CFPB Offers Servicers Slight Leeway with Mortgage Servicing Rule Implementation Date

November 30, 2017 by David Basen

A few minor changes and updated guidance to the final mortgage servicing rule have been released by the Consumer Financial Protection Bureau (CFPB) days before the rule is set to go into effect.

The 2016 Mortgage Servicing Final Rule consists of two acts – 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z). The bureau has now published two documents related to 2016 amendments to the mortgage servicing rule.

The first document addresses two typos in the rule, the authority citation for Regulation Z, and various corrective instructions about specific official commentary to apply the correct effective date.

The Bureau reasons that because there is little room to argue the correction of technical errors within the document, there is justification in publishing the changes without requesting public comment.

The explanations of the changes can be found on page three and describe corrections like adjusting the word “contact” to say “contract.”

The second document the bureau released addresses concerns mentioned by some contributors within the industry.

The CFPB released guidance to the effective date of the final mortgage servicing rule, which is scheduled for Thursday, Oct. 19, 2017.

“The Bureau has heard concerns that these midweek effective dates for the 2016 Mortgage Servicing Final Rule could create operational challenges for servicers,” the CFPB document reads. “The Bureau understands that, for many servicers, the Thursday effective dates could afford less than a full day—from the close of business overnight on each of the preceding Wednesdays—to update and test systems in order to be compliant with the 2016 amendments. If servicers do not have sufficient time to complete these tasks, their systems may be more likely to produce errors, which could expose servicers and consumers to risk.”

With acknowledgment of the challenges, the Bureau said it would allow servicers to begin implementing the servicing rule up to three days before the implementation date without taking action against those servicers for violating existing Regulation X or Regulation Z rules.

“While the substance of the policy guidance does not appear to have a lot of operational impact, it does send a clear signal that the bureau does not intend to extend the effective dates of the rule changes,” Mike Jones, director with Navigant, explained. “In fact, the policy guidance encourages servicers to implement the rule changes over the weekend before the mid-week effective dates.”

Jones adds that servicers need to take action immediately to be prepared for the Oct. 19 implementation date.

“It’s also a good reminder that servicers don’t have a lot of time to spare as the deadlines approach,” said Jones. “There’s a lot to do to get ready.”