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42 COUNSEL'S CORNER Rolling With the Changes in an Ever-Evolving Default Servicing Industry Lack of Uniformity in Bankruptcy Laws and CFPB Rules Create New Challenges for Servicers Marcy Ford is a managing partner and EVP of bankruptcy and firm operations with Detroit- based Trott Law P.C. She is a member of the State Bar of Michigan, the Federal Bar Association, the Oakland County Bar Association, the American Bankruptcy Institute, and the National Association of Chapter 13 Trustees. She is a frequent speaker and published author, and she has been honored on the Crain Detroit Business "Women to Watch" list and by DBusiness Magazine as a "Top Lawyer" since the award's inception. What are some of the current land mines in the bankruptcy space as it relates to mortgage servicing? At the present time, what bankruptcy default servicers and their counsel are dealing with is the overarching issue that there is no margin for error. e servicers feel that they must be perfect in everything they do every single time. Keep in mind that there are 94 bankruptcy districts, approximately 350 bankruptcy judges that have different opinions, different rulings, different perspectives, local rules, and the U.S. Trustee all looking at mortgage default servicing and bankruptcy very closely. Rules are sometimes hard to follow and apply uniformly. You might say there is no uniformity despite bankruptcy be- ing a federal law. is makes it very difficult not to have human errors or unintended consequences of processes or procedures and attempts to auto- mate and operationalize in the current environ- ment. ere are so many different rule books that the servicers have to follow. Specifically, if you wanted to look at one section of the bankruptcy law that servicers still struggle with, it certainly would be the rule 3002.1 requirements, which are payment change notices, 180-day notices, and notices of final cure payment. Across the board, servicers are still struggling with those rules and how to operation- alize the requirements in a uniform way across the country when there is no uniformity. How can this lack of uniformity be im- proved? at is the second prong of looking at what's going on in bankruptcy right now that servicers have to be aware of in regard to future changes. ere are three things that are on the horizon. One of them is, we just completed the comment period—it just closed February 17—for the proposed bankruptcy federal rule changes and implementation of a national model plan. To some extent, the Federal Rules Committee has heard and is attempting to correct the lack of uniformity with the implementation of a national model plan and a set of rule changes that will support and require use of that national model plan. It certainly wouldn't fix everything, but it would be a move in the right direction. It's not law yet, and as a matter of fact, I'm not sure that anyone would give passage as it currently stands at greater than a 50 percent shot. Out of approximately 350 bankruptcy judges that sit in the United States, 144 of them signed onto a letter opposing the implementation of the national model plan. e mortgage industry supports the imple- mentation of a national model plan, by and large. It may not be perfect, but it's better than having 300-plus plans around the country. We don't know if it will pass, and if it does, it would not be effective until at least December 1, 2016. What other significant bankruptcy-related issues are currently facing mortgage ser- vicers? Potentially, a bigger concern for servicers is the proposed CFPB rules as they apply to bankruptcy. Right now there is a waiver in the re- quirement for servicers to send a monthly periodic statement to borrowers who are in bankruptcy. It is optional, but servicers are not required to send out periodic statements. e CFPB has proposed a rule that would eliminate that exception for borrowers in bankruptcy. ere is, written into the proposal, the possibility of an exemption where certain conditions are met. However, those exemptions are very complicated to follow, and I think that it would be easy on a one-off basis, but we know, and the CFPB does know, that deci- sions on exemptions cannot be made on a one-off basis. ey need to be put into rules, and we need to be able to use automation. From my discussions with servicers and the technology companies, that challenge will be difficult to work through if the proposed rule is indeed the final rule. MARCY FORD: MANAGING PARTNER AND EVP OF BANKRUPTCY AND FIRM OPERATIONS WITH DETROIT-BASED TROTT LAW P.C.

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