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In reviewing the new rules, it���s clear the CFPB listened to feedback from the industry and took many of those comments into account in finalizing its directives. Important provisions were modified in ways that are more reflective of the realities of servicing. 4.Avoiding ���Force-Placed��� Insurance To help borrowers avoid paying for expensive ���force-placed��� insurance (FPI) in the event their property insurance coverage lapses, servicers are required to provide borrowers with notifications at multiple stages before charging the borrower for FPI coverage. In addition, the charges related to FPI must be ���reasonable��� to the servicer���s cost of providing the service (though the CFPB has not yet defined ���reasonable���). However, if funds are available in the borrower���s escrow account, servicers should pay the borrower���s current insurance premiums from that account rather than purchasing force-placed insurance. What���s New? Servicers are required to send multiple notifications to customers before FPI premiums are paid. The first notice must be sent 45 days prior to paying the premium as before, but now the rules require the addition of a second notice, which must be sent at least 15 days prior to force-placing insurance and include the cost of the insurance policy/premium or a reasonable estimate. 5.Same-Day Crediting of Payments Servicers are required to credit a borrower���s account the day that a periodic payment is received. Even if the consumer makes a partial payment, servicers have the ability to retain that payment in a suspense account until enough money is received to equal one full periodic payment. At that point, the servicer must apply the funds to the earliest delinquent payment. Servicers must also provide an accurate payoff balance to borrowers no later than seven business days after receipt of a written request for such information. What���s New? The final rule reflected the original provisions in the outline without changes. 6.Information Management Under the information-management policies and procedures in the new rules, servicers must keep records ���up-to-date and accessible.��� Examples of the requirements servicers must fulfill include providing accurate and timely disclosures and other information for borrowers, investors, and courts. Servicers must also 60 maintain specific documents and information for loans in a manner that allows the servicer to compile them into a servicing file within five days. Servicers are also required to facilitate loss mitigation by accepting, organizing, and managing documents and information in connection with loss mitigation requests so that the loss mitigation option is processed efficiently and accurately. What���s New? This rule has much the same language as the original outline, but there is still some ambiguity regarding what ���accessible��� means. For example, does this mean that information must reside on the same platform, or can it be archived elsewhere? Some clarification is still needed here. 7. Errors Corrected Quickly Servicers must comply with new requirements for responding to written requests for information or an assertion of an error from a borrower. If a borrower notifies a servicer that he or she believes an error has been made on the account, the servicer must acknowledge receipt of that notice within five business days. Once a servicer receives such a notification from the borrower, the servicer must conduct and conclude an investigation within 30 days (or less with respect to foreclosures or payoffs) and provide the borrower with written notification of the correction or resolution of the problem. What���s New? This rule is largely unchanged from the original outline. 8.Consistent Servicer Contact for Borrowers For borrowers who are delinquent or who ask for help to avoid delinquency, servicers must offer direct, ongoing access to staff dedicated to servicing delinquent borrowers. To accomplish this, servicers will need properly trained personnel who are both dedicated to assisting borrowers in pursuing loss mitigation options and who have access to the records and resources needed to assist them. In addition, loss mitigation personnel must be able to determine the best possible solutions for a borrower, given his or her circumstances. They must have access to underwriters who can evaluate the borrower and determine eligibility for a loan modification or other solution. What���s New? This rule is largely unchanged from the original outline. 9.Loss Mitigation Procedures Servicers are restricted from simultaneously evaluating a borrower for loan modifications or other loss mitigation options at the same time the loan is being prepared for foreclosure, a process known as ���dual tracking.��� Servicers will be required to follow specified procedures for mortgage loans secured by a borrower���s principal residence. Examples of the new requirements include acknowledgement of the receipt of a written application from a borrower for a loss mitigation option within five days, along with information regarding whether or not the application is complete, and if not, what is required to complete it. Servicers must also provide the borrower with a written decision regarding his or her eligibility for the loss mitigation option and allow an appeal of a denial as long as the borrower���s complete loss mitigation application is received 90 days or more before a scheduled foreclosure sale. The CFPB also prohibits a servicer from making the first notice or filing required for a foreclosure process until the borrower is more than 120 days delinquent. What���s New? If a completed loan modification application is received by a servicer more than 37 days before foreclosure sale date, the servicer is required to evaluate the borrower for the modification and must halt the foreclosure process until the modification has been finalized. Since the August 2012 outline of the proposed servicing rules from the CFPB, servicers have been working both internally and with their technology partners to craft their unique roadmaps to comply with the proposed requirements. Now that those requirements are finalized and uncertainty surrounding the new rules has been removed, servicers are free to move full steam ahead and make the necessary changes to be in compliance by January 2014. While other regulations may still be forthcoming, the new rules released by the CFPB are a significant step forward, not only in moving the industry toward a stronger future, but also in helping America���s homeowners have a positive, transparent mortgage experience. George FitzGerald is SVP of product management in Lender Processing Services��� (LPS) servicing solutions and technology division. He has 26 years��� experience in the mortgage banking industry and has spent 19 of those with LPS.

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