[Federal Register Volume 83, Number 48 (Monday, March 12, 2018)]
[Rules and Regulations]
[Pages 10553-10559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04823]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 83, No. 48 / Monday, March 12, 2018 / Rules
and Regulations
[[Page 10553]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1026
[Docket No. CFPB-2017-0030]
RIN 3170-AA75
Mortgage Servicing Rules Under the Truth in Lending Act
(Regulation Z)
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Final rule.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing this final rule amending certain Regulation Z mortgage
servicing rules issued in 2016 relating to the timing for servicers to
transition to providing modified or unmodified periodic statements and
coupon books in connection with a consumer's bankruptcy case.
DATES: This rule is effective April 19, 2018.
FOR FURTHER INFORMATION CONTACT: Adam C. Mayle or Joel L. Singerman,
Counsels; or Amanda Quester, Senior Counsel, Office of Regulations, at
202-435-7700 or https://reginquiries.consumerfinance.gov/. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
I. Summary of the Final Rule
On August 4, 2016, the Bureau issued the Amendments to the 2013
Mortgage Rules Under the Real Estate Settlement Procedures Act
(Regulation X) and the Truth in Lending Act (Regulation Z) (2016
Mortgage Servicing Final Rule) amending certain of the Bureau's
mortgage servicing rules.\1\ The Bureau learned, through its outreach
in support of industry's implementation of the 2016 Mortgage Servicing
Final Rule, that certain technical aspects of the rule relating to the
timing for servicers to transition to providing modified or unmodified
periodic statements and coupon books in connection with a consumer's
bankruptcy case may create unintended challenges in implementation. To
alleviate any unintended challenges, the Bureau issued a proposed rule
on October 4, 2017, to address the timing provisions.\2\ The Bureau is
now finalizing the proposed amendments without revision.
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\1\ 81 FR 72160 (Oct. 19, 2016).
\2\ 82 FR 48463 (Oct. 18, 2017).
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Among other things, the 2016 Mortgage Servicing Final Rule
addresses Regulation Z's periodic statement and coupon book
requirements when a person is a debtor in bankruptcy.\3\ It includes a
single-billing-cycle exemption from the requirement to provide a
periodic statement or coupon book in certain circumstances after one of
several specific triggering events occurs resulting in a servicer
needing to transition to or from providing bankruptcy-specific
disclosures. The single-billing-cycle exemption applies only if the
payment due date for that billing cycle is no more than 14 days after
the triggering event. The 2016 Mortgage Servicing Final Rule also
includes specific timing requirements for servicers to provide the next
modified or unmodified statement or coupon book after the single-
billing-cycle exemption has ended.
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\3\ The provisions of Regulation Z discussed herein were amended
by the 2016 Mortgage Servicing Final Rule but are not effective
until April 19, 2018. To simplify review of this document and
differentiate between those amendments and this final rule, this
document generally refers to the 2016 amendments as though they
already are in effect.
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Based on feedback received regarding implementation of the 2016
Mortgage Servicing Final Rule, the Bureau understands that certain
aspects of the single-billing-cycle exemption and timing requirements
may be more complex and operationally challenging than the Bureau
realized, and that the relevant provisions may be subject to different
interpretations, as discussed more below. The Bureau is therefore
issuing this final rule revising Sec. 1026.41(e)(5)(iv)(B) and (C) and
related commentary to replace the single-billing-cycle exemption with a
single-statement exemption. This final rule provides a single-statement
exemption for the next periodic statement or coupon book that a
servicer would otherwise have to provide, regardless of when in the
billing cycle the triggering event occurs. The Bureau is adding new
comments 41(e)(5)(iv)(B)-1 through -3 to clarify the operation of the
single-statement exemption. The Bureau is also removing Sec.
1026.41(e)(5)(iv)(C) and its related commentary, as they are no longer
necessary in light of the changes to Sec. 1026.41(e)(5)(iv)(B) and its
related commentary.
The Bureau believes this final rule provides a clearer and more
straightforward standard than the timing requirement adopted in the
2016 Mortgage Servicing Final Rule, offering greater certainty for
implementation and compliance, without unnecessarily disadvantaging
consumers.
II. Background
In August 2016, the Bureau issued the 2016 Mortgage Servicing Final
Rule, which amends certain of the Bureau's mortgage servicing rules in
Regulations X and Z.\4\ Most of these amendments became effective
October 19, 2017. Provisions relating to bankruptcy periodic statements
and successors in interest become effective April 19, 2018.\5\
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\4\ 81 FR 72160 (Oct. 19, 2016). The amendments cover nine major
topics and focus primarily on clarifying, revising, or amending
provisions regarding force-placed insurance notices, policies and
procedures, early intervention, and loss mitigation requirements
under Regulation X's servicing provisions; and prompt crediting and
periodic statement requirements under Regulation Z's servicing
provisions. The amendments also address proper compliance regarding
certain servicing requirements when a person is a potential or
confirmed successor in interest, is a debtor in bankruptcy, or sends
a cease communication request under the Fair Debt Collection
Practices Act.
\5\ In June 2017, the Bureau issued policy guidance on its
supervisory and enforcement priorities regarding early compliance
with the 2016 Mortgage Servicing Final Rule. Policy Guidance on
Supervisory and Enforcement Priorities Regarding Early Compliance
With the 2016 Amendments to the 2013 Mortgage Rules Under the Real
Estate Settlement Procedures Act (Regulation X) and the Truth in
Lending Act (Regulation Z), 82 FR 29713 (June 30, 2017). The Bureau
indicated in the guidance that it does not intend to take
supervisory or enforcement action for violations of Regulation X or
Regulation Z resulting from a servicer's compliance with the 2016
Mortgage Servicing Final Rule occurring up to three days before the
applicable effective dates. Id. at 29713.
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Under existing Sec. 1026.41(a)(2) in Regulation Z, a servicer
generally must provide a consumer, for each billing cycle, a periodic
statement meeting certain requirements. Existing Sec. 1026.41(e)(5)
provides a blanket
[[Page 10554]]
exemption from Sec. 1026.41 for a mortgage loan while a consumer is a
debtor in bankruptcy under title 11 of the United States Code. The 2016
Mortgage Servicing Final Rule, however, generally limits this exemption
to only certain consumers in bankruptcy.\6\ When a consumer either is a
debtor in bankruptcy under title 11 of the United States Code or has
discharged personal liability for the mortgage loan pursuant to 11
U.S.C. 727, 1141, 1228, or 1328, so long as an exemption under Sec.
1026.41(e) does not otherwise apply, the 2016 Mortgage Servicing Final
Rule requires a servicer to provide a periodic statement or coupon book
with certain bankruptcy-specific modifications. In these circumstances,
once a consumer enters bankruptcy, a servicer must transition from
providing unmodified periodic statements or coupon books to providing
periodic statements or coupon books with bankruptcy modifications.
Similarly, when a consumer exits bankruptcy, a servicer generally must
transition back to providing unmodified periodic statements or coupon
books.
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\6\ See Sec. 1026.41(e)(5)(i) (81 FR 72388-89, Oct. 19, 2016).
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To allow servicers time to make this transition in their systems,
the Bureau finalized a single-billing-cycle exemption in the 2016
Mortgage Servicing Final Rule.\7\ Section 1026.41(e)(5)(iv)(B) in the
2016 Mortgage Servicing Final Rule provides that a servicer is exempt
from the requirements of Sec. 1026.41 with respect to a single billing
cycle when the payment due date for that billing cycle is no more than
14 days after the date on which one of the three triggering events
listed under Sec. 1026.41(e)(5)(iv)(A) occurs: (1) A mortgage loan
becomes subject to the requirement to provide a modified periodic
statement; (2) a mortgage loan ceases to be subject to the requirement
to provide a modified periodic statement; or (3) the servicer ceases to
qualify for an exemption pursuant to Sec. 1026.41(e)(5)(i). Section
1026.41(e)(5)(iv)(C) sets forth the timeframe within which a servicer
must provide the next periodic statement after an event listed in Sec.
1026.41(e)(5)(iv)(A) occurs.\8\
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\7\ See generally 81 FR 72160, 72324-26 (Oct. 19, 2016).
\8\ See Sec. 1026.41(e)(5)(iv)(C) (81 FR 72389, Oct. 19, 2016).
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Since issuing the 2016 Mortgage Servicing Final Rule, the Bureau
received questions indicating that the single-billing-cycle exemption
may be more complex and operationally challenging than the Bureau
realized, and that the provisions setting forth the exemption and
transition timing requirements may be subject to different
interpretations. The Bureau therefore proposed to replace the single-
billing-cycle exemption with a single-statement exemption, which the
Bureau believed would be a clearer and more straightforward standard.
III. Summary of the Rulemaking Process
The Bureau has supported implementation of the 2016 Mortgage
Servicing Final Rule by providing an updated compliance guide, other
implementation aids, a technical corrections final rule,\9\ an interim
final rule related to timing for certain early intervention
notices,\10\ policy guidance regarding early compliance,\11\ and
informal guidance in response to regulatory inquiries. Information
regarding the Bureau's implementation support initiative and available
implementation resources can be found on the Bureau's regulatory
implementation website at https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/mortserv/. The Bureau
continues to facilitate industry's implementation progress, including
by responding to informal guidance inquiries and publishing additional
implementation materials, as appropriate. Based on its ongoing
outreach, the Bureau believes that industry has made substantial
implementation progress regarding the 2016 Mortgage Servicing Final
Rule.
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\9\ Amendments to the 2013 Mortgage Rules Under the Real Estate
Settlement Procedures Act (Regulation X) and the Truth in Lending
Act (Regulation Z); Correction, 82 FR 30947 (July 5, 2017).
\10\ 82 FR 47953 (Oct. 16, 2017).
\11\ Policy Guidance on Supervisory and Enforcement Priorities
Regarding Early Compliance With the 2016 Amendments to the 2013
Mortgage Rules Under the Real Estate Settlement Procedures Act
(Regulation X) and the Truth in Lending Act (Regulation Z), 82 FR
29713 (June 30, 2017).
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The Bureau also learned, through its outreach in support of
industry's implementation of the 2016 Mortgage Servicing Final Rule,
that certain technical aspects of the rule relating to the timing for
servicers to transition to providing modified or unmodified periodic
statements and coupon books in connection with a consumer's bankruptcy
case may create unintended challenges in implementation. As a result,
and to alleviate any unintended challenges, the Bureau issued a
proposed rule on October 4, 2017, published in the Federal Register on
October 18, 2017, to address the timing provisions.\12\ The comment
period on the proposed rule ended on November 17, 2017. The Bureau
received ten comments, including seven from industry trade
associations, two from individual consumers, and one from consumer
advocacy groups. As discussed in more detail below, the Bureau has
considered these comments in adopting this final rule.
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\12\ 82 FR 48463 (Oct. 18, 2017).
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IV. Legal Authority
The Bureau is finalizing this rule pursuant to its authority under
the Truth in Lending Act (TILA) \13\ and the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act),\14\ including the
authorities discussed below. In general, the provisions in this final
rule amend certain provisions previously adopted by the Bureau in the
2016 Mortgage Servicing Final Rule. In doing so, the Bureau relied on
one or more of the authorities discussed below, as well as other
authority. The Bureau is issuing this final rule in reliance on the
same authority and for the same reasons relied on in adopting the
relevant provisions of the 2016 Mortgage Servicing Final Rule, as
discussed in detail in the Legal Authority and Section-by-Section
Analysis parts of the 2016 Mortgage Servicing Final Rule.
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\13\ 15 U.S.C. 1601 et seq.
\14\ Public Law 111-203, 124 Stat. 1376 (2010).
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A. TILA
Section 105(a) of TILA, 15 U.S.C. 1604(a), authorizes the Bureau to
prescribe regulations to carry out the purposes of TILA. Under section
105(a), such regulations may contain such additional requirements,
classifications, differentiations, or other provisions, and may provide
for such adjustments and exceptions for all or any class of
transactions, as in the judgment of the Bureau are necessary or proper
to effectuate the purposes of TILA, to prevent circumvention or evasion
thereof, or to facilitate compliance therewith. Under section 102(a),
15 U.S.C. 1601(a), the purposes of TILA are to assure a meaningful
disclosure of credit terms so that the consumer will be able to compare
more readily the various available credit terms and avoid the
uninformed use of credit and to protect the consumer against inaccurate
and unfair credit billing practices. For the reasons discussed in this
document, the Bureau is adopting these amendments to Regulation Z to
carry out TILA's purposes and such additional requirements,
adjustments, and exceptions as, in the Bureau's
[[Page 10555]]
judgment, are necessary and proper to carry out the purposes of TILA,
prevent circumvention or evasion thereof, or to facilitate compliance
therewith.
Section 105(f) of TILA, 15 U.S.C. 1604(f), authorizes the Bureau to
exempt from all or part of TILA any class of transactions if the Bureau
determines that TILA coverage does not provide a meaningful benefit to
consumers in the form of useful information or protection. For the
reasons discussed herein, the Bureau is finalizing the amendments
relating to exemptions for certain transactions from the requirements
of TILA pursuant to its authority under section 105(f) of TILA.
This final rule also includes amendments to the official Bureau
commentary in Regulation Z. Good faith compliance with the
interpretations would afford protection from liability under section
130(f) of TILA.
B. The Dodd-Frank Act
Section 1022(b)(1) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(1),
authorizes the Bureau to prescribe rules ``as may be necessary or
appropriate to enable the Bureau to administer and carry out the
purposes and objectives of the Federal consumer financial laws, and to
prevent evasions thereof.'' TILA and title X of the Dodd-Frank Act are
Federal consumer financial laws.
Section 1032(a) of the Dodd-Frank Act, 12 U.S.C. 5532(a), provides
that the Bureau ``may prescribe rules to ensure that the features of
any consumer financial product or service, both initially and over the
term of the product or service, are fully, accurately, and effectively
disclosed to consumers in a manner that permits consumers to understand
the costs, benefits, and risks associated with the product or service,
in light of the facts and circumstances.'' The authority granted to the
Bureau in section 1032(a) of the Dodd-Frank Act is broad and empowers
the Bureau to prescribe rules regarding the disclosure of the
``features'' of consumer financial products and services generally.
Accordingly, the Bureau may prescribe rules containing disclosure
requirements even if other Federal consumer financial laws do not
specifically require disclosure of such features.
Section 1032(c) of the Dodd-Frank Act, 12 U.S.C. 5532(c), provides
that, in prescribing rules pursuant to section 1032 of the Dodd-Frank
Act, the Bureau ``shall consider available evidence about consumer
awareness, understanding of, and responses to disclosures or
communications about the risks, costs, and benefits of consumer
financial products or services.'' Accordingly, in proposing to amend
provisions authorized under section 1032(a) of the Dodd-Frank Act, the
Bureau has considered available studies, reports, and other evidence
about consumer awareness, understanding of, and responses to
disclosures or communications about the risks, costs, and benefits of
consumer financial products or services.
V. Section-by-Section Analysis
Section 1026.41 Periodic Statements for Residential Mortgage Loans
41(e) Exemptions
41(e)(5) Certain Consumers in Bankruptcy
41(e)(5)(iv) Timing of Compliance Following Transition
As finalized in the 2016 Mortgage Servicing Final Rule, Sec.
1026.41(e)(5)(iv)(B) set forth a single-billing-cycle exemption from
the requirement to provide a periodic statement or coupon book in
certain circumstances after one of several specific triggering events
occurs; and Sec. 1026.41(e)(5)(iv)(C) established timing requirements
for resuming compliance after that exemption. The Bureau proposed to
revise Sec. 1026.41(e)(5)(iv)(B) and related commentary, and to remove
Sec. 1026.41(e)(5)(iv)(C) and related commentary. Instead of a single-
billing-cycle exemption, proposed Sec. 1026.41(e)(5)(iv)(B) would have
provided a single-statement exemption for the next periodic statement
or coupon book that a servicer would otherwise have to provide
following a triggering event, regardless of when in the billing cycle
the triggering event occurs. Proposed comments 41(e)(5)(iv)(B)-1
through -3 would have clarified how the single-statement exemption
would operate in specific circumstances. For the reasons discussed
below, the Bureau is finalizing Sec. 1026.41(e)(5)(iv)(B) and related
commentary as proposed, and is removing Sec. 1026.41(e)(5)(iv)(C) and
related commentary, as proposed.
The Bureau received ten comments on the proposal, including seven
from industry trade associations, two from individual consumers, and
one from consumer advocacy groups. All comments addressing the
substance of the proposal supported replacing the single-billing-cycle
exemption with the proposed single-statement exemption. Several
industry trade association commenters stated that the proposed changes
would simplify implementation or improve compliance. They stated, for
example, that the proposed single-statement exemption was clearer and
more straightforward than the single-billing-cycle exemption, or that
the proposed single-statement exemption would vastly reduce the
complexity of compliance. The consumer advocacy groups and two consumer
commenters also expressed general support for the proposal. One
industry trade association supporting the proposal also suggested that
the Bureau clarify in commentary that a servicer would not violate
proposed Sec. 1026.41(e)(5)(iv)(B) by providing a periodic statement
or coupon book while the single-statement exemption applies, and that
the servicer would not be required to correct such a statement. The
Bureau also received several comments from industry trade associations
that requested amendments to aspects of the periodic statement
requirements other than the timing requirements addressed in the
proposal, as discussed further below.
The Bureau is adopting Sec. 1026.41(e)(5)(iv)(B) and related
commentary as proposed. As finalized, Sec. 1026.41(e)(5)(iv)(B)
provides that, as of the date on which one of the triggering events
listed in Sec. 1026.41(e)(5)(iv)(A) occurs, a servicer is exempt from
the requirements of Sec. 1026.41 with respect to the next periodic
statement or coupon book that would otherwise be required but
thereafter must provide modified or unmodified periodic statements or
coupon books that comply with the requirements of this section.
Comments 41(e)(5)(iv)(B)-1 through -3 describe how the single-statement
exemption operates in specific circumstances. Comment 41(e)(5)(iv)(B)-1
explains that the exemption applies with respect to a single periodic
statement or coupon book following an event listed in Sec.
1026.41(e)(5)(iv)(A) and provides two examples illustrating the timing.
Both examples assume that a mortgage loan has a monthly billing cycle,
each payment due date is on the first day of the month following its
respective billing cycle, and each payment due date has a 15-day
courtesy period.
Comment 41(e)(5)(iv)(B)-1.i explains that, if an event listed in
Sec. 1026.41(e)(5)(iv)(A) occurs on October 6, before the end of the
15-day courtesy period provided for the October 1 payment due date, and
the servicer has not yet provided a periodic statement or coupon book
for the billing cycle with a November 1 payment due date, the servicer
is exempt from providing a periodic statement or coupon book for that
billing cycle. The servicer is required thereafter to resume providing
periodic statements or coupon books that comply with the requirements
of Sec. 1026.41 by providing a modified or unmodified periodic
statement or
[[Page 10556]]
coupon book for the billing cycle with a December 1 payment due date
within a reasonably prompt time after November 1 or the end of the 15-
day courtesy period provided for the November 1 payment due date.
Comment 41(e)(5)(iv)(B)-1.ii provides an example for when a
servicer already timely provided a periodic statement or coupon book
for a billing cycle in which an event listed in Sec.
1026.41(e)(5)(iv)(A) occurs. It provides that, if an event listed in
Sec. 1026.41(e)(5)(iv)(A) occurs on October 20, after the end of the
15-day courtesy period provided for the October 1 payment due date, and
the servicer timely provided a periodic statement or coupon book for
the billing cycle with a November 1 payment due date, the servicer is
not required to correct the periodic statement or coupon book already
provided and is exempt from providing the next periodic statement or
coupon book, which is the one that would otherwise be required for the
billing cycle with a December 1 payment due date. The servicer is
required thereafter to resume providing periodic statements or coupon
books that comply with the requirements of Sec. 1026.41 by providing a
modified or unmodified periodic statement or coupon book for the
billing cycle with a January 1 payment due date within a reasonably
prompt time after December 1 or the end of the 15-day courtesy period
provided for the December 1 payment due date.
Because comments 41(e)(5)(iv)(B)-1.i and -1.ii describe when a
servicer must provide periodic statements or coupon books following the
exemption, Sec. 1026.41(e)(5)(iv)(C) and related commentary are
unnecessary. The Bureau is removing Sec. 1026.41(e)(5)(iv)(C) and
related commentary.
The Bureau is also adopting as proposed comments 41(e)(5)(iv)(B)-2
and -3 to clarify how the single-statement exemption would operate in
additional specific circumstances. Comment 41(e)(5)(iv)(B)-2 states
that, if a servicer provides a coupon book instead of a periodic
statement under Sec. 1026.41(e)(3), Sec. 1026.41 requires the
servicer to provide a new coupon book after one of the events listed in
Sec. 1026.41(e)(5)(iv)(A) occurs only to the extent the servicer has
not previously provided the consumer with a coupon book that covers the
upcoming billing cycle. Comment 41(e)(5)(iv)(B)-3 clarifies that the
single-statement exemption in Sec. 1026.41(e)(5)(iv)(B) might apply
more than once over the life of a loan. For example, assume the
exemption applies beginning on April 14 because the consumer files for
bankruptcy on that date and the bankruptcy plan provides that the
consumer will surrender the dwelling, such that the mortgage loan
becomes subject to the requirements of Sec. 1026.41(f). If the
consumer later exits bankruptcy on November 2 and has not discharged
personal liability for the mortgage loan pursuant to 11 U.S.C. 727,
1141, 1228, or 1328, such that the mortgage loan ceases to be subject
to the requirements of Sec. 1026.41(f), the single-statement exemption
would apply again beginning on November 2.
The Bureau believes that these amendments will provide a clearer
and more straightforward standard than the timing requirement finalized
in the 2016 Mortgage Servicing Final Rule. The Bureau anticipates that
the amendments will offer greater certainty for implementation and
compliance, without unnecessarily disadvantaging consumers.
The Bureau declines to adopt one commenter's recommendation to
clarify in commentary that a servicer does not violate Sec.
1026.41(e)(5)(iv)(B) by providing a periodic statement or coupon book
while the single-statement exemption applies. This clarification is
unnecessary because Regulation Z does not prohibit a servicer from
providing a periodic statement or coupon book while the single-
statement exemption applies. The Bureau notes, however, that servicers
choosing to provide a periodic statement or coupon book while an
exemption applies should provide accurate disclosures and comply with
other applicable laws. The Bureau also notes that Sec. 1026.41 does
not prohibit servicers from adding language to a periodic statement or
coupon book that may be helpful in limiting any potential liability.
As stated above, the Bureau also received several comments from
industry trade associations that requested amendments to aspects of the
periodic statement requirements other than the timing requirements
addressed in the proposal. For example, one industry trade association
recommended expanding the small servicer exemption set forth in Sec.
1024.41(e)(4). Another suggested that, when a consumer files a chapter
12 or 13 bankruptcy case, the servicer should be exempt from providing
bankruptcy-specific periodic statements or coupon books under Sec.
1026.41(f) until the consumer's bankruptcy plan is confirmed. The
Bureau's proposal did not address the small servicer exemption, nor did
it raise the question whether the periodic-statement requirement should
apply only after a plan is confirmed in chapter 12 or 13 bankruptcies.
Because these comments are beyond the scope of the proposal, the Bureau
declines to adopt their recommendations.
One industry trade association also requested that the Bureau
include language in the final rule that could help insulate a servicer
that is unable to suppress a periodic statement when an exemption
applies. The commenter stated that events triggering an exemption
sometimes occur near-in-time to when a servicer is scheduled to provide
the periodic statement. The commenter indicated that, because servicers
sometimes do not learn of the triggering events in real-time, a
servicer might provide a periodic statement containing inaccurate
information. The commenter stated that this could be particularly
problematic if the servicer provides a standard periodic statement to a
consumer who has recently filed for bankruptcy, instead of a periodic
statement containing bankruptcy-specific disclosures and disclaimers
under Sec. 1026.41.
This recommendation broaches issues beyond the narrow timing
requirements addressed in the proposal, and the Bureau is not adopting
it. To the extent servicers are concerned about exposure to liability
for providing a periodic statement that becomes inaccurate before it
reaches the consumer, the Bureau notes that Regulation Z does not
prohibit a servicer from adding language that may be helpful in
limiting any potential liability. Further, the Bureau learned during
outreach before issuing the 2016 Mortgage Servicing Rule that servicers
often learn of new bankruptcy filings, important case activity, and
case closings quickly, usually within approximately a day.\15\ Although
some servicers may manually review bankruptcy filings,\16\ which may
take longer, the Bureau believes that a servicer would typically learn
of a consumer's bankruptcy filing with enough time to suppress periodic
statements and make use of the single-statement exemption.
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\15\ See 81 FR 72160, 72317.
\16\ See id.
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VI. Effective Date
Regulation Z Sec. 1026.41(e)(5), as amended by the 2016 Mortgage
Servicing Final Rule, becomes effective April 19, 2018, along with the
rest of the Regulation Z bankruptcy-specific periodic statement
requirements. Thus, the Bureau proposed an April 19, 2018, effective
date for the proposed revisions to Sec. 1024.41(e)(5)(iv).
One commenter requested that the Bureau postpone the effective date
of all
[[Page 10557]]
the provisions relating to bankruptcy periodic statements in both the
2016 Mortgage Servicing Final Rule and this final rule.\17\ This
comment is beyond the scope of the proposal, and the Bureau did not
receive any comments requesting that the Bureau extend the effective
date of only the proposed revisions to Sec. 1024.41(e)(5)(iv).
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\17\ After the close of the comment period, the Bureau received
additional feedback related to the effective date of all the
provisions relating to bankruptcy periodic statements in the 2016
Mortgage Servicing Final Rule. As noted above, this feedback is
beyond the scope of the proposal.
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The Bureau is adopting, as proposed, an April 19, 2018, effective
date for this final rule and believes that there is no need to delay
the effective date of this final rule. The Bureau believes that the
revisions to Sec. 1026.41(e)(5)(iv) would not require substantial
reprogramming of systems by industry. The Bureau also believes it is
issuing this final rule with sufficient time before the April 19, 2018,
effective date to enable servicers to meet the requirements of the
final rule.
VII. Dodd-Frank Act Section 1022(b) Analysis
In developing this final rule, the Bureau considered the potential
benefits, costs, and impacts as required by section 1022(b)(2) of the
Dodd-Frank Act. Specifically, section 1022(b)(2) calls for the Bureau
to consider the potential benefits and costs of a regulation to
consumers and covered persons, including the potential reduction of
consumer access to consumer financial products or services, the impact
on depository institutions and credit unions with $10 billion or less
in total assets as described in section 1026 of the Dodd-Frank Act, and
the impact on consumers in rural areas. In addition, 12 U.S.C.
5512(b)(2)(B) directs the Bureau to consult, before and during the
rulemaking, with appropriate prudential regulators or other Federal
agencies, regarding consistency with the objectives those agencies
administer. The Bureau consulted, or offered to consult with, the
prudential regulators, the Securities and Exchange Commission, the
Department of Housing and Urban Development (HUD), the HUD Office of
Inspector General, the Federal Housing Finance Agency, the Federal
Trade Commission, the Department of the Treasury, the Department of
Agriculture, and the Department of Veterans Affairs, including
regarding consistency with any prudential, market, or systemic
objectives administered by these agencies.
The Bureau previously considered the benefits, costs, and impacts
of the 2016 Mortgage Servicing Final Rule's major provisions.\18\ The
baseline \19\ for this discussion is the mortgage servicing market as
it would exist ``but for'' this final rule; that is, the Bureau
considered the benefits, costs, and impacts of this final rule on
consumers and covered persons relative to the baseline established by
the 2016 Mortgage Servicing Final Rule.
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\18\ 81 FR 72160, 72351 (Oct. 19, 2016).
\19\ The Bureau has discretion in any rulemaking to choose an
appropriate scope of analysis with respect to potential benefits,
costs, and impacts and an appropriate baseline.
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In considering the relevant potential benefits, costs, and impacts
of this final rule, the Bureau reviewed the comments received and has
applied its knowledge and expertise concerning consumer financial
markets. The discussion below of these potential costs, benefits, and
impacts is qualitative, reflecting both the specialized nature of the
final amendments and the fact that the 2016 Mortgage Servicing Final
Rule, which establishes the baseline for the Bureau's analysis, is not
yet in effect.
The Bureau requested comment on the discussion of costs, benefits,
and impacts in the preamble to the proposed rule as well as the
submission of data or other information that could inform the Bureau's
consideration of the potential benefits, costs, and impacts of this
final rule. The Bureau did not receive any such comments, data, or
other information.
This final rule seeks to decrease burden incurred by industry
participants by clarifying the timing requirements for certain
disclosures required under the 2016 Mortgage Servicing Final Rule. As
is described in more detail below, the Bureau does not believe that
these changes will have a significant enough impact on consumers or
covered persons to affect consumer access to consumer financial
products and services.
A mortgage servicer generally must provide a consumer, for each
billing cycle, a periodic statement or coupon book meeting certain
requirements. Under the 2016 Mortgage Servicing Final Rule, servicers
generally must provide a modified periodic statement or coupon book to
certain consumers who are debtors in bankruptcy or who have discharged
personal liability for the mortgage loan. The Bureau is amending Sec.
1026.41(e)(5)(iv), as proposed, to provide that, when a servicer must
transition to sending either modified periodic statements or to sending
unmodified periodic statements, the servicer is exempt from the
requirements of Sec. 1026.41 with respect to the next periodic
statement or coupon book that would otherwise be required but
thereafter must provide modified or unmodified periodic statements or
coupon books that comply with the requirements of Sec. 1026.41. This
single-statement exemption replaces the single-billing-cycle exemption
in the 2016 Mortgage Servicing Final Rule.
The Bureau expects that these changes will reduce the cost to
servicers of providing periodic statements. The Bureau understands,
based on comments received in response to the proposed rule and through
other industry outreach that implementing the single-billing-cycle
exemption provided under the 2016 Mortgage Servicing Rule might have
proved more complex and operationally challenging for servicers than
the Bureau realized and believes that a single-statement exemption will
be clearer and operationally easier to implement. In addition, the
single-billing-cycle exemption would have applied only when the payment
due date falls no more than 14 days after the event that triggers the
transition to or from modified periodic statements, whereas the final
single-statement exemption will apply to these transitions regardless
of when during the billing cycle the triggering event occurs. The
Bureau believes that servicers will benefit from the more
straightforward single-statement exemption standard and from the
additional time afforded for some transitions.
Relative to the baseline established by the 2016 Mortgage Servicing
Final Rule, the final rule could sometimes afford servicers a longer
exemption than the standard provided in the 2016 Mortgage Servicing
Final Rule. As a result, the final rule might extend the period of time
some consumers go without receiving any periodic statement or coupon
book, which could disadvantage those consumers. However, any such delay
would generally be at most one billing cycle, and servicers generally
are required to provide consumers the information in periodic
statements on request. Thus, the Bureau does not expect that the
overall effect on consumers will be significant, and there is no basis
to believe that these changes will have a significant enough impact on
consumers or covered persons to affect consumer access to consumer
financial products and services.
Potential specific impacts of the final rule. The Bureau believes
that a large fraction of depository institutions and credit unions with
$10 billion or less in total assets that are engaged in servicing
mortgage loans qualify as ``small servicers'' for purposes of the
mortgage
[[Page 10558]]
servicing rules because they service 5,000 or fewer loans, all of which
they or an affiliate own or originated. The Bureau has estimated that
96 percent of insured depositories and credit unions with $10 billion
or less in total assets service 5,000 mortgage loans or fewer.\20\
Small servicers are not subject to Regulation Z Sec. 1026.41, and so
are not affected by the amendments in this final rule.
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\20\ Based on an analysis of December 2015 Call Report data as
compiled by SNL Financial.
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With respect to servicers that are not small servicers as defined
in Sec. 1026.41(e)(4), the Bureau believes that the consideration of
benefits and costs of covered persons presented above provides an
accurate analysis of the impacts of the final rule on depository
institutions and credit unions with $10 billion or less in total assets
that are engaged in servicing mortgage loans.
The Bureau requested comment regarding the impact of the proposed
provisions in rural areas and how those impacts may differ from those
experienced by consumers generally. After careful consideration of the
comments received and based on the Bureau's knowledge and expertise
concerning consumer financial markets, the Bureau has no reason to
believe that the additional timing flexibility offered to covered
persons by this final rule will differentially impact consumers in
rural areas.
VIII. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act,\21\ as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996,\22\ (RFA)
requires each agency to consider the potential impact of its
regulations on small entities, including small businesses, small
governmental units, and small not-for-profit organizations.\23\ The RFA
defines a ``small business'' as a business that meets the size standard
developed by the Small Business Administration (SBA) pursuant to the
Small Business Act.\24\
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\21\ Public Law 96-354, 94 Stat. 1164 (1980).
\22\ Public Law 104-21, section 241, 110 Stat. 847, 864-65
(1996).
\23\ 5 U.S.C. 601 through 612. The term `` `small organization'
means any not-for-profit enterprise which is independently owned and
operated and is not dominant in its field, unless an agency
establishes [an alternative definition under notice and comment].''
5 U.S.C. 601(4). The term `` `small governmental jurisdiction' means
governments of cities, counties, towns, townships, villages, school
districts, or special districts, with a population of less than
fifty thousand, unless an agency establishes [an alternative
definition after notice and comment].'' 5 U.S.C. 601(5).
\24\ 5 U.S.C. 601(3). The Bureau may establish an alternative
definition after consulting with the SBA and providing an
opportunity for public comment. Id.
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The RFA generally requires an agency to conduct an initial
regulatory flexibility analysis (IRFA) and a final regulatory
flexibility analysis (FRFA) of any rule subject to notice-and- comment
rulemaking requirements, unless the agency certifies that the rule
would not have a significant economic impact on a substantial number of
small entities.\25\ The Bureau also is subject to certain additional
procedures under the RFA involving the convening of a panel to consult
with small entity representatives prior to proposing a rule for which
an IRFA is required.\26\
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\25\ 5 U.S.C. 601 et seq.
\26\ 5 U.S.C. 609.
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As discussed above, the final rule amends certain Regulation Z
mortgage servicing rules issued in 2016 relating to the timing for
servicers to transition to providing modified or unmodified periodic
statements and coupon books under Regulation Z in connection with a
consumer's bankruptcy case.
When the Bureau issued the proposed rule that was finalized as the
2016 Mortgage Servicing Final Rule, it concluded that those provisions
would not have a significant economic impact on a substantial number of
small entities and that an IRFA was therefore not required.\27\ That
conclusion remained unchanged for the 2016 Mortgage Servicing Final
Rule.\28\
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\27\ 79 FR 74176, 74279 (Dec. 15, 2014).
\28\ 81 FR 72160, 72364 (Oct. 19, 2016).
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Similarly, when the Bureau issued the proposed rule in this
rulemaking, it concluded that the proposal would not have a significant
economic impact on a substantial number of small entities and that an
IRFA was therefore not required.\29\ For the same reasons, the Bureau
concludes that this final rule, as adopted, will not have a significant
economic impact on a substantial number of small entities, and
therefore a FRFA is not required. As discussed above, the Bureau
expects that this final rule will reduce costs to servicers, including
small entities, of providing periodic statements. In addition, the
final amendments do not affect servicers that are ``small servicers''
for purposes of the mortgage servicing rules. Small servicers are
exempt from the requirements that the final rule would amend, and the
Bureau believes that a large fraction of small entities that are
engaged in servicing mortgage loans qualify as small servicers because
they service 5,000 or fewer loans, all of which they or an affiliate
own or originated. Therefore, a FRFA is not required for this final
rule.
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\29\ 82 FR 48463, 48468 (Oct. 18, 2017).
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Accordingly, the undersigned certifies that this final rule will
not have a significant economic impact on a substantial number of small
entities.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA),\30\ Federal
agencies are generally required to seek Office of Management and Budget
(OMB) approval for information collection requirements prior to
implementation. Further, the Bureau may not conduct or sponsor an
information collection unless the OMB approves the collection under the
PRA and the information collection displays a currently valid OMB
control number. Notwithstanding any other provision of law, no person
is required to comply with, or is subject to penalty for failure to
comply with, a collection of information if the collection instrument
does not display a currently valid OMB control number. The collections
of information related to the 2016 Mortgage Servicing Final Rule have
been reviewed and approved by OMB previously in accordance with the PRA
and assigned OMB Control Numbers 3170-0016 (Regulation X) and 3170-0015
(Regulation Z).
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\30\ 44 U.S.C. 3501 et seq.
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The Bureau has determined that this final rule will provide firms
with additional flexibility and clarity with respect to what must be
disclosed under the 2016 Mortgage Servicing Final Rule. It does not
materially change the underlying information collections in terms of
who is responding or when they must provide the disclosures.
Additionally the Bureau believes this will have de minimis impact on
the reported PRA burden for this collection.
X. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Bureau will submit a report containing this rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to the rule's
published effective date. The Office of Information and Regulatory
Affairs has designated this rule as not a ``major rule'' as defined by
5 U.S.C. 804(2).
List of Subjects in 12 CFR Part 1026
Advertising, Appraisal, Appraiser, Banking, Banks, Consumer
protection, Credit, Credit unions, Mortgages, National banks, Reporting
and recordkeeping requirements, Savings associations, Truth in lending.
[[Page 10559]]
Authority and Issuance
For the reasons set forth in the preamble, the Bureau amends 12 CFR
part 1026 as follows:
PART 1026--TRUTH IN LENDING (REGULATION Z)
0
1. The authority citation for part 1026 continues to read as follows:
Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353,
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.
Subpart E--Special Rules for Certain Home Mortgage Transactions
0
2. Amend Sec. 1026.41 by:
0
a. Revising paragraph (e)(5)(iv)(B); and
0
b. Removing paragraph (e)(5)(iv)(C).
The revision reads as follows:
Sec. 1026.41 Periodic statements for residential mortgage loans.
* * * * *
(e) * * *
(5) * * *
(iv) * * *
(B) Single-statement exemption. As of the date on which one of the
events listed in paragraph (e)(5)(iv)(A) of this section occurs, a
servicer is exempt from the requirements of this section with respect
to the next periodic statement or coupon book that would otherwise be
required but thereafter must provide modified or unmodified periodic
statements or coupon books that comply with the requirements of this
section.
* * * * *
0
3. Amend Supplement I to Part 1026 as follows:
0
a. Under Section 1026.41--Periodic Statements for Residential Mortgage
Loans:
0
i. 41(e)(5)(iv)(B) Transitional single-billing-cycle exemption is
revised; and
0
ii. 41(e)(5)(iv)(C) Timing of first modified or unmodified statement or
coupon book after transition is removed.
The revision reads as follows:
Supplement I to Part 1026--Official Interpretations
* * * * *
Section 1026.41 Periodic Statements for Residential Mortgage Loans
* * * * *
41(e)(5)(iv)(B) Single-Statement Exemption.
1. Timing. The exemption in Sec. 1026.41(e)(5)(iv)(B) applies with
respect to a single periodic statement or coupon book following an
event listed in Sec. 1026.41(e)(5)(iv)(A). For example, assume that a
mortgage loan has a monthly billing cycle, each payment due date is on
the first day of the month following its respective billing cycle, and
each payment due date has a 15-day courtesy period. In this scenario:
i. If an event listed in Sec. 1026.41(e)(5)(iv)(A) occurs on
October 6, before the end of the 15-day courtesy period provided for
the October 1 payment due date, and the servicer has not yet provided a
periodic statement or coupon book for the billing cycle with a November
1 payment due date, the servicer is exempt from providing a periodic
statement or coupon book for that billing cycle. The servicer is
required thereafter to resume providing periodic statements or coupon
books that comply with the requirements of Sec. 1026.41 by providing a
modified or unmodified periodic statement or coupon book for the
billing cycle with a December 1 payment due date within a reasonably
prompt time after November 1 or the end of the 15-day courtesy period
provided for the November 1 payment due date. See Sec. 1026.41(b).
ii. If an event listed in Sec. 1026.41(e)(5)(iv)(A) occurs on
October 20, after the end of the 15-day courtesy period provided for
the October 1 payment due date, and the servicer timely provided a
periodic statement or coupon book for the billing cycle with the
November 1 payment due date, the servicer is not required to correct
the periodic statement or coupon book already provided and is exempt
from providing the next periodic statement or coupon book, which is the
one that would otherwise be required for the billing cycle with a
December 1 payment due date. The servicer is required thereafter to
resume providing periodic statements or coupon books that comply with
the requirements of Sec. 1026.41 by providing a modified or unmodified
periodic statement or coupon book for the billing cycle with a January
1 payment due date within a reasonably prompt time after December 1 or
the end of the 15-day courtesy period provided for the December 1
payment due date. See Sec. 1026.41(b).
2. Duplicate coupon books not required. If a servicer provides a
coupon book instead of a periodic statement under Sec. 1026.41(e)(3),
Sec. 1026.41 requires the servicer to provide a new coupon book after
one of the events listed in Sec. 1026.41(e)(5)(iv)(A) occurs only to
the extent the servicer has not previously provided the consumer with a
coupon book that covers the upcoming billing cycle.
3. Subsequent triggering events. The single-statement exemption in
Sec. 1026.41(e)(5)(iv)(B) might apply more than once over the life of
a loan. For example, assume the exemption applies beginning on April 14
because the consumer files for bankruptcy on that date and the
bankruptcy plan provides that the consumer will surrender the dwelling,
such that the mortgage loan becomes subject to the requirements of
Sec. 1026.41(f). See Sec. 1026.41(e)(5)(iv)(A)(1). If the consumer
later exits bankruptcy on November 2 and has not discharged personal
liability for the mortgage loan pursuant to 11 U.S.C. 727, 1141, 1228,
or 1328, such that the mortgage loan ceases to be subject to the
requirements of Sec. 1026.41(f), the single-statement exemption would
apply again beginning on November 2. See Sec. 1026.41(e)(5)(iv)(A)(2).
* * * * *
Dated: March 6, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-04823 Filed 3-9-18; 8:45 am]
BILLING CODE 4810-AM-P