 7
CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act requires “the creditor, assignee, or servicer” of a 

residential mortgage loan to transmit to the borrower, for each billing cycle, a 

periodic statement that contains general information about their mortgages, how 

borrowers may obtain information regarding their mortgages, and how troubled 

borrowers may get help. 

 The periodic statement requirement does not apply to any fixed rate 

residential mortgage loan where the borrower is given a coupon book with 

substantially the same information as required by the periodic statement. 

 The CFPB is considering proposing that the periodic statement serve as a 

billing statement, as well as providing borrowers with general information about 

their mortgages, how borrowers may obtain information regarding their 

mortgages, and how trouble borrowers may get help. 

 The CFPB is considering proposing alternative ways of presenting the 

information in the coupon book format, given size limitations and the ability to 

provide updated information for each billing cycle in that format. 

Topic 1: Periodic Statements and Coupon Book Exception

SBREFA Panel Outreach - Apr. 24, 2012 8

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act requires “the creditor, assignee, or servicer” of a 

residential mortgage loan to transmit to the borrower, for each billing cycle, a 

periodic statement that contains general information about their mortgages, how 

borrowers may obtain information regarding their mortgages, and how troubled 

borrowers may get help. 

 The periodic statement requirement does not apply to any fixed rate 

residential mortgage loan where the borrower is given a coupon book with 

substantially the same information as required by the periodic statement. 

 The CFPB is considering proposing that the periodic statement serve as a 

billing statement, as well as providing borrowers with general information about 

their mortgages, how borrowers may obtain information regarding their 

mortgages, and how trouble borrowers may get help. 

 The CFPB is considering proposing alternative ways of presenting the 

information in the coupon book format, given size limitations and the ability to 

provide updated information for each billing cycle in that format. 

Topic 1: Periodic Statements and Coupon Book Exception

SBREFA Panel Outreach - Apr. 24, 2012 8

Topic 1: Periodic Statements and Coupon Book Exception

DISCUSSION POINTS

1. Do you provide your borrowers with periodic statements? 

• If so, how do you distribute them (e.g., mail, email, Web portal, other)? 

2. If you provide periodic statement disclosures, what 

information that the CFPB is considering requiring do you 

currently not provide? 

3. What would you need to do to develop, produce and send a 

periodic statement disclosure with all of the information the 

CFPB is considering requiring? 

• What would those actions cost? 

• Which costs would be one-time costs and which would be ongoing?

SBREFA Panel Outreach - Apr. 24, 2012 9

Topic 1: Periodic Statements and Coupon Book Exception

DISCUSSION POINTS

1. Do you provide your borrowers with periodic statements? 

• If so, how do you distribute them (e.g., mail, email, Web portal, other)? 

2. If you provide periodic statement disclosures, what 

information that the CFPB is considering requiring do you 

currently not provide? 

3. What would you need to do to develop, produce and send a 

periodic statement disclosure with all of the information the 

CFPB is considering requiring? 

• What would those actions cost? 

• Which costs would be one-time costs and which would be ongoing?

SBREFA Panel Outreach - Apr. 24, 2012 9
Topic 1: Periodic Statements and Coupon Book Exception

DISCUSSION POINTS (cont’d)

4. If you already provide periodic statements, how do you store 

records of the statements and the information provided in them? 

• What must you do to store the statements and the information in a 

machine-readable form? 

• What would those actions this cost? 

5. Do you provide borrowers with coupon books for making 

payments? 

• To what percentage of borrowers do you provide coupon books? 

SBREFA Panel Outreach - Apr. 24, 2012 10

Topic 1: Periodic Statements and Coupon Book Exception

DISCUSSION POINTS (cont’d)

4. If you already provide periodic statements, how do you store 

records of the statements and the information provided in them? 

• What must you do to store the statements and the information in a 

machine-readable form? 

• What would those actions this cost? 

5. Do you provide borrowers with coupon books for making 

payments? 

• To what percentage of borrowers do you provide coupon books? 

SBREFA Panel Outreach - Apr. 24, 2012 10

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 11

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 11
Topic 2: Adjustable Rate Mortgage Disclosures

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act requires a creditor or servicer to provide a written 

disclosure, separate from all other correspondence, regarding the adjustment or 

reset of the interest rate for certain adjustable rate mortgages (ARMs) 6 to 7 

months before the interest rate in effect during the introductory period of such 

ARMs adjusts or resets to a variable rate. (If the adjustment or reset occurs 

during the first 6 months after consummation, then the disclosure must be 

provided at consummation.)

 The CFPB is considering a proposal requiring creditors or servicers to provide 

this written disclosure for all ARMs secured by a consumer’s principal residence.

 Current TILA rules requires creditors to provide ARM disclosures 25 to 120 

days before an ARM interest rate adjustment causing a change in payment. 

Similar disclosures are required annually if no rate adjustment during that 

timeframe caused a change in payment. The CFPB is considering a proposal to 

harmonize these rules with the Dodd-Frank requirements. 

SBREFA Panel Outreach - Apr. 24, 2012 12

Topic 2: Adjustable Rate Mortgage Disclosures

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act requires a creditor or servicer to provide a written 

disclosure, separate from all other correspondence, regarding the adjustment or 

reset of the interest rate for certain adjustable rate mortgages (ARMs) 6 to 7 

months before the interest rate in effect during the introductory period of such 

ARMs adjusts or resets to a variable rate. (If the adjustment or reset occurs 

during the first 6 months after consummation, then the disclosure must be 

provided at consummation.)

 The CFPB is considering a proposal requiring creditors or servicers to provide 

this written disclosure for all ARMs secured by a consumer’s principal residence.

 Current TILA rules requires creditors to provide ARM disclosures 25 to 120 

days before an ARM interest rate adjustment causing a change in payment. 

Similar disclosures are required annually if no rate adjustment during that 

timeframe caused a change in payment. The CFPB is considering a proposal to 

harmonize these rules with the Dodd-Frank requirements. 

SBREFA Panel Outreach - Apr. 24, 2012 12

Topic 2: Adjustable Rate Mortgage Disclosures

DISCUSSION POINTS

1. If you currently provide ARM interest rate adjustment 

disclosures, how far in advance of the first adjustment do you 

send the disclosure? 

• Is the timeframe different for subsequent adjustments?

2. If you currently provide ARM reset notices, what information 

the CFPB is considering requiring do you currently not provide? 

• What would you need to do to develop, produce and send an ARM reset 

notice with all of the proposed information? 

• What would those actions cost? 

• Which costs would be one-time costs and which would be ongoing costs?

3. In your experience, is the first interest rate reset generally 

more problematic for borrowers than subsequent resets?

Note: “ARM reset notice” means an ARM interest rate adjustment disclosure that pertains to the 

initial interest rate adjustment.

SBREFA Panel Outreach - Apr. 24, 2012 13

Topic 2: Adjustable Rate Mortgage Disclosures

DISCUSSION POINTS

1. If you currently provide ARM interest rate adjustment 

disclosures, how far in advance of the first adjustment do you 

send the disclosure? 

• Is the timeframe different for subsequent adjustments?

2. If you currently provide ARM reset notices, what information 

the CFPB is considering requiring do you currently not provide? 

• What would you need to do to develop, produce and send an ARM reset 

notice with all of the proposed information? 

• What would those actions cost? 

• Which costs would be one-time costs and which would be ongoing costs?

3. In your experience, is the first interest rate reset generally 

more problematic for borrowers than subsequent resets?

Note: “ARM reset notice” means an ARM interest rate adjustment disclosure that pertains to the 

initial interest rate adjustment.

SBREFA Panel Outreach - Apr. 24, 2012 13
SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 14

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 14

Topic 3: Force-Placed Insurance

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act prohibits a servicer from obtaining force-placed insurance 

without a reasonable basis to believe the borrower has failed to comply with 

contractual property insurance requirements. 

 The Act requires servicers to provide borrowers with two written notices over a 

45-day timeframe before charging for force-placed insurance. Upon receiving 

written confirmation of coverage from a borrower, a servicer must terminate the 

force-placed insurance and provide a refund for force-placed premiums and 

related charges paid by borrower for all periods the borrower had coverage. 

 The CFPB is also considering a proposal that would amend current RESPA rules 

by requiring servicers to make timely disbursement from escrow to pay a 

borrower’s property insurance premium even if the borrower is more than 30 

days past due and even if the servicer has to advance the funds, unless the 

borrower’s policy was canceled for reasons other than nonpayment of premiums. 

 The CFPB is considering clarifying that “force-placed insurance,” and thus the 

rule, do not apply to servicers who re-purchase a borrower’s pre-existing policy 

with the borrower’s express consent. 

SBREFA Panel Outreach - Apr. 24, 2012 15

Topic 3: Force-Placed Insurance

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act prohibits a servicer from obtaining force-placed insurance 

without a reasonable basis to believe the borrower has failed to comply with 

contractual property insurance requirements. 

 The Act requires servicers to provide borrowers with two written notices over a 

45-day timeframe before charging for force-placed insurance. Upon receiving 

written confirmation of coverage from a borrower, a servicer must terminate the 

force-placed insurance and provide a refund for force-placed premiums and 

related charges paid by borrower for all periods the borrower had coverage. 

 The CFPB is also considering a proposal that would amend current RESPA rules 

by requiring servicers to make timely disbursement from escrow to pay a 

borrower’s property insurance premium even if the borrower is more than 30 

days past due and even if the servicer has to advance the funds, unless the 

borrower’s policy was canceled for reasons other than nonpayment of premiums. 

 The CFPB is considering clarifying that “force-placed insurance,” and thus the 

rule, do not apply to servicers who re-purchase a borrower’s pre-existing policy 

with the borrower’s express consent. 

SBREFA Panel Outreach - Apr. 24, 2012 15
Topic 3: Force-Placed Insurance

DISCUSSION POINTS

1. Do you have vendor costs associated with force-placed 

insurance? (e.g. costs for providing disclosures to borrowers, 

monitoring coverage on properties in your portfolio, placing force-placed 

insurance?)

• If so, what are they?

2. If you or your vendor communicates with borrowers with respect 

to placing coverage on the borrowers’ behalf, what information the 

CFPB is proposing to require do you currently not provide? 

• What actions would you need to take to ensure that a force-placed insurance 

disclosure with all of the proposed information is provided to borrowers? 

• What would those actions cost you and would the costs be one-time or 

ongoing costs?

3. What costs may a proposal that amends current RESPA rules on 

the timely disbursements of insurance premiums out of escrow 

impose on you?

SBREFA Panel Outreach - Apr. 24, 2012 16

Topic 3: Force-Placed Insurance

DISCUSSION POINTS

1. Do you have vendor costs associated with force-placed 

insurance? (e.g. costs for providing disclosures to borrowers, 

monitoring coverage on properties in your portfolio, placing force-placed 

insurance?)

• If so, what are they?

2. If you or your vendor communicates with borrowers with respect 

to placing coverage on the borrowers’ behalf, what information the 

CFPB is proposing to require do you currently not provide? 

• What actions would you need to take to ensure that a force-placed insurance 

disclosure with all of the proposed information is provided to borrowers? 

• What would those actions cost you and would the costs be one-time or 

ongoing costs?

3. What costs may a proposal that amends current RESPA rules on 

the timely disbursements of insurance premiums out of escrow 

impose on you?

SBREFA Panel Outreach - Apr. 24, 2012 16

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 17

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 17
SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 18

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 18

Topic 4: Error Resolution and Responses to Inquiries

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act provides for a number of prohibitions with respect to 

servicers’ handling of alleged errors and borrower inquiries for information, 

including revising RESPA’s timeframe for responding to qualified written requests 

(QWRs). 

 As set forth in the Dodd-Frank Act, a servicer of a federally related mortgage 

shall not:

• Charge fees for responding to valid QWRs, as defined by the CFPB;

• Fail to respond within 10 business days to a borrower’s request for the 

identity and contact information for the owner or assignee of the loan; or 

• Fail to take timely action to respond to a borrower’s requests to correct 

errors relating to: 

(1) allocation of payments,

(2) final balances for purposes of paying off the loan, 

(3) avoiding foreclosure, or 

(4) other standard servicer duties. 

SBREFA Panel Outreach - Apr. 24, 2012 19

Topic 4: Error Resolution and Responses to Inquiries

CFPB PROPOSAL UNDER CONSIDERATION

 The Dodd-Frank Act provides for a number of prohibitions with respect to 

servicers’ handling of alleged errors and borrower inquiries for information, 

including revising RESPA’s timeframe for responding to qualified written requests 

(QWRs). 

 As set forth in the Dodd-Frank Act, a servicer of a federally related mortgage 

shall not:

• Charge fees for responding to valid QWRs, as defined by the CFPB;

• Fail to respond within 10 business days to a borrower’s request for the 

identity and contact information for the owner or assignee of the loan; or 

• Fail to take timely action to respond to a borrower’s requests to correct 

errors relating to: 

(1) allocation of payments,

(2) final balances for purposes of paying off the loan, 

(3) avoiding foreclosure, or 

(4) other standard servicer duties. 

SBREFA Panel Outreach - Apr. 24, 2012 19
Topic 4: Error Resolution and Responses to Inquiries

CFPB PROPOSAL UNDER CONSIDERATION (cont.)

 In order to cover each of the areas for which servicers must correct errors, the 

CFPB is considering proposing to define “errors” with an exclusive list.

 The CFPB is also considering proposing a comprehensive set of procedures and 

timeframes for servicers to investigate and respond to borrowers’ oral and 

written assertions of error and inquiries for information.

• The procedures would incorporate, but not be limited to RESPA’s use of 

QWRs to address “servicing” issues, as defined by RESPA. 

• The timeframes would generally track the revised timeframes for responding 

to QWRs in RESPA, subject to certain explicit exceptions the CFPB is 

considering proposing. 

 The CFPB is considering proposing to exclude open-end lines of credit, like 

HELOCs, from these provisions because they are subject to distinct error 

resolution procedures under TILA.

SBREFA Panel Outreach - Apr. 24, 2012 20

Topic 4: Error Resolution and Responses to Inquiries

CFPB PROPOSAL UNDER CONSIDERATION (cont.)

 In order to cover each of the areas for which servicers must correct errors, the 

CFPB is considering proposing to define “errors” with an exclusive list.

 The CFPB is also considering proposing a comprehensive set of procedures and 

timeframes for servicers to investigate and respond to borrowers’ oral and 

written assertions of error and inquiries for information.

• The procedures would incorporate, but not be limited to RESPA’s use of 

QWRs to address “servicing” issues, as defined by RESPA. 

• The timeframes would generally track the revised timeframes for responding 

to QWRs in RESPA, subject to certain explicit exceptions the CFPB is 

considering proposing. 

 The CFPB is considering proposing to exclude open-end lines of credit, like 

HELOCs, from these provisions because they are subject to distinct error 

resolution procedures under TILA.

SBREFA Panel Outreach - Apr. 24, 2012 20

Topic 4: Error Resolution and Responses to Inquiries

DISCUSSION POINTS

1. The CFPB is considering proposing an exclusive list of errors. If a 

borrower contacts you in writing and claims that one of the errors on 

the list has occurred, how do you currently respond? 

• If a borrower contacts you orally, is your response different? 

• Does your response depend on the type of loan the borrower has? 

• What borrower issues or errors do you currently respond to that are not on 

the list of errors the CFPB is considering?

2. The CFPB is considering proposing timeframes for responding to 

alleged errors from borrowers. Are there alleged errors to which you do 

not currently respond in the timeframes the CFPB is proposing? 

• If so, what actions would you need to take in order to respond within these 

timeframes? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing?

SBREFA Panel Outreach - Apr. 24, 2012 21

Topic 4: Error Resolution and Responses to Inquiries

DISCUSSION POINTS

1. The CFPB is considering proposing an exclusive list of errors. If a 

borrower contacts you in writing and claims that one of the errors on 

the list has occurred, how do you currently respond? 

• If a borrower contacts you orally, is your response different? 

• Does your response depend on the type of loan the borrower has? 

• What borrower issues or errors do you currently respond to that are not on 

the list of errors the CFPB is considering?

2. The CFPB is considering proposing timeframes for responding to 

alleged errors from borrowers. Are there alleged errors to which you do 

not currently respond in the timeframes the CFPB is proposing? 

• If so, what actions would you need to take in order to respond within these 

timeframes? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing?

SBREFA Panel Outreach - Apr. 24, 2012 21
SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 22

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 22

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 23

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 23
Topic 5: Reasonable Information Management Policies

CFPB PROPOSAL UNDER CONSIDERATION

 The CFPB is considering requiring servicers to establish reasonable policies 

and procedures for managing borrower information in order to achieve certain 

objectives, such as:

(1) Provide accurate and timely disclosures.

(2) Minimize errors and facilitate prompt error correction.

(3) Maintain records of borrower contact (with a possible exception for some 

small servicers).

(4) Facilitate loss mitigation, such as ensuring reasonable and timely access 

to documents about the borrower or submitted by the borrower in 

connection with loss mitigation requests.

(5) Enable servicers to transfer all relevant and accurate information and 

documents about a borrower to a subsequent servicer during a mortgage 

loan servicing transfer or a forum addressing foreclosure. 

 The CFPB is considering proposing that the reasonableness of a servicer’s 

information management policies and procedures would depend upon the 

servicer’s size and the nature and scope of its activities.

SBREFA Panel Outreach - Apr. 24, 2012 24

Topic 5: Reasonable Information Management Policies

CFPB PROPOSAL UNDER CONSIDERATION

 The CFPB is considering requiring servicers to establish reasonable policies 

and procedures for managing borrower information in order to achieve certain 

objectives, such as:

(1) Provide accurate and timely disclosures.

(2) Minimize errors and facilitate prompt error correction.

(3) Maintain records of borrower contact (with a possible exception for some 

small servicers).

(4) Facilitate loss mitigation, such as ensuring reasonable and timely access 

to documents about the borrower or submitted by the borrower in 

connection with loss mitigation requests.

(5) Enable servicers to transfer all relevant and accurate information and 

documents about a borrower to a subsequent servicer during a mortgage 

loan servicing transfer or a forum addressing foreclosure. 

 The CFPB is considering proposing that the reasonableness of a servicer’s 

information management policies and procedures would depend upon the 

servicer’s size and the nature and scope of its activities.

SBREFA Panel Outreach - Apr. 24, 2012 24

Topic 5: Reasonable Information Management Policies

CFPB PROPOSAL UNDER CONSIDERATION (cont.)

 The CFPB is considering proposing to explain a violation would occur if the 

servicer:

(1) fails to establish reasonable information management policies and 

procedures, or 

(2) demonstrates a pattern or practice of failing to comply with the information 

management policies and procedures it establishes.

 An occasional failure to comply with established policies and procedures 

would not constitute a violation.

 Note: Civil liability in a private action may arise from violation of the CFPB’s 

proposed reasonable information management policies and procedures 

regulation.

SBREFA Panel Outreach - Apr. 24, 2012 25

Topic 5: Reasonable Information Management Policies

CFPB PROPOSAL UNDER CONSIDERATION (cont.)

 The CFPB is considering proposing to explain a violation would occur if the 

servicer:

(1) fails to establish reasonable information management policies and 

procedures, or 

(2) demonstrates a pattern or practice of failing to comply with the information 

management policies and procedures it establishes.

 An occasional failure to comply with established policies and procedures 

would not constitute a violation.

 Note: Civil liability in a private action may arise from violation of the CFPB’s 

proposed reasonable information management policies and procedures 

regulation.

SBREFA Panel Outreach - Apr. 24, 2012 25
Topic 5: Reasonable Information Management Policies

DISCUSSION POINTS

1. Do you currently manage information in a way that allows 

you to meet the duties the CFPB is proposing to be stated in 

your information management policies and procedures? 

2. If there are certain duties you can’t meet due to how you 

currently manage information, what actions would you need to 

take with respect to how you manage information to meet these 

duties? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing? 

SBREFA Panel Outreach - Apr. 24, 2012 26

Topic 5: Reasonable Information Management Policies

DISCUSSION POINTS

1. Do you currently manage information in a way that allows 

you to meet the duties the CFPB is proposing to be stated in 

your information management policies and procedures? 

2. If there are certain duties you can’t meet due to how you 

currently manage information, what actions would you need to 

take with respect to how you manage information to meet these 

duties? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing? 

SBREFA Panel Outreach - Apr. 24, 2012 26

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 27

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 27
CFPB PROPOSAL UNDER CONSIDERATION

Early Intervention

 The CFPB is considering proposing requiring servicers to make good faith 

efforts to contact delinquent borrowers no later than 45 days after the onset of 

delinquency and to respond promptly to borrowers who contact them about 

having or expecting to have trouble making payments.

 For delinquent borrowers, the CFPB is considering requiring servicers to 

provide written information about options to help avoid foreclosures and 

information about the foreclosure process no later than 45 days after the date of 

delinquency.

 For borrowers who contact their servicers about having or expecting to have 

trouble making payments, the CFPB is considering requiring servicers to provide 

the written information within 5 days of the borrower making such contact.

 The CFPB is considering exempting small servicers from this written 

disclosure requirement with respect to portfolio loans if they make good faith 

efforts to contact borrowers no later than 45 days after the borrowers become 

delinquent.

Topic 6: Early Intervention and Continuity of Contact

SBREFA Panel Outreach - Apr. 24, 2012 28

CFPB PROPOSAL UNDER CONSIDERATION

Early Intervention

 The CFPB is considering proposing requiring servicers to make good faith 

efforts to contact delinquent borrowers no later than 45 days after the onset of 

delinquency and to respond promptly to borrowers who contact them about 

having or expecting to have trouble making payments.

 For delinquent borrowers, the CFPB is considering requiring servicers to 

provide written information about options to help avoid foreclosures and 

information about the foreclosure process no later than 45 days after the date of 

delinquency.

 For borrowers who contact their servicers about having or expecting to have 

trouble making payments, the CFPB is considering requiring servicers to provide 

the written information within 5 days of the borrower making such contact.

 The CFPB is considering exempting small servicers from this written 

disclosure requirement with respect to portfolio loans if they make good faith 

efforts to contact borrowers no later than 45 days after the borrowers become 

delinquent.

Topic 6: Early Intervention and Continuity of Contact

SBREFA Panel Outreach - Apr. 24, 2012 28

CFPB PROPOSAL UNDER CONSIDERATION

Continuity of Contact

 The CFPB is considering proposing requiring servicers to provide all borrowers 

who become 45 days delinquent or who request help in avoiding delinquency 

with direct and on-going access to employees dedicated to serving such 

borrowers. 

 These employees would have ready access to:

• A complete record of the borrower’s payment history and previous communications 

between the servicer and the borrower or a third party acting on the borrower’s behalf 

from the earlier of the date of delinquency or the date when the borrower first 

requested assistance;

• All documentation associated with loss mitigation submitted by or on the borrower’s 

behalf;

• Underwriters that may evaluate the borrower for loss mitigation; and

• Information on the status of any current or pending foreclosure action. 

 The CFPB may consider proposing adjustments to these requirements if the 

CFPB finds that certain small servicers already maintain consistent, but less 

formal, contact with their delinquent or troubled borrowers.

Topic 6: Early Intervention and Continuity of Contact

SBREFA Panel Outreach - Apr. 24, 2012 29

CFPB PROPOSAL UNDER CONSIDERATION

Continuity of Contact

 The CFPB is considering proposing requiring servicers to provide all borrowers 

who become 45 days delinquent or who request help in avoiding delinquency 

with direct and on-going access to employees dedicated to serving such 

borrowers. 

 These employees would have ready access to:

• A complete record of the borrower’s payment history and previous communications 

between the servicer and the borrower or a third party acting on the borrower’s behalf 

from the earlier of the date of delinquency or the date when the borrower first 

requested assistance;

• All documentation associated with loss mitigation submitted by or on the borrower’s 

behalf;

• Underwriters that may evaluate the borrower for loss mitigation; and

• Information on the status of any current or pending foreclosure action. 

 The CFPB may consider proposing adjustments to these requirements if the 

CFPB finds that certain small servicers already maintain consistent, but less 

formal, contact with their delinquent or troubled borrowers.

Topic 6: Early Intervention and Continuity of Contact

SBREFA Panel Outreach - Apr. 24, 2012 29
Topic 6: Early Intervention and Continuity of Contact

DISCUSSION POINTS

Early Intervention

1. How long after delinquency do you currently attempt to 

contact borrowers? 

• Would you ever wait longer than 45 days before attempting to contact the 

borrower?

2. If your procedure is different from the proposed early 

intervention procedures, what actions would you need to take in 

order to comply with them? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing?

• Would the costs be substantially mitigated if you did not have provide 

written information a delinquent borrower for portfolio loans? 

3. Would the costs of complying be substantially mitigated if you 

did not have to contact a delinquent borrower in writing if you 

originated the delinquent loan and held it in portfolio? 

SBREFA Panel Outreach - Apr. 24, 2012 30

Topic 6: Early Intervention and Continuity of Contact

DISCUSSION POINTS

Early Intervention

1. How long after delinquency do you currently attempt to 

contact borrowers? 

• Would you ever wait longer than 45 days before attempting to contact the 

borrower?

2. If your procedure is different from the proposed early 

intervention procedures, what actions would you need to take in 

order to comply with them? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing?

• Would the costs be substantially mitigated if you did not have provide 

written information a delinquent borrower for portfolio loans? 

3. Would the costs of complying be substantially mitigated if you 

did not have to contact a delinquent borrower in writing if you 

originated the delinquent loan and held it in portfolio? 

SBREFA Panel Outreach - Apr. 24, 2012 30

Topic 6: Early Intervention and Continuity of Contact

DISCUSSION POINTS (cont’d)

Continuity of Contact

1. How much staff do you currently have to work with troubled 

borrowers? 

• How do you provide access to this staff?

2. If you currently do not provide troubled borrowers with 

direct and ongoing access to staff (e.g., a dedicated phone 

number that is staffed during business hours), what actions 

would you have to take to do so? 

• What would those actions cost?

3. Does the staff that works with troubled borrowers currently 

have ready access to the information described in the proposal? 

• If not, what information is not readily available? 

• What actions would you need to take in order to make sure that staff has 

access to this information? 

• How much would those actions cost?

SBREFA Panel Outreach - Apr. 24, 2012 31

Topic 6: Early Intervention and Continuity of Contact

DISCUSSION POINTS (cont’d)

Continuity of Contact

1. How much staff do you currently have to work with troubled 

borrowers? 

• How do you provide access to this staff?

2. If you currently do not provide troubled borrowers with 

direct and ongoing access to staff (e.g., a dedicated phone 

number that is staffed during business hours), what actions 

would you have to take to do so? 

• What would those actions cost?

3. Does the staff that works with troubled borrowers currently 

have ready access to the information described in the proposal? 

• If not, what information is not readily available? 

• What actions would you need to take in order to make sure that staff has 

access to this information? 

• How much would those actions cost?

SBREFA Panel Outreach - Apr. 24, 2012 31
SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 32

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 32

Topic 7: Prompt Crediting and Payoff Amounts

CFPB PROPOSAL UNDER CONSIDERATION

Prompt Crediting

 The Dodd-Frank Act requires servicers to credit payments on a consumer’s 

principal dwelling as of the date of receipt, except if the delay does not result in 

a charge or the reporting of negative information to a consumer reporting 

agency. 

 The servicer may, however, specify in writing requirements that the consumer 

must follow to make conforming payments. If non-conforming payments are 

accepted, servicers must credit payments 5 days after receipt. 

 The CFPB is considering proposing retaining the current TILA rule requiring 

partial payments be treated in accordance with legal obligations as determined 

by applicable state or other law. 

 The CFPB is also considering proposing to require that as soon as the amount 

in a suspense account equals a full contractual payment, the servicer must 

credit the payment to the earliest delinquent payment. 

SBREFA Panel Outreach - Apr. 24, 2012 33

Topic 7: Prompt Crediting and Payoff Amounts

CFPB PROPOSAL UNDER CONSIDERATION

Prompt Crediting

 The Dodd-Frank Act requires servicers to credit payments on a consumer’s 

principal dwelling as of the date of receipt, except if the delay does not result in 

a charge or the reporting of negative information to a consumer reporting 

agency. 

 The servicer may, however, specify in writing requirements that the consumer 

must follow to make conforming payments. If non-conforming payments are 

accepted, servicers must credit payments 5 days after receipt. 

 The CFPB is considering proposing retaining the current TILA rule requiring 

partial payments be treated in accordance with legal obligations as determined 

by applicable state or other law. 

 The CFPB is also considering proposing to require that as soon as the amount 

in a suspense account equals a full contractual payment, the servicer must 

credit the payment to the earliest delinquent payment. 

SBREFA Panel Outreach - Apr. 24, 2012 33
Topic 7: Prompt Crediting and Payoff Amounts

CFPB PROPOSAL UNDER CONSIDERATION

Payoff Amounts

 The Dodd-Frank Act requires the creditor or servicer of a “home loan” to send 

an accurate payoff balance within a reasonable time, but no more than 7 

business days, after the receipt of a written request for the payoff balance from 

or on behalf of the borrower. 

 Current TILA rules address payoff amount requests for certain high cost 

mortgages, but create a 5 business day safe harbor. 

 The CFPB is considering proposing a rule that would generally follow the 

Dodd-Frank Act and require an accurate payoff balance to be provided no later 

than 7 days (excluding holidays and weekends) after the receipt of a written 

request from the borrower. 

 The CFPB is considering proposing the term “home loan” be construed broadly 

but that it exclude reverse mortgages.

SBREFA Panel Outreach - Apr. 24, 2012 34

Topic 7: Prompt Crediting and Payoff Amounts

CFPB PROPOSAL UNDER CONSIDERATION

Payoff Amounts

 The Dodd-Frank Act requires the creditor or servicer of a “home loan” to send 

an accurate payoff balance within a reasonable time, but no more than 7 

business days, after the receipt of a written request for the payoff balance from 

or on behalf of the borrower. 

 Current TILA rules address payoff amount requests for certain high cost 

mortgages, but create a 5 business day safe harbor. 

 The CFPB is considering proposing a rule that would generally follow the 

Dodd-Frank Act and require an accurate payoff balance to be provided no later 

than 7 days (excluding holidays and weekends) after the receipt of a written 

request from the borrower. 

 The CFPB is considering proposing the term “home loan” be construed broadly 

but that it exclude reverse mortgages.

SBREFA Panel Outreach - Apr. 24, 2012 34

DISCUSSION POINTS

Prompt Crediting and Payoff Amounts

1. How do you currently handle partial payments from 

borrowers? 

2. If you currently place partial payments in suspense 

accounts, when do you credit the borrower with a payment? 

3. If you do not credit the borrower with a full payment once a 

full payment is in the suspense account, what actions would you 

need to take in order to do so? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing? 

Topic 7: Prompt Crediting and Payoff Amounts

SBREFA Panel Outreach - Apr. 24, 2012 35

DISCUSSION POINTS

Prompt Crediting and Payoff Amounts

1. How do you currently handle partial payments from 

borrowers? 

2. If you currently place partial payments in suspense 

accounts, when do you credit the borrower with a payment? 

3. If you do not credit the borrower with a full payment once a 

full payment is in the suspense account, what actions would you 

need to take in order to do so? 

• What would those actions cost? 

• Which costs would be one-time and which would be ongoing? 

Topic 7: Prompt Crediting and Payoff Amounts

SBREFA Panel Outreach - Apr. 24, 2012 35
SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 36

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 36

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 37

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 37
Topic 8: Impact on the Cost of Business Credit

CFPB PROPOSAL UNDER CONSIDERATION

 The Regulatory Flexibility Act requires the CFPB to consult with small 

entities regarding any potential increase in the cost of credit for small 

entities that would result from the proposals under consideration, and 

on alternatives that minimize any such increase.

 At this time, the CFPB has no evidence that the proposals under 

consideration would result in an increase in the cost of credit for small 

entities. 

• The proposals under consideration would apply only to mortgage loans 

obtained by consumers primarily for personal, family, or household 

purposes. 

• The proposals would not apply to loans obtained primarily for business 

purposes.

 The CFPB is seeking the advice and recommendations of the SERs 

regarding this issue.

SBREFA Panel Outreach - Apr. 24, 2012 38

Topic 8: Impact on the Cost of Business Credit

CFPB PROPOSAL UNDER CONSIDERATION

 The Regulatory Flexibility Act requires the CFPB to consult with small 

entities regarding any potential increase in the cost of credit for small 

entities that would result from the proposals under consideration, and 

on alternatives that minimize any such increase.

 At this time, the CFPB has no evidence that the proposals under 

consideration would result in an increase in the cost of credit for small 

entities. 

• The proposals under consideration would apply only to mortgage loans 

obtained by consumers primarily for personal, family, or household 

purposes. 

• The proposals would not apply to loans obtained primarily for business 

purposes.

 The CFPB is seeking the advice and recommendations of the SERs 

regarding this issue.

SBREFA Panel Outreach - Apr. 24, 2012 38

Topic 8: Impact on the Cost of Business Credit

DISCUSSION POINTS

1. Which of the proposals under consideration, if any, do you believe 

may impact the cost of credit for small entities? 

• Why might this occur?

• Are there significant alternatives to any of the proposals that may minimize the impact 

on the cost of credit for small entities while accomplishing the statutory objectives 

addressed by that proposal?

2. Do you extend consumer mortgage loans that are used secondarily to 

finance a small business?

• If so, what percentage of all of your consumer mortgage loans are these loans? 

• What is the average amount of the credit extended on these loans? 

• What percentage of the credit extended is actually used for a business purpose?

• Would the proposals under consideration cause you to increase the rates or fees you 

charge for these loans? (If yes, please describe the increase that you anticipate, your 

basis for anticipating that increase, and any feasible alternatives to the proposals under 

consideration you would recommend to minimize that increase.)

• Do you believe these borrowers could instead obtain home-secured business loans (i.e., 

a home-secured loan used primarily for business purposes) from you or another lender?

SBREFA Panel Outreach - Apr. 24, 2012 39

Topic 8: Impact on the Cost of Business Credit

DISCUSSION POINTS

1. Which of the proposals under consideration, if any, do you believe 

may impact the cost of credit for small entities? 

• Why might this occur?

• Are there significant alternatives to any of the proposals that may minimize the impact 

on the cost of credit for small entities while accomplishing the statutory objectives 

addressed by that proposal?

2. Do you extend consumer mortgage loans that are used secondarily to 

finance a small business?

• If so, what percentage of all of your consumer mortgage loans are these loans? 

• What is the average amount of the credit extended on these loans? 

• What percentage of the credit extended is actually used for a business purpose?

• Would the proposals under consideration cause you to increase the rates or fees you 

charge for these loans? (If yes, please describe the increase that you anticipate, your 

basis for anticipating that increase, and any feasible alternatives to the proposals under 

consideration you would recommend to minimize that increase.)

• Do you believe these borrowers could instead obtain home-secured business loans (i.e., 

a home-secured loan used primarily for business purposes) from you or another lender?

SBREFA Panel Outreach - Apr. 24, 2012 39
Topic 8: Impact on the Cost of Business Credit

DISCUSSION POINTS (cont.)

3. In the past year, have you, as a small entity, taken out a consumer 

mortgage loan that you also used secondarily to finance your small 

business?

• If so, in the past year, what percentage of your business costs did you fund through 

such credit?

• Do you believe that the proposals under consideration would cause you to pay higher 

rates or fees for such loans? 

• If yes, why might this occur? 

• If yes, please describe any feasible alternatives to the proposals under consideration 

you would recommend to minimize the increase.

• As an alternative to this type of credit, could you obtain a home-secured business loan 

(i.e., a home-secured loan used primarily for business purposes)?

SBREFA Panel Outreach - Apr. 24, 2012 40

Topic 8: Impact on the Cost of Business Credit

DISCUSSION POINTS (cont.)

3. In the past year, have you, as a small entity, taken out a consumer 

mortgage loan that you also used secondarily to finance your small 

business?

• If so, in the past year, what percentage of your business costs did you fund through 

such credit?

• Do you believe that the proposals under consideration would cause you to pay higher 

rates or fees for such loans? 

• If yes, why might this occur? 

• If yes, please describe any feasible alternatives to the proposals under consideration 

you would recommend to minimize the increase.

• As an alternative to this type of credit, could you obtain a home-secured business loan 

(i.e., a home-secured loan used primarily for business purposes)?

SBREFA Panel Outreach - Apr. 24, 2012 40

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 41

SCHEDULE

Item Time (min)

Welcome and Introductions 8:00 – 8:15

General Overview: What is SBREFA?

Your Role in the SBREFA Process

Background on Servicing Regulation

8:15 – 8:30

Topic 1: Periodic Statements and Coupon Book Exception 8:30 – 9:15 

Topic 2: Adjustable Rate Mortgage Disclosures 9:15 – 10:00

Topic 3: Force-Placed Insurance 10:00 - 10:45

Morning Break 10:45 – 11:00

Topic 4: Error Resolution and Responses to Inquiries 11:00 – 12:00

Lunch Break 12:00 – 1:00 

Topic 5: Reasonable Information Management Policies 1:00 – 1:30

Topic 6: Early Intervention and Continuity of Contact 1:30 – 2:30

Topic 7: Prompt Crediting and Payoff Amounts 2:30 – 3:00

Afternoon Break 3:00 – 3:15

Topic 8: Impact on the Cost of Business Credit 3:15 – 3:45

Additional Feedback/Wrap-Up 3:45 – 5:00

SBREFA Panel Outreach - Apr. 24, 2012 41
ADDITIONAL FEEDBACK

DISCUSSION POINTS

 Are there any feasible alternatives to the proposals under 

consideration that would minimize any significant economic impact on 

your business while accomplishing the CFPB’s statutory mandate and 

objectives?

• The CFPB is particularly interested in learning whether adjustments may be 

called for in the case of small servicers that originate loans for their 

customers and self-service those loans either while held in portfolio or after 

selling the loans (servicing retained) to Government-Sponsored Enterprises 

(“GSEs”) or other investors.

• The CFPB seeks to understand how consumers would be protected in those 

cases where adjustments are suggested.

 Are there any other federal rules that you believe may duplicate, 

overlap or conflict with the proposals under consideration?

SBREFA Panel Outreach - Apr. 24, 2012 42

ADDITIONAL FEEDBACK

DISCUSSION POINTS

 Are there any feasible alternatives to the proposals under 

consideration that would minimize any significant economic impact on 

your business while accomplishing the CFPB’s statutory mandate and 

objectives?

• The CFPB is particularly interested in learning whether adjustments may be 

called for in the case of small servicers that originate loans for their 

customers and self-service those loans either while held in portfolio or after 

selling the loans (servicing retained) to Government-Sponsored Enterprises 

(“GSEs”) or other investors.

• The CFPB seeks to understand how consumers would be protected in those 

cases where adjustments are suggested.

 Are there any other federal rules that you believe may duplicate, 

overlap or conflict with the proposals under consideration?

SBREFA Panel Outreach - Apr. 24, 2012 42

WRAP-UP

CLOSING REMARKS: DAN SOKOLOV, CFPB

 Written comments are due no later than May 1, 2012.

 Please email comments to Rachel Ross, Rachel.Ross@cfpb.gov

SBREFA Panel Outreach - Apr. 24, 2012 43

WRAP-UP

CLOSING REMARKS: DAN SOKOLOV, CFPB

 Written comments are due no later than May 1, 2012.

 Please email comments to Rachel Ross, Rachel.Ross@cfpb.gov

SBREFA Panel Outreach - Apr. 24, 2012 43