News & Events

CFPB Issues Final Mortgage Servicing Rules

Mid-South Regulatory Compliance Group February 2013 On January 17, 2013, the Consumer Financial Protection Bureau (CFPB) issued final rules to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) relating to mortgage loan servicing. In the wake of the financial crisis, Dodd-Frank imposed new requirements on servicers and gave the CFPB the authority to both implement the new requirements and also to adopt additional rules to protect consumers. The CFPB’s stated purpose is to improve the information consumers receive from their servicers, enhance the protections available to consumers to address servicer errors, and establish baseline servicing requirements to provide additional protections for consumers who have fallen behind on their mortgage payments. The rules will take effect on January 10, 2014.

The rules amend both Regulation X (RESPA) and Regulation Z (Truth in Lending). Regulation X is amended and re-organized into three subparts: Subpart A covering settlement costs and disclosures, Subpart B covering escrows, and Subpart C covering mortgage servicing. The amendments to Reg. Z cover servicing related issues such as initial rate adjustment notices for ARM loans, periodic statements, prompt crediting of payments, and responses to payoff requests. The Reg. Z rules generally apply to any dwelling secured closed-end consumer credit transaction. Most of the Reg. X servicing requirements apply to any “federally related mortgage loan” subject, however, to the existing exemptions from coverage under RESPA and excluding HELOCs. However, the requirements for early intervention, continuity of contact and loss mitigation procedures for delinquent borrowers apply only to loans secured by the borrower’s principal dwelling.

The final rules also include several exemptions and exceptions from some requirements for small servicers, defined as servicers that service 5,000 or fewer mortgage loans and service only mortgage loans that they or an affiliate originated or own. This should help to reduce the burden somewhat for most community banks servicing their own mortgages. Taken together, the final rules cover nine major topics, summarized below.

Periodic billing statements. Under Reg. Z, as amended, servicers (which may include creditors and assignees) must provide a periodic statement for each billing cycle containing information on: payments currently due (including due date, the amount of any late charge and the date it will be imposed if payment is not received, the amount due, and a breakdown of the payment as to principal, interest, escrow, fees and any past due amount); payments previously made (including the amount of payments received since the last statement along with a breakdown of how the payment was applied and the total of payments received since the beginning of the calendar year along with a breakdown showing how that total was applied); transaction activity (any debits or credits to the account during the statement period including date, brief description and amount); an explanation of any partial payments held in suspense or unapplied and what must be done for the funds to be applied; account information (including principal balance, current interest rate, next interest rate change date, and the existence of any prepayment penalty); contact information for the servicer (toll-free telephone number and, if applicable, e-mail address) and housing counselors (website address for either the CFPB or HUD list of approved counselors and the HUD toll-free telephone number which may be used to obtain a list of approved counselors); information on delinquencies if the consumer is more than 45 days past due (date delinquency occurred, notification of possible risks including foreclosure, an account history dating back to the time the account was last current or, if less, the prior 6 months, a notice indicating any loss mitigation program the consumer has agreed to, a notice of whether the servicer has made the first filing or notice required to begin foreclosure, the total amount to bring the loan current, and a reference to the homeownership counseling information disclosed earlier). These statements must meet the timing, form, and content requirements provided in the rule, and the rule contains sample forms.

Reverse mortgages and timeshare plans are exempt. In addition, the periodic statement requirement generally does not apply to fixed-rate loans if the servicer provides a coupon book, so long as the coupon book contains the following information: on each coupon, information about the payment coming due (including due date, amount, and the amount of any late charge and the date it will be imposed if payment is not received); in the coupon book, information about the account (including principal balance, current interest rate, next interest rate change date, and the existence of any prepayment penalty), contact information for the servicer (toll-free telephone number and, if applicable, e-mail address), and information about how the consumer can obtain the information that would otherwise be required to appear on a periodic statement. Most importantly, small servicers, as defined above, are exempt entirely from the billing statement/coupon book requirements.

Interest-rate adjustment notices for ARMs. The amendments to Reg. Z require servicers, including creditors and assignees, to provide a consumer whose mortgage has an adjustable rate with an early warning notice between 210 and 240 days before the first payment at the adjusted level comes due. If the first payment at the adjusted level is due within 210 days after consummation, then the notice must be given at consummation. This notice must be in a separate document and contain the date of the disclosure, an explanation that the current interest rate period is ending and that a change in the interest rate may result in a change in the mortgage payment, the effective date of the first interest rate adjustment and when additional rate adjustments are scheduled to occur, and any other changes to loan terms or features that may occur at the same time, such as the expiration of an interest-only or payment-option feature.

The notice must also include the current and new interest rate, current and new payment amounts, date the first new payment is due, and, for interest only or negatively amortizing payments, an explanation of how the current and new payment is allocated to principal, interest and escrows. If the new interest rate is not known at the time the notice is given, the new rate and new payment amount must be estimated based on the index used on the loan that is current within the last 15 days prior to the disclosure date and labeled as estimates.

The notice must also contain: an explanation of how the rate is determined (including the index used, a source of information for the index and an explanation of any margin added to the index); any limits on rate adjustments or payment increases at each adjustment period and over the life of the loan; an explanation of how the new payment amount is determined (including index, margin, loan balance on the date of the adjustment and length of remaining loan term); if the new rate and payment amounts are estimated, a statement that an additional notice will be provided between 2 and 4 months before a new payment at the adjusted amount comes due; for interest only payments, a warning that the new payment will not be allocated to principal and will not reduce the loan balance; for negatively amortizing payments, a warning that the new payment will not be allocated to principal, will pay only part of the interest due, thereby, adding to the loan balance, and the payment amount required to amortize the loan balance at the new interest rate over the remaining loan term; the circumstances under which any prepayment penalty may be imposed and a statement that the consumer may contact the servicer for more information; a telephone number for the consumer to call if they anticipate a problem making their new payment; a brief explanation of alternatives the consumer may pursue to avoid paying at the new rate including refinancing, selling the property, modifying the loan terms, and arranging a payment forbearance; website addresses for either the CFPB or HUD list of approved counselors, the HUD toll-free telephone number to obtain the HUD list and the CFPB website to access contact information for state housing finance authorities.

A similar notice must be provided between 60 and 120 days before a payment at a new level becomes due when a rate adjustment causes the payment to change. Generally, the disclosures Reverse mortgages and timeshare plans are exempt. In addition, the periodic statement requirement generally does not apply to fixed-rate loans if the servicer provides a coupon book, so long as the coupon book contains the following information: on each coupon, information about the payment coming due (including due date, amount, and the amount of any late charge and the date it will be imposed if payment is not received); in the coupon book, information about the account (including principal balance, current interest rate, next interest rate change date, and the existence of any prepayment penalty), contact information for the servicer (toll-free telephone number and, if applicable, e-mail address), and information about how the consumer can obtain the information that would otherwise be required to appear on a periodic statement. Most importantly, small servicers, as defined above, are exempt entirely from the billing statement/coupon book requirements. Interest-rate adjustment notices for ARMs. The amendments to Reg. Z require servicers, including creditors and assignees, to provide a consumer whose mortgage has an adjustable rate with an early warning notice between 210 and 240 days before the first payment at the adjusted level comes due. If the first payment at the adjusted level is due within 210 days after consummation, then the notice must be given at consummation. This notice must be in a separate document and contain the date of the disclosure, an explanation that the current interest rate period is ending and that a change in the interest rate may result in a change in the mortgage payment, the effective date of the first interest rate adjustment and when additional rate adjustments are scheduled to occur, and any other changes to loan terms or features that may occur at the same time, such as the expiration of an interest-only or payment-option feature. The notice must also include the current and new interest rate, current and new payment amounts, date the first new payment is due, and, for interest only or negatively amortizing payments, an explanation of how the current and new payment is allocated to principal, interest and escrows. If the new interest rate is not known at the time the notice is given, the new rate and new payment amount must be estimated based on the index used on the loan that is current within the last 15 days prior to the disclosure date and labeled as estimates. The notice must also contain: an explanation of how the rate is determined (including the index used, a source of information for the index and an explanation of any margin added to the index); any limits on rate adjustments or payment increases at each adjustment period and over the life of the loan; an explanation of how the new payment amount is determined (including index, margin, loan balance on the date of the adjustment and length of remaining loan term); if the new rate and payment amounts are estimated, a statement that an additional notice will be provided between 2 and 4 months before a new payment at the adjusted amount comes due; for interest only payments, a warning that the new payment will not be allocated to principal and will not reduce the loan balance; for negatively amortizing payments, a warning that the new payment will not be allocated to principal, will pay only part of the interest due, thereby, adding to the loan balance, and the payment amount required to amortize the loan balance at the new interest rate over the remaining loan term; the circumstances under which any prepayment penalty may be imposed and a statement that the consumer may contact the servicer for more information; a telephone number for the consumer to call if they anticipate a problem making their new payment; a brief explanation of alternatives the consumer may pursue to avoid paying at the new rate including refinancing, selling the property, modifying the loan terms, and arranging a payment forbearance; website addresses for either the CFPB or HUD list of approved counselors, the HUD toll-free telephone number to obtain the HUD list and the CFPB website to access contact information for state housing finance authorities. A similar notice must be provided between 60 and 120 days before a payment at a new level becomes due when a rate adjustment causes the payment to change. Generally, the disclosures should be in the form of a table and in the same should be in the form of a table and in the same order and format as the model forms provided in the rule with certain disclosures to appear outside and above the table. The current annual notice that must be provided for ARMs for which the interest rate, but not the payment, has changed over the course of the year is no longer required.

Prompt payment crediting and payoff statements. The rules amend the existing Reg. Z requirements concerning prompt crediting of payments and responding to payoff requests. Servicers must promptly credit a periodic payment as of the day of receipt. A “periodic payment” is defined as one that is sufficient to pay principal, interest, and escrows (if applicable), whether or not it is also sufficient to cover any late charges, other fees or non-escrow payments a servicer has advanced. If a servicer receives a payment that is less than the amount due for a periodic payment, it may apply the partial payment or hold the partial payment in a suspense account until it receives enough to constitute a periodic payment. When the amount in the suspense account is enough to cover a periodic payment, the servicer must apply the funds to the consumer’s account. Pyramiding of late fees is prohibited, meaning no late fee can be assessed based on the failure of the consumer to pay a late charge attributable to an earlier payment. In addition, creditors, assignees, and servicers must provide an accurate payoff balance to a consumer within a reasonable time and no later than seven business days after receipt of a written request from the borrower or any person acting on the borrower’s behalf.

Force-placed insurance. Under the amendments to RESPA Reg. X, servicers are prohibited 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 and has provided required notices. Force-placed insurance covered by the rule is servicer-placed hazard insurance other than required flood insurance and other than hazard insurance obtained by the borrower and renewed by the servicer. An initial notice must be sent to the borrower at least 45 days before charging the borrower for force-placed insurance  coverage, and a second reminder notice must be sent no earlier than 30 days after the first notice and at least 15 days before charging the borrower for force-placed insurance coverage. Before force-placed coverage can be renewed, a notice must be sent at least 45 days before charging the borrower for the renewed coverage. The rule prescribes the content and format of the notices and contains model forms. Some information must be in bold text and the notices must be in a separate document; although, a separate mailing is not required. If mailed, the notices must be sent by first class mail or better.

If a borrower provides proof of hazard insurance coverage, the servicer must cancel any force- placed insurance policy and refund any premiums paid for overlapping periods in which the borrower’s coverage was in place. The rule also provides that charges related to force-placed insurance, other than those subject to State regulation as the business of insurance (such as premiums approved by the state insurance commissioner) or authorized by Federal law for flood insurance, must be for a service that was actually performed and must bear a reasonable relationship to the servicer’s cost of providing the service.

When an escrow account has been established for payment of taxes and insurance, RESPA requires a servicer to make timely disbursements and advance funds where necessary to pay escrow items as long as the borrower is not more than 30 days past due. The new rule changes that with respect to obtaining force-placed insurance. If the borrower has an escrow account for the payment of hazard insurance premiums, the servicer is prohibited from obtaining force-placed insurance even where the borrower is more than 30 days past due, unless the servicer is “unable to disburse funds from a borrower’s escrow account to ensure that the borrower’s hazard insurance premium charges are paid in a timely manner.” A servicer is deemed unable to disburse funds to keep the borrower’s insurance in force when there is a reasonable basis to conclude the policy was cancelled for reasons other than non-payment of the premium, such as where the insurance company sends notice of cancellation or non- renewal before the premium is due. In essence, a servicer must continue the borrower’s existing homeowner insurance whenever possible, even if the borrower is delinquent and the servicer must advance additional funds to the borrower’s escrow account to do so.

Small servicers are exempt from the rule against obtaining force-placed insurance in cases in which hazard insurance is paid through an escrow account, so long as any force-placed insurance purchased by the small servicer is less expensive to the borrower than the amount of any disbursement the servicer would have made to maintain the borrower’s hazard insurance coverage. Force-placed insurance is usually significantly more expensive than normal coverage, so this exemption may not mean very much as a practical matter. Small servicers are not exempt from the notice and other requirements for force-placed insurance.

Error Resolution and Information Requests. Servicers are required under Reg. X to meet certain procedural requirements for responding to written information requests or complaints of errors, including qualified written requests. The rule requires servicers to comply with the error resolution procedures for certain listed errors (including failure to properly accept, apply or timely credit a payment; failure to pay taxes, insurance premiums or other escrow items or to refund an escrow surplus in a timely manner; failure to provide an accurate and timely payoff statement; failure to provide accurate information concerning loss mitigation options and foreclosure; failure to provide accurate and timely information concerning a transfer of servicing; charging an unauthorized fee; initiating foreclosure, moving for a judgment or order of foreclosure, or conducting a foreclosure sale in violation of the rule), and any other error relating to the servicing of a mortgage loan. Servicers may designate by written notice a specific address for borrowers to use to assert an error.

Servicers generally are required to acknowledge the request or notice of error within five days (excluding Saturdays, Sundays and legal holidays). Servicers are also required, generally, to investigate and correct the error asserted by the borrower, and any additional errors discovered in the course of investigation, and to provide the borrower with written notification describing the action taken to correct the error, the effective date of the correction, and contact information including a phone number that can be used for further assistance. If the investigation finds that no error occurred, then the notice must include a statement of the reasons for that determination and the borrower’s right to obtain copies of any documentation relied upon by the servicer, along with contact information including a phone number that may be used for that purpose. The servicer may request information from the borrower in connection with the investigation, but may not require it before initiating its investigation or use the failure to receive it as a reason for determining no error occurred without conducting an investigation.

There are time limits for responding to a notice of an error. For failure to provide a payoff statement – the time limit is 7 days after receipt of the notice, excluding Saturdays, Sundays and legal holidays. For errors relating to starting foreclosure, moving for a judgment or order of foreclosure, or conducting a foreclosure sale in violation of the rule, a response is due prior to foreclosure or within 30 days after receipt of notice; and for other errors, a response is due 30 days after receipt. For errors other than the first two listed, the 30 day period can be extended to 45 days by notifying the borrower in writing of the extension and the reasons for it. If the borrower requests copies of the documentation relied upon by the servicer in its investigation, the servicer must provide it within 15 days after receiving the borrower’s request and at no charge. Privileged, confidential or proprietary information can be withheld on notice to the borrower within 15 days of receipt of the borrower’s request.

The servicer can short-cut the investigation process entirely by correcting the error asserted by the borrower and notifying the borrower of the correction within 5 days after receiving the borrower’s notice. There are also exceptions to the notice and investigation requirements and deadlines for repetitive notices of the same error, vague or overbroad notices where the servicer cannot reasonably determine the specific error asserted, and notices of error received more than one year after the loan has been paid off or the servicing transferred to another servicer. If an exception applies, the servicer must respond to the borrower’s notice within 5 days after receipt notifying the borrower of the reason no investigation will be made.

Servicers cannot charge a fee or require any payment owed to be made as a condition of responding to an error and may not, for 60 days after receipt of notice of an error, furnish adverse information to a consumer reporting agency regarding any payment that is the subject of the error notice. Except in connection with errors relating to initiating a foreclosure, moving for a judgment or order of foreclosure, or conducting a foreclosure sale, a servicer is free to pursue any remedy it might otherwise have against the borrower or the property, including foreclosure.

Information requests are treated in a similar fashion. Within a similar amount of time, servicers generally are required to acknowledge borrower written requests for information and either provide the information or explain why the information is not available. The distinction given a “qualified written request” under current rules pretty much goes away. The term still exists under the new rules, but a qualified written request is just a subset of error notices or requests for information and is subject to the same rules and deadlines.

General servicing policies, procedures, and requirements. Servicers are required to establish policies and procedures reasonably designed to achieve certain objectives specified in the rule. The reasonableness of a servicer’s policies and procedures may take into account the size, scope, and nature of the servicer’s operations. The objectives are divided into five categories and the rules provide more detail on the types of required policies and procedures for each category. The categories include: accessing and providing accurate and timely information to borrowers, investors, and courts (required policies and procedures should cover providing accurate and timely disclosures, responding to error notices and information requests, providing mortgage investors and assignees with information about the loan being serviced, proper handling of foreclosures and foreclosure documentation, and handling loans where the borrower has died); properly evaluating loss mitigation applications (including procedures dealing with making borrowers aware of available loss mitigation options, identifying all options for which the borrower may be eligible, identifying all information or documents the borrower is required to submit for consideration and then making sure all personnel assisting the borrower have access to it, and evaluating the borrower’s application pursuant to the eligibility rules established by investors and required RESPA loss mitigation procedures); facilitating oversight of, and compliance by, third party service providers to the mortgage loan servicer (including procedures for appropriate servicer personnel to have access to documents and information concerning actions taken by the service provider, periodic reviews/compliance audits of the service provider, and facilitating sharing of information between servicer and service provider personnel regarding the status of any loss mitigation processes and foreclosure proceedings); facilitating transfer of information during servicing transfers (including procedures for transferors to assure transfer of complete and accurate information and procedures for transferees to identify any necessary information or documents it did not receive); and informing borrowers of the availability of written error resolution and information request procedures.

In addition, servicers are required to maintain certain documents and data for each mortgage loan in a manner that enables the servicer to compile it into a loan servicing file within five days. Required records include a schedule of all transactions on the account include any escrow or suspense accounts; a copy of the mortgage, deed of trust or other security instrument; any notes created by servicing personnel reflecting communications with the borrower about the account; to the extent applicable, a report of the data fields relating to the account in the servicer’s electronic systems; and copies of any documents or information provided by the borrower in connection with any error notices or loss mitigation procedures.

Small servicers, as defined above, are exempt from the requirements of this section along with “qualified lenders” subject to certain Farm Credit Administration rules.

Early Intervention with Delinquent Borrowers. For loans secured by the borrower’s principal dwelling, servicers must establish or make good faith efforts to establish live contact with borrowers by the 36th day of their delinquency and promptly inform such borrowers, where appropriate, that loss mitigation options may be available. In addition, a servicer must provide a borrower a written notice with information about loss mitigation options by the 45th day of a borrower’s delinquency. The written notice must include: a statement encouraging the borrower to contact the servicer; the telephone number to reach servicer personnel assigned to assist the borrower and the servicer’s mailing address; if applicable, a brief description of available loss mitigation options; if applicable, loss mitigation application instructions or a statement on how to obtain more information; and the website to access either the CFPB or HUD list of approved counselors and the HUD toll-free telephone number to obtain the list. The rule contains model language servicers may use for the written notice.

Small servicers, as defined above, and “qualified lenders” under certain Farm Credit Administration rules are exempt from this section.

Continuity of contact with delinquent borrowers. For loans secured by the borrower’s principal dwelling, servicers are required 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. The policies and procedures must be reasonably designed to ensure that a servicer assigns personnel to a delinquent borrower by the time the servicer provides the written notice required by the early intervention requirements, but no later than the 45th day of a borrower’s delinquency. The personnel assigned should be accessible to the borrower by phone to assist the borrower in pursuing loss mitigation options, including advising the borrower on the status of any loss mitigation application and applicable timelines. The personnel should be able to access all information the borrower has provided to the servicer and furnish that information, when appropriate, to those responsible for evaluating the borrower for loss mitigation options.

This section includes an exemption for small servicers and qualified lenders as described above.

Loss Mitigation Procedures. A loss mitigation option is any alternative to foreclosure offered by the investor/owner of the mortgage loan that is made available through the servicer. The rules do not impose a duty on a servicer to make any specific loss mitigation option available to borrowers, but servicers offering any form of loss mitigation are required to follow specified loss mitigation procedures for those loss mitigation options available through the servicer for loans secured by the borrower’s principal residence.

If a borrower submits an application for a loss mitigation option, the servicer is required to acknowledge the receipt of the application in writing within five days and inform the borrower whether the application is complete and, if not, what information is needed to complete the application and the deadline for providing it. The servicer is required to 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 servicer is required to evaluate the borrower, within 30 days, for all loss mitigation options for which the borrower may be eligible in accordance with the investor’s eligibility rules, including both options that enable the borrower to retain the home (such as a loan modification) and non-retention options (such as a short sale). Servicers are free to follow the requirements and guidelines established by the investor to determine eligibility for particular loss mitigation options. The servicer must provide the borrower with a written decision, including an explanation of the specific reasons for denying the borrower for any loan modification option offered by the investor and a statement of the borrower’s right to appeal the denial. A borrower may appeal a denial of a loan modification program so long as the borrower’s complete loss mitigation application is received 90 days or more before a scheduled foreclosure sale. The appeal must be reviewed by personnel independent of those responsible for evaluating the borrower’s original loss mitigation application.

The rule restricts “dual tracking,” where a servicer is simultaneously evaluating a consumer for loan modifications or other alternatives at the same time that it prepares to foreclose on the property. Specifically, the rule prohibits a servicer from making the first notice or filing required for a foreclosure until a mortgage loan account is more than 120 days delinquent. Even where a borrower is more than 120 days delinquent, if a borrower submits a complete application for a loss mitigation option before a servicer has made the first notice or filing required for a foreclosure, a servicer may not start foreclosure unless (1) the servicer informs the borrower that the borrower is not eligible for any loss mitigation option (and any appeal has been exhausted), (2) a borrower rejects all loss mitigation offers, or (3) a borrower fails to comply with the terms of a loss mitigation option, such as a trial modification.

If a borrower submits a complete application for a loss mitigation option after the foreclosure process has commenced but more than 37 days before a foreclosure sale, a servicer may not move for a foreclosure judgment or order of sale, or actually conduct a foreclosure sale, until one of the same three conditions above has been satisfied. In all of these situations, the servicer is responsible for promptly instructing any legal counsel retained by the servicer not to proceed with filing for a foreclosure judgment or order of sale, or to conduct a foreclosure sale, as applicable.

This section includes an exemption for small servicers, as defined above, and “qualified lenders” that are required to comply with Farm Credit Administration regulations relating to distressed borrowers. However, a small servicer is still required to comply with two requirements: (1) a small servicer may not make the first notice or filing required for a foreclosure process unless a borrower is more than 120 days delinquent, and (2) a small servicer may not proceed to foreclosure judgment or order of sale, or conduct a foreclosure sale, if a borrower is performing pursuant to the terms of a loss mitigation agreement.

Civil Liability. With two exceptions, the CFPB is relying, at least in part, on its authority under Section 6 of RESPA, as amended by Dodd-Frank, in issuing the Reg. X servicing rules. For the two sections requiring reasonable policies and procedures to meet the overall servicing objectives and reasonable policies and procedures to maintain continuity of contact with delinquent borrowers, the CFPB is relying only on its authority under Section 19(a) of RESPA. This distinction is important. Violations of Section 6 of RESPA may be enforced by individual borrowers through litigation. Section 6(f) of RESPA provides that servicers may be liable in a civil action for actual damages, statutory damages of up to $2,000 for a pattern or practice of non-compliance (up to $2,000 per classmember in a class action, not to exceed the lesser of $1,000,000 or 1% of the servicer’s net worth), plus attorneys’ fees. So, there is the potential for civil liability for violations of the new servicing requirements under either Reg. Z (Truth in Lending) or Reg. X (RESPA), except with respect to the requirements to establish reasonable policies and procedures in those two areas. The CFPB apparently listened to industry and decided that it would be inappropriate to provide for civil liability for violations of those two sections which set forth broad and flexible policy and procedure requirements. Nevertheless, there is a significant risk for civil liability for other violations. In particular, the requirements for early intervention and loss mitigation procedures may give borrowers a significant potential claim or defense to use in foreclosure proceedings. And, of course, the CFPB and the prudential regulators have authority over servicers within their jurisdiction to bring enforcement actions to assure compliance with all of the new requirements.

Effective Date; Implementation. The effective date for both of these rules is January 10, 2014. While that sounds like a long way off, the final rules will, in many cases, require development of extensive written servicing procedures, revisions to software, staff training, and other changes. Thankfully, there is a break for small servicers with respect to at least some of the requirements. Even small servicers, however, may be wise to review their existing policies and procedures, keeping the new rules for larger servicers in mind as a guide. The CFPB has said it will be working to provide additional information and guidance to help the mortgage servicing industry to implement the new rules by the effective date.