Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 62993 

(2) When sold at retail, is designated 

and marketed for the intended 

application, with 

* * * * * 

General service incandescent lamp 

means a standard incandescent or 

halogen type lamp that is intended for 

general service applications; has a 

medium screw base; has a lumen range 

of not less than 310 lumens and not 

more than 2,600 lumens or, in the case 

of a modified spectrum lamp, not less 

than 232 lumens and not more than 

1,950 lumens; and is capable of being 

operated at a voltage range at least 

partially within 110 and 130 volts; 

however this definition does not apply 

to the following incandescent lamps— 

* * * * * 

§ 430.31 [Amended] 

■ 3. Section 430.31 is amended by 

removing the second sentence. 

§ 430.33 [Amended] 

■ 4. Section 430.33 is amended by: 

■ a. Adding ‘‘and’’ at the end of 

paragraph (b)(1); 

■ b. Removing ‘‘; and’’ and adding in its 

place a period at the end of paragraph 

(b)(2); and 

■ c. Removing paragraph (b)(3). 

PART 431—ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

■ 5. The authority citation for part 431 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6317. 

■ 6. Section 431.62 is amended by 

adding in alphabetical order a definition 

of ‘‘service over the counter, selfcontained, medium temperature 

commercial refrigerator’’ or ‘‘SOC–SC– 

M’’ to read as follows: 

§ 431.62 Definitions concerning 

commercial refrigerators, freezers and 

refrigerator-freezers. 

* * * * * 

Service over the counter, selfcontained, medium temperature 

commercial refrigerator or SOC–SC–M 

means a commercial refrigerator— 

(1) That operates at temperatures at or 

above 32 °F; 

(2) With a self-contained condensing 

unit; 

(3) Equipped with sliding or hinged 

doors in the back intended for use by 

sales personnel, and with glass or other 

transparent material in the front for 

displaying merchandise; and 

(4) That has a height not greater than 

66 inches and is intended to serve as a 

counter for transactions between sales 

personnel and customers. 

* * * * * 

§ 431.63 [Amended] 

■ 7. Section 431.63 is amended, in 

paragraph (c)(2), by removing 

‘‘§ 431.64.’’, and adding in its place 

‘‘§§ 431.64 and 431.66.’’. 

■ 8. Section 431.66 is amended by: 

■ a. Revising paragraph (a)(3); 

■ b. Adding in paragraph (b) the 

designation ‘‘(1)’’ immediately after 

‘‘(b)’’ and revising newly designated 

paragraph (b)(1) introductory text; and 

■ c. Adding paragraph (b)(2). 

The revision and additions read as 

follows: 

§ 431.66 Energy conservation standards 

and their effective dates. 

(a) * * * 

(3) Except as to service over the 

counter, self-contained, medium 

temperature commercial refrigerators 

manufactured on or after January 1, 

2012, the term ‘‘TDA’’ means the total 

display area (ft2) of the case, as defined 

in the ARI Standard 1200–2006, 

appendix D (incorporated by reference, 

see § 431.63). 

(b)(1) Except for service over the 

counter, self-contained, medium 

temperature commercial refrigerators 

manufactured on or after January 1, 

2012, each commercial refrigerator, 

freezer and refrigerator-freezer with a 

self-contained condensing unit designed 

for holding temperature applications 

manufactured on or after January 1, 

2010, shall have a daily energy 

consumption (in kilowatt hours per day) 

that does not exceed the following: 

* * * * * 

(2) Each service over the counter, selfcontained, medium temperature 

commercial refrigerator (SOC–SC–M) 

manufactured on or after January 1, 

2012, shall have a total daily energy 

consumption (in kilowatt hours per day) 

of not more than 0.6 × TDA + 1.0. As 

used in the preceding sentence, ‘‘TDA’’ 

means the total display area (ft2) of the 

case, as defined in the AHRI Standard 

1200 (I–P)–2010, appendix D 

(incorporated by reference, see 

§ 431.63). 

* * * * * 

■ 9. Section 431.306 is amended by 

revising paragraph (a)(3) to read as 

follows: 

§ 431.306 Energy conservation standards 

and their effective dates. 

(a) * * * 

(3) Contain wall, ceiling, and door 

insulation of at least R–25 for coolers 

and R–32 for freezers, except that this 

paragraph shall not apply to— 

(i) Glazed portions of doors or 

structural members, or 

(ii) A wall, ceiling or door if the 

manufacturer of that component has 

provided to the Assistant Secretary for 

Energy Efficiency and Renewable 

Energy all data and technical 

information necessary to fully evaluate 

whether the component reduces energy 

consumption at least as much as if this 

paragraph were to apply, and has 

demonstrated to the satisfaction of the 

Assistant Secretary that the component 

achieves such a reduction in energy 

consumption; 

* * * * * 

§ 431.408 [Amended] 

■ 10. Section 431.408 is amended by 

adding, in the second sentence, 

‘‘(a)(10),’’ immediately after ‘‘345’’ and 

before ‘‘(e).’’ 

[FR Doc. 2013–24353 Filed 10–22–13; 8:45 am] 

BILLING CODE 6450–01–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Parts 1024 and 1026 

[Docket No. CFPB–2013–0031] 

RIN 3170–AA37 

Amendments to the 2013 Mortgage 

Rules Under the Real Estate 

Settlement Procedures Act (Regulation 

X) and the Truth in Lending Act 

(Regulation Z) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Interim final rule with request 

for public comment. 

SUMMARY: This rule amends provisions 

in Regulation Z and final rules issued by 

the Bureau of Consumer Financial 

Protection (Bureau) in 2013, which, 

among other things, required that 

consumers receive counseling before 

obtaining high-cost mortgages and that 

servicers provide periodic account 

statements and rate adjustment notices 

to mortgage borrowers, as well as engage 

in early intervention when borrowers 

become delinquent. The amendments 

clarify the specific disclosures that must 

be provided before counseling for highcost mortgages can occur, and proper 

compliance regarding servicing 

requirements when a consumer is in 

bankruptcy or sends a cease 

communication request under the Fair 

Debt Collection Practices Act. The rule 

also makes technical corrections to 

provisions of other rules. The Bureau 

requests public comment on these 

changes. 

DATES: This interim final rule is 

effective January 10, 2014. Comments 

must be received on or before November 

22, 2013. 


tkelley on DSK3SPTVN1PROD with RULES
62994 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

1 78 FR 10695 (Feb. 14, 2013). 

2 78 FR 10901 (Feb. 14, 2013). 

3 78 FR 6855 (Jan. 31, 2013). 

4CFPB Bulletin 2013–12, available at http://

files.consumerfinance.gov/f/201310_cfpb_mortgageservicing_bulletin.pdf. 

5 78 FR 35429 (June 12, 2013). 

6 78 FR 44685 (Jul. 24, 2013). 

7 78 FR 60382 (Oct. 1, 2013). 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2013– 

0031 or RIN 3170–AA37, by any of the 

following methods: 

• Electronic: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail/Hand Delivery/Courier: 

Monica Jackson, Office of the Executive 

Secretary, Consumer Financial 

Protection Bureau, 1700 G Street NW., 

Washington, DC 20552. 

Instructions: All submissions should 

include the agency name and docket 

number or Regulatory Information 

Number (RIN) for this rulemaking. 

Because paper mail in the Washington, 

DC area and at the Bureau is subject to 

delay, commenters are encouraged to 

submit comments electronically. In 

general, all comments received will be 

posted without change to http://

www.regulations.gov. In addition, 

comments will be available for public 

inspection and copying at 1700 G Street 

NW., Washington, DC 20552, on official 

business days between the hours of 10 

a.m. and 5 p.m. Eastern Time. You can 

make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Sensitive 

personal information, such as account 

numbers or social security numbers, 

should not be included. Comments will 

not be edited to remove any identifying 

or contact information. 

FOR FURTHER INFORMATION CONTACT: 

Joseph Devlin, Counsel; Laura Johnson, 

Nicholas Hluchyj, and Marta 

Tanenhaus, Senior Counsels; Office of 

Regulations, at (202) 435–7700. 

SUPPLEMENTARY INFORMATION: 

I. Summary of Interim Final Rule 

In January 2013, the Bureau issued 

several final rules concerning mortgage 

markets in the United States pursuant to 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act) Public Law 111–203, 124 Stat. 1376 

(2010) (2013 Title XIV Final Rules). 

Three of these rules were (1) the 

Mortgage Servicing Rules under the Real 

Estate Settlement Procedures Act 

(Regulation X) (2013 RESPA Servicing 

Final Rule); 1 (2) the Mortgage Servicing 

Rules under the Truth in Lending Act 

(Regulation Z) (2013 TILA Servicing 

Final Rule); 2 and (3) the High-Cost 

Mortgage and Homeownership 

Counseling Amendments to the Truth in 

Lending Act (Regulation Z) and 

Homeownership Counseling 

Amendments to the Real Estate 

Settlement Procedures Act (Regulation 

X) (2013 HOEPA Final Rule).3 The 2013 

TILA Servicing Final Rule and the 2013 

RESPA Servicing Final Rule are referred 

to collectively as the 2013 Mortgage 

Servicing Final Rules. 

The Bureau is clarifying compliance 

requirements in relation to bankruptcy 

law and the Fair Debt Collection 

Practices Act (FDCPA) through this rule 

and through a contemporaneous 

compliance bulletin.4 Bankruptcy law 

and the FDCPA both provide significant 

protections for consumers, and each 

strictly limits communications with 

consumers in certain circumstances. 

The Bureau has received a large number 

of questions from servicers about how 

the servicing rules intersect with the 

other two bodies of law generally and in 

particular on how to communicate 

effectively with borrowers in light of 

their status in bankruptcy. While the 

Bureau believes that some of these 

questions can be resolved by 

interpretations now, it has also 

concluded that further analysis and 

study are required to resolve other 

issues that cannot be completed before 

the 2013 Mortgage Servicing Final Rules 

take effect. In those cases, the Bureau is 

creating narrow exemptions from the 

servicing rules to allow time to 

complete the additional analysis. 

Specifically, the Bulletin confirms 

that servicers must comply with certain 

requirements of the Dodd-Frank Act and 

respond to certain borrower 

communications in accordance with the 

Bureau’s servicing rules even after a 

borrower has sent a cease 

communication request under the 

FDCPA. The Bulletin provides a safe 

harbor from liability under the FDCPA 

with regard to such communications. 

Separately in this rule, the Bureau is 

providing exemptions for two other 

servicing communications that are not 

specifically mandated by statute—the 

requirement in § 1026.20(c) for a notice 

of rate change for adjustable-rate 

mortgages (ARMs) and the early 

intervention requirements in 

§ 1024.39—when a borrower has 

properly invoked the FDCPA’s cease 

communication protections. The Bureau 

expects to explore the potential utility 

and application of such requirements in 

comparison to the FDCPA protections in 

a broader debt collection rulemaking. 

The interim final rule also exempts 

servicers from the early intervention 

requirements in § 1024.39 and from the 

periodic statement requirements under 

12 CFR 1026.41 for borrowers while 

they are in bankruptcy. Again, the 

Bureau intends to engage in further 

analysis of how these servicing 

requirements intersect with bankruptcy 

law and how to ensure that servicer 

communications do not confuse 

borrowers regarding their status. 

This interim final rule also amends 

the 2013 HOEPA Final Rule by 

clarifying which federally required 

disclosure must be used in counseling 

under 12 CFR 1026.34(a)(5) for a closedend HOEPA loan not subject to the Real 

Estate Settlement Procedures Act 

(RESPA). The rule replaces language 

that could have been read to require 

provision of the Good Faith Estimate 

(GFE) or successor disclosure under 

RESPA, which are not required for 

transactions not covered by RESPA, and 

instead clarifies that counseling may be 

based on the HOEPA disclosures that 

are required for such transactions 

pursuant to TILA section 129(a) and 

Regulation Z section 1026.32(c). 

This interim final rule also makes two 

technical corrections to Regulation Z, as 

revised by the May Ability-to-Repay and 

Qualified Mortgage Standards Under the 

Truth in Lending Act (May 2013 ATR 

Final Rule),5 Amendments to the 2013 

Mortgage Rules under the Real Estate 

Settlement Procedures Act (Regulation 

X) and the Truth in Lending Act 

(Regulation X) (July 2013 Final Rule 

Amendments to the 2013 Mortgage 

Rules),6 and the Amendments to the 

2013 Mortgage Rules under the Equal 

Credit Opportunity Act (Regulation B), 

Real Estate Settlement Procedures Act 

(Regulation X), and the Truth in 

Lending Act (Regulation Z) (September 

2013 Final Rule Amendments to the 

2013 Mortgage Rules).7 These changes 

correct section 1026.43(e)(4)(ii)(C) and 

comment 32(b)(1)(ii)–4.iii. This rule also 

makes another minor technical 

correction to the September 2013 Final 

Rule Amendments to the 2013 Mortgage 

Rules. 

The Bureau seeks public comment on 

these changes. 

II. Background 

A. Title XIV Rules Under the DoddFrank Act 

In response to an unprecedented cycle 

of expansion and contraction in the 

mortgage market that sparked the most 

severe U.S. recession since the Great 

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


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 62995 

8Sections 1011 and 1021 of the Dodd-Frank Act, 

in title X, the ‘‘Consumer Financial Protection Act,’’ 

Public Law 111–203, secs. 1001–1100H, codified at 

12 U.S.C. 5491, 5511. The Consumer Financial 

Protection Act is substantially codified at 12 U.S.C. 

5481–5603. Section 1029 of the Dodd-Frank Act 

excludes from this transfer of authority, subject to 

certain exceptions, any rulemaking authority over a 

motor vehicle dealer that is predominantly engaged 

in the sale and servicing of motor vehicles, the 

leasing and servicing of motor vehicles, or both. 12 

U.S.C. 5519. 

9 Dodd-Frank Act section 1400(c), 15 U.S.C. 1601 

note. 10Consumer Financial Protection Bureau Lays 

Out Implementation Plan for New Mortgage Rules. 

Press Release. Feb. 13, 2013 available at http://

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

11http://www.consumerfinance.gov/regulatoryimplementation. 

12 12 U.S.C. 5581(a)(1). 

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

5481(14) (defining ‘‘Federal consumer financial 

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

and the provisions of title X of the Dodd-Frank Act); 

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

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

include RESPA and TILA), Dodd-Frank section 

1400(b), 15 U.S.C. 1601 note (defining ‘‘enumerated 

consumer laws’’ to certain subtitles and provisions 

of title XIV). 

14 78 FR 6855 (Jan. 31, 2013). 

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

Congress established the Bureau and, 

under sections 1061 and 1100A, 

generally consolidated the rulemaking 

authority for Federal consumer financial 

laws, including the Truth in Lending 

Act (TILA), in the Bureau.8 At the same 

time, Congress significantly amended 

the statutory requirements governing 

mortgages with the intent to restrict the 

practices that contributed to and 

exacerbated the crisis. Under the statute, 

most of these new requirements would 

have taken effect automatically on 

January 21, 2013, if the Bureau had not 

issued implementing regulations by that 

date.9 To avoid uncertainty and 

potential disruption in the national 

mortgage market at a time of economic 

vulnerability, the Bureau issued several 

final rules in a span of less than two 

weeks in January 2013 to implement 

these new statutory provisions and 

provide for an orderly transition. These 

rules included the 2013 HOEPA Final 

Rule, issued on January 10, and the 

2013 Mortgage Servicing Final Rules, 

issued on January 17. 

B. Implementation Plan for New 

Mortgage Rules 

On February 13, 2013, the Bureau 

announced an initiative to support 

implementation of the new mortgage 

rules (Implementation Plan),10 under 

which the Bureau would work with the 

mortgage industry to ensure that the 

2013 Title XIV Final Rules could be 

implemented accurately and 

expeditiously. The Implementation Plan 

included: (1) Coordination with other 

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

publication of additional interpretive 

guidance and corrections or 

clarifications of the new rules as 

needed; (4) publication of readiness 

guides for the new rules; and (5) 

education of consumers on the new 

rules. 

This interim final rule makes narrow 

amendments to the 2013 Title XIV Final 

Rules and three technical corrections to 

the September 2013 Final Rule 

Amendments to the 2013 Mortgage 

Rules. The Bureau is proceeding by 

interim final rule to provide immediate 

certainty regarding compliance to the 

small sub-markets affected. For 

information and documents regarding 

other guidance and amendments under 

the Implementation Plan, please visit 

the Bureau’s Regulatory Implementation 

Web page.11

III. Legal Authority 

The Bureau is issuing this interim 

final rule pursuant to its authority under 

RESPA, TILA and the Dodd-Frank Act. 

Section 1061 of the Dodd-Frank Act 

transferred to the Bureau the ‘‘consumer 

financial protection functions’’ 

previously vested in certain other 

Federal agencies, including the Board of 

Governors of the Federal Reserve 

System (Board) and the Department of 

Housing and Urban Development 

(HUD). The Dodd-Frank Act defines 

‘‘consumer financial protection 

function’’ to include ‘‘all authority to 

prescribe rules or issue orders or 

guidelines pursuant to any Federal 

consumer financial law, including 

performing appropriate functions to 

promulgate and review such rules, 

orders, and guidelines.’’ 12 RESPA, 

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

certain subtitles and provisions of title 

XIV of the Dodd-Frank Act are Federal 

consumer financial laws.13 Accordingly, 

the Bureau has authority to issue 

regulations pursuant to RESPA, TILA, 

title X, and the enumerated subtitles 

and provisions of title XIV. 

The Bureau is amending the 2013 

HOEPA Final Rule and the 2013 

Mortgage Servicing Final Rules with 

this interim final rule. The interim final 

rule relies on the broad rulemaking 

authority specifically granted to the 

Bureau by RESPA sections 6(k), 6(j)(3) 

and 19(a), and by TILA sections 105(a) 

and 105(f), and title X of the DoddFrank Act. Additionally, the interim 

final rule relies on the rulemaking 

authority used in connection with the 

2013 HOEPA Final Rule,14 including 

RESPA section 19(a), TILA section 

129(p), and the specific rulemaking 

provision for the pre-loan counseling 

requirement, at TILA section 129(u)(3). 

IV. Administrative Procedure Act 

To the extent that notice and 

comment would otherwise be required, 

the Bureau finds that there is good cause 

to publish this interim final rule 

without notice and comment. See 5 

U.S.C. 553(b)(3)(B). 

First, with respect to the amendments 

of Regulation X section 1024.39 and 

Regulation Z sections 1026.20(c) and 

1026.41, notice and comment is 

impracticable and contrary to the public 

interest. The amendments to these 

sections effectuate narrow exceptions to 

Regulation Z and the 2013 Mortgage 

Servicing Final Rules to facilitate 

compliance with the requirements of 

those rules with respect to the small 

number of borrowers under the 

protection of the Bankruptcy Code or 

provisions of the FDCPA that require 

debt collectors to cease communications 

upon request by the borrower. The 2013 

Mortgage Servicing Final Rules, along 

with the other mortgage rules issued by 

the Bureau, implement fundamental 

reforms and important new consumer 

protections mandated by Congress to 

guard against practices that contributed 

to the nation’s most significant financial 

crisis in nearly a century. The 

rulemakings as a whole implicate 

multiple processes for both mortgage 

originations and servicing. Congress 

mandated that a number of the rules be 

issued by January 21, 2013, and that 

they take effect by one year after 

issuance. Consequently, the 2013 

Mortgage Servicing Final Rules, along 

with most of the other mortgage rules 

issued by the Bureau in January 2013, 

will take effect in January 2014. 

Although section 1026.20(c) of 

Regulation Z was not established by the 

new rules, compliance with that preexisting provision must be worked in to 

servicers’ overall compliance strategy 

for January. Because many financial 

institutions lock down their computer 

systems late in the calendar year due to 

high holiday processing volume and the 

need to generate year-end reports, 

institutions have relatively little time to 

institute programming changes before 

the January effective dates. 

If the Bureau were to give advance 

notice of the amendment of these 

sections and even a two-week comment 

period, a rule could not reasonably be 

published in final form until early 

December. Servicers would experience a 

period of uncertainty in which they 

would have to continue to prepare for 

compliance with the original rules in 

case the exemptions were not finalized. 


tkelley on DSK3SPTVN1PROD with RULES
62996 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

15The Bureau has issued guidance to clarify how 

a servicer may comply with the requirements in 

§ 1024.39 to make good faith efforts to establish live 

contact with a borrower in CFPB Bulletin 2013–12, 

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

201310_cfpb_mortgage-servicing_bulletin.pdf. 

16 15 U.S.C. 1692 et seq. 

17See 11 U.S.C. 362 (automatic stay); see also 11 

U.S.C. 524 (effect of discharge). 

This would likely divert resources from 

activities that would have more 

beneficial impacts for consumers. If the 

Bureau adopted the exemptions in 

December, servicers would then be 

forced to change their systems in a rush 

before the effective date, potentially 

leading to severe compliance problems 

and harm to consumers. 

Second, the Bureau finds that the 

notice-and-comment procedure is 

unnecessary for the amendments to 

§§ 1026.32, 1026.43, and 1026.34 and 

related commentary. As discussed more 

fully below in this preamble, the 

amendments correct inadvertent, 

technical errors with respect to these 

sections. First, a rule the Bureau 

adopted in May 2013 included the 

proper version of comment 32(b)(1)(ii)– 

4.iii, but a recent amendment 

erroneously reverted the comment to an 

old version. The Bureau is restoring the 

proper May 2013 version of the 

comment with a minor clarifying 

adjustment to remove an extraneous 

phrase and thereby avoid the 

misinterpretation that the comment is in 

conflict with the regulatory text. The 

Bureau believes that affected members 

of the public, including institutions 

subject to the rule, have understood that 

the removal of the May 2013 version of 

the comment was inadvertent, that the 

May 2013 version of the comment 

should not be understood to conflict 

with the regulatory text, and that the 

Bureau would correct the comment. 

Second, the amendment to section 

1026.43(e)(4)(ii)(C) corrects a similar 

technical error. The July 2013 rule 

included the proper version of section 

1026.43(e)(4)(ii)(C) but a recent 

amendment inadvertently omitted 

language reiterating in the regulation 

text that matters wholly unrelated to 

ability to repay will not be relevant to 

the determination of QM status under 

that provision. No change in the 

standard was intended or made by the 

recent amendment, as is clear from the 

interpretation of that provision 

contained in comment 43(e)(4)–4. 

Finally, the amendment to section 

1026.34(a)(5) corrects a failure to 

address a very narrow category of 

transactions for which the disclosures 

specified in the regulation are not 

required. In the absence of the 

correction, the existing language could 

be read to require new disclosures that 

would be unduly burdensome and 

unsuitable for consumers or simply to 

render the provision impossible to 

comply with for affected transactions. 

The interim final rule corrects the 

inadvertent omission by expressly 

referencing existing disclosures that are 

already required for the affected 

transactions. 

V. Effective Date 

This interim final rule is effective on 

January 10, 2014. As with the 

requirements of the 2013 HOEPA Final 

Rule which it amends, the change to 

§ 1026.34(a)(5) applies to transactions 

for which the creditor received an 

application on or after that date. The 

servicing exemptions provided in this 

rule amending existing Regulation Z 

and the 2013 Mortgage Servicing Rules 

are available for use with any servicing 

account beginning on the effective date. 

The technical corrections to section 

1026.32 and section 1026.43 take effect 

on January 10, 2014. 

VI. Section-by-Section Analysis 

A. Regulation X 

General 

In addition to the clarifications and 

amendments to Regulation X discussed 

below, the Bureau is making one 

correction to an amendatory instruction 

that relates to FR Doc. 2013–22752, 

published on October 1, 2013. 

Section 1024.39 Early intervention 

requirements for certain borrowers 

1024.39(d) Exemptions 

The early intervention requirements 

in § 1024.39 are intended to provide 

delinquent borrowers with 

opportunities to pursue available loss 

mitigation options at the early stages of 

a delinquency by requiring that the 

servicer attempt to make live contact 

with the borrower and to issue a written 

notice. The requirements apply to each 

payment for which the borrower is 

delinquent, although the written notice 

must be provided only once every 180 

days.15 In this interim final rule, the 

Bureau is adding new § 1024.39(d)(1), 

exempting a servicer from the early 

intervention requirements while a 

borrower is a debtor in bankruptcy, and 

new § 1024.39(d)(2), exempting a 

servicer from the early intervention 

requirements when a borrower has 

invoked the cease communication 

provisions under the Fair Debt 

Collections Practices Act (FDCPA).16

The Bureau first proposed the early 

intervention requirements in § 1024.39 

on August 10, 2012. In the preamble to 

the proposed rule, the Bureau noted that 

servicers may be subject to State and 

Federal laws related to debt collection 

practices, such as the FDCPA. In 

addition, the preamble acknowledged 

that the Bankruptcy Code’s automatic 

stay provisions generally prohibit, 

among other things, actions to collect, 

assess, or recover a claim against a 

debtor that arose before the debtor filed 

for bankruptcy.17 The Bureau invited 

comment on whether servicers may 

reasonably question how they could 

comply with the Bureau’s proposal in 

light of those laws. 

Several industry commenters 

expressed concern that the Bureau’s 

rules overlap with and could conflict 

with existing State and Federal law. 

Several commenters requested guidance 

on whether servicers would be required 

to comply with the early intervention 

requirements if the borrower instructed 

the servicer to cease collection efforts, 

not to contact the borrower by 

telephone, or if the borrower refused to 

pay the debt. Several of these 

commenters requested that the Bureau 

include an exemption from the early 

intervention requirements in cases 

involving debt collection or bankruptcy 

law. One industry commenter requested 

that the Bureau clarify whether servicers 

would have immunity from claims of 

harassment or improper conduct under 

the FDCPA. 

With respect to addressing potential 

conflicts between the Bureau’s rules and 

existing State and Federal law as well as 

existing industry practice, commenters 

identified a variety of ways the Bureau 

could provide relief, including by not 

adopting rules that exceed or otherwise 

conflict with existing requirements, 

providing safe harbors (such as by 

clarifying that compliance with existing 

laws and agreements satisfies 

§ 1024.39), adopting more flexible 

standards, providing exemptions, 

including a mechanism in the rule to 

resolve compliance conflicts, or broadly 

preempting State laws. 

On January 17, 2013, the Bureau 

issued the 2013 RESPA Servicing Final 

Rule with early intervention 

requirements in § 1024.39 that included 

a conflicts of law provision specifying 

that servicers are not required to make 

contact with borrowers in a manner that 

may be prohibited by Federal laws, such 

as the FDCPA or the Bankruptcy Code’s 

automatic stay provisions. The Bureau 

also added comment 39(c)–1, addressing 

borrowers in bankruptcy. The comment 

specified, ‘‘Section 1024.39 does not 

require a servicer to communicate with 

a borrower in a manner that would be 

inconsistent with applicable bankruptcy 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 62997 

18See infra note 35; see also In re Duke, 79 F.3d 

43 (7th Cir. 1996) (holding creditor does not violate 

automatic stay when sending ‘‘nonthreatening and 

non-coercive’’ offer to reaffirm Chapter 7 debtor’s 

pre-petition debt); In re Silva, No. 09–02504, 2010 

WL 605578 (Bankr. D. Haw. Feb. 19, 2010) 

(‘‘Nothing in the Bankruptcy Code prevents or 

prohibits a chapter 7 or chapter 13 debtor or its 

secured creditors from entering into 

communications or negotiations about the 

possibility of a loan modification.’’) 

19See, e.g., HUD, Mortgagee Letter 2008–32 (Oct. 

17, 2008) (‘‘[M]ortgagees must, upon receipt of 

notice of a bankruptcy filing, send information to 

debtor’s counsel indicating that loss mitigation may 

be available, and provide instruction sufficient to 

facilitate workout discussions including 

documentation requirements, timeframes and 

servicer contact information . . . . Nothing in this 

mortgagee letter requires that mortgagees make 

direct contact with any borrower under bankruptcy 

protection.’’) (emphasis added) available at http:// 

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

mortgagee/2008ml.cfm; U.S. Dep’t of Treasury, 

Making Home Affordable Program Handbook for 

Servicers of Non-GSE Loans, v.4.3 at 77, 80 (Sept. 

16, 2013) (‘‘Borrowers in active Chapter 7 or 

Chapter 13 bankruptcy cases are eligible for HAMP 

at the servicer’s discretion in accordance with 

investor guidelines, but servicers are not required 

to solicit these borrowers proactively for HAMP 

. . . . Borrowers who have received a Chapter 7 

bankruptcy discharge in a case involving the first 

lien mortgage who did not reaffirm the mortgage 

debt under applicable law are eligible for HAMP 

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

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

sending two written notices to the last address of 

record in addition to the two required written 

notices. . . .’’) (emphasis added) available at 

http://www.makinghomeaffordable.gov/forpartners/understanding-guidelines/Documents/

mhahandbook_43.pdf. 

20See, e.g., Amended General Order Regarding 

Negotiations Between Debtor(s) and Mortgage 

Servicer(s) to Consider Loan Modifications (Bankr. 

D.N.J. July 24, 2009) (‘‘[C]ommunications and/or 

negotiations between debtors and mortgagees/

mortgage servicers about loan modification shall 

not be deemed as a violation of the automatic stay 

. . . . [A]ny such communication or negotiation 

shall not be used by either party against the other 

in any subsequent litigation . . . .’’) available at 

http://www.njb.uscourts.gov/sites/default/files/

general-ordes/2009_07_27_

generalOrderLoanModify2.pdf; Bankr. W.D. Wash. 

R. 4001–2(b) (‘‘A mortgage creditor’s contact with 

the debtor and/or the debtor’s counsel for the 

purposes of negotiating a loan modification shall 

not be considered a violation of the automatic stay 

imposed by 11 U.S.C. 362.’’). While these two 

courts’ rules might permit some communications 

regarding loan modifications, their approach is not 

necessarily generally accepted. 

law or a court order in a bankruptcy 

case. To the extent permitted by such 

law or court order, servicers may adapt 

the requirements of § 1024.39 in any 

manner that would permit them to 

notify borrowers of loss mitigation 

options.’’ In the preamble to the final 

rule, the Bureau stated that it did not 

seek to interpret the Bankruptcy Code 

through this comment, but instead 

intended to indicate that servicers could 

take a flexible approach to complying 

with § 1024.39 for borrowers in 

bankruptcy. 

1024.39(d)(1) Borrowers in bankruptcy 

After publication of the 2013 RESPA 

Servicing Final Rule, industry 

stakeholders expressed continued 

concerns to the Bureau about complying 

with certain servicing requirements for 

borrowers under the protection of 

bankruptcy law. In general, and as 

discussed further below with regard to 

periodic statement requirements, 

servicers asserted that simply providing 

flexibility in accommodating 

bankruptcy law restrictions on 

communications with borrowers was 

not sufficient because they faced a 

substantial legal burden in determining 

when and how bankruptcy law 

provisions applied in the first instance. 

Servicers also expressed concern about 

how to fulfill the servicing rules’ 

requirements in a way that did not 

confuse borrowers with regard to their 

status in bankruptcy and the fact that 

servicers were not attempting to collect 

on accounts. Bankruptcy trustees raised 

similar concerns about the likelihood of 

servicers providing information that 

will be confusing to borrowers/debtors, 

debtor attorneys, and even courts and 

trustees. Specifically, with regard to 

early intervention, industry sought 

additional guidance on whether the 

Bureau would require some attempt at 

compliance even if there was an 

automatic stay and whether servicers 

would be subject to claims by private 

litigants asserting that bankruptcy was 

not an excuse for a servicer’s lack of 

performance under § 1024.39. 

Based on these inquiries, the Bureau 

believes that the potential interactions 

between the § 1024.39 early intervention 

requirements and bankruptcy law 

requirements can be highly varied and 

complex. The Bankruptcy Code itself 

provides a robust set of consumer 

protections for debtors, including 

oversight of debt repayment plans, 

where applicable. However, whether 

certain communications with the 

borrower may violate an automatic stay 

or discharge injunction are fact-specific 

inquiries and can vary depending on the 

Chapter of the Bankruptcy Code at 

issue, the intention of the debtor to 

retain the property, and the frequency 

and detailed contents of the 

communications.18 Uncertainty with 

respect to loss mitigation-related 

communications has led federal 

regulators 19 and several bankruptcy 

courts 20 to issue guidelines or rules for 

servicers on the interaction between 

those communications and bankruptcy 

law. While some sources identified by 

the Bureau suggest that it is permissible 

for servicers to engage in loss mitigation 

negotiations with borrowers who have 

invoked bankruptcy protections, they do 

not address affirmative outreach directly 

to the borrower to solicit discussions 

about loss mitigation options. 

In addition, when a borrower is under 

bankruptcy protections, the benefits of 

continuing early intervention contacts 

may depend on the context. Borrowers 

who became delinquent on their 

mortgage loans prior to filing 

bankruptcy will likely already have 

received early intervention contacts 

from the servicer and thus will already 

be on notice about the availability of 

potential loss mitigation options. In 

such cases, continuing contacts may 

have limited if any utility. And while 

the small group of borrowers who file 

bankruptcy without first becoming 

delinquent on their mortgage loans 

might benefit from information 

regarding the availability of loss 

mitigation information, the Bureau is 

concerned that additional guidance is 

needed to ensure that any early 

intervention contacts communicate 

effectively regarding the borrower’s 

status in bankruptcy and do not instead 

create borrower confusion. 

The Bureau believes that further study 

of these issues is warranted but cannot 

be concluded quickly enough to provide 

further calibration of the requirements 

before January 2014. Therefore, the 

interim final rule adds § 1024.39(d)(1), 

which exempts servicers from the 

requirements of § 1024.39 for a mortgage 

loan while the borrower is a debtor in 

bankruptcy. However, the Bureau is not 

taking any position on whether early 

intervention efforts generally may 

violate an automatic stay or discharge 

injunction and encourages servicers 

who communicate with borrowers in 

bankruptcy about loss mitigation 

options to continue such tailored 

communications so far as bankruptcy 

law permits. The Bureau believes that 

some borrowers facing the complexities 

of bankruptcy could benefit from 

receiving loss mitigation information in 

some tailored form that is appropriate to 

their circumstances. 

Because of the new exemption 

addressing bankruptcy in 

§ 1024.39(d)(1), the interim final rule 

removes comment 39(c)–1 and 

incorporates it into new commentary in 

§ 1024.39(d)(1)–2, as discussed below. 

Comment 39(d)(1)–1 clarifies that the 

exemption begins once a petition has 

been filed commencing a case under 

Title 11 of the United States Code in 

which the borrower is a debtor. 

Comment 39(d)(1)–2 clarifies that with 

respect to any portion of the mortgage 

debt that is not discharged, a servicer 

must resume compliance with § 1024.39 

after the first delinquency that follows 

the earliest of any of three potential 

outcomes in the borrower’s bankruptcy 


tkelley on DSK3SPTVN1PROD with RULES
62998 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

21 15 U.S.C. 1692c(c). 22The new mortgage servicing rules that do not 

exempt servicers based on their status as debt 

collectors under the FDCPA are, in Regulation X, 

12 CFR 1024.35 (error resolution), 1024.36 (requests 

for information), 1024.37 (force-place insurance), 

and 1024.41 (loss mitigation) and, in Regulation Z, 

12 CFR 1026.20(d) (ARM initial interest rate 

adjustment) and 1026.41 (periodic statement). See 

CFPB Bulletin 2013–12, available at http://

files.consumerfinance.gov/f/201310_cfpb_mortgageservicing_bulletin.pdf. Note that, elsewhere in this 

interim final rule, the Bureau is issuing an 

exemption for § 1026.20(c) similar to the one for 

§ 1024.39. 

23 12 CFR 1026.20(c), as revised by 78 FR 10901 

(Feb. 14, 2013) (2013 TILA Servicing Final Rule). 24 15 U.S.C. 1692 et seq. 25 15 U.S.C. 1692c(c). 

case: (i) the case is dismissed, (ii) the 

case is closed, or (iii) the borrower 

receives a discharge under 11 U.S.C. 

§§ 727, 1141, 1228, or 1328. However, 

this requirement to resume compliance 

does not require a servicer to 

communicate with a borrower in a 

manner that would be inconsistent with 

applicable bankruptcy law or a court 

order in a bankruptcy case. To the 

extent permitted by such law or court 

order, a servicer may adapt the 

requirements of § 1024.39 in any 

manner believed necessary. Compliance 

with § 1024.39 is not required for any 

portion of the mortgage debt that is 

discharged under applicable provisions 

of the U.S. Bankruptcy Code. If the 

borrower’s bankruptcy case is revived— 

for example if the court reinstates a 

previously dismissed case, reopens the 

case, or revokes a discharge—the 

servicer is again exempt from the 

requirement in § 1024.39. Comment 

39(d)(1)–3 clarifies that the exemption 

applies when any of the borrowers who 

are joint obligors with primary liability 

on the mortgage loan is a debtor in 

bankruptcy. 

For the reasons discussed, the Bureau 

is providing this exemption at this time, 

particularly because of the complex 

compliance concerns and the 

impending effective date of the 2013 

RESPA Servicing Final Rule. The 

Bureau will continue to examine this 

issue and may reinstate an early 

intervention requirement with respect to 

borrowers in bankruptcy, but it will not 

reinstate any such requirement without 

notice and comment rulemaking and an 

appropriate implementation period. The 

Bureau solicits comment on the scope of 

the exemption, the triggers for meeting 

the exemption and having to resume 

early intervention, and how the early 

intervention communications might be 

tailored to meet the particular needs of 

borrowers in bankruptcy. The Bureau 

also seeks comment on other factors the 

Bureau should take into consideration 

in determining whether to reinstate any 

type of early intervention requirement 

with respect to borrowers in 

bankruptcy. 

Legal Authority. The Bureau uses its 

authority under RESPA sections 6(j)(3) 

and 19(a) to exempt servicers from the 

early intervention requirements in 

§ 1024.39 for a mortgage loan while the 

borrower is a debtor in bankruptcy and 

to adopt related official Bureau 

interpretations in Supplement I to Part 

1024. For the reasons discussed above, 

the Bureau does not believe at this time 

that the consumer protection purposes 

of RESPA would be furthered by 

requiring servicers to comply with 

§ 1024.39 for a mortgage loan while the 

borrower is a debtor in bankruptcy. 

1024.39(d)(2) Fair Debt Collection 

Practices Act 

A servicer of defaulted mortgage loans 

may also be a debt collector under the 

FDCPA. The FDCPA grants debtors the 

right generally to bar debt collectors 

from communicating with them 

regarding the debt by sending a written 

‘‘cease communication’’ request.21 As 

discussed above, the Bureau is 

separately issuing a bulletin that 

concludes that the FDCPA ‘‘cease 

communication’’ provision does not 

override servicers’ obligations to have 

various communications with borrowers 

that are specifically mandated by the 

Dodd-Frank Act or to respond to certain 

borrower-initiated communications in 

accordance with the 2013 Mortgage 

Servicing Final Rules.22 However, 

because the early intervention 

requirements are neither statutorily 

mandated nor borrower-initiated, the 

interplay between the early intervention 

requirements and the ‘‘cease 

communication’’ provision of the 

FDCPA is less clear than it is with the 

servicing provisions discussed in the 

bulletin. 

Therefore, new § 1024.39(d)(2) 

exempts a servicer that is a debt 

collector under the FDCPA with respect 

to a borrower from the requirements of 

§ 1024.39 after the borrower has 

exercised this ‘‘cease communication’’ 

right. The exemption provides a servicer 

that is a debt collector under the FDCPA 

with certainty that it has no obligations 

under § 1024.39 with regard to a 

borrower who has followed FDCPA 

procedure and instructed the servicer/

debt collector to stop communicating 

with the borrower about the debt. The 

Bureau is not, however, making a 

determination as to the legal status of 

intervention efforts following receipt of 

proper cease communication requests, 

and servicers are encouraged to pursue 

loss mitigation options to the extent that 

the FDCPA permits. 

The CFPB will be exploring the legal 

issues and practical benefits of requiring 

some type of early intervention to notify 

borrowers of the potential availability of 

loss mitigation options, in an upcoming 

rulemaking on debt collection. 

Balancing the rights of debtors to protect 

themselves against certain debt collector 

practices with the consumer protections 

afforded by servicer-borrower contact 

that may lead to the resolution of 

borrower default is more appropriately 

addressed in the broader context of a 

notice-and-comment rulemaking. For 

this reason, the interim final rule revises 

§ 1024.39 to add the exemption 

discussed above and provide clarity to 

stakeholders, but the Bureau notes that 

the future rulemaking on debt collection 

may alter or eliminate this exemption. 

Legal Authority. The Bureau uses its 

authority under RESPA sections 6(j)(3) 

and 19(a) to exempt a servicer that is a 

debt collector pursuant to the FDCPA 

with regard to a mortgage loan from the 

early intervention requirements in 

§ 1024.39 when a borrower has 

exercised the ‘‘cease communication’’ 

right under the FDCPA prohibiting the 

servicer/debt collector from 

communicating with the borrower 

regarding the debt. For the reasons 

discussed above, the Bureau believes at 

this time that the consumer protection 

purposes of RESPA would not be 

furthered by requiring compliance with 

§ 1024.39 at a time when a borrower has 

specifically requested the servicer/debt 

collector to stop communicating with 

the borrower about the debt. 

B. Regulation Z 

Section 1026.20 Disclosure 

Requirements Regarding PostConsummation Events 

20(c) Rate Adjustments With a 

Corresponding Change in Payment 

20(c)(1)(ii) Exemptions 

20(c)(1)(ii)(C) 

In this interim final rule, the Bureau 

is adding a third exemption to 

§ 1026.20(c), the regulation requiring 

disclosures to consumers with 

adjustable-rate mortgages (ARMs) each 

time an interest rate adjustment causes 

a corresponding change in payment.23

Servicers of defaulted mortgage loans 

may be debt collectors under the 

FDCPA.24 As discussed above, the 

FDCPA grants debtors the right 

generally to bar debt collectors from 

communicating with them by sending a 

written ‘‘cease communication’’ 

request.25 New § 1026.20(c)(1)(ii)(C) 

exempts servicers, creditors and 

assignees on an ARM from the 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 62999 

26The new mortgage servicing rules that do not 

exempt servicers based on their status as debt 

collectors under the FDCPA are, in Regulation X, 

12 CFR 1024.35 (error resolution), 1024.36 (requests 

for information), 1024.37 (force-place insurance), 

and 1024.41 (loss mitigation) and, in Regulation Z, 

12 CFR 1026.20(d) (ARM initial interest rate 

adjustment) and 1026.41 (periodic statement). See 

CFPB Bulletin 2013–12, available at http://

files.consumerfinance.gov/f/201310_cfpb_mortgageservicing_bulletin.pdf. Note that, elsewhere in this 

interim final rule, the Bureau is issuing an 

exemption for § 1024.39 similar to the one for 

§ 1026.20(c). 

27 Dodd-Frank Act section 1433(e), TILA section 

129(u), 15 U.S.C. 1639(u). 

28The Bureau notes that the adoption of the 

forthcoming TILA/RESPA integrated disclosure, 

required by Dodd-Frank Act section 1098, will not 

affect this requirement. The new Loan Estimate 

integrated disclosure will satisfy the requirement 

for a good faith estimate under RESPA section 5(c), 

and will be provided prior to counseling on closedend RESPA transactions. 

29See 12 CFR 1024.2(b). 

requirements of § 1026.20(c) when the 

servicer for that ARM is a debt collector 

under the FDCPA and the consumer has 

exercised this ‘‘cease communication’’ 

right. 

As discussed above, the Bureau is 

separately issuing a bulletin that 

concludes that the FDCPA ‘‘cease 

communication’’ provision does not 

override servicers’ obligations to have 

various communications with borrowers 

that are specifically mandated by the 

Dodd-Frank Act or to respond to certain 

borrower-initiated communications in 

accordance with the 2013 Mortgage 

Servicing Final Rules.26 However, 

because the notice requirements of 

§ 1026.20(c) are neither statutorily 

mandated nor borrower-initiated, the 

interplay between those requirements 

and the ‘‘cease communication’’ 

provision of the FDCPA is less clear 

than it is with the servicing provisions 

discussed in the bulletin. 

Therefore, new § 1026.20(c)(1)(ii)(C) 

exempts servicers, creditors and 

assignees on an ARM from the 

requirements of § 1026.20(c) when the 

servicer for that ARM is a debt collector 

under the FDCPA and the consumer has 

exercised this ‘‘cease communication’’ 

right. The exemption provides a servicer 

that is a debt collector under the FDCPA 

with certainty that it has no obligations 

under § 1026.20(c) with regard to a 

borrower who has followed FDCPA 

procedure and instructed the servicer/

debt collector to stop communicating 

with the borrower about the debt. The 

Bureau is not, however, making a 

determination as to the legal status of 

§ 1026.20(c) requirements following 

receipt of proper cease communication 

requests, and servicers are encouraged 

to provide ARM adjustment notices to 

the extent that the FDCPA permits. 

The CFPB will be exploring the legal 

issues and practical benefits of requiring 

some form of § 1026.20(c) notice 

following a cease communication 

request, in an upcoming rulemaking on 

debt collection. Balancing the rights of 

debtors to protect themselves against 

certain debt collector practices with the 

consumer protection afforded by timely 

notice of interest rate and payment 

adjustments is more appropriately 

addressed in the broader context of a 

notice-and-comment rulemaking. For 

this reason, the interim final rule revises 

§ 1026.20(c) to add the exemption 

discussed above and provide clarity to 

stakeholders, but the Bureau notes that 

the future rulemaking on debt collection 

may alter or eliminate this exemption. 

Legal Authority. The Bureau uses its 

authority under TILA section 105(a) to 

provide an exemption from the ARM 

disclosures required by § 1026.20(c) 

when a servicer that is a debt collector 

pursuant to the FDCPA with regard to 

an adjustable-rate mortgage loan 

receives a ‘‘cease communication’’ 

notice. For the reasons discussed above, 

the Bureau believes this exemption is 

necessary and proper under TILA 

section 105(a) to effectuate the purposes 

of and to facilitate compliance with 

TILA. 

Section 1026.32 Requirements for 

Certain High-Cost Mortgages 

32(b) Definitions 

32(b)(1) 

This interim final rule makes a 

technical correction to comment 

32(b)(1)(ii)–4.iii, as revised by the May 

2013 ATR Final Rule and the September 

2013 Final Rule Amendments to the 

2013 Mortgage Rules. Among other 

things, the May 2013 ATR Final Rule 

substantially revised § 1026.32(b)(1)(ii) 

and, with it, comment 32(b)(1)(ii)–4. 

However, the September 2013 Final 

Rule Amendments to the 2013 Mortgage 

Rules inadvertently replaced comment 

32(b)(1)(ii)–4.iii with the comment 

language that was in place before the 

May 2013 ATR Final Rule revision. This 

rule restores the May 2013 language. 

This rule also makes a minor 

adjustment to the May 2013 language to 

remove an extraneous reference to 

compensation paid by ‘‘a consumer.’’ 

Comment 32(b)(1)(ii)–4.iii is intended to 

focus on how compensation paid by a 

creditor to a loan originator is included 

in the calculation of points and fees. 

The reference to compensation paid by 

‘‘a consumer’’ in this particular context 

is not relevant and could have been 

misread to suggest that mortgage broker 

compensation already included in the 

points and fees calculation under 

§ 1026.32(b)(1)(i) should be counted 

again under § 1026.32(b)(1)(ii). Such an 

interpretation would not have been 

consistent with § 1026.32(b)(1)(ii)(A), as 

both the regulatory text and comment 

32(b)(1)–4.i make plain. This rule makes 

the technical correction of removing the 

phrase ‘‘consumer or’’ in comment 

32(b)(1)(ii)–4.iii to avoid such potential 

confusion. 

Section 1026.34 Prohibited acts or 

practices in connection with high-cost 

mortgages 

34(a) Prohibited acts or practices for 

high-cost mortgages 

34(a)(5) Pre-loan counseling 

The Dodd-Frank Act provides that a 

creditor shall not extend a high-cost 

mortgage to a consumer without 

obtaining certification from an approved 

housing counselor that the consumer 

has received counseling on the 

advisability of the mortgage.27 The 

Dodd-Frank Act also requires that (1) 

the counselor not be employed by or 

affiliated with the creditor; and (2) the 

counselor not certify that a consumer 

has received counseling unless the 

consumer has received the appropriate 

required disclosures. The statutory 

section requiring pre-loan counseling 

authorizes the Bureau to prescribe 

regulations to carry out the requirement. 

The Bureau implemented the pre-loan 

counseling requirement in 

§ 1026.34(a)(5) of the 2013 HOEPA Final 

Rule. In order to ensure that a consumer 

would receive useful counseling on the 

advisability of the particular loan 

offered, § 1026.34(a)(5)(ii) required that 

the counseling occur after the consumer 

receives the initial disclosure under 

RESPA (currently the GFE 28), or the 

TILA disclosures for open-end credit 

under Regulation Z section 1026.40. 

However, the rule inadvertently failed 

to address a very narrow category of 

closed-end transactions that are neither 

covered by RESPA nor subject to the 

disclosures for open-end credit under 

Regulation Z. These other high-cost 

loans are typically secured by 

manufactured housing but do not 

involve residential real property, and 

therefore are not federally related 

mortgage loans subject to RESPA.29

Such loans also are not covered by 

Regulation Z section 1026.40. 

Consequently, § 1026.34(a)(5) could be 

read to make such closed-end, nonRESPA transactions impossible, or to 

require a RESPA or open-end 

disclosures for transactions that would 

otherwise not require such disclosures 

and for which such disclosures would 


tkelley on DSK3SPTVN1PROD with RULES
63000 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

30 ‘‘Servicer’’ is defined for purposes of § 1026.41 

as including the creditor, assignee or servicer. To 

increase readability, this interim final rule also uses 

the term servicer in the preamble to describe those 

same entities covered by § 1026.41. 

31The Bureau has addressed the concern about 

the relationship between the periodic statement 

requirements and the FDCPA in CFPB Bulletin 

2013–12, available at http://

files.consumerfinance.gov/f/201310_cfpb_mortgageservicing_bulletin.pdf. 

32See 11 U.S.C. 362(a)(6) (prohibiting ‘‘any act to 

collect, assess, or recover a claim against the debtor 

that arose before the commencement of the case 

under this title’’). 

33See 11 U.S.C. 524(a)(2)–(3) (discharge ‘‘operates 

as an injunction against the commencement or 

continuation of an action, the employment of 

process, or an act, to collect . . . .’’); but see 11 

U.S.C. 524(j) (exception from 11 U.S.C. 524(a)(2) 

injunction for ‘‘an act by a creditor that is the 

holder of a secured claim, if—(1) such creditor 

retains a security interest in real property that is the 

principal residence of the debtor; (2) such act is in 

the ordinary course of business between the 

creditor and the debtor; and (3) such act is limited 

to seeking or obtaining periodic payments 

associated with a valid security interest in lieu of 

pursuit of in rem relief to enforce the lien.’’). 

34See, e.g., In re Brown, 481 B.R. 351, 361 (Bankr. 

W.D. Pa. 2012) (Statements without a bankruptcy 

disclaimer sent after a Chapter 7 discharge of the 

mortgage debt that ‘‘provide the amount of the 

payment and when it is due, a late charge if the 

payment is not received by a certain date, and the 

past due amount’’ were found to ‘‘seek payment 

from the Debtor and violate the discharge 

injunction.’’); In re Joens, No. 03–02077, 2003 WL 

22839822 at *2 (Bankr. N.D. Iowa Nov. 21, 2003) 

(Statements including a bankruptcy disclaimer sent 

to debtors in a Chapter 7 case who stated their 

intent to surrender the home violated the automatic 

stay. ‘‘Only if a Chapter 7 debtor’s statement of 

intention indicates the intent to continue to make 

payments and retain property may a creditor 

continue to send monthly statements 

postpetition.’’); In re Draper, 237 B.R. 502, 506 

(Bankr. M.D. Fla. 1999) (Statements including a 

bankruptcy disclaimer sent to a debtor in a Chapter 

13 case violated the automatic stay because ‘‘[t]he 

only credible reason to send such invoices on a 

monthly basis is to try to collect payments from 

debtors protected by the automatic stay.’’). 

be unduly burdensome and unsuitable 

for consumers. 

To address these concerns, this 

interim final rule amends 

§ 1026.34(a)(5) to require that 

counseling for high-cost loans that are 

not covered by either RESPA or section 

1026.40 must occur after the consumer 

receives the HOEPA disclosure required 

under § 1026.32(c). The interim final 

rule clarifies that RESPA or open-end 

disclosures are not required for these 

transactions. 

The Bureau notes that the HOEPA 

disclosures are not required to be 

provided until three business days 

before consummation of the loan, which 

may cause some difficulties in obtaining 

the counseling and in ensuring that 

consummation is not unnecessarily or 

unduly delayed. Therefore, new 

comment 34(a)(5)(ii)–2 states that 

creditors are encouraged but not 

required to provide the disclosures in 

§ 1026.32(c) earlier than three business 

days before consummation in order to 

facilitate the counseling and timely 

consummation of covered transactions. 

In addition, conforming changes have 

been made to comment 34(a)(5)(ii)–1, 

renumbered comment 34(a)(5)(ii)–3 and 

comment 34(a)(5)(iv)–1. 

The Bureau seeks comment on this 

provision of the interim final rule and 

whether it ensures that consumers can 

both receive meaningful counseling 

based on disclosures of their loan terms 

and proceed with consummation in a 

timely manner. The Bureau also solicits 

comment on any burdens the interim 

final rule imposes on industry and how 

such burdens could be mitigated, 

keeping in mind the consumer benefits 

of timely and meaningful counseling. 

The Bureau is also making a small 

technical correction to comment 

34(a)(5)(v)–1. 

Section 1026.41 Periodic Statements for 

Residential Mortgage Loans 

41(e) Exemptions 

41(e)(5) Consumers in bankruptcy 

Dodd-Frank Act section 1420 

established TILA section 128(f) 

requiring periodic statements for 

mortgage loans. On January 17, 2013, 

the Bureau issued the 2013 TILA 

Servicing Final Rule implementing the 

periodic statement requirements and 

exemptions in § 1026.41. The periodic 

statements required in § 1026.41 are 

intended to provide consumers with 

useful information about the amounts 

they have paid as well as the amounts 

they owe and other information. In this 

interim final rule, the Bureau is adding 

new § 1026.41(e)(5), exempting a 

servicer 30 from the periodic statement 

requirements in § 1026.41 for a mortgage 

loan while the consumer is a debtor in 

bankruptcy. 

On August 10, 2012, the Bureau 

proposed implementing the periodic 

statement requirements and exemptions 

in § 1026.41. The proposed rule and 

preamble did not specifically address 

any relationship between the periodic 

statement requirements and consumers 

in bankruptcy. The Bureau received 

several comments on the proposed rule 

that presented opposing views about the 

issue. Some consumer advocates felt it 

was essential that statements be 

provided to consumers in bankruptcy to 

ensure they are kept informed on the 

status of their loans and have a record 

of the account, while industry 

commenters insisted that providing 

statements for loans in bankruptcy 

might cause confusion or violate court 

orders or the FDCPA.31 One commenter 

added that if statements must be 

provided to consumers in bankruptcy, 

the statements should be allowed to 

contain any information, disclosures or 

messaging required under bankruptcy 

rules or court orders. 

In the preamble to the 2013 TILA 

Servicing Final Rule, the Bureau 

acknowledged that the Bankruptcy Code 

might prevent attempts to collect a debt 

from a consumer in bankruptcy, but 

stated that it did not believe the 

Bankruptcy Code would prevent a 

servicer from sending a consumer a 

statement on the status of the mortgage 

loan. The Bureau further specified that 

the final rule allows servicers to make 

changes to the periodic statement they 

believe are necessary when a consumer 

is in bankruptcy. Specifically, servicers 

may include a message about the 

bankruptcy and alternatively present the 

amount due to reflect payment 

obligations determined by the 

individual bankruptcy proceeding. 

After publication of the final rule, 

industry stakeholders expressed more 

detailed concerns to the Bureau about 

providing periodic statements to 

consumers under bankruptcy 

protection. The Bureau received 

comments on this issue in response to 

its proposed rules published on May 2, 

2013, and July 2, 2013, even though 

those proposed rules did not address 

periodic statements provided to 

consumers in bankruptcy. One 

commenter expressed support for the 

Bureau’s suggested message language as 

a way to satisfy the requirements of 

§ 1026.41 and bankruptcy law. Most of 

the commenters, however, expressed 

continued concerns about potential 

conflicts with bankruptcy law and 

indicated that the periodic statement 

would need to be redesigned for 

consumers in bankruptcy. 

In addition, the Bureau has received 

numerous specific guidance questions 

and requests for clarification about how 

to reconcile the periodic statement 

requirements in the final rule with 

various bankruptcy law requirements. 

Industry stakeholders have expressed 

concerns that bankruptcy courts, under 

certain circumstances, may find 

servicers in violation of an automatic 

stay 32 or discharge injunction 33 if 

servicers provide a periodic statement, 

whether or not it includes a 

disclaimer.34 They have asked for 

guidance on whether and how servicers 

would be able to permit consumers to 

request that they receive no more 

statements. Bankruptcy trustees raised 

similar concerns that sending a periodic 

statement designed to communicate 

information that does not recognize the 

unique character of the Chapter 13 


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35Compare, e.g., In re Zotow, 432 B.R. 252, 259– 

60 (B.A.P. 9th Cir. 2010) (Notice to debtors showing 

an increase to postpetition mortgage payments to 

reflect prepetition escrow arrears ‘‘was 

informational in nature and thus not in violation of 

the stay . . . First, [it] was not in the nature of an 

invoice . . . Second, [the creditor] did not send the 

Notice with a payment coupon or envelope . . . 

Third and last, [the creditor] sent a single Notice 

. . . prior to confirmation of Debtors’ Chapter 13 

plan.’’); and Pearson v Bank of America, No. 3:12– 

cv–00013, 2012 WL 2804826, at *6 (W.D. Va. July 

10, 2012) (Statements with bankruptcy disclaimers 

did not violate the Chapter 7 discharge injunction 

even though the statements also provided 

‘‘principal balances, estimated payments, payment 

instructions, information on how [the creditor] will 

post any payments made, and other remarks that 

could surely be construed, by themselves, as 

attempts to collect an already-discharged debt.’’); 

with, e.g., In re Cousins, 404 B.R. 281, 284, 288 (S.D. 

Ohio 2009) (Statements with the past and current 

balance, ‘‘voluntary payment coupon,’’ and 

bankruptcy disclaimer sent to the debtor whose 

Chapter 13 plan provided for mortgage payments 

through the trustee violated the automatic stay. 

‘‘The fact is that statements containing conflicting 

information like those allegedly sent in this case 

may be confusing to a debtor. Although the 

document states that it is an account statement for 

informational purposes only, it also includes a 

‘current balance’ and a payment coupon.’’); In re 

Draper, 237 B.R. 502, 506 (Bankr. M.D. Fla. 1999) 

(Statements including the amount due, a detachable 

payment coupon, return envelope, and bankruptcy 

disclaimer sent to a debtor in a Chapter 13 case 

whose plan provided for the cure of defaults under 

his mortgage debt violated the automatic stay 

because ‘‘[t]he only credible reason to send such 

invoices on a monthly basis is to try to collect 

payments from debtors protected by the automatic 

stay.’’). See also n re Connor, 366 B.R. 133, 134– 

38 (Bankr. D. Haw. 2007) (Statements with the 

principal balance, amount due, instructions on how 

to make a payment, a perforated, detachable 

payment coupon, return envelope and bankruptcy 

disclaimer did not violate the automatic stay while 

the Chapter 13 plan was pending but did violate the 

automatic stay once the debtor converted to Chapter 

7 and stated his intent to surrender the property. 

‘‘In order to formulate a confirmable chapter 13 

plan, [the debtor] needed to know the amount of his 

mortgage arrears and current payments . . . After 

[the debtor] converted his case to chapter 7 and 

stated his intention to surrender the mortgaged 

property, . . . [he] no longer needed to know the 

status of the mortgage payments. The only purpose 

for sending the monthly statements after that point 

was to induce [the debtor] to make payments on a 

prepetition debt which was dischargeable and has 

now been discharged.’’). 

treatment of mortgages in default may 

arguably violate the automatic stay. 

Industry stakeholders have also asked 

how to comply with several disclosure 

requirements in the periodic statement 

under specific circumstances that can 

arise depending on the type of 

bankruptcy proceeding. For example, 

the Bureau received questions from 

industry and bankruptcy trustees about 

possible consumer confusion depending 

on what ‘‘amount due’’ and ‘‘payment 

due date’’ servicers would disclose in a 

Chapter 13 case that has different prepetition arrearage cure payments and 

post-petition monthly payments, which 

may be due on different dates. Servicers 

also expressed concern about how to 

fulfill the servicing rules’ requirements 

in a way that did not confuse consumers 

with regard to their status in bankruptcy 

and the fact that servicers were not 

attempting to collect on accounts. 

Bankruptcy trustees also raised 

concerns about the likelihood of 

servicers providing information that 

will be confusing to borrowers/debtors, 

debtor attorneys, and even courts and 

trustees. In addition, the Bureau 

received requests to delay the effective 

date of the periodic statement 

requirement with respect to consumers 

in bankruptcy and to exclude those 

consumers from the periodic statement 

requirements. 

Based on the detailed questions 

received, the Bureau believes that the 

potential interactions between the 

§ 1026.41 periodic statement 

requirements and bankruptcy law 

requirements can be highly varied and 

complex. The Bankruptcy Code itself 

provides a robust set of consumer 

protections for debtors, including 

oversight of debt repayment plans, 

where applicable. However, whether 

any periodic statement provided may 

violate an automatic stay or discharge 

injunction are fact-specific inquiries and 

can vary depending on the Chapter of 

the Bankruptcy Code at issue, the 

intention of the debtor to retain the 

property, and the frequency and 

detailed contents of the periodic 

statement provided.35

In addition, when a consumer is 

under bankruptcy protections, the 

benefits of periodic statements may 

depend on the context. The Bureau has 

indicated that servicers may take a 

flexible approach in complying with 

§ 1026.41 for consumers in bankruptcy. 

However, without providing additional 

guidance about how servicers can tailor 

their periodic statements to 

communicate effectively the status of a 

consumer’s loan in light of the 

bankruptcy, it is not clear whether a 

servicer’s tailored periodic statements 

would provide a meaningful benefit for 

that consumer in the form of useful 

information. Indeed, the statements 

could provide that consumer with 

information that may be confusing. 

The Bureau believes that further study 

of these issues is warranted but cannot 

be concluded quickly enough to provide 

further calibration of the requirements 

before January 2014. Therefore, the 

interim final rule exempts servicers 

from the requirements of § 1026.41 for a 

mortgage loan while the consumer is a 

debtor in bankruptcy. However, the 

Bureau is not taking any position on 

whether periodic statements generally 

may violate an automatic stay or 

discharge injunction and does not 

discourage servicers who send tailored 

periodic statements or communications 

to consumers in bankruptcy from 

continuing such communications so far 

as bankruptcy law permits. The Bureau 

still believes that some consumers 

facing the complexities of bankruptcy 

could benefit from receiving 

information in some tailored form of a 

periodic statement that is appropriate to 

their circumstances. 

The interim final rule also adds new 

commentary to § 1026.41(e)(5). 

Comment 41(e)(5)–1 clarifies that the 

exemption begins once a petition has 

been filed commencing a case under 

Title 11 of the United States Code in 

which the consumer is a debtor. 

Comment 41(e)(5)–2 clarifies that with 

respect to any portion of the mortgage 

debt that is not discharged, a servicer 

must resume sending periodic 

statements in compliance with 

§ 1026.41 within a reasonably prompt 

time after the next payment due date 

that follows the earliest of any of three 

potential outcomes in the consumer’s 

bankruptcy case: (i) the case is 

dismissed, (ii) the case is closed, or (iii) 

the consumer receives a discharge under 

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

However, this requirement to resume 

sending periodic statements does not 

require a servicer to communicate with 

a consumer in a manner that would be 

inconsistent with applicable bankruptcy 

law or a court order in a bankruptcy 

case. To the extent permitted by such 

law or court order, a servicer may adapt 

the requirements of § 1026.41 in any 

manner believed necessary. The 

periodic statement is not required for 

any portion of the mortgage debt that is 

discharged under applicable provisions 

of the U.S. Bankruptcy Code. If the 

consumer’s bankruptcy case is 

revived—for example if the court 

reinstates a previously dismissed case, 

reopens the case, or revokes a 

discharge—the servicer is again exempt 

from the requirement in § 1026.41. 

Comment 41(e)(5)–3 clarifies that the 

exemption applies when any consumer 

who is among the joint obligors with 

primary liability on the transaction is a 

debtor in bankruptcy. 

For the reasons discussed, the Bureau 

is providing this exemption at this time, 

particularly because of the complex 

compliance concerns and the 

impending effective date of the 2013 

TILA Servicing Final Rule. The Bureau 

will continue to examine this issue and 

may reinstate a periodic statement 

requirement with respect to consumers 

in bankruptcy, but it will not reinstate 

any such requirement without notice 

and comment rulemaking and an 

appropriate implementation period. The 


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63002 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

36Section 1022(b)(2)(A) of the Dodd-Frank Act, 

12 U.S.C. 5521(b)(2), directs the Bureau, when 

prescribing a rule under the Federal consumer 

financial laws, to consider the potential benefits 

and costs of regulation to consumers and covered 

persons, including the potential reduction of access 

by consumers to consumer financial products or 

services; the impact on insured depository 

institutions and credit unions with $10 billion or 

less in total assets as described in section 1026 of 

the Dodd-Frank Act; and the impact on consumers 

in rural areas. Section 1022(b)(2)(B) of the DoddFrank Act directs the Bureau to consult with 

appropriate prudential regulators or other Federal 

agencies regarding consistency with prudential, 

market, or systemic objectives that those agencies 

administer. 

37The interim final rule also restores the proper 

version of § 1026.43(e)(4)(ii)(C), as revised in the 

July 2013 Final Rule Amendments to the 2013 

Mortgage Rules, which was inadvertently changed 

in the September 2013 Final Rule Amendments to 

the 2013 Mortgage Rules. No change was intended 

or made by the September amendment, as is clear 

from the interpretation of § 1026.43(e)(4)(ii)(C) 

contained in the commentary. Nevertheless, as 

compared to the baseline established by the 

September amendment, the revision made by the 

interim final rule may benefit consumers and 

covered persons by reducing compliance costs. 

Bureau solicits comment on the scope of 

the exemption, the triggers for meeting 

the exemption and having to resume 

sending periodic statements, and how 

the content of the periodic statement 

might be tailored to meet the particular 

needs of consumers in bankruptcy. The 

Bureau also seeks comment on other 

factors it should take into consideration 

in determining whether to reinstate any 

type of periodic statement requirement 

with respect to consumers in 

bankruptcy. 

Legal Authority. The Bureau uses its 

authority under TILA sections 105(a) 

and (f) and Dodd-Frank Act section 

1405(b) to exempt servicers from the 

requirement in TILA section 128(f) to 

provide periodic statements for a 

mortgage loan while the consumer is a 

debtor in bankruptcy and to adopt 

related official Bureau interpretations in 

Supplement I to Part 1026. For the 

reasons discussed above, the Bureau 

believes this exemption is necessary and 

proper under TILA section 105(a) to 

facilitate compliance. In addition, 

consistent with TILA section 105(f) and 

in light of the factors in that provision, 

the Bureau believes that imposing the 

periodic statement requirement for 

consumers in bankruptcy may not 

currently provide a meaningful benefit 

to those consumers in the form of useful 

information. Consistent with DoddFrank Act section 1405(b), the Bureau 

also believes that the modification of the 

requirements in TILA section 128(f) to 

provide this exemption is in the interest 

of consumers and in the public interest. 

Section 1026.43 Minimum standards 

for transactions secured by a dwelling 

43(e) Qualified mortgages 

43(e)(4) Qualified mortgage defined— 

special rules 

43(e)(4)(ii)(C) 

The September 2013 Final Rule 

Amendments to the 2013 Mortgage 

Rules inadvertently replaced the 

language at § 1026.43(e)(4)(ii)(C) as 

revised in July with the earlier version 

of the language. This rule restores the 

language as revised in July. 

VII. Section 1022(b)(2) of the DoddFrank Act 

A. Overview 

The Bureau has conducted an analysis 

of the potential benefits, costs, and 

impacts of the interim final rule.36 The 

Bureau has consulted, or offered to 

consult with, the prudential regulators, 

SEC, HUD, FHFA, the Federal Trade 

Commission, and the Department of the 

Treasury, including regarding 

consistency with any prudential, 

market, or systemic objectives 

administered by such agencies. 

As noted above, the interim final rule 

makes amendments to the 2013 RESPA 

Servicing Final Rule, 2013 TILA 

Servicing Final Rule, 2013 HOEPA Final 

Rule, and makes two technical 

corrections to Regulation Z and the 

commentary as revised by the May 2013 

ATR Final Rule, the July 2013 Final 

Rule Amendments to the 2013 Mortgage 

Rules, and the September 2013 Final 

Rule Amendments to the 2013 Mortgage 

Rules. These changes clarify, correct, or 

amend provisions or commentary on (1) 

The scope of the requirement to engage 

in early intervention with delinquent 

borrowers under 12 CFR 1024.39, (2) the 

scope of the requirement to provide a 

notice to consumers with adjustable-rate 

mortgages when an interest rate 

adjustment causes a corresponding 

change in payment under 12 CFR 

1026.20, (3) compensation to be 

included in points and fees for loan 

originators that are not employees of the 

creditor, (4) the federally required 

disclosure that must be used in pre-loan 

counseling required under 12 CFR 

1026.34(a)(5) for a closed-end HOEPA 

loan not subject to RESPA, and (5) the 

scope of the requirement to provide a 

periodic statement under 12 CFR 

1026.41.37

B. Potential Benefits and Costs to 

Consumers and Covered Persons 

Compared to the baseline established 

by the September 2013 Final Rule 

Amendments to the 2013 Mortgage 

Rules (for (3)) or the baseline 

established by the final rules issued in 

January 2013 (for (1), (2), (4) and (5)), 

the Bureau believes that the interim 

final rule generally reduces burden on 

covered persons. The impact on 

consumers is nuanced, as explained 

above and discussed further below, but 

there are benefits to consumers 

considering certain high-cost loans. 

The interim final rule adds a new 

provision § 1024.39(d)(1) which 

exempts a servicer from the early 

intervention requirements in § 1024.39 

for a mortgage loan while the borrower 

is a debtor in bankruptcy. The Bureau 

is adding this exemption in light of 

detailed questions received since 

issuing the 2013 RESPA Servicing Final 

Rule concerning potential conflicts 

between this provision and bankruptcy 

law and concerning how to tailor 

servicing communications for borrowers 

who have invoked bankruptcy 

protections. This exemption will obviate 

the need for servicers to analyze their 

§ 1024.39 early intervention activities to 

account for the requirements of 

bankruptcy law and to provide 

§ 1024.39 early intervention activities 

consistent with the requirements of 

bankruptcy law. The new provision 

therefore reduces burden on servicers. 

The impact on borrowers of the 

exemption is less clear in light of the 

continued uncertainty expressed by 

servicers about how to comply with 

both the early intervention requirement 

and bankruptcy law and because the 

Bureau cannot at this time provide 

guidance to servicers about how to 

comply. As a result, there is significant 

uncertainty regarding the impact of the 

early intervention activities that would 

have been provided under the baseline 

rule if any on borrowers who were 

debtors in bankruptcy and therefore 

significant uncertainty regarding the 

impact of the exemption. For example, 

borrowers might not have received 

significant benefit under the baseline 

rule, either because servicers 

determined that early intervention 

contacts were prohibited by bankruptcy 

law or because the contacts confused 

borrowers regarding the status of their 

accounts, in which case the exemption 

imposes little if any cost on these 

borrowers. The Bureau will continue to 

examine this issue. 

The interim final rule also adds a new 

provision § 1024.39(d)(2) which 

exempts a servicer that is a debt 

collector under the FDCPA with respect 

to a borrower who has exercised his or 

her ‘‘cease communication’’ right under 

the FDCPA from the requirements of 

§ 1024.39. This exemption will obviate 

the need for servicers to analyze their 

§ 1024.39 early intervention activities to 

account for this requirement of the 


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Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 63003 

FDCPA and to provide § 1024.39 early 

intervention activities consistent with 

this requirement of the FDCPA. The 

new provision therefore reduces burden 

on servicers. 

The impact on borrowers of the 

exemption is less clear in light of 

continued uncertainty about how 

servicers would have complied with 

both the early intervention requirement 

and the FDCPA. As a result, there is 

uncertainty regarding the impact of the 

early intervention activities if any that 

would have been provided under the 

baseline rule on borrowers who had 

exercised their ‘‘cease communication’’ 

right and therefore uncertainty 

regarding the impact of the exemption. 

For example, a borrower might benefit 

from certain types of early intervention 

notwithstanding a request that the 

servicer/debt collector stop 

communicating with the borrower about 

the debt. If such early intervention 

would have been provided under the 

baseline rule, then the exemption 

imposes a cost on these borrowers. 

Balancing protections provided by early 

intervention against the protections 

provided by the ‘‘cease communication’’ 

right requires a complex analysis more 

appropriate in the broader context of a 

separate rulemaking on debt collection. 

The Bureau will continue to examine 

this issue. 

The interim final rule adds a new 

provision § 1026.20(c)(1)(ii)(C) which 

exempts a servicer who is a debt 

collector under the FDCPA with respect 

to a borrower who has an adjustable rate 

mortgage from the requirement to 

provide a notice when an interest rate 

adjustment causes a corresponding 

change in payment if the borrower has 

exercised his or her ‘‘cease 

communication’’ right. As explained in 

the 2013 TILA Servicing Final Rule, this 

disclosure modified an existing 

disclosure that was provided when 

interest rate adjustments resulted in a 

corresponding payment change. 

Servicers who were debt collectors 

presumably complied with the ‘‘cease 

communication’’ requirement of the 

FDCPA. Under the baseline, such 

servicers are presumed to have incurred 

the cost of determining whether the 

modifications to the disclosure in the 

2013 TILA Servicing Final Rule changed 

the circumstances under which the 

disclosure needed to be provided to 

consumers who had exercised their 

‘‘cease communication’’ right. The 

exemption does, however, obviate the 

need for servicers to provide the 

§ 1026.20(c) disclosures. The exemption 

therefore reduces burden on servicers. 

The impact on consumers of the 

exemption is less clear given 

uncertainty about the impact of the 

disclosures on consumers who have 

exercised their ‘‘cease communication’’ 

right. Some consumers who, under the 

baseline rule, would have received the 

disclosure after having requested the 

cessation of communication about the 

debt might benefit from not receiving 

the disclosure under the exemption. 

Other consumers might be made worse 

off from not receiving the disclosure 

under the exemption. The Bureau will 

continue to examine this issue. 

The interim final rule restores 

comment 32(b)(1)(ii)–4.iii as it was 

established by the May 2013 ATR Final 

Rule in Supplement I to Part 1026 while 

removing an extraneous phrase that 

might have been misinterpreted to 

conflict with the regulatory text. The 

technical correction in the interim final 

rule conforms the comment to the 

purpose intended by the May 2013 ATR 

Final Rule. Thus, the interim final rule 

restores and clarifies the intended 

comment and may benefit consumers 

and covered persons by reducing 

compliance costs. 

As discussed above, under the 

Bureau’s 2013 HOEPA Final Rule, the 

pre-loan counseling requirement in 

§ 1026.34(a)(5) could be read either to 

make certain closed-end non-RESPA 

transactions impossible or to require 

creditors to provide either a GFE or 

TILA open-end disclosure. The interim 

final rule removes the uncertainty about 

compliance and specifies that the 

counseling requirement in 

§ 1026.34(a)(5) is met after the consumer 

receives the HOEPA disclosure required 

by TILA section 129(a) and Regulation 

Z § 1026.32(c). 

The requirement under the interim 

final rule reduces burden on covered 

persons by clarifying that these closedend non-RESPA transactions are 

allowed and that providers satisfy the 

counseling requirement by providing 

counseling prior to consummation and 

subsequent to furnishing the 

§ 1026.32(c) disclosure. The Bureau 

recognizes that there may be as few as 

three days between the time creditors 

furnish the § 1026.32(c) disclosure and 

consummation of the mortgage loan. As 

a result, some providers may choose to 

offer the § 1026.32(c) disclosure earlier 

to make it more feasible to meet the 

counseling requirement. The Bureau 

believes that any costs associated with 

earlier provision of the § 1026.32(c) 

disclosure are likely less than the cost 

of providing a new GFE or TILA openend disclosure. Consumers benefit from 

the requirements in the interim final 

rule compared to the baseline in which 

the loans within the scope of the 

requirement might not be offered or in 

which consumers would be provided a 

less suitable disclosure as the basis for 

counseling. 

The interim final rule adds a new 

provision § 1026.41(e)(5) which exempts 

a servicer from the periodic statement 

requirements in § 1026.41 for a mortgage 

loan while the consumer is a debtor in 

bankruptcy. The Bureau has made this 

decision in light of detailed questions 

received since issuing the 2013 TILA 

Servicing Final Rule concerning 

potential conflicts between this 

provision and bankruptcy law and 

concerning how to tailor servicing 

communications for borrowers who 

have invoked bankruptcy protections. 

This exemption will obviate the need 

for servicers to analyze and potentially 

adjust the content of the § 1026.41 

periodic statements to account for the 

requirements of bankruptcy law and to 

provide the § 1026.41 periodic 

statements consistent with the 

requirements of bankruptcy law. The 

exemption therefore reduces burden on 

servicers. 

The impact on consumers of the 

exemption is less clear in light of the 

continued uncertainty expressed by 

servicers about how to comply with 

both the periodic statement requirement 

and bankruptcy law and because the 

Bureau cannot at this time provide 

guidance to servicers about how to 

comply. As a result, there is significant 

uncertainty regarding the impact of the 

periodic statements that would have 

been provided under the baseline rule to 

consumers who were debtors in 

bankruptcy and therefore significant 

uncertainty regarding the impact of the 

exemption. For example, borrowers 

might not have received significant 

benefit under the baseline rule, either 

because servicers determined that 

periodic statements were prohibited by 

bankruptcy law or because the 

statements confused borrowers 

regarding the status of their accounts, in 

which case the exemption would 

impose little if any cost on these 

consumers. The Bureau will continue to 

examine this issue. 

The interim final rule is generally not 

expected to have a differential impact 

on depository institutions and credit 

unions with $10 billion or less in total 

assets as described in section 1026 of 

the Dodd-Frank Act. The main 

exception is for those depository 

institutions and credit unions which by 

virtue of their size are more likely to 

already be exempt from the periodic 

statement and early intervention 


tkelley on DSK3SPTVN1PROD with RULES
63004 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

38A creditor, assignee, or servicer is exempt from 

the periodic statement requirement for mortgage 

loans serviced by a small servicer. A small servicer 

is a servicer that either services 5,000 or fewer 

mortgage loans, for all of which the servicer (or an 

affiliate) is the creditor or assignee; or is a Housing 

Finance Agency, as defined in 24 CFR 266.5. See 

the 2013 TILA Servicing Final Rule, section 

1026.41(e). 

39 5 U.S.C. 601 et seq. 

40 5 U.S.C. 553(b)(B); 5 U.S.C. 605(b); 62 FR 

23,538 (April 30, 1997); 66 FR 37,752 (July 19, 

2001); 64 FR 3865 (Jan. 26, 1999). 

requirements.38 These institutions 

derive no additional benefit from the 

exemptions for consumers in 

bankruptcy or (for early intervention 

requirements) from the FDCPA. The 

interim final rule may have some 

differential impacts on consumers in 

rural areas. To the extent that liens on 

a dwelling that are not federally related 

mortgage loans are more prevalent in 

these areas, the provisions on pre-loan 

counseling may have slightly greater 

impacts. As discussed above, costs for 

creditors in these areas should be 

reduced and consumers should benefit 

from increased access to credit without 

any loss in consumer protections. 

Given the nature and limited scope of 

the changes in the interim final rule, the 

Bureau does not believe that the final 

rule will reduce consumers’ access to 

consumer financial products and 

services. Rather, the reduced burden in 

certain changes in this rule should 

generally help to improve access to 

credit. 

VIII. Regulatory Flexibility Act 

Analysis 

The Regulatory Flexibility Act (RFA), 

as amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996, requires each agency to consider 

the potential impact of its regulations on 

small entities including small 

businesses, small governmental units, 

and small not-for-profit organizations.39

The RFA generally requires an agency to 

conduct an initial regulatory flexibility 

analysis (IRFA) and a final regulatory 

flexibility analysis (FRFA) of any rule 

subject to notice-and-comment 

rulemaking requirements, unless the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities. 

The CFPB is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small business 

representatives regarding any rule for 

which an IRFA is required. 

The RFA requirements do not apply 

in cases in which an agency finds good 

cause to issue an interim final rule 

without a notice of proposed 

rulemaking.40 As discussed above in 

Section IV, the CFPB has made such a 

finding. Moreover, the CFPB believes 

that any delay in the issuance of the 

interim final rule would be contrary to 

the interests of small businesses insofar 

as the provisions should generally 

reduce the costs of compliance for 

covered persons. 

Further, this rulemaking is part of a 

series of rules that have revised and 

expanded the regulatory requirements 

for entities that originate or service 

mortgage loans. Because this interim 

final rule generally makes clarifying 

changes to conform these rules to their 

intended purposes, the RFA analyses 

associated with those rules generally 

take into account the impact of the 

changes made by this interim final rule. 

Because these rules qualify as ‘‘a series 

of closely related rules,’’ for purposes of 

the RFA, the Bureau relies on those 

analyses and determines that it has met 

or exceeded the IRFA and FRFA 

requirements. 

In the alternative, the Bureau also 

concludes that the interim final rule 

will not have a significant impact on a 

substantial number of small entities. As 

noted, this interim final rule generally 

clarifies the existing rule and to the 

extent any changes are substantive, 

these changes will not have a material 

impact on small entities. The provision 

related to servicing does not apply to 

many small entities under the small 

servicer exemption (and to the extent 

that they do, small entities will benefit), 

while the provisions related to loan 

originator compensation and counseling 

lower the regulatory burden and 

possible compliance costs for affected 

entities. Therefore, the undersigned 

certifies that the rule will not have a 

significant impact on a substantial 

number of small entities. 

IX. Paperwork Reduction Act 

This interim final rule amends 12 CFR 

part 1024 (Regulation X), which 

implements the Real Estate Settlement 

Procedures Act (RESPA) and 12 CFR 

part 1026 (Regulation Z), which 

implements the Truth in Lending Act 

(TILA). Regulations X and Z currently 

contains collections of information 

approved by OMB. The Bureau’s OMB 

control number for Regulation X is 

3170–0016 and for Regulation Z is 

3170–0015. Regarding new 

§ 1026.41(e)(5) and new § 1024.39(d)(1), 

which respectively exempt servicers 

from the periodic statement 

requirements in § 1026.41 and early 

intervention requirements in § 1024.39 

for homeowners who are debtors in 

bankruptcy, the Bureau cannot 

separately assess the burden associated 

with these consumers from other 

homeowners. Similarly, new 

§ 1024.39(d)(2) and new 

§ 1026.20(c)(1)(ii)(C), which respectively 

exempt servicers from the early 

intervention requirements in § 1024.39 

and the notice requirements in 

§ 1026.20(c) for mortgagors who have 

exercised the ‘‘cease communication’’ 

right under FDCPA, the Bureau cannot 

separately assess the burden associated 

with these consumers from other 

homeowners. Thus, the Bureau has 

determined that this interim final rule 

would not materially alter these 

collections of information nor impose 

any new recordkeeping, reporting, or 

disclosure requirements on the public 

that would constitute collections of 

information requiring approval under 

the Paperwork Reduction Act, 44 U.S.C. 

3501 et seq. 

List of Subjects 

12 CFR Part 1024 

Condominiums, Consumer protection, 

Housing, Mortgage servicing, 

Mortgagees, Mortgages, Reporting and 

recordkeeping requirements. 

12 CFR Part 1026 

Advertising, Consumer protection, 

Mortgages, Reporting and recordkeeping 

requirements, Truth in lending. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Bureau further amends 

Regulation X, 12 CFR part 1024 and 

Regulation Z, 12 CFR part 1026, as 

amended by the final rules published on 

January 30, 2013, at 78 FR 6407, on 

January 31, 2013, at 78 FR 6855, on 

February 14, 2013, at 78 FR 10901 and 

78 FR 10695, on June 12, 2013, at 78 FR 

35429, on July 24, 2013, at 78 FR 44685, 

on July 30, 2013, at 78 FR 45842, and 

on October 1, 2013, at 78 FR 60382, as 

set forth below: 

PART 1024—REAL ESTATE 

SETTLEMENT PROCEDURES ACT 

(REGULATION X) 

■ 1. The authority citation for part 1024 

continues to read as follows: 

Authority: 12 U.S.C. 2603–2605, 2607, 

2609, 2617, 5512, 5532, 5581. 

Subpart C—Mortgage Servicing 

■ 2. Section 1024.39, as added at 78 FR 

10876 (Feb. 14, 2013), is amended by 

adding paragraph (d) to read as follows: 

§ 1024.39 Early intervention requirements 

for certain borrowers. 

* * * * * 

(d) Exemptions—(1) Borrowers in 

bankruptcy. A servicer is exempt from 


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Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 63005 

the requirements of this section for a 

mortgage loan while the borrower is a 

debtor in bankruptcy under Title 11 of 

the United States Code. 

(2) Fair Debt Collections Practices 

Act. A servicer subject to the Fair Debt 

Collections Practices Act (FDCPA) (15 

U.S.C. 1692 et seq.) with respect to a 

borrower is exempt from the 

requirements of this section with regard 

to a mortgage loan for which the 

borrower has sent a notification 

pursuant to FDCPA section 805(c) (15 

U.S.C. 1692c(c)). 

■ 3. In Supplement I to Part 1024, as 

added February 14, 2013, at 78 FR 

10887: 

■ a. Under Section 1024.39—Early 

intervention requirements for certain 

borrowers: 

■ i. The heading Paragraph 39(c) and 

paragraph 1 is removed. 

■ ii. The heading 39(d)(1) Borrowers in 

bankruptcy and paragraphs 1, 2, and 3 

are added. 

Supplement I to Part 1024—Official 

Bureau Interpretations 

* * * * * 

Subpart C—Mortgage Servicing 

* * * * * 

Section 1024.39—Early intervention 

requirements for certain borrowers 

* * * * * 

39(d)(1) Borrowers in bankruptcy. 

1. Commencing a case. The requirements 

of § 1024.39 do not apply once a petition is 

filed under Title 11 of the United States 

Code, commencing a case in which the 

borrower is a debtor. 

2. Obligation to resume early intervention 

requirements. i. With respect to any portion 

of the mortgage debt that is not discharged, 

a servicer must resume compliance with 

§ 1024.39 after the first delinquency that 

follows the earliest of any of three potential 

outcomes in the borrower’s bankruptcy case: 

the case is dismissed, the case is closed, or 

the borrower receives a discharge under 11 

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

this requirement to resume compliance with 

§ 1024.39 does not require a servicer to 

communicate with a borrower in a manner 

that would be inconsistent with applicable 

bankruptcy law or a court order in a 

bankruptcy case. To the extent permitted by 

such law or court order, a servicer may adapt 

the requirements of § 1024.39 in any manner 

believed necessary. 

ii. Compliance with § 1024.39 is not 

required for any portion of the mortgage debt 

that is discharged under applicable 

provisions of the U.S. Bankruptcy Code. If 

the borrower’s bankruptcy case is revived— 

for example if the court reinstates a 

previously dismissed case, reopens the case, 

or revokes a discharge—the servicer is again 

exempt from the requirement in § 1024.39. 

3. Joint obligors. When two or more 

borrowers are joint obligors with primary 

liability on a mortgage loan subject to 

§ 1024.39, the exemption in § 1024.39(d)(1) 

applies if any of the borrowers is in 

bankruptcy. For example, if a husband and 

wife jointly own a home, and the husband 

files for bankruptcy, the servicer is exempt 

from complying with § 1024.39 as to both the 

husband and the wife. 

* * * * * 

■ 4. In FR Doc. 2013–22752 appearing 

on page 60382 in the Federal Register 

on October 1, 2013, the following 

correction is made: 

Supplement I to Part 1024 [Corrected] 

■ On page 60438, in the third column, 

amendatory instruction 11.g is corrected 

to read as follows: 

■ g. Under Section 1024.41—Loss 

Mitigation Procedures: 

■ i. Under Paragraph 41(b)(1), 

paragraph 4 is revised. 

■ ii. Paragraphs 41(b)(2), 41(b)(3), 

41(c)(2)(iii), and 41(c)(2)(iv) are added. 

■ iii. The heading for paragraph 41(c) is 

revised. 

■ iv. The heading Paragraph 41(d)(1) is 

removed. 

■ v. Under Paragraph 41(d), paragraph 

3 is redesignated as paragraph 41(c)(1), 

paragraph 4; and paragraph 4 is 

redesignated as paragraph 3. 

■ vi. Under paragraph 41(d), paragraph 

4 is added. 

■ vii. Under paragraph 41(f), heading 

41(f)(1) is removed, and paragraph 1 is 

redesignated as 41(f) paragraph 1 and 

republished. 

PART 1026—TRUTH IN LENDING 

(REGULATION Z) 

■ 5. The authority citation for part 1026 

continues to read as follows: 

Authority: 12 U.S.C. 2601, 2603–2605, 

2607, 2609, 2617, 5511, 5512, 5532, 5581; 15 

U.S.C. 1601 et seq. 

Subpart C—Closed-End Credit 

■ 6. Section 1026.20, as amended by 78 

FR 11004 (Feb. 14, 2013), is amended 

by: 

■ a. Removing ‘‘or’’ from the end of 

paragraph (c)(1)(ii)(A). 

■ b. Removing the period from the end 

of paragraph (c)(1)(ii)(B) and adding in 

its place ‘‘; or’’. 

■ c. Adding paragraph (c)(1)(ii)(C) to 

read as follows: 

§ 1026.20 Disclosure requirements 

regarding post-consummation events. 

* * * * * 

(c) * * * 

(1) * * * 

(ii) * * * 

(C) The creditor, assignee or servicer 

of an adjustable-rate mortgage when the 

servicer on the loan is subject to the Fair 

Debt Collections Practices Act (FDCPA) 

(15 U.S.C. 1692 et seq.) with regard to 

the loan and the consumer has sent a 

notification pursuant to FDCPA section 

805(c) (15 U.S.C. 1692c(c)). 

* * * * * 

Subpart E—Special Rules for Certain 

Home Mortgage Transactions 

■ 7. Section 1026.34, as amended at 78 

FR 6964 (Jan. 31, 2013), is amended by 

revising paragraphs (a)(5)(ii), 

(a)(5)(iv)(D), and (a)(5)(iv)(E), and 

adding paragraph (a)(5)(iv)(F), to read as 

follows: 

§ 1026.34 Prohibited acts or practices in 

connection with high-cost mortgages. 

(a) * * * 

(5) * * * 

(ii) Timing of counseling. The 

counseling required under this 

paragraph (a)(5) must occur after: 

(A) The consumer receives either the 

disclosure required by section 5(c) of 

the Real Estate Settlement Procedures 

Act of 1974 (12 U.S.C. 2604(c)) or the 

disclosures required by § 1026.40; or 

(B) The consumer receives the 

disclosures required by § 1026.32(c), for 

transactions in which neither of the 

disclosures listed in paragraph 

(a)(5)(ii)(A) of this section are provided. 

* * * * * 

(iv) * * * 

(D) A statement that the consumer(s) 

received counseling on the advisability 

of the high-cost mortgage based on the 

terms provided in either the disclosure 

required by section 5(c) of the Real 

Estate Settlement Procedures Act of 

1974 (12 U.S.C. 2604(c)) or the 

disclosures required by § 1026.40. 

(E) For transactions for which neither 

of the disclosures listed in paragraph 

(a)(5)(ii)(A) of this section are provided, 

a statement that the consumer(s) 

received counseling on the advisability 

of the high-cost mortgage based on the 

terms provided in the disclosures 

required by § 1026.32(c); and 

(F) A statement that the counselor has 

verified that the consumer(s) received 

the disclosures required by either 

§ 1026.32(c) or the Real Estate 

Settlement Procedures Act of 1974 (12 

U.S.C. 2601 et seq.) with respect to the 

transaction. 

* * * * * 

■ 8. Section 1026.41, as added at 78 FR 

11007 (Feb. 14, 2013), is amended by 

adding paragraph (e)(5) to read as 

follows: 

§ 1026.41 Periodic statements for 

residential mortgage loans. 

* * * * * 


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63006 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 

(e) * * * 

(5) Consumers in bankruptcy. A 

servicer is exempt from the 

requirements of this section for a 

mortgage loan while the consumer is a 

debtor in bankruptcy under Title 11 of 

the United States Code. 

■ 9. Section 1026.43(e)(4)(ii)(C), as 

added at 78 FR 6584 (Jan. 30, 2013) and 

amended at 78 FR 44718 (July 24, 2013) 

and 78 FR 60442 (Oct. 1, 2013), is 

revised to read as follows: 

§ 1026.43 Minimum standards for 

transactions secured by a dwelling. 

* * * * * 

(e) * * * 

(4) * * * 

(ii) * * * 

(C) A loan that is eligible to be 

guaranteed, except with regard to 

matters wholly unrelated to ability to 

repay, by the U.S. Department of 

Veterans Affairs; 

* * * * * 

■ 10. In Supplement I to Part 1026, as 

amended at 78 FR 6589, Jan. 30, 2013; 

78 FR 6967, Jan. 31, 2013; 78 FR 11019, 

Feb. 14, 2013; and 78 FR 35504, June 12, 

2013: 

■ A. Under Section 1026.32— 

Requirements for High-Cost Mortgages: 

■ i. Under 32(b) Definitions: 

■ a. Under Paragraph 32(b)(1)(ii), 

paragraph 4.iii is revised. 

■ B. Under Section 1026.34—Prohibited 

Acts or Practices for High-Cost 

Mortgages: 

■ i. Under 34(a)(5) Pre-loan counseling: 

■ a. Under Paragraph 34(a)(5)(ii), 

paragraph 1 is revised, paragraph 2 is 

redesignated as paragraph 3 and revised, 

and new paragraph 2 is added. 

■ b. Under paragraph 34(a)(5)(iv), 

paragraph 1 is revised. 

■ c. Under paragraph 34(a)(5)(v), 

paragraph 1 is revised. 

■ C. Under Section 1026.41—Periodic 

Statements for Residential Mortgage 

Loans: 

■ i. The heading 41(e)(5) Consumers in 

bankruptcy and paragraphs 1, 2, and 3 

are added. 

The additions and revisions read as 

follows: 

Supplement I to Part 1026—Official 

Interpretations 

* * * * * 

Subpart E—Special Rules for Certain 

Home Mortgage Transactions 

* * * * * 

Section 1026.32—Requirements for 

High-Cost Mortgages 

* * * * * 

32(b) Definitions 

* * * * * 

Paragraph 32(b)(1)(ii). 

* * * * * 

4. Loan originator compensation— 

calculating loan originator compensation in 

connection with other charges or payments 

included in the finance charge or made to 

loan originators. 

* * * * * 

iii. Creditor’s origination fees—loan 

originator not employed by creditor. 

Compensation paid by a creditor to a loan 

originator who is not employed by the 

creditor is included in the calculation of 

points and fees under § 1026.32(b)(1)(ii). 

Such compensation is included in points and 

fees in addition to any origination fees or 

charges paid by the consumer to the creditor 

that are included in points and fees under 

§ 1026.32(b)(1)(i). For example, assume that a 

consumer pays to the creditor a $3,000 

origination fee and that the creditor pays a 

mortgage broker $1,500 in compensation 

attributed to the transaction. Assume further 

that the consumer pays no other charges to 

the creditor that are included in points and 

fees under § 1026.32(b)(1)(i) and that the 

mortgage broker receives no other 

compensation that is included in points and 

fees under § 1026.32(b)(1)(ii). For purposes of 

calculating points and fees, the $3,000 

origination fee is included in points and fees 

under § 1026.32(b)(1)(i) and the $1,500 in 

loan originator compensation is included in 

points and fees under § 1026.32(b)(1)(ii), 

equaling $4,500 in total points and fees, 

provided that no other points and fees are 

paid or compensation received. 

* * * * * 

Section 1026.34—Prohibited Acts or 

Practices for High-Cost Mortgages 

* * * * * 

34(a)(5) Pre-loan counseling. 

* * * * * 

34(a)(5)(ii) Timing of counseling. 

1. Disclosures for open-end credit plans. 

Section 1026.34(a)(5)(ii) permits receipt of 

either the disclosure required by section 5(c) 

of RESPA or the disclosures required under 

§ 1026.40 to allow counseling to occur. 

Pursuant to 12 CFR 1024.7(h), the disclosures 

required by § 1026.40 can be provided for 

open-end plans in lieu of the usual 

disclosure required by section 5(c) of RESPA. 

2. Transactions not subject to RESPA or 

§ 1026.40. For closed-end mortgage 

transactions that are not subject to RESPA, 

the counseling certification must include a 

statement that the consumer(s) received 

counseling on the advisability of the highcost mortgage based on the terms provided in 

the disclosures required by § 1026.32(c). 

(Reference to counseling on advisability 

using the disclosures required by § 1026.32(c) 

is not required for transactions subject to 

RESPA or § 1026.40.) The disclosures 

required by § 1026.32(c) must be furnished to 

the consumer at least three business days 

prior to consummation of the mortgage. The 

creditor may wish to furnish the disclosures 

sooner, to provide sufficient time for 

counseling and certification. 

3. Initial disclosure. Counseling may occur 

after receipt of either an initial disclosure 

required by section 5(c) of RESPA, the 

disclosures required by § 1026.40, or the 

disclosures required by § 1026.32(c), 

regardless of whether revised versions of 

such disclosures are subsequently provided 

to the consumer. 

34(a)(5)(iv) Content of certification. 

1. Statement of counseling on advisability. 

A statement that a consumer has received 

counseling on the advisability of the highcost mortgage means that the consumer has 

received counseling about key terms of the 

mortgage transaction, as set out in either the 

disclosure required by section 5(c) of RESPA 

or the disclosures provided to the consumer 

pursuant to § 1026.40, or, for closed-end 

transactions not subject to RESPA, the 

disclosures required by § 1026.32(c); the 

consumer’s budget, including the consumer’s 

income, assets, financial obligations, and 

expenses; and the affordability of the 

mortgage transaction for the consumer. 

Examples of such terms of the mortgage 

transaction include the initial interest rate, 

the initial monthly payment, whether the 

payment may increase, how the minimum 

periodic payment will be determined, and 

fees imposed by the creditor, as may be 

reflected in the applicable disclosure. A 

statement that a consumer has received 

counseling on the advisability of the highcost mortgage does not require the counselor 

to have made a judgment or determination as 

to the appropriateness of the mortgage 

transaction for the consumer. 

* * * * * 

34(a)(5)(v) Counseling fees. 

1. Financing. Section 1026.34(a)(5)(v) does 

not prohibit a creditor from financing the 

counseling fee as part of the transaction for 

a high-cost mortgage, if the fee is a bona fide 

third-party charge as provided by 

§ 1026.32(b)(5)(i). 

* * * * * 

Section 1026.41—Periodic Statements for 

Residential Mortgage Loans 

* * * * * 

41(e)(5) Consumers in bankruptcy. 

1. Commencing a case. The requirements 

of § 1026.41 do not apply once a petition is 

filed under Title 11 of the United States 

Code, commencing a case in which the 

consumer is a debtor. 

2. Obligation to resume sending periodic 

statements. i. With respect to any portion of 

the mortgage debt that is not discharged, a 

servicer must resume sending periodic 

statements in compliance with § 1026.41 

within a reasonably prompt time after the 

next payment due date that follows the 

earliest of any of three potential outcomes in 

the consumer’s bankruptcy case: the case is 

dismissed, the case is closed, or the 

consumer receives a discharge under 11 

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

this requirement to resume sending periodic 

statements does not require a servicer to 

communicate with a consumer in a manner 

that would be inconsistent with applicable 

bankruptcy law or a court order in a 

bankruptcy case. To the extent permitted by 

such law or court order, a servicer may adapt 

the requirements of § 1026.41 in any manner 

believed necessary. 

ii. The periodic statement is not required 

for any portion of the mortgage debt that is 


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Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Rules and Regulations 63007 

discharged under applicable provisions of 

the U.S. Bankruptcy Code. If the consumer’s 

bankruptcy case is revived—for example if 

the court reinstates a previously dismissed 

case, reopens the case, or revokes a 

discharge—the servicer is again exempt from 

the requirement in § 1026.41. 

3. Joint obligors. When two or more 

consumers are joint obligors with primary 

liability on a closed-end consumer credit 

transaction secured by a dwelling subject to 

§ 1026.41, the exemption in § 1026.41(e)(5) 

applies if any of the consumers is in 

bankruptcy. For example, if a husband and 

wife jointly own a home, and the husband 

files for bankruptcy, the servicer is exempt 

from providing periodic statements to both 

the husband and the wife. 

* * * * * 

Dated: October 15, 2013. 

Richard Cordray, 

Director, Bureau of Consumer Financial 

Protection. 

[FR Doc. 2013–24521 Filed 10–22–13; 8:45 am] 

BILLING CODE 4810–AM–P 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1227 

RIN 2590–AA60 

Suspended Counterparty Program 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is issuing an interim 

final rule with request for comments 

that generally codifies the procedures 

FHFA follows under its existing 

Suspended Counterparty Program, 

established in June, 2012. The interim 

final rule requires the Federal National 

Mortgage Association (Fannie Mae), the 

Federal Home Loan Mortgage 

Corporation (Freddie Mac), and the 

twelve Federal Home Loan Banks 

(Banks) (hereafter, collectively, 

‘‘regulated entities’’ or individually, 

‘‘regulated entity’’) to submit reports to 

FHFA when they become aware that an 

individual or institution and any 

affiliates thereof with which they are 

doing or have done business has 

committed fraud or other financial 

misconduct during the time period 

specified in the rule. The interim final 

rule sets forth the procedures for FHFA 

issuance of proposed and final 

suspension orders. Proposed suspension 

orders include an opportunity for 

response by the affected individual or 

institution and by the regulated entities. 

A final suspension order may be issued 

if FHFA determines that the covered 

misconduct is of a type that would be 

likely to cause significant financial or 

reputational harm to a regulated entity 

or otherwise threaten the safe and sound 

operation of a regulated entity. Final 

suspension orders direct the regulated 

entities to cease or refrain from doing 

business with the individuals or 

institutions for a specified period of 

time or permanently. 

DATES: The interim final rule is effective 

on October 23, 2013. FHFA will accept 

written comments on the interim final 

rule on or before December 23, 2013. 

For additional information, see 

SUPPLEMENTARY INFORMATION. 

ADDRESSES: You may submit your 

comments on the interim final rule, 

identified by regulatory information 

number (RIN) 2590–AA60, by any of the 

following methods: 

• Email: Comments to Alfred M. 

Pollard, General Counsel, may be sent 

by email to RegComments@fhfa.gov. 

Please include ‘‘RIN 2590–AA60’’ in the 

subject line of the message. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by email to FHFA at 

RegComments@fhfa.gov to ensure 

timely receipt by FHFA. Include the 

following information in the subject line 

of your submission: Comments/RIN 

2590–AA60. 

• Hand Delivered/Courier: The hand 

delivery address is: Alfred M. Pollard, 

General Counsel, Attention: Comments/ 

RIN 2590–AA60, Federal Housing 

Finance Agency, Constitution Center, 

Eighth Floor (OGC), 400 Seventh Street 

SW., Washington, DC 20024. Deliver the 

package at the Seventh Street entrance 

Guard Desk, First Floor, on business 

days between 9 a.m. and 5 p.m. 

• U.S. Mail, United Parcel Service, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Alfred M. Pollard, General Counsel, 

Attention: Comments/RIN 2590–AA60, 

Federal Housing Finance Agency, 

Constitution Center, Eighth Floor (OGC), 

400 Seventh Street SW., Washington, 

DC 20024. 

FOR FURTHER INFORMATION CONTACT: 

Kevin Sheehan, Assistant General 

Counsel, at (202) 649–3086 (not a tollfree number), Federal Housing Finance 

Agency, Constitution Center, Eighth 

Floor (OGC), 400 Seventh Street SW., 

Washington, DC 20024. The telephone 

number for the Telecommunications 

Device for the Hearing Impaired is (800) 

877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Comments 

FHFA invites comments on all aspects 

of the interim final rule, and will take 

all comments into consideration before 

issuing the final regulation. Copies of all 

comments will be posted without 

change, including any personal 

information you provide, such as your 

name, address, email address, and 

telephone number, on the FHFA Web 

site at http://www.fhfa.gov. In addition, 

copies of all comments received will be 

available for examination by the public 

on business days between the hours of 

10 a.m. and 3 p.m., at the Federal 

Housing Finance Agency, Constitution 

Center, Eighth Floor, 400 Seventh Street 

SW., Washington, DC 20024. To make 

an appointment to inspect comments, 

please call the Office of General Counsel 

at (202) 649–3804. 

II. Background and Summary of 

Interim Final Rule 

A. Summary of Interim Final Rule 

FHFA established the Suspended 

Counterparty Program in June, 2012 by 

letter to the regulated entities. The 

Suspended Counterparty Program 

requires each regulated entity to report 

to FHFA when it becomes aware that an 

individual or institution with which it 

is doing or has done business has 

committed fraud or other financial 

misconduct within a specified time 

period. FHFA reviews the reports 

submitted by the regulated entities to 

determine whether additional action is 

needed by FHFA to limit the risk of the 

regulated entities continuing to do 

business with the individual or 

institution, in order to protect the safe 

and sound operation of the regulated 

entities. In appropriate cases, FHFA will 

issue suspension orders directing the 

regulated entities to cease or refrain 

from doing business with the individual 

or institution for a specified period of 

time or permanently. Before issuing a 

final suspension order, FHFA will 

provide notice and an opportunity to 

respond to the affected individual or 

institution and to each of the regulated 

entities. 

The interim final rule generally 

codifies the existing procedures under 

which the Suspended Counterparty 

Program operates in new 12 CFR part 

1227. The specific procedures for 

reporting of covered misconduct and 

issuance of proposed and final 

suspension orders are further discussed 

below in the Section-by-Section 

Analysis. The Suspended Counterparty 

Program is intended to complement and 

support the risk management practices 

of the regulated entities. The Suspended 

Counterparty Program is not designed as 


tkelley on DSK3SPTVN1PROD with RULES