Consumer Financial Protection Bureau: Real Estate Settlement Procedure Act Regulation - Assignment Example

Consumer Financial Protection Bureau (CFPB) - RESPA Regulation X Force – Placed Insurance 1024.37) effective 01/10/2014 As a result of the Dodd-Frank Act Amendment, the Real Estate Settlement Procedure Act 1974, Section 6 was altered, offering that a federally related mortgage loan servicer cannot, unless there exists some reasonable basis of belief that a borrower has defaulted in maintaining insurance based on the loan requirements, get a force-placed hazard insurance. This amendment also brought about a myriad of changes including the requirement of 45-day minimum period for a notice, a new 2 letter notice, as well as a 15 day period for refund for all charges with regards to duplicate insurance. In order to implement these numerous amendments, the Consumer Financial Protection Bureau (CFPB) was tasked with the drafting of relevant regulations. These regulations included the RESPA - Real Estate Settlement Procedure Act mandated amendments, in addition to the additional requirements, most of which were above and beyond the Dodd-Frank Act’s strict mandate. This regulation was intended to take effect and took effect on January 10, 2014. It has a myriad of components including the definition of the Forced-Placed Insurance and/or applicability; the reasonable basis of believe, notices that insurers give to borrowers, how the forced-placed insurance can be terminated, demonstration of an existing insurance by a borrower, as well as the mandatory escrow disbursements. According to this regulation, the CFPB broadly defines force-placed insurance as a hazard insurance hat a servicer obtains on behalf of the assignee or owner of a mortgage loan, which insurers the property meant to secure such a mortgage loan (Consumer Financial Protection Bureau). Apparently, this regulation does not consider the following as forced-placed insurance: 1. Escrowed Loans 2. Flood Insurance that the FDPA – the Flood Disaster Protection Act, 1973, requires a servicer to obtain 3. Non-escrowed loans This regulation requires that a servicer must have a reasonable basis to consider that a consumer has defaulting in his obligation to maintain the required hazard insurance before they charge for force-placed insurance. It is up to the servicer to have a reasonable basis to consider that the borrower has not complied with the requirements of the contract. This regulation, however, was revised in the final rules and regulations; therefore it provides that the servicer is able to obtain force-placed insurance before meeting the set requirements for a reasonable basis to consider or believe; however, the servicer cannot the charge cannot be passed to the borrower until that time when the servicer has acted diligently to show that the borrower has defaulted in his/her duty to obtain the needed insurance. Previously, the CFPB had proposed specific situation of what the regulation would consider as a reasonable basis to consider based on the status of an escrow account; this however, was scrapped in the final rules and a new Comment 37(b)-1 was adopted. This ne Comment provided that any information received by a servicer regards borrower’s insurance policy, regardless of the source, whether from the borrower’s insurance provider/agent, or from the borrower, would provide the servicer with a reason to consider or believe. In fact, it provided also that the absence of information might act as a reason to believe for the servicer to act with thoroughness by adhering to the regulation’s notice requirements, and yet the servicer failing to get the required insurance information. CFPB thus realized that there are instances in which a servicer may act on the basis of erroneous information that insurance providers offer. Whether or not such instances violate the provisions of the regulations will depend on whether or not the servicer had enough bases to make a consideration based on the information it receives. Before a servicer assess any charge or premium related to force-placed insurer, it must offer the borrower with up to two written notices, with the first notice being delivered at least 45 days before assessing a premium or charge. The second notice, on the other hand, must be mailed or transmitted as a reminder 15 days before a charge or a premium can be assessed. A premium, charge or fee must not be assessed if there is evidence suggesting the borrower had a hazard insurance coverage. A written notice must be delivered by a servicer to a borrower within 45 days before assessing a charge related to replacing to renewing an existing force-placed insurance. The servicer must cancel force-placed insurance within 15 days of receiving evidence that the consumer has required hazard insurance in place and refund to the consumer any fees or charges for periods of overlapping coverage General Servicing policies, procedures, and requirements (§1024.38) effective 01/10/2014 This rule establishes procedures and policies in four main areas including proper evaluation of applications for loss mitigation, provision and access to accurate and timely information, facilitation of compliance and oversight by service providers, and the facilitation of information transfer during the transfer of service. It requires servicers to have procedures and policies related to informing borrowers of the steps for submitting information requests as well as error notices. It states that procedures and policies must be designed in such a way that ensures that the servicer can and will be able to timely and accurately disclosures to borrowers as required by law and by this subpart. The must be designed in a way that a servicer can investigate, appropriately respond to, and make corrections in response to borrowers complaints, in addition to offering borrowers with timely and accurate documents and information in response to the information requests by borrowers that relate to their mortgage loans. It must also enable assignees or owners of mortgage loans with current and accurate information regarding the entire mortgage that the borrower owns. The servicer can also submit filings and documents that are necessary for foreclosure process. In the event that borrower dies, the servicer must promptly and swiftly recognize and facilitate communications with the interests of the deceased. Procedures and policies must also be designed reasonably to ensure that the servicer is able to accurately provide information with regards to options for loss mitigation that are available to the borrower from the owner of the mortgage loan. they must ensure that the servicer is able to recognize all the options for loss mitigation which borrowers may be eligible pursuant to the borrower’s mortgage loan assignee’s or owner’s requirements., and enable prompt access to all the information and documents that a borrower submits with in connection to options of loss mitigation pursuant to section 1024.40. The designed procedures and policies must enable servicers to offer appropriate personnel with access to current and accurate information and documents that reflect upon the actions of the service providers (Proctor Financial Inc.). Ensure that service providers are periodically reviewed, and that current and accurate information and documents regarding the status of any evaluation of a borrower’s application for loss mitigation, as well as foreclosure status are shared among the right servicer personnel and the personnel assigned to a mortgage loan account. During service transfers, servicers as transferor must ensure that all documents and information in their control are timely transferred. They must also retain and store records which document actions that have been taken with regards to a mortgage loan account until such a time that that account will be closed. These documents include a transaction schedule debited or credited to the loan account, including suspense and escrow account; a security instrument copy, communication notes created by the servicer; copy of any documents and information offered by the average. Early Intervention with delinquent consumers (§1024.39) effective 01/10/2014 This rule requires that a servicer makes good faith efforts such as calling the borrower more than once to try and have a live conversation with a borrower via an in-person meeting or telephone, at least before the end of the 36th day of the borrowers’ delinquency. The servicer in appropriate situations can promptly follow up and inform the borrower of the availability of options for mitigating loss. Before the 45th delinquency day comes, it is important that a written notice is given, at least once with a period of 180 days. The notice has to contain information such as an encouragement for the borrower to get in touch with the servicer, servicers telephone, a brief description of options for loss mitigation that the servicer offers, and instructions regarding how the borrower can obtain more information about the servicer’s loss mitigation options. The delinquency period begins on the sufficient payment that covers the principal interest, as well as escrow for a giving billing period becomes due. Continuity of contact with delinquent consumers (§1024.40) effective 01/10/2014 The procedures and policies from the servicer must have a provision for a process which ensures that a given personnel will be assigned to a delinquent borrower by the time the written delinquency notice is provided. The personnel assigned must be available to respond even via telephone to the inquiries by the borrower and help the borrower with available options for loss mitigation until a borrower makes two consecutive payments without being charged for lateness. If this is not possible, then, it is up to the servicer to ensure that a bower is contacted in a timely manner. A servicer personnel assigned to a delinquent borrower carries out certain functions including providing them with accurate information, retrieval of current and accurate information in a quick and timely manner. They should also provider borrowers with accurate information including options for loss mitigation from the assignee or owner of the borrower’s mortgage loan, circumstances for a servicer to make a foreclosure referral, the status of any application for loss mitigation that a servicer receives from the borrower, any applicable deadlines that an assignee or owner of the borrower’s mortgage loan establishes, and the actions that a borrower must take in order for him/her to be evaluated for certain options of loss mitigation. They should facilitate the timely retrieval of information such as complete records of a borrower’s payment history as well as all written correspondence from the borrower to the servicer. It must offer a delinquent borrower with information regarding the process for submission of an information request or a notice error. Loss Mitigation Procedures (§1024.41) effective 01/10/2014 These provisions do not obligate a servicer to offer a borrower with any specific option for loss mitigation, whatsoever. In the event that a servicer receives an application for loss mitigation more than 45 days before a foreclosure, the servicer is required to review such an application for completeness and offer the borrower with a notice acknowledging the receipt of the application and the status of the application. This rule requires that a borrower should be notified within a minimum of five days excluding weekends and legal public holidays. If the application for loss mitigation has all the information that the servicer requires, it is considered to be complete. However, an application for loss mitigation that does have all the required information by the servicer, it is deemed as incomplete. If the servicer marks an application as incomplete, the notice provided to the borrower must indicate the additional information required and the date for submission of such information. This new due date for the submission of additional information, according to this provision, must be on the earliest remaining date within a 30 day period before a foreclosure sale, or before the borrower’s delinquency. With regards to complete loss mitigation applications that are received 37 prior to a foreclosure sale, servicers must review the borrower for all available loss mitigations options and offer a notice of the same explaining which loss mitigation options the servicer will be offering. In the event that an application is denied, the servicer is required to give a notice explaining the determination of the option, and where applicable, advice the borrower if there exists an option for appeal; the requirements and deadline for the appeal must also be communicated. Timely appeals submitted by borrowers must then be reviewed by the servicer; however, the review must be carried out by independent service personnel; not the servicer personnel who had in the first instance evaluated an initial loss mitigation application and a determination must then be communicated to the borrower within 30 days. Works Cited Consumer Financial Protection Bureau. “CFPB Bulletin 2013-12.” Consumerfinance.gov. 2013. Web. 17 Apr. 2014. Proctor Financial Inc. CFPB’s New Force-Placed Insurance Procedures. Troy, MI, 2014. Print. Read More