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Consumer Financial ProtectionBureau (CFPB) Rules – NOE/RFI;Noncompliance IssuesMichigan Foreclosure Prevention ProjectJohn Rao National Consumer Law Center 2014Notices of Error and Requestsfor Information New regime January 10, 2014: separatequalifications and procedures for:– “notice of error” under Reg. X § 1024.35– “request for information” under Reg. X§ 1024.36 Written inquiry can be a NOE or RFI even ifnot a QWR No fees for either a NOE or RFI– § 1024.35(h) – error resolution– § 1024.36(g) – information requests

Notice of Error12 C.F.R. § 1024.35Failure to accept aconforming paymentFailure to apply apayment correctlyFailure to timelycredit a paymentFailure to maketimely escrowdisbursementsImposing anunreasonable feeFailure to provide apayoff statementFailure to provideaccurate lossmitigationinformationFailure to do aservicing transfercorrectlyFiling a foreclosurewithout giving thecorrect notices re.loss mitigationMoving forforeclosure judgmentor sale withoutfollowing the lossmitigation protocolsAny other errorrelating to theservicing of aborrower's mortgageloanWhat Isn’t Subject to aNotice of Error12 C.F.R. § 1024.35(g) & Official Bureau Interpretation § 1024.35(b)-1Origination of loanUnderwriting of loanSecuritization or transfer of ownership of loanDuplicative requestsOverbroad requestsNOEs more than one year after loan discharged or no longer servicerServicer must notify borrower in writing within 5 business days after making determination notto comply

What If Servicer Says No Error? Within 15 business days of receivingborrower’s request, servicer must provide atno charge the documents and information itrelied upon in making a determination that noerror occurred. May include documents showing informationentered in servicer’s collection system (suchas a copy of screen shot of servicer’s system). Servicer is not required to provide documentsthat contain confidential, proprietary, orprivileged information, but must still providenotice within 15 daysNotice of Error & Loss Mitigation Loss mitigation is related to servicing of loan Provisions for Notices of Error on– Initiating foreclosure improperly– Proceeding to sale improperly– Failing to provide accurate loss mitigation info. But no explicit Notice of Error for failure toadequately evaluate for loss mitigation– Appeal process in § 1024.41(h) should provideeffective review– Catch-all was added “to encompass the myriad anddiverse types of errors that borrowers mayencounter .”– Loss mitigation evaluation not excluded

Using RESPA Error Resolution Potential loss mitigation covered errors:– failing to provide accurate information regardingloss mitigation options and foreclosure– failing to transfer accurate and timely informationabout borrower’s mortgage account to a transfereeservicer, including loss mitigation information– making the first notice or filing for any foreclosureprocess in violation of § 1024.41(f) or (j) - NOEmust be received more than 7 days before ascheduled foreclosure sale– moving for foreclosure judgment or order of sale, orconducting a foreclosure sale in violation of§ 1024.41(g) or (j) - NOE must be received morethan 7 days before a scheduled foreclosure saleRequest for Information Servicer is required to respond to anywritten request for information “with respectto the borrower’s mortgage loan” Unlike QWR, a RFI is not limited toinformation “related to the servicing” of theloan

Request for Information RFI may seek:– information about a loan modificationapplication– “servicing file,” which includes: schedule of all account transactions copy of security instrument that establishes lien any notes created by servicer personnel reflectingcommunications with the borrower– no per se rule against seeking loan originationdocs

Limitations on RFI12 C.F.R. § 1024.36(f) Duplicative– Not duplicative if for different time period, if informationcould change Confidential or proprietary– Servicer employee compensation or personnel actions– Examination reports or audits Irrelevant– Info on other borrowers– Servicer training manuals– Investor instructions (!) Overbroad or unduly burdensome Untimely (more than one year after loan discharged orservicer no longer servicing loan) Servicer must notify borrower in writing within 5business days after deciding not to complyWho Can Send a NOE or RFI? Borrower Borrower’s Attorney Borrower’s “Agent”– CFPB Commentary: Servicer may require proofof authority from agent and may not treat letter asnotice of error or information request untildocumentation received

Where to Send a NOE or RFI? If servicer has an “exclusive address,” it must:– provide written notice designating the exclusiveaddress– use same address for notices of error and requestsfor information– provide the exclusive address on: any websiteservicer maintains for servicing of the loan; anyrequired periodic statement or coupon book; anynotices required by early intervention or lossmitigation rulesReg. X, 12 C.F.R. § 1024.35(c) and 1024.36(b)

Time for Servicer Response5 business days Acknowledge QWR, NOE,or RFI, or Take requested action30 business days Correct borrower’saccount, or After conducting areasonable investigation,provide borrower writtenexplanation as to whyservicer believes accountis correct, or Provide borrower withrequested information orexplanation whyinformation is unavailableExceptions to 30-Day ResponsePeriod7 business days for NOE asserting failure to provide accurate payoffstatementPrior to foreclosure sale for NOE based on 120-day pre-foreclosure waiting periodor dual-track requirements, if NOE received more than 7days before a scheduled foreclosure sale10 business days for RFI seeking identity of owner of mortgage

Extension of 30-Day ResponsePeriod15 day extension if servicer notifies borrower of extension and reasonfor delay before end of initial 30-day period.No extension for timely notice of error based on 120-day preforeclosure waiting period or dual-trackrequirements or request for information seeking identity of mortgageownerDuring the Response Period No adverse credit reporting of payment that issubject of notice of error, for 60 days afterreceipt of notice. 12 U.S.C. § 2605(e)(3) No foreclosure if notice of error received on120-day pre-foreclosure waiting period or dualtrack provisions more than 7 days beforeforeclosure sale. 12 C.F.R. § 1024.35(i) Otherwise, servicer may pursue collectionremedies, including foreclosure

Asking the Servicer to Identify theMortgage Loan OwnerTILA (1641(f)(2))RESPA (Reg. X§1024.36(d)(2)TimePresumptively “reasonable”10 business daysFeesNot discussedBannedRemedy 4K plus actuals, butservicer liability?Actual, unless patternand practice and then 2KStatute of limitations1 year3 yearsUseful commentary in the RESPA Official Interpretations,§ 1024.36(a)-2Force-Placed Insurance Final rule requires servicer to pay the borrower’sexisting insurance policy, if there is an escrowaccount, except if servicer has reasonable basisto believe:– that the borrower’s insurance is being canceled forreasons other than nonpayment, or– the property is vacant. FPI charges must be for services actuallyperformed and have reasonable relationship tocost of providing the service20

Loss Mitigation RulesRules effective Jan. 10, 2014 dealing withforeclosure avoidance: Early Intervention - Reg. X § 1024.39 Continuity of Contact - Reg. X § 1024.40 Loss Mitigation - Reg. X § 1024.4121Jan. 10, 2014 Effective Date Does not apply to applications received beforeeffective date Applies to applications received after effectivedate even if borrower evaluated for lossmitigation before effective date 120 day ban on foreclosure referrals applies tomortgage loans that:– become delinquent on or after effective date, and– are delinquent on effective date but for whichforeclosure has not been initiated

Receipt of Application 45 Daysor More Before SaleServicer must: Conduct review to determine whether applicationis complete Within 5 business days of receiving application,provide written notice to borrower that: acknowledges application is complete, or describes documents and information needed tocomplete the application, and provides “reasonable date” by which borrowershould submit missing documents andinformation

“Reasonable Date” to Complete? A “reasonable date” should preserve the“maximum borrower rights,” except when it wouldbe impracticable (e.g., requesting docs in lessthan 7 days), based on the following milestones:– date when documents already submitted will bestale– date that is 120th day of delinquency– date that is 90 days before a foreclosure sale– date that is 38 days before a foreclosure sale

Loan Modification Denial If loan modification denial based on a requirement setby loan owner or assignee, notice must identify owneror assignee and specific requirement that was basisfor denial If loan modification denial based on net present valuetest, notice must state this reason and include theinputs used for the calculation Denial notice must also describe borrower’s right toappeal, the deadline to appeal, and any requirementsfor making an appeal, if applicableConcern # l: You requested us to provide you information with regards to thedenial of modification on the loan.Response: The terms of any possible modification are determined by manyfactors, including Ocwen's servicing guidelines, the status of the loan and thefinancial information provided by the borrowers. Please note that the modificationwill be denied if the loan does not qualify based on either one or all of the abovefactors.Our records indicate that your request to modify the loan under the HomeAffordable Modification Program (HAMP) has been denied as unfortunately, theOwner of your loan did not approve the loan modification request.However, the modification was denied, as under guidelines established by theowner of your loan, please be advised that we are unable to provide you with thecalculations, as they are for internal purposes.Further, the loan was reviewed for modification. However, this modification wasalso denied, as the owner of the loan did not approve the modification of the loan.The reason for the denial has also been mentioned in the Denial Letterthat was sent on March 17, 2014.For any further questions or concerns regarding the loan, you may contact ourCustomer Care Center at (800) 746-2936.

Borrower’s Response If complete application received 90 days or morebefore a foreclosure sale,– servicer may require that borrower accept or reject an offerno earlier than 14 days after offer made If a complete application received less than 90 daysbut more than 37 days before a foreclosure sale:– servicer may require that borrower accept or reject offer noearlier than 7 days after offer made If a borrower requests an appeal, deadline foraccepting option is extended until 14 days afterservicer provides the appeal determination noticeLoss Mitigation Review RightsDays ApplicationReceived BeforeForeclosure SaleAcknowledgment ofApplication 90 45 38Yes, must acknowledge within 5 businessdays and provide deadline for supplyingadditional documentsTime to Evaluate30 daysTime to Appeal14 daysNo appeal rightsTime to AcceptLoan Mod Offer14 days7 daysNo