Request for Information Regarding 2013 Real Estate Settlement Procedures Act Servicing Rule Assessment
Notice of assessment of 2013 RESPA servicing rule and request for public comment.
CFR Part: "12 CFR Part 1024"
Citation: "82 FR 21952"
Document Number: "Docket No.
Page Number: "21952"
"Proposed Rules"
SUMMARY:
EFFECTIVE DATE: Comments must be received on or before:
ADDRESSES: You may submit comments, identified by Docket No.
* Electronic: http://www.regulations.gov. Follow the instructions for submitting comments.
* Email: [email protected]. Include Docket No.
* Mail:
* Hand Delivery/Courier:
Instructions: All submissions should include the document title and docket number. Because paper mail in the
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
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Background
Congress established the Bureau in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). /1/ In the Dodd-Frank Act,
FOOTNOTE 1 Public Law 111-203, 124 Stat. 1376 (2010). END FOOTNOTE
FOOTNOTE 2 12 U.S.C. 5512(b)(1). END FOOTNOTE
FOOTNOTE 3 12 U.S.C. 5512(d). END FOOTNOTE
Section 1022(d) of the Dodd-Frank Act requires the Bureau to conduct an assessment of each significant rule or order adopted by the Bureau under Federal consumer financial law. The Bureau must publish a report of the assessment not later than five years after the effective date of such rule or order. The assessment must address, among other relevant factors, the rule's effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act and the specific goals stated by the Bureau. The assessment must reflect available evidence and any data that the Bureau reasonably may collect. Before publishing a report of its assessment, the Bureau must invite public comment on recommendations for modifying, expanding, or eliminating the significant rule or order.
In
FOOTNOTE 4 78 FR 10695 (
FOOTNOTE 5 See infra note 9. END FOOTNOTE
II. Assessment Process
Assessments pursuant to section 1022(d) of the Dodd-Frank Act are for informational purposes only and are not part of any formal or informal rulemaking proceedings under the Administrative Procedure Act. The Bureau plans to consider relevant comments and other information received as it conducts the assessment and prepares an assessment report. The Bureau does not, however, expect that it will respond in the assessment report to each comment received pursuant to this document. Furthermore, the Bureau does not anticipate that the assessment report will include specific proposals by the Bureau to modify any rules, although the findings made in the assessment will help to inform the Bureau's thinking as to whether to consider commencing a rulemaking proceeding in the future. /6/ Upon completion of the assessment, the Bureau plans to issue an assessment report no later than
FOOTNOTE 6 The Bureau announces its rulemaking plans in semiannual updates of its rulemaking agenda, which are posted as part of the Federal government's Unified Agenda of Regulatory and Deregulatory Actions. See Off. of Info. and Reg. Affairs, Off. of Mgmt. and Budget, Current Regulatory Plan and the Unified Agenda of Regulatory and Deregulatory Actions, http://www.reginfo.gov/public/do/eAgendaMain (last visited
III. The 2013 RESPA Servicing Rule
Congress adopted the Dodd-Frank Act in response to an unprecedented cycle of expansion and contraction in the mortgage market that sparked the most severe
In
FOOTNOTE 7 78 FR 10695 (
FOOTNOTE 8 Section 1022(c) provides that, to support its rulemaking and other functions, the Bureau shall monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in the markets for such products or services. END FOOTNOTE
FOOTNOTE 9 In the summer and fall of 2013 the Bureau finalized the (1) Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) (
FOOTNOTE 10 After the
The 2013 RESPA Servicing Rule in part implements section 1463 of the Dodd-Frank Act, which amended RESPA. Section 1463(a) imposed new mortgage servicing requirements and prohibitions under RESPA on servicers of federally related mortgage loans with respect to force-placed insurance, borrower assertions of error, and borrower requests for information. /11/ It also provided the Bureau authority to establish obligations on servicers of federally related mortgage loans appropriate to carry out the consumer protection purposes of RESPA. The Bureau also has the authority under RESPA to prescribe such rules and regulations, to make such interpretations, and to grant such reasonable exemptions for classes of transactions as may be necessary to achieve the purposes of RESPA. /12/ Accordingly, the 2013 RESPA Servicing Rule included not only provisions that implemented the specific Dodd-Frank Act requirements mentioned above but also provisions regarding servicing policies and procedures, early intervention with delinquent borrowers, continuity of contact with delinquent borrowers, and loss mitigation procedures, as well as certain exemptions, all of which the Bureau found to be appropriate to carry out or necessary to achieve the purposes of RESPA and title X and prevent evasion of those laws.
FOOTNOTE 11 For example, the 2013 RESPA Servicing Rule's force-placed insurance provisions implement sections 6(k)(1)(A), 6(k)(2), 6(l) and 6(m) of RESPA, which were added by section 1463 of the Dodd-Frank Act. The 2013 RESPA Servicing Rule's error resolution and information request provisions implement section 6(k)(1)(B) through (D) of RESPA, which was added by section 1463 of the Dodd-Frank Act. The Dodd-Frank Act also imposed certain new requirements under TILA relating to mortgage servicing, and the Bureau issued rules in TILA's implementing Regulation Z. As noted above and below, the Bureau is not seeking comment on the 2013 TILA Servicing Final Rule or its related subsequent amendments in this document. END FOOTNOTE
FOOTNOTE 12 12 U.S.C. 2617(a). END FOOTNOTE
A. Major Provisions of the Servicing Rule
The 2013 RESPA Servicing Rule addressed six major topics, which are summarized below. Many of these requirements do not apply to small servicers, generally defined as servicers that service 5,000 mortgage loans or fewer and only service mortgage loans the servicer or an affiliate owns or originated. /13/ Small servicers are exempt from: Certain requirements relating to obtaining force-placed insurance; the provisions relating to general servicing policies, procedures, and requirements; and certain requirements and restrictions relating to communicating with borrowers about, and evaluation of, loss mitigation applications.
FOOTNOTE 13 See 12 CFR 1024.30(b)(1); 12 CFR 1026.41(e)(4). END FOOTNOTE
1. Force-placed insurance. The rule prohibits servicers from charging a borrower for force-placed insurance coverage unless the servicer has a reasonable basis to believe the borrower has failed to maintain hazard insurance required by the loan agreement. Where the borrower has an escrow account for the payment of hazard insurance premiums, the servicer is prohibited from obtaining force-placed insurance where the servicer can continue the borrower's homeowner insurance, even if the servicer needs to advance funds to the borrower's escrow account to do so. The rule also requires servicers to send two notices before charging the borrower for force-placed insurance coverage and provides other requirements regarding force-placed insurance.
2. Error resolution and information requests. The rule requires servicers to comply with certain error resolution procedures for written notices of error relating to the servicing of a mortgage loan. Servicers generally are required to acknowledge the notice of error within five days and to investigate and respond in writing within 30 days, either correcting the error or notifying the borrower that no error occurred. Similar procedures and timeframes apply to servicer acknowledgment of and response to borrower written requests for information.
3. General servicing policies, procedures, and requirements. The rule requires servicers to establish policies and procedures reasonably designed to achieve objectives specified in the rule.
4. Early intervention with delinquent borrowers. The rule generally requires servicers to establish or make good faith efforts to establish live contact with borrowers by the 36th day of their delinquency (for each billing cycle for which a payment sufficient to cover principal, interest, and, if applicable, escrow is due and unpaid) and to promptly inform such borrowers, where appropriate, that loss mitigation options may be available. In addition, servicers must generally provide borrowers a written notice with information about loss mitigation options by the 45th day of their delinquency.
5. Continuity of contact with delinquent borrowers. The rule requires servicers to maintain reasonable policies and procedures with respect to providing delinquent borrowers with access to personnel to assist them with loss mitigation options where applicable.
6. Loss mitigation procedures. The rule requires servicers to follow specified loss mitigation procedures for a mortgage loan secured by a borrower's principal residence. Servicers generally must provide a written notice acknowledging receipt of a borrower's loss mitigation application within five days and exercise reasonable diligence in obtaining documents and information to complete the application. For a complete loss mitigation application received more than 37 days before a foreclosure sale, the rule requires the servicer to evaluate the borrower, within 30 days, for all loss mitigation options available to the borrower in accordance with the investor's eligibility rules. The rule also prohibits a servicer from making the first notice or filing required by applicable law for any judicial or nonjudicial foreclosure process until a mortgage loan is more than 120 days delinquent and places certain restrictions on "dual tracking," where a servicer is simultaneously processing a consumer's loss mitigation application at the same time that it advances the foreclosure process.
B. Significant Rule Determination
The Bureau has determined that the 2013 RESPA Servicing Rule is a significant rule for purposes of Dodd-Frank Act section 1022(d). The Bureau makes this determination partly on the basis of the estimated aggregate annual cost to industry of complying with the rule. /14/ The rule mandated a large number of changes in the features of mortgage servicing, including new disclosures for force-placed insurance, an expanded error resolution regime, and new servicing procedures and requirements that apply to all servicing of delinquent loans, including mandated timelines and procedural rights in loss mitigation. These changes in turn required multiple changes in business operations, including adjustments in technology, training and compliance. The Bureau noted in the preamble to the 2013 RESPA Servicing Final Rule that these changes would require servicers to make changes to systems and procedures and that the new requirements could require servicers to increase staffing time devoted to certain activities and to hire more staff. /15/ Taking all of these factors into consideration, the Bureau has concluded that the 2013 RESPA Servicing Rule is "significant" for purposes of Dodd-Frank Act section 1022(d).
FOOTNOTE 14 In the Paperwork Reduction Act (PRA) Analysis published with the 2013 RESPA Servicing Final Rule, the Bureau estimated an additional 1,100,000 in ongoing burden hours (as well as an additional 29,000 in one-time burden hours) from the 2013 RESPA Servicing Final Rule. 78 FR 10695, 10873 (
FOOTNOTE 15 See 78 FR 10695, 10847-60 (
The 2013 TILA Servicing Final Rule became effective at the same time as the 2013 RESPA Servicing Rule. The Bureau has determined that the 2013 TILA Servicing Final Rule is not a significant rule (either individually or collectively with any amendments to the 2013 TILA Servicing Final Rule that took effect on
FOOTNOTE 16 In the PRA Analysis published with the 2013 TILA Servicing Final Rule, the Bureau estimated an additional 56,000 in ongoing burden hours (as well as an additional 5,000 in one-time burden hours) from the 2013 TILA Servicing Final Rule as well as ongoing vendor costs of
FOOTNOTE 17 Consumers were already receiving the ARM adjustment notice, and the Bureau estimated that the new periodic statement, where required, would for the most part replace billing statements that consumers were already receiving. Regarding the new initial interest rate adjustment disclosure, the Bureau estimated that annual production and distribution costs would be
FOOTNOTE 18 The Bureau noted that the additional information provided by the revised ARM adjustment notice and new periodic statement might require servicers (more specifically, their vendors) to access databases that were not regularly accessed by systems that produced the existing disclosures. 78 FR 10901, 10984-85, 10992 (
FOOTNOTE 19 78 FR 10901, 10985 (
IV. The Assessment Plan
Because the Bureau has determined that the 2013 RESPA Servicing Rule is a significant rule for purposes of Dodd-Frank Act section 1022(d), section 1022(d) requires the Bureau to assess the rule's effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act and the specific goals stated by the Bureau. Section 1021 of the Dodd-Frank Act states that the Bureau's purpose is to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive. Section 1021 also sets forth the Bureau's objectives, which are to ensure that, with respect to consumer financial products and services:
* Consumers are provided with timely and understandable information to make responsible decisions about financial transactions;
* Consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;
* Outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;
* Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and
* Markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
In the 2013 RESPA Servicing Rule, the Bureau stated that, considered as a whole, RESPA, as amended by the Dodd-Frank Act, reflects at least two significant consumer protection purposes: (1) To establish requirements that ensure that servicers have a reasonable basis for undertaking actions that may harm borrowers; and (2) to establish servicers' duties to borrowers with respect to the servicing of federally related mortgage loans. /20/ The Bureau further stated that, specifically with respect to mortgage servicing, the consumer protection purposes of RESPA include: (1) Responding to borrower requests and complaints in a timely manner; (2) maintaining and providing accurate information; (3) helping borrowers avoid unwarranted or unnecessary costs and fees; and (4) facilitating review for foreclosure avoidance options. /21/ The Bureau further stated that each of the provisions adopted in the 2013 RESPA Servicing Rule was intended to achieve some or all of these purposes. /22/ The Bureau intends to focus the assessment on how well the rule has met these four purposes, which it believes are corollaries to certain of the Bureau's five objectives set forth in section 1021.
FOOTNOTE 20 78 FR 10695, 10709 (
FOOTNOTE 21 Id. END FOOTNOTE
FOOTNOTE 22 Id. END FOOTNOTE
To assess the effectiveness of the 2013 RESPA Servicing Rule, the Bureau plans to analyze a variety of metrics and data to the extent feasible. Feasibility will depend on the availability of data and the cost to obtain any new data. The Bureau will seek to gather information about activities and outcomes including the ones listed below and seek to understand how these activities and outcomes relate to each other:
(1) Servicer activities undertaken to comply with the 2013 RESPA Servicing Rule, such as responding to loss mitigation applications or responding to borrower notices of error, including the timing of these actions;
(2) Consumer activities, including (a) utilization of the rights provided by the 2013 RESPA Servicing Rule, such as assertion of errors, submission of loss mitigation applications, submission of complete applications, and use of appeals; and (b) consumer actions that may be prompted or enabled by the 2013 RESPA Servicing Rule, such as additional payments or other consumer responses after early intervention by the servicer or consumer verification of hazard insurance in response to the 45 day notice sent by the servicer; and
(3) Consumer outcomes that the 2013 RESPA Servicing Rule sought to affect, including, for example, fees and charges assessed and paid, incidence and severity of delinquency, how delinquency is resolved, and time to resolution of delinquency. The Bureau will seek data that can help distinguish negative outcomes that are plausibly avoidable by consumers from those that are not.
The Bureau will seek to understand how these metrics relate to one another. In particular, to the extent possible given available data, the Bureau will seek to understand how the consumer outcomes described in category 3 are affected by the measures of servicer and consumer activities described in categories 1 and 2.
The Bureau intends to place emphasis in the assessment on provisions of the 2013 RESPA Servicing Rule that have particular relevance to delinquent borrowers. These include provisions governing servicers' communication with delinquent borrowers and loss mitigation procedures, as well as provisions providing rights that could be particularly important to consumers facing payment difficulties, including error resolution requirements and requirements applicable to force-placed insurance. In conducting the assessment the Bureau plans to focus its resources, particularly with respect to efforts to collect new data, on these provisions. The Bureau anticipates addressing other provisions of the 2013 RESPA Servicing Rule to the extent that data are already available to the Bureau, provided by commenters in response to this document, or identified by commenters and reasonably available.
In conducting the assessment, the Bureau will seek to compare servicer and consumer activities and outcomes to a baseline that would exist if the 2013 RESPA Servicing Rule's requirements were not in effect. Doing so is challenging because the Bureau cannot observe the activities and outcomes of an unregulated "control" group, i.e., of a representative group of servicers that are exempt from the 2013 RESPA Servicing Rule. /23/ In some cases the Bureau may have access to data from before the effective date of the 2013 RESPA Servicing Rule that is informative about the outcomes absent the 2013 RESPA Servicing Rule. In other cases there may be institutional factors that indicate what one would expect to observe absent the 2013 RESPA Servicing Rule's requirements, for example, where servicer incentives absent the rule are very clear. Even if one can observe a clear association between activities that the rule requires and consumer outcomes, the Bureau recognizes that some of those activities might also be required by consent orders, State law, or private contracts. In these cases, the impacts one observes may reflect these other requirements in addition to those of the rule. The Bureau will draw conclusions as supported by the data, taking into account that factors other than the rule itself may affect observable outcomes.
FOOTNOTE 23 Exempt entities can serve as a limited type of control group. While small servicers are exempt from many provisions of the 2013 RESPA Servicing Rule, the Bureau understands that many small servicers follow a business model that differs in important respects from that of larger servicers, which may make small servicers an ineffective control group. The Bureau plans to explore whether small servicers that fall just below the 5,000-loan cutoff might serve as an effective control group to analyze the effectiveness of those provisions of the 2013 RESPA Servicing Rule from which small servicers are exempt. END FOOTNOTE
The Bureau has data sources, currently available or in development, with which to undertake these analyses, and the Bureau is also planning to secure additional data. These data sources include the National Mortgage Database (NMDB) and the
FOOTNOTE 24 The NMDB and the ASMB are multi-year projects being jointly undertaken by the
The Bureau intends to seek input from housing counselors, legal aid attorneys, and mortgage servicers as it analyzes the data described above and interprets the findings. The Bureau is also seeking to obtain deidentified loan-level data from a small number of servicers. This would potentially allow the Bureau to correlate mandated servicer activity (e.g., the early intervention requirements of the 2013 RESPA Servicing Rule) with consumer activity (e.g., additional consumer payments or additional loss mitigation applications occurring shortly after early intervention communications). It would also potentially allow the Bureau to correlate consumer and servicer activity with the measures of immediate consumer outcomes discussed earlier (fees and charges, delinquency resolution, time to resolution).
V. Request for Comment
To inform the assessment, the Bureau hereby invites members of the public to submit information and other comments relevant to the issues identified below, as well as any information relevant to assessing the effectiveness of the 2013 RESPA Servicing Rule in meeting the purposes and objectives of title X of the Dodd-Frank Act (section 1021) and the specific goals of the Bureau (enumerated above). In particular, the Bureau invites the public, including consumers and their advocates, housing counselors, mortgage loan servicers and other industry representatives, industry analysts, and other interested persons to submit the following:
(1) Comments on the feasibility and effectiveness of the assessment plan, the objectives of the 2013 RESPA Servicing Rule that the Bureau intends to emphasize in the assessment, and the outcomes, metrics, baselines, and analytical methods for assessing the effectiveness of the rule as described in part IV above;
(2) Data and other factual information that may be useful for executing the Bureau's assessment plan, as described in part IV above;
(3) Recommendations to improve the assessment plan, as well as data, other factual information, and sources of data that would be useful and available to execute any recommended improvements to the assessment plan;
(4) Data and other factual information about the benefits and costs of the rule for consumers, servicers, and others in the mortgage industry; and about the effects of the rule on transparency, efficiency, access, and innovation in the mortgage market;
(5) Data and other factual information about the rule's effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act (section 1021), which are listed in part IV above; and
(6) Recommendations for modifying, expanding or eliminating the 2013 RESPA Servicing Rule.
Dated:
Director,
[FR Doc. 2017-09361 Filed 5-10-17;
BILLING CODE 4810-AM-P
The Senior Citizens League Strongly Opposes Portions of The American Health Care Act
Kyriba Corp. Reports 40 Percent Sales Growth in First Quarter of 2017
Advisor News
- Help child-free clients plan for their later years
- When new investment trends emerge, Gen Z is most likely generation to be first in
- Could ‘plain English’ become an advisor’s secret weapon?
- IRI urges Senate action on 403(b) parity legislation
- Three estate planning ideas to protect your clients and their wealth
More Advisor NewsAnnuity News
- Nationwide adds mutual fund-linked strategy to New Heights Select FIA
- NUNN INTRODUCES BILL TO CUT RED TAPE, GIVE IOWANS CLEARER INSURANCE INFORMATION
- NAIC working group pressed to accelerate annuity illustration overhaul
- State Auditor James Brown Kicks Off Life Insurance Awareness Month With Policy Locator Tool
- Wink: Annuity sales post strong Q2, led by MYGAs and structured products
More Annuity NewsHealth/Employee Benefits News
Life Insurance News