Outline of the CFPB s Mortgage Servicing Proposal - American by okyestao

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									      Outline of the CFPB’s Mortgage Servicing Proposal: Regulation Z Amendments
                                        American Bankers Association
                                           September 12, 2012


Overview

On August 10, 2012, the Bureau of Consumer Financial Protection (“CFPB”) proposed mortgage servicing
regulations that would 1) implement the servicing provisions of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) and 2) adopt additional servicing standards to “address a lack of
transparency and accountability in key parts of the [mortgage] market.” The proposals would amend the
mortgage servicing provisions of Regulation Z, which implements the Truth in Lending Act (“TILA”) and Regulation
X, which implements the Real Estate Settlement Procedures Act (“RESPA”).

Below is a detailed outline of the proposed revisions to Regulation Z as well as several discussion questions,
including questions posed by the CFPB. The proposal addresses adjustable rate mortgage (“ARM”) interest rate
adjustment notices, prompt crediting of accounts (including requirements for partial payments and non-
conforming payments), payoff statements, and periodic statements. The proposed Regulation X requirements are
discussed in a separate ABA summary. Notably, several components of both proposals are not required by the
Dodd-Frank Act. Rather, CFPB is asserting its discretionary authority to implement additional servicing
requirements in order to “reduce avoidable foreclosures and improve general customer service.” Comments on
the proposals are due to the CFPB by October 9, 2012.

ABA has formed a Mortgage Servicing Working Group to assist ABA in formulating comments on the CFPB’s
proposals. Please contact Alex Maroulis-Cronmiller at acronmil@aba.com or 202-663-5165 if you or one of your
colleagues would like to participate in the Mortgage Servicing Working Group. Contact Krista Shonk at
kshonk@aba.com or 202-663-5014 if you would like to discuss the proposals.

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I.     ARM Rate Reset Notices
       A. Initial Rate Reset Notice. (Proposed § 1026.20(d))
               1. Generally. Servicers must notify consumers 6-7 months prior to the first time the interest
                   rate of their ARM adjusts. The new timing requirement would be tied to the date the first
                   payment at a new level is due rather than the date of the interest rate adjustment. Thus, the
                   proposed notices would be required 210-240 days before the first payment at the adjusted
                   level is due.
               2. Scope. Would apply to closed-end consumer credit transactions secured by the consumer’s
                   principal dwelling. The proposed commentary provides that the initial ARM adjustment
                   notice is not limited to transactions financing the initial acquisition of the consumer’s
                   principal dwelling; the notice requirement would also apply to other closed-end ARM
                   transactions secured by the consumer’s principal dwelling.
Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



                           a. Hybrid and Non-Hybrid ARMs. The Dodd-Frank Act applies this disclosure to only
                              hybrid ARMs, but the CFPB is proposing to use its discretionary authority to extend
                              the requirements to ARMs that are not hybrid.
                           b. Would NOT Apply To:
                                  i.  Adjustable-rate home equity plans
                                 ii.  Construction loans with terms of one year or less
                                iii.  The following loans, provided that they are fixed-rate transactions: price-
                                      level adjusted or other indexed mortgages that have a fixed rate of interest
                                      but provide for periodic adjustments to payments and the loan balance to
                                      reflect changes in an index measuring prices or inflation; graduated-payment
                                      mortgages or step-rate transactions; renewable balloon-payment
                                      instruments; preferred-rate loans

                                Feedback Request: Timing and Scope of Initial Rate Reset Notice

                                     Will the burden imposed on small entities by the Initial Rate Reset requirements
                                      outweigh the consumer protection benefits afforded by the early notice of the
                                      initial ARM interest rate adjustment?

                                     How easy or difficult would it be for servicers to comply with the new timing
                                      requirement? What changes would need to be made to systems and processes?
                                      What are the types of costs that would be associated with such changes? What is
                                      the estimate of these costs?

                                     What additional costs and burdens would servicers incur by providing the Initial
                                      Rate Reset Notices for hybrid as well as non-hybrid ARMs?

                                     See I.A.1.b.ii. Are there other ARMs with terms of less than one year? Should
                                      such ARMs be excepted from the Initial Rate Reset Notice requirement? What
                                      notice period would be appropriate?



                  3. Content of Notice. Some of the proposed disclosure content is required by the Dodd-Frank
                     Act; however, the CFPB is proposing to use its discretionary authority to require that
                     additional information be included in the disclosure. The proposal specifies that certain
                     information in the disclosures must be provided in tabular form. The CFPB is also proposing
                     specific language for certain disclosure requirements. See proposed model forms.
                         a. Content Required by Statute.
                                 i.  Index or Formula. Any index or formula used in adjusting or resetting the
                                     interest rate and a source of information about the index or formula.



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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



                                  ii.Explanation. An explanation of how the new rate and payment would be
                                     determined, including how the index may be adjusted, such as by the addition
                                     of a margin.
                               iii.  Good Faith Estimate. A good faith estimate, based on accepted industry
                                     standards, of the amount of the resulting monthly payment after the
                                     adjustment or reset and the assumptions on which the estimate is based.
                                         a) CFPB believes that 210-240 days advance notice would require an
                                             estimated new interest rate and payment instead of exact amounts.
                                             However, CFPB interprets the statute to require disclosure of the
                                             exact amount of the new interest rate, if this amount is available.
                                         b) Would require that any estimated amount be calculated using the
                                             index figure disclosed in the source of information within 15 business
                                             days prior to the date of the disclosure.
                               iv.   Alternatives. A list of alternatives that the consumers may pursue, including
                                     refinancing, renegotiation of loan terms, payment forbearance, and pre-
                                     foreclosure sales, and descriptions of actions the consumer must take to
                                     pursue these alternatives.
                                v.   Housing Counselors. Contact information for HUD- or State housing agency-
                                     approved housing counselors or programs reasonably available. CFPB
                                     proposing to use its discretionary authority to permit servicers to simply
                                     provide the website address to access either the CFPB’s list or the HUD list of
                                     homeownership counseling agencies and programs instead of requiring
                                     contact information for a list of specific counseling agencies or programs.
                               vi.   State Housing Finance Authority. Contact information for the State housing
                                     finance authority for the State where the consumer resides.
                           b. Content Proposed Pursuant to CFPB’s Discretionary Authority
                                 i.  Date. Date of the disclosure; would be the date the creditor, assignee, or
                                     servicer generates the notice.
                                ii.  Telephone Number. Telephone number of the creditor, assignee, or servicer.
                               iii.  Statements Regarding Change to Interest Rate and Payment. Statements
                                     specifying that the consumer’s interest rate is scheduled to adjust pursuant to
                                     the terms of the loan, that the adjustment may effect a change in the
                                     mortgage payment, the specific time period the current interest rate has
                                     been in effect, the dates of the upcoming and future interest rate
                                     adjustments, and any other changes to loan terms, features, or options taking
                                     effect on the same date as the interest rate adjustment.
                               iv.   Due Date of New Payment. The due date of the first payment after the
                                     adjustment.
                                v.   For interest-only or negatively-amortizing payments.
                                            The amount of the current and new payment allocated to principal,
                                                interest, and taxes and insurance in escrow, as applicable.

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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



                                                   A statement regarding payment allocation, including the payment
                                                    required to fully amortize an ARM that becomes negatively-
                                                    amortizing as a result of the interest rate adjustment.
                                  vi.    Any Interest Rate or Payment Limits and Any Foregone Interest.
                                 vii.    Actual Payment Amount. If the new interest rate or new payment provided is
                                         an estimate, a statement that another disclosure containing the actual new
                                         interest rate and payment will be provided within a specified time period -- if
                                         the actual interest rate adjustment results in a corresponding payment
                                         change.
                                viii.    Prepayment Penalty. The amount and expiration date of any prepayment
                                         penalty and the circumstances under which such penalty might apply.

                     Feedback Request: Content of Initial Rate Reset Notice

                      How easy or difficult would it be for servicers to comply with the new disclosure content
                       requirement? What are the types of costs that would be associated with such changes (e.g.,
                       programming costs)? What is the estimate of these costs?

                      Is the content being proposed pursuant to CFPB’s discretionary authority reasonable? Can
                       servicers provide this information with relative ease? If not, why? What are the costs
                       associated with providing this content?

                      Should rate limits and unapplied carryover interest be included in the disclosures?

                      Regarding state housing finance authorities -- other CFPB rulemakings require this information
                       for the state in which the property is located since those rules are not limited to a consumer’s
                       principal dwelling. What compliance difficulties are posed by this inconsistency? How should
                       they be addressed?

                  4. Separate and Distinct. The Dodd-Frank Act requires that the Initial Rate Reset Notices be
                     “separate and distinct from all other correspondence to the consumer.” The proposed
                     commentary explains that the notices must be mailed or delivered separately from any other
                     material. In the case of mailing the disclosure, there should be no material in the envelope
                     other than the Initial Rate Reset Notice. In the case of emailing the disclosure, the only
                     attachment should be the Initial Rate Reset Notice. This requirement contrasts with
                     Subsequent Rate Reset Notices discussed in I.B. below, which would be subject to less
                     stringent segregation requirements.

                     Feedback Request: Would consumer protection be compromised by providing the notices on a
                     separate piece of paper but in the same envelope or as email correspondence with other messages
                     from the creditor, assignee, or servicer?


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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



                  5. Electronic Delivery. The proposed commentary explains that the Initial Rate Reset Notices
                     may be provided to consumers in electronic form with consumer consent.
                  6. Applicable to Assignees. The proposal would apply to creditors, assignees, and servicers;
                     would add assignees to the list of covered persons. CFPB believes that holding creditors, but
                     not assignees, liable under the regulation would result in inconsistent levels of consumer
                     protection and an unlevel playing field for owners of mortgages.
                  7. Notice of Actual Payment Amount. The Initial Rate Reset Notice would have to be followed by
                     a later notice apprising consumers of the actual amount of their interest rate and payment
                     resulting from the adjustment.
                     Feedback Request: What are the types of costs associated with providing multiple rate reset
                     notices (the estimated disclosure and the disclosure contain the actual amount)? What is the
                     estimate of these costs?

         B. Subsequent Rate Reset Notices. (Proposed 1026.20(c))
               1. Generally. Would require servicers to provide disclosures to consumers each time the
                   interest rate adjustment results in a payment change. The proposed commentary would
                   clarify that the new interest rate must be the actual rate, not an estimate. This notice would
                   be required 60-120 days before the new payment amount is due. (Current regulation is 25-
                   120 days notice). (Page 38 of the proposal explains the CFPB’s rationale as to why this timing
                   is workable for the majority of ARMs). These provisions are not required by the Dodd-Frank-
                   Act; CFPB is proposing these changes pursuant to its discretionary authority.


                     Feedback Request: Timing

                      What is the industry’s general feedback regarding the proposed timing of the disclosure?

                      What is the feasibility of applying the proposed 60-day period to ARMs that have look-back
                       period of less than 45 days?

                      Is a look-back period of 45 days or longer feasible going forward for loans that currently use
                       shorter look-back periods? If not, why not?

                      What are the operational changes that would be required to provide the notices at least 60
                       days before payment at a new level is due?

                      What factors would hinder compliance with the proposed time frame?




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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association




                     Feedback Requested: Timing (cont’d)

                      What is the verification period necessary for producing the disclosure? Why is this amount
                       of time needed? What is the feasibility of reducing the length of the verification period?
                      To what extent, if any, could the relative length of the look-back period affect the interest
                       rate risk for the creditor, assignee, or servicer?



                  2. In Scope. Would apply to closed-end consumer credit transactions secured by the consumer’s
                     principal dwelling in which the annual percentage rate may increase after consummation.
                     Note that this would apply to loans with terms of one year or less, which differs from existing
                     requirements. The CFPB is also proposing to amend the staff commentary to clarify that the
                     disclosure requirements are not limited to transactions financing the initial acquisition of the
                     consumer’s principal dwelling, but would also apply to other closed-end ARM transactions
                     secured by the consumer’s principal dwelling.
                  3. Out of Scope.
                           a. Grandfathered ARMs. Existing ARMs with look-back periods of less than 45 days
                                that were originated before 7/21/13.
                           b. Construction loans with terms of one year or less.
                           c. 210 days. The first adjustment to an ARM if the first payment at the adjusted level
                                is due within 210 days after the consummation and the actual, not estimated, new
                                interest rate was disclosed at consummation.
                           d. 60 days. ARMs that adjust for the first time within 60 days of consummation where
                                the actual, not estimated, new interest rate was not disclosed at consummation.
                                For such loans, the disclosures must be provided to consumers as soon as
                                practicable, but not less than 25 days before a payment at a new level is due.


                            Feedback Request: Exemptions

                             Are there other ARMs with terms of less than one year that should be exempt from the
                              60-day notice requirement?

                             Is 7/21/13 an appropriate time frame for grandfathering existing ARMs with look-back
                              periods of less than 45 days or is another time period more appropriate? Why?

                             Are there other adjustable-rate mortgages that should be allowed to continue with a 25-
                              to 120-day period?



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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



                  4. Content of Notice. Would generally retain the content of existing ARM notices. Would also
                     require the following additional information:
                        a. Statement that the consumer’s interest rate is scheduled to adjust, the adjustment
                             may change the mortgage payment, the time period the current interest rate has
                             been in effect, and the dates of the future rate adjustments.
                        b. The date when the new payment is due after the adjustment; any interest rate or
                             payment limits.
                        c. Any unapplied carryover interest and the earliest date it could be applied.
                        d. Additional amortization information for negatively-amortizing and interest-only loans
                        e. The amount and expiration date of any prepayment penalty.

                                  Feedback Request: How easy or difficult would it be for servicers to comply with
                                  the new disclosure content requirement? What are the types of costs that would
                                  be associated with such changes (e.g., programming costs)? What is the estimate
                                  of these costs?

                  5. Form. Would require that certain rate reset information be grouped together and segregated
                     from everything else. Would prohibit inclusion of any information not directly related to the
                     rate reset disclosure. Would also require that the ARM payment change notices be in tabular
                     form, including the current and new interest rates, the current and new payments, and the
                     date the first new payment is due. For interest-only and negatively-amortizing ARMs, the
                     table would also include the allocation of payments.
                  6. Applicable to Assignees. This provision would explicitly apply to creditors, assignees, and
                     servicers.
                  7. Conversions. The Subsequent Rate Reset Notice requirement would apply to ARMs
                     converting to fixed-rate mortgages when the adjustment to the interest rate results in a
                     corresponding payment change.
                  8. Separate and Distinct. Notice would have to be separate and distinct from the periodic
                     statement. However, the notice may be provided to consumers together with the periodic
                     statement, depending on the mode of delivery, in the same envelope or as an additional
                     attachment to the email.

                        Feedback Request: Should the CFPB permit or require the rate reset notice to be
                        incorporated into periodic statements in lieu of providing a separate notice? CFPB notes
                        that this approach might require greater programming complexity in connection with the
                        periodic statements.

                  9. Annual Disclosure. Would eliminate the requirement to provide consumers with an
                     adjustment notice at least once each year during which an interest rate adjustment is
                     implemented without resulting in a corresponding payment change. CFPB’s rationale in
                     proposing this approach is that much of the same information would be received on the
                     periodic statement.

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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association




II.      Prompt Crediting and Provision of Payoff Statements (Proposed §1026.36)
         A. Full Contractual Payments. Servicers must credit full contractual payments to the consumer’s loan
            account as of the date of receipt, except when a delay in crediting does not result in any charge to the
            consumer or in the reporting of negative information to a consumer reporting agency. Full
            contractual payment would include principal, interest, and escrow (if applicable); it would not include
            late fees.
         B. Partial Payments.
                 1. Options. Upon receipt of a partial payment, the servicer’s options would be to credit the
                     payment on receipt, return the payment, or hold the payment in a suspense or unapplied
                     funds account.
                 2. Disclosure. If a servicer holds a partial payment (anything less than a full contractual
                     payment) in a suspense or unapplied funds account, the servicer must disclose on the periodic
                     statement the amount of funds held in such account. The servicer must also disclose when
                     such funds will be applied to the outstanding payments due on the account.
                 3. Application of Funds. Once there are sufficient funds in the account to cover a full contractual
                     payment, the servicer must apply those funds to the oldest outstanding payment due.
         C. Non-Conforming Payments. If a servicer specifies in writing requirements for the consumer to follow
            in making payments, but accepts a payment that does not conform to the requirements, the servicer
            must credit the payment as of 5 days after receipt. The CFPB notes that payments held in a suspense
            or unapplied funds account would not be considered to have been “accepted” by the servicer. Thus,
            under the CFPB’s proposal, partial payments retained in suspense or unapplied funds accounts are
            treated as payments that have not been accepted, as opposed to non-conforming payments that have
            been accepted and must be credited within 5 days of receipt.
         D. Payoff Statements. Servicers must send an accurate payoff balance to the consumer within a
            reasonable time, but in no more than 7 business days after the receipt of a written request for such
            balance from or on behalf of the consumer. This requirement would apply to consumer credit
            transactions (both open- and closed-end) secured by a dwelling, not just a principal dwelling.

               Feedback Request: Payment Crediting and Payoff Requests

                Is this approach is the optimal way to address suspense accounts and non-conforming
                 payments?

                Should there be time requirements on returning partial payments?

                Is the proposal consistent with existing contracts? How does it compare to existing GSE
                 requirements?


III.     Periodic Statements (Proposed §1026.41)


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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



         A. Generally. Must provide periodic statements for closed-end consumer credit transaction secured by a
            dwelling. The Dodd-Frank Act requires periodic statements, with certain exceptions (discussed
            below).
         B. Transmit to the Consumer. The term “transmit” is used in the Dodd-Frank Act. CFPB interprets this
            term to indicate that the servicer must do more than simply make the statement available. Paper
            statements mailed to the consumer would meet the “transmit” requirement. Also, if the servicer is
            using an electronic distribution method, the servicer may send the consumer an email indicating that
            the statement is available, rather than attaching the statement to the email. Joint obligors need not
            receive separate statements; a single statement addressed to both of them would be sufficient.
         C. Billing Cycle. The periodic statement would need to be sent each “billing cycle.” The billing cycle
            would correspond to the frequency of payments, as set forth in the mortgage note or subsequent
            modifications.
                 1. Example. If a loan requires the consumer to make monthly payments, that consumer will
                     have a monthly billing cycle. A consumer making quarterly payments would have a quarterly
                     billing cycle.
                 2. Exception. If a loan has a billing cycle shorter than a period of 31 days (e.g., a bi-weekly
                     cycle), a periodic statement covering an entire month may be used. The proposed
                     commentary would clarify how a single statement would aggregate information from multiple
                     billing cycles.
         D. Timing. The periodic statement must be sent within a reasonably prompt time after the close of the
            grace period of the previous billing cycle. The proposed commentary would clarify that 4 days after
            the close of any grace period would be considered reasonably prompt.
                 1. First Payment. The first periodic statement must be sent no later than 10 days before the first
                     payment is due.

                        Feedback Request: Timing of Periodic Statement

                         Is the proposed timing requirement appropriate? Would there be any operational
                          challenges in complying with the 4 day requirement? CFPB notes that to be helpful, the
                          periodic statement must arrive after the last payment was received and before the next
                          payment is due. If the grace period extends to the 15th of the month, the servicer could
                          take an additional 4 days to send the periodic statement, which potentially creates a tight
                          timeframe for the consumer to make the payment by the first of the following month.

                         Are there any operational difficulties to have the first statement delivered or placed in the
                          mail 10 days before the first payment is due?

         E. Form, Content, and Layout.
               1. Clear and Conspicuous. Must be clear and conspicuous, in writing or electronic (if the
                   consumer affirmatively agrees), and in a form that the consumer may keep. Other
                   information may be included on the periodic statement, so long as the other information


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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association



                     does not overwhelm or obscure the required disclosures (e.g., servicer’s logo, payment
                     methods, etc.).
                  2. Additional Information. Servicers may combine disclosures required by other laws with the
                     periodic statement, unless otherwise prohibited. This would allow for consolidated
                     statements for a checking account and a mortgage loan, for example.
                  3. Content and Layout. The proposal contains content and layout requirements for the periodic
                     statement, such as requiring that certain related pieces of information be grouped together.
                  4. Sample Forms. Sample forms are provided in Appendix H-28 and appropriate use of these
                     forms will be deemed to comply with the content and layout requirements.

                     Feedback Request: Consolidated Statements

                     CFPB notes that difficulties may arise when different disclosures have different timing
                     requirements, and when multiple disclosures have requirements that information be
                     presented on the first page of the statement. For example, if both mortgage loan
                     disclosures and credit card disclosures are required to be on the first page of a statement,
                     how would these statements be combined?

         F. Electronic Distribution. Electronic delivery is permitted, subject to the consumer’s affirmative
            consent.

                     Feedback Request: Electronic Delivery

                      Should there be additional requirements on when a consumer consents to receiving
                       electronic statement? Should consent be obtained or confirmed electronically in a manner
                       that demonstrates that the consumer is able to access information electronically?

                      Should consumers who already receive electronic statements be deemed as having consented
                       to receive statements electronically?

                      Should consumers who have auto-debit set up to deduct payments from their bank account
                       be deemed as having consented to receive statements electronically?


         G. Required Information
               1. Amount Due. Must include amount due, the payment due date, late payment fee, and the
                   date on which the late payment fee would be imposed.
               2. Explanation. Must include an explanation of the amount due, including the allocation of the
                   payment to principal, interest, and escrow (if applicable); must also include the total fees or
                   charges incurred since the last statement and any amount past-due. If a consumer has a
                   payment-option loan, a breakdown of each of the payment options would be required.
               3. Past Payment Breakdown.


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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
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                           a. Since Last Statement. Must include the total of all payments received since the last
                                statement and a breakdown of how those payments were applied to principal,
                                interest, escrow, fees, and any partial payment or suspense account (if applicable).
                           b. Since Beginning of Calendar Year. Would also require the total of all payments
                                received since the beginning of the calendar year and a breakdown of how those
                                payments were applied to principal, escrow, fees, and charges, as well as the
                                amount currently held in a partial payment or suspense account.
                           c. Partial Payments. Proposed comment 41(d)(3)-1 provides guidance on how partial
                                payments that have been sent to a suspense account should be reflected in the past
                                payments breakdown section of the periodic statement. The proposed comment
                                provides illustrative examples of how partial payments sent to a suspense account
                                should be listed as unapplied funds since the last statement and year to date.
                  4. Transaction Activity. Would list any activity since the last statement that credits or debits the
                     outstanding account balance.
                           a. Late Fee Description. Describe the charge, the date, and the amount of the fee.
                           b. Suspense Accounts. If a partial payment is sent to a suspense account, the fact of
                                the transfer should be reflected in the transaction description and in the past
                                payment breakdown, and the messages section (see below) should explain what
                                must be done to release the funds.
                  5. Messages. Would require a message on the front of the statement if a partial payment of
                     funds is being held in a suspense account regarding what must be done for the funds to be
                     applied.

                         Feedback Request: Messages

                          What, if any, additional messages should be required?
                          Should there be a special message where the consumer has a negatively-amortizing or
                           interest-only loan?
                          Should there be a required message on private mortgage insurance and when it may be
                           eliminated?
                          If more than one message is required, should they be grouped together and should the
                           messages be required to be on the first page of the statement?


                  6. Contact Information. Must include contact information specifying where a consumer may
                     obtain information regarding the mortgage. This information must be the same as the
                     contact information for asserting errors and requesting information (See Outline of RESPA
                     Servicing Proposal). Contact information must include a toll-free telephone number.

                         Feedback Request: Contact Information

                         Are consumers likely to contact the servicer for information other than errors or inquiries?
                         Is the requirement to include the same contact information appropriate or consistent with
                         existing business models?
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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
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                  7. Account Information. The following information must also be provided on the statement
                          a. Principal obligation
                          b. Current interest rate
                          c. Date on which the interest rate may next reset or adjust
                          d. Amount of any prepayment penalty. A prepayment penalty is defined as “a charge
                               imposed for paying all or part of a transaction’s principal before the date on which
                               the principal is due.” Proposed comment 41(d)(7)(iv)-1 gives four examples of
                               prepayment penalties. Proposed comment 41(d)(7)(iv)-2 clarifies what a
                               prepayment penalty does not include.
                          e. Information on Housing Counselors. Contact information for the State housing
                               finance authority for the state in which the property is located, and information to
                               access either the CFPB list or the HUD list of homeownership counselors or
                               counseling organizations.

                  Feedback Request: Which State housing finance authority’s contact information should be
                  required on the periodic statement? CFPB notes that this information is different than the
                  contact information for the ARM initial interest rate adjustment notification and that such
                  difference in the regulation requirements for different disclosures may increase compliance
                  costs.


                  8. Delinquency Notice. Must include certain delinquency-related information if a borrower is
                     more than 45 days delinquent. Information includes:
                           a. Date on which the consumer became delinquent and a statement of the potential
                              risks of delinquency (e.g., late fees or, if delinquency persists, foreclosure)
                           b. A recent account history showing the amount due for each billing cycle or the date
                              on which a payment for a billing cycle was fully paid.
                           c. Notice of any acceptance into a modification program, either trial or permanent
                           d. Notice if the loan has been referred to foreclosure
                           e. Total amount to bring the loan current
                           f. Statement directing the borrower to the housing counselor information located on
                              the statement.

                Feedback Request: Periodic Statement

                Is the content that is to be included in the periodic statement reasonable? Please elaborate on
                the programming and other work that would have to be done to produce the proposed
                content. What would be the costs associated with compliance?


         H. Exemptions from Periodic Statement Requirement.
               1. Reverse Mortgages.
               2. Time Shares.
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Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
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                  3. Coupon Books. Would be exempt, subject to the following:
                          a. Information Required on Each Coupon. Payment due date, amount due, and
                             amount and date that any late fee will be incurred.
                          b. Information Required to be Included In the Coupon Book (not each coupon).
                             Amount of the principal loan balance, interest rate in effect for the loan, date on
                             which the interest rate may next change, amount of any prepayment fee that may
                             be charged, contact information for the servicer, housing counselor information,
                             and how to obtain the dynamic information described below.
                          c. “Dynamic” Information to be Available Upon Request. The monthly payment
                             amount, including a breakdown showing how much, if any, will be allocated to
                             principal, interest, and any escrow account; the total of fees or charges imposed
                             since the last payment period; any payment amount past due; the total of all
                             payments received since the beginning of the payment period, including a
                             breakdown of how much, if any, of those payments was applied to principal,
                             interest, escrow, fees and charges, and any partial payment suspense accounts; the
                             total of all payments received since the beginning of the calendar year, including a
                             breakdown of how much, if any, of those payments was applied to principal,
                             interest, escrow, fees and charges, and how much is currently in any partial
                             payment or suspense account; and a list of all the transaction activity that occurred
                             since the payment period.

                         Feedback Request: “Dynamic Information”

                         Would requiring servicers to make the “dynamic” information available impose significant
                         burden or costs that exceed consumer benefits? Would providing the past payment
                         breakdown information impose greater burden than benefits?


                  4. Small Servicers.
                           a. Service 1,000 or fewer mortgage loans AND
                           b. Only services mortgage loans for which the servicer or an affiliate is the owner or
                               assignee, or for which the servicer is an affiliate is the entity to whom the mortgage
                               loan obligation was initially payable.

                          Feedback Request: Costs and Small Servicers

                           What types of costs would servicers incur to comply with the periodic statement
                            requirement? What is the estimate of these costs? The CFPB is requesting data on
                            implementation costs and the level of general activity by small servicers.

                           Is the proposed scope and definition of a small servicer appropriate?

                           Would another test be more appropriate?

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                           Should the small servicer exemption apply to other elements of the proposed servicing
                            rules?
Outline of CFPB Mortgage Servicing Proposal: TILA Amendments
American Bankers Association




IV.      Effective Date
         A. The Dodd-Frank Act servicing requirements take effect automatically on 1/21/13, unless final rules
             are issued on or before that date. Where rules are required to be issued, the Dodd-Frank Act permits
             the CFPB to provide up to 12 months for implementation. For all other rules, the implementation
             period is left to the discretion of the CFPB.

            Feedback Requested: Effective Date

             What is the appropriate effective date for each of the servicing-related rules?

             What is the nature and length of implementation process for each individual servicing
              requirement? How would this be impacted by interactions between the rules?

             What are impacts to consumers and servicers on a staggered implementation sequence, as
              compared to imposing a single date by which all rules must be implemented?




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