Special Mortgage Rules - Mortgage Servicing Flashcards
How long do mortgage servicers have to make contact with delinquent members?
- Establish live contact by the 36th day of delinquency for each payment.
- Written notice of loss mitigation options by the 45th day of a member’s delinquency.
What are the requirements for credit unions to use coupon books instead of periodic statements?
Servicers may use coupon books instead of periodic statements for fixed rate loans. Each coupon must include:
- Amount due
- Amount of any late fees
- Date late fees will be charged
- Due date
The coupon book itself must also include:
- Contact information for homeownership counseling including HUD’s toll-free telephone number
- Principal balance as of the beginning of the time period covered by the coupon book
- Statement regarding how a member can obtain information
- Current interest rate
- Any prepayment penalty
- Contact information
What types of loans are exempt from the periodic statement requirement?
- Reverse mortgages
- Timeshare loans
- Certain charged-off loans
What is the timing of the notice requirements for force-placed insurance?
The rule requires by a first notice and a reminder notice.
- FIRST NOTICE - Sent at least 45 days before charging the member for force-placed insurance
- SECOND NOTICE - Sent at least 30 days after the first notice
When is a credit union considered a “small servicer”? What are some of the provisions that would still apply to “small servicers”?
A credit union is a small servicer if the credit union, together with any affiliates, services 5,000 or fewer mortgage loans and the credit union/affiliate is the creditor/assignee for all of them.
Small servicers must still comply with:
- Adjustable rate mortgage notices
- Prompt crediting of payments
- Responding to qualified written requests (the error resolution and information requests requirements)
- Escrow account servicing requirements
- The remainder of the force-placed insurance requirements
- Two provisions of the loss mitigation requirements:
- Small servicers must not make the first notice or filing for foreclosure unless a member’s mortgage is more than 120 days delinquent
- Small servicers must not proceed to foreclosure judgment if the member is performing under the terms of a loss mitigation agreement
- Payoff statements requirements
- Service transfer requirements
What is an error for the purposes of the error resolution rule?
Relating to the servicing of a borrower’s mortgage loan.
- Failure to accept a payment
- Failure to apply an accepted payment to principal, interest, escrow or other charges
- Failure to credit a payment as of the date of receipt
- Failure to pay taxes, insurance premiums or other changes or to refund an escrow account balance
- Failure to provide an accurate payoff balance
- Failure to provide accurate information to the member regarding loss mitigation options and foreclosure
- Failure to transfer accurately and timely information relating to service transfers
- Imposition of a fee/charge servicer lacks reasonable basis to impose
- Moving for foreclosure judgment or order of sale or conducting a foreclosure sale in violation of RESPA loss mitigation procedures
What is the difference between an information request and an error notice?
Information Request - Written request that requests information relating to the servicing of the mortgage loan
Error Notice - Written notice must include the error that the member believes occurred
Possible a notice can be both. Credit union should evaluate “whether the letter fulfills the substantive requirements of a notice of error, information request, or both”
What is a periodic payment and how must servicers handle these payments?
One that includes the amount necessary to pay principal, interest and any applicable escrow
- Must credit “periodic payments” as of the day the payment was received (day the payment reaches the credit union)
- May delay crediting a periodic payment so long as the delay does not result in negative action against the member
How are partial payments treated? Can the credit union charge a late payment fee for a partial payment?
Any payment that is insufficient to cover principal, interest and any applicable escrow
- Credit the payment
- Return the payment
- Place partial payment into a suspense account until it becomes a periodic payment
- May assess a late fee
What constitutes prohibited pyramiding of late fees?
If a member makes a periodic payment on time without paying a past due late fee, the credit union may not charge an additional late fee.
What is dual tracking under the loss mitigation rule? How can credit unions avoid this?
Occurs when a servicer moves forward with foreclosure while simultaneously working with the member to avoid foreclosure
- Cannot make the first notice or filing required for a foreclosure process until a member is more than 120 days delinquent
- If a member has submitted a complete loss mitigation application during the 120-day period, the servicer may not begin the foreclosure process unless:
- The servicer sends the member a notice that the member is not eligible for any loss mitigation options and the member has exhausted the appeal process
- The member rejects all loss mitigation options the servicer offers
- The member fails to perform under an agreement on a loss mitigation option
How do Regulations X and Z determine which persons might be successors in interest that are covered by some of the mortgage servicing rules?
Successor in interest means a person to whom an ownership interest in a dwelling securing a closed-end consumer credit transaction is transferred from a consumer, provided that the transfer is:
- A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety
- A transfer to a relative resulting from the death of the consumer
- A transfer to consumer’s spouse or children
- A transfer resulting from divorce, legal separation, or from an incidental property settlement agreement, by which the spouse of the consumer becomes an owner of the property
- A transfer into an inter vivos [living] trust in which the consumer is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.
General idea is that if the ownership interest in the property securing a mortgage loan is transferred to another person under specific circumstances, then certain mortgage servicing rules would apply to that person if the person is a “confirmed” successor in interest.
How should a credit union treat a shortage in an escrow account?
Shortage of LESS than one month’s escrow payment
- The servicer may allow the shortage to exist and do nothing to change it
- The servicer may require the member to repay the shortage amount within 30 days
- The servicer may require the member to repay the shortage amount in equal monthly payments over at least a 12-month period.
Shortage is more than or equal to one month’s escrow payment, then the servicer has two possible courses of action:
- The servicer may allow the shortage to exist and do nothing to change it
- The servicer may require the member to repay the shortage in equal monthly payments over at least a 12-month period.
