Amendments to the 2013 Mortgage Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 62993-63007 [2013-24521]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Rules and Regulations]
[Pages 62993-63007]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24521]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Parts 1024 and 1026

[Docket No. CFPB-2013-0031]
RIN 3170-AA37


Amendments to the 2013 Mortgage Rules Under the Real Estate 
Settlement Procedures Act (Regulation X) and the Truth in Lending Act 
(Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

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SUMMARY: This rule amends provisions in Regulation Z and final rules 
issued by the Bureau of Consumer Financial Protection (Bureau) in 2013, 
which, among other things, required that consumers receive counseling 
before obtaining high-cost mortgages and that servicers provide 
periodic account statements and rate adjustment notices to mortgage 
borrowers, as well as engage in early intervention when borrowers 
become delinquent. The amendments clarify the specific disclosures that 
must be provided before counseling for high-cost mortgages can occur, 
and proper compliance regarding servicing requirements when a consumer 
is in bankruptcy or sends a cease communication request under the Fair 
Debt Collection Practices Act. The rule also makes technical 
corrections to provisions of other rules. The Bureau requests public 
comment on these changes.

DATES: This interim final rule is effective January 10, 2014. Comments 
must be received on or before November 22, 2013.

[[Page 62994]]


ADDRESSES: You may submit comments, identified by Docket No. CFPB-2013-
0031 or RIN 3170-AA37, by any of the following methods:
     Electronic: https://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail/Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1700 G 
Street NW., Washington, DC 20552.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to https://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1700 G 
Street NW., Washington, DC 20552, on official business days between the 
hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment 
to inspect the documents by telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Joseph Devlin, Counsel; Laura Johnson, 
Nicholas Hluchyj, and Marta Tanenhaus, Senior Counsels; Office of 
Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Summary of Interim Final Rule

    In January 2013, the Bureau issued several final rules concerning 
mortgage markets in the United States pursuant to the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act) Public Law 
111-203, 124 Stat. 1376 (2010) (2013 Title XIV Final Rules). Three of 
these rules were (1) the Mortgage Servicing Rules under the Real Estate 
Settlement Procedures Act (Regulation X) (2013 RESPA Servicing Final 
Rule); \1\ (2) the Mortgage Servicing Rules under the Truth in Lending 
Act (Regulation Z) (2013 TILA Servicing Final Rule); \2\ and (3) the 
High-Cost Mortgage and Homeownership Counseling Amendments to the Truth 
in Lending Act (Regulation Z) and Homeownership Counseling Amendments 
to the Real Estate Settlement Procedures Act (Regulation X) (2013 HOEPA 
Final Rule).\3\ The 2013 TILA Servicing Final Rule and the 2013 RESPA 
Servicing Final Rule are referred to collectively as the 2013 Mortgage 
Servicing Final Rules.
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    \1\ 78 FR 10695 (Feb. 14, 2013).
    \2\ 78 FR 10901 (Feb. 14, 2013).
    \3\ 78 FR 6855 (Jan. 31, 2013).
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    The Bureau is clarifying compliance requirements in relation to 
bankruptcy law and the Fair Debt Collection Practices Act (FDCPA) 
through this rule and through a contemporaneous compliance bulletin.\4\ 
Bankruptcy law and the FDCPA both provide significant protections for 
consumers, and each strictly limits communications with consumers in 
certain circumstances. The Bureau has received a large number of 
questions from servicers about how the servicing rules intersect with 
the other two bodies of law generally and in particular on how to 
communicate effectively with borrowers in light of their status in 
bankruptcy. While the Bureau believes that some of these questions can 
be resolved by interpretations now, it has also concluded that further 
analysis and study are required to resolve other issues that cannot be 
completed before the 2013 Mortgage Servicing Final Rules take effect. 
In those cases, the Bureau is creating narrow exemptions from the 
servicing rules to allow time to complete the additional analysis.
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    \4\ CFPB Bulletin 2013-12, available at https://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf.
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    Specifically, the Bulletin confirms that servicers must comply with 
certain requirements of the Dodd-Frank Act and respond to certain 
borrower communications in accordance with the Bureau's servicing rules 
even after a borrower has sent a cease communication request under the 
FDCPA. The Bulletin provides a safe harbor from liability under the 
FDCPA with regard to such communications. Separately in this rule, the 
Bureau is providing exemptions for two other servicing communications 
that are not specifically mandated by statute--the requirement in Sec.  
1026.20(c) for a notice of rate change for adjustable-rate mortgages 
(ARMs) and the early intervention requirements in Sec.  1024.39--when a 
borrower has properly invoked the FDCPA's cease communication 
protections. The Bureau expects to explore the potential utility and 
application of such requirements in comparison to the FDCPA protections 
in a broader debt collection rulemaking. The interim final rule also 
exempts servicers from the early intervention requirements in Sec.  
1024.39 and from the periodic statement requirements under 12 CFR 
1026.41 for borrowers while they are in bankruptcy. Again, the Bureau 
intends to engage in further analysis of how these servicing 
requirements intersect with bankruptcy law and how to ensure that 
servicer communications do not confuse borrowers regarding their 
status.
    This interim final rule also amends the 2013 HOEPA Final Rule by 
clarifying which federally required disclosure must be used in 
counseling under 12 CFR 1026.34(a)(5) for a closed-end HOEPA loan not 
subject to the Real Estate Settlement Procedures Act (RESPA). The rule 
replaces language that could have been read to require provision of the 
Good Faith Estimate (GFE) or successor disclosure under RESPA, which 
are not required for transactions not covered by RESPA, and instead 
clarifies that counseling may be based on the HOEPA disclosures that 
are required for such transactions pursuant to TILA section 129(a) and 
Regulation Z section 1026.32(c).
    This interim final rule also makes two technical corrections to 
Regulation Z, as revised by the May Ability-to-Repay and Qualified 
Mortgage Standards Under the Truth in Lending Act (May 2013 ATR Final 
Rule),\5\ Amendments to the 2013 Mortgage Rules under the Real Estate 
Settlement Procedures Act (Regulation X) and the Truth in Lending Act 
(Regulation X) (July 2013 Final Rule Amendments to the 2013 Mortgage 
Rules),\6\ and the Amendments to the 2013 Mortgage Rules under the 
Equal Credit Opportunity Act (Regulation B), Real Estate Settlement 
Procedures Act (Regulation X), and the Truth in Lending Act (Regulation 
Z) (September 2013 Final Rule Amendments to the 2013 Mortgage 
Rules).\7\ These changes correct section 1026.43(e)(4)(ii)(C) and 
comment 32(b)(1)(ii)-4.iii. This rule also makes another minor 
technical correction to the September 2013 Final Rule Amendments to the 
2013 Mortgage Rules.
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    \5\ 78 FR 35429 (June 12, 2013).
    \6\ 78 FR 44685 (Jul. 24, 2013).
    \7\ 78 FR 60382 (Oct. 1, 2013).
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    The Bureau seeks public comment on these changes.

II. Background

A. Title XIV Rules Under the Dodd-Frank Act

    In response to an unprecedented cycle of expansion and contraction 
in the mortgage market that sparked the most severe U.S. recession 
since the Great Depression, Congress passed the Dodd-Frank Act, which 
was signed into law

[[Page 62995]]

on July 21, 2010. In the Dodd-Frank Act, Congress established the 
Bureau and, under sections 1061 and 1100A, generally consolidated the 
rulemaking authority for Federal consumer financial laws, including the 
Truth in Lending Act (TILA), in the Bureau.\8\ At the same time, 
Congress significantly amended the statutory requirements governing 
mortgages with the intent to restrict the practices that contributed to 
and exacerbated the crisis. Under the statute, most of these new 
requirements would have taken effect automatically on January 21, 2013, 
if the Bureau had not issued implementing regulations by that date.\9\ 
To avoid uncertainty and potential disruption in the national mortgage 
market at a time of economic vulnerability, the Bureau issued several 
final rules in a span of less than two weeks in January 2013 to 
implement these new statutory provisions and provide for an orderly 
transition. These rules included the 2013 HOEPA Final Rule, issued on 
January 10, and the 2013 Mortgage Servicing Final Rules, issued on 
January 17.
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    \8\ Sections 1011 and 1021 of the Dodd-Frank Act, in title X, 
the ``Consumer Financial Protection Act,'' Public Law 111-203, secs. 
1001-1100H, codified at 12 U.S.C. 5491, 5511. The Consumer Financial 
Protection Act is substantially codified at 12 U.S.C. 5481-5603. 
Section 1029 of the Dodd-Frank Act excludes from this transfer of 
authority, subject to certain exceptions, any rulemaking authority 
over a motor vehicle dealer that is predominantly engaged in the 
sale and servicing of motor vehicles, the leasing and servicing of 
motor vehicles, or both. 12 U.S.C. 5519.
    \9\ Dodd-Frank Act section 1400(c), 15 U.S.C. 1601 note.
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B. Implementation Plan for New Mortgage Rules

    On February 13, 2013, the Bureau announced an initiative to support 
implementation of the new mortgage rules (Implementation Plan),\10\ 
under which the Bureau would work with the mortgage industry to ensure 
that the 2013 Title XIV Final Rules could be implemented accurately and 
expeditiously. The Implementation Plan included: (1) Coordination with 
other agencies; (2) publication of plain-language guides to the new 
rules; (3) publication of additional interpretive guidance and 
corrections or clarifications of the new rules as needed; (4) 
publication of readiness guides for the new rules; and (5) education of 
consumers on the new rules.
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    \10\ Consumer Financial Protection Bureau Lays Out 
Implementation Plan for New Mortgage Rules. Press Release. Feb. 13, 
2013 available at https://www.consumerfinance.gov/newsroom/consumer-financial-protection-bureau-lays-out-implementation-plan-for-new-mortgage-rules/.
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    This interim final rule makes narrow amendments to the 2013 Title 
XIV Final Rules and three technical corrections to the September 2013 
Final Rule Amendments to the 2013 Mortgage Rules. The Bureau is 
proceeding by interim final rule to provide immediate certainty 
regarding compliance to the small sub-markets affected. For information 
and documents regarding other guidance and amendments under the 
Implementation Plan, please visit the Bureau's Regulatory 
Implementation Web page.\11\
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    \11\ https://www.consumerfinance.gov/regulatory-implementation.
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III. Legal Authority

    The Bureau is issuing this interim final rule pursuant to its 
authority under RESPA, TILA and the Dodd-Frank Act. Section 1061 of the 
Dodd-Frank Act transferred to the Bureau the ``consumer financial 
protection functions'' previously vested in certain other Federal 
agencies, including the Board of Governors of the Federal Reserve 
System (Board) and the Department of Housing and Urban Development 
(HUD). The Dodd-Frank Act defines ``consumer financial protection 
function'' to include ``all authority to prescribe rules or issue 
orders or guidelines pursuant to any Federal consumer financial law, 
including performing appropriate functions to promulgate and review 
such rules, orders, and guidelines.'' \12\ RESPA, TILA, title X of the 
Dodd-Frank Act, and certain subtitles and provisions of title XIV of 
the Dodd-Frank Act are Federal consumer financial laws.\13\ 
Accordingly, the Bureau has authority to issue regulations pursuant to 
RESPA, TILA, title X, and the enumerated subtitles and provisions of 
title XIV.
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    \12\ 12 U.S.C. 5581(a)(1).
    \13\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) 
(defining ``Federal consumer financial law'' to include the 
``enumerated consumer laws'' and the provisions of title X of the 
Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. 5481(12) 
(defining ``enumerated consumer laws'' to include RESPA and TILA), 
Dodd-Frank section 1400(b), 15 U.S.C. 1601 note (defining 
``enumerated consumer laws'' to certain subtitles and provisions of 
title XIV).
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    The Bureau is amending the 2013 HOEPA Final Rule and the 2013 
Mortgage Servicing Final Rules with this interim final rule. The 
interim final rule relies on the broad rulemaking authority 
specifically granted to the Bureau by RESPA sections 6(k), 6(j)(3) and 
19(a), and by TILA sections 105(a) and 105(f), and title X of the Dodd-
Frank Act. Additionally, the interim final rule relies on the 
rulemaking authority used in connection with the 2013 HOEPA Final 
Rule,\14\ including RESPA section 19(a), TILA section 129(p), and the 
specific rulemaking provision for the pre-loan counseling requirement, 
at TILA section 129(u)(3).
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    \14\ 78 FR 6855 (Jan. 31, 2013).
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IV. Administrative Procedure Act

    To the extent that notice and comment would otherwise be required, 
the Bureau finds that there is good cause to publish this interim final 
rule without notice and comment. See 5 U.S.C. 553(b)(3)(B).
    First, with respect to the amendments of Regulation X section 
1024.39 and Regulation Z sections 1026.20(c) and 1026.41, notice and 
comment is impracticable and contrary to the public interest. The 
amendments to these sections effectuate narrow exceptions to Regulation 
Z and the 2013 Mortgage Servicing Final Rules to facilitate compliance 
with the requirements of those rules with respect to the small number 
of borrowers under the protection of the Bankruptcy Code or provisions 
of the FDCPA that require debt collectors to cease communications upon 
request by the borrower. The 2013 Mortgage Servicing Final Rules, along 
with the other mortgage rules issued by the Bureau, implement 
fundamental reforms and important new consumer protections mandated by 
Congress to guard against practices that contributed to the nation's 
most significant financial crisis in nearly a century. The rulemakings 
as a whole implicate multiple processes for both mortgage originations 
and servicing. Congress mandated that a number of the rules be issued 
by January 21, 2013, and that they take effect by one year after 
issuance. Consequently, the 2013 Mortgage Servicing Final Rules, along 
with most of the other mortgage rules issued by the Bureau in January 
2013, will take effect in January 2014. Although section 1026.20(c) of 
Regulation Z was not established by the new rules, compliance with that 
pre-existing provision must be worked in to servicers' overall 
compliance strategy for January. Because many financial institutions 
lock down their computer systems late in the calendar year due to high 
holiday processing volume and the need to generate year-end reports, 
institutions have relatively little time to institute programming 
changes before the January effective dates.
    If the Bureau were to give advance notice of the amendment of these 
sections and even a two-week comment period, a rule could not 
reasonably be published in final form until early December. Servicers 
would experience a period of uncertainty in which they would have to 
continue to prepare for compliance with the original rules in case the 
exemptions were not finalized.

[[Page 62996]]

This would likely divert resources from activities that would have more 
beneficial impacts for consumers. If the Bureau adopted the exemptions 
in December, servicers would then be forced to change their systems in 
a rush before the effective date, potentially leading to severe 
compliance problems and harm to consumers.
    Second, the Bureau finds that the notice-and-comment procedure is 
unnecessary for the amendments to Sec. Sec.  1026.32, 1026.43, and 
1026.34 and related commentary. As discussed more fully below in this 
preamble, the amendments correct inadvertent, technical errors with 
respect to these sections. First, a rule the Bureau adopted in May 2013 
included the proper version of comment 32(b)(1)(ii)-4.iii, but a recent 
amendment erroneously reverted the comment to an old version. The 
Bureau is restoring the proper May 2013 version of the comment with a 
minor clarifying adjustment to remove an extraneous phrase and thereby 
avoid the misinterpretation that the comment is in conflict with the 
regulatory text. The Bureau believes that affected members of the 
public, including institutions subject to the rule, have understood 
that the removal of the May 2013 version of the comment was 
inadvertent, that the May 2013 version of the comment should not be 
understood to conflict with the regulatory text, and that the Bureau 
would correct the comment.
    Second, the amendment to section 1026.43(e)(4)(ii)(C) corrects a 
similar technical error. The July 2013 rule included the proper version 
of section 1026.43(e)(4)(ii)(C) but a recent amendment inadvertently 
omitted language reiterating in the regulation text that matters wholly 
unrelated to ability to repay will not be relevant to the determination 
of QM status under that provision. No change in the standard was 
intended or made by the recent amendment, as is clear from the 
interpretation of that provision contained in comment 43(e)(4)-4. 
Finally, the amendment to section 1026.34(a)(5) corrects a failure to 
address a very narrow category of transactions for which the 
disclosures specified in the regulation are not required. In the 
absence of the correction, the existing language could be read to 
require new disclosures that would be unduly burdensome and unsuitable 
for consumers or simply to render the provision impossible to comply 
with for affected transactions. The interim final rule corrects the 
inadvertent omission by expressly referencing existing disclosures that 
are already required for the affected transactions.

V. Effective Date

    This interim final rule is effective on January 10, 2014. As with 
the requirements of the 2013 HOEPA Final Rule which it amends, the 
change to Sec.  1026.34(a)(5) applies to transactions for which the 
creditor received an application on or after that date. The servicing 
exemptions provided in this rule amending existing Regulation Z and the 
2013 Mortgage Servicing Rules are available for use with any servicing 
account beginning on the effective date. The technical corrections to 
section 1026.32 and section 1026.43 take effect on January 10, 2014.

VI. Section-by-Section Analysis

A. Regulation X

General
    In addition to the clarifications and amendments to Regulation X 
discussed below, the Bureau is making one correction to an amendatory 
instruction that relates to FR Doc. 2013-22752, published on October 1, 
2013.
Section 1024.39 Early intervention requirements for certain borrowers 
1024.39(d) Exemptions
    The early intervention requirements in Sec.  1024.39 are intended 
to provide delinquent borrowers with opportunities to pursue available 
loss mitigation options at the early stages of a delinquency by 
requiring that the servicer attempt to make live contact with the 
borrower and to issue a written notice. The requirements apply to each 
payment for which the borrower is delinquent, although the written 
notice must be provided only once every 180 days.\15\ In this interim 
final rule, the Bureau is adding new Sec.  1024.39(d)(1), exempting a 
servicer from the early intervention requirements while a borrower is a 
debtor in bankruptcy, and new Sec.  1024.39(d)(2), exempting a servicer 
from the early intervention requirements when a borrower has invoked 
the cease communication provisions under the Fair Debt Collections 
Practices Act (FDCPA).\16\
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    \15\ The Bureau has issued guidance to clarify how a servicer 
may comply with the requirements in Sec.  1024.39 to make good faith 
efforts to establish live contact with a borrower in CFPB Bulletin 
2013-12, available at https://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf.
    \16\ 15 U.S.C. 1692 et seq.
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    The Bureau first proposed the early intervention requirements in 
Sec.  1024.39 on August 10, 2012. In the preamble to the proposed rule, 
the Bureau noted that servicers may be subject to State and Federal 
laws related to debt collection practices, such as the FDCPA. In 
addition, the preamble acknowledged that the Bankruptcy Code's 
automatic stay provisions generally prohibit, among other things, 
actions to collect, assess, or recover a claim against a debtor that 
arose before the debtor filed for bankruptcy.\17\ The Bureau invited 
comment on whether servicers may reasonably question how they could 
comply with the Bureau's proposal in light of those laws.
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    \17\ See 11 U.S.C. 362 (automatic stay); see also 11 U.S.C. 524 
(effect of discharge).
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    Several industry commenters expressed concern that the Bureau's 
rules overlap with and could conflict with existing State and Federal 
law. Several commenters requested guidance on whether servicers would 
be required to comply with the early intervention requirements if the 
borrower instructed the servicer to cease collection efforts, not to 
contact the borrower by telephone, or if the borrower refused to pay 
the debt. Several of these commenters requested that the Bureau include 
an exemption from the early intervention requirements in cases 
involving debt collection or bankruptcy law. One industry commenter 
requested that the Bureau clarify whether servicers would have immunity 
from claims of harassment or improper conduct under the FDCPA.
    With respect to addressing potential conflicts between the Bureau's 
rules and existing State and Federal law as well as existing industry 
practice, commenters identified a variety of ways the Bureau could 
provide relief, including by not adopting rules that exceed or 
otherwise conflict with existing requirements, providing safe harbors 
(such as by clarifying that compliance with existing laws and 
agreements satisfies Sec.  1024.39), adopting more flexible standards, 
providing exemptions, including a mechanism in the rule to resolve 
compliance conflicts, or broadly preempting State laws.
    On January 17, 2013, the Bureau issued the 2013 RESPA Servicing 
Final Rule with early intervention requirements in Sec.  1024.39 that 
included a conflicts of law provision specifying that servicers are not 
required to make contact with borrowers in a manner that may be 
prohibited by Federal laws, such as the FDCPA or the Bankruptcy Code's 
automatic stay provisions. The Bureau also added comment 39(c)-1, 
addressing borrowers in bankruptcy. The comment specified, ``Section 
1024.39 does not require a servicer to communicate with a borrower in a 
manner that would be inconsistent with applicable bankruptcy

[[Page 62997]]

law or a court order in a bankruptcy case. To the extent permitted by 
such law or court order, servicers may adapt the requirements of Sec.  
1024.39 in any manner that would permit them to notify borrowers of 
loss mitigation options.'' In the preamble to the final rule, the 
Bureau stated that it did not seek to interpret the Bankruptcy Code 
through this comment, but instead intended to indicate that servicers 
could take a flexible approach to complying with Sec.  1024.39 for 
borrowers in bankruptcy.

1024.39(d)(1) Borrowers in bankruptcy

    After publication of the 2013 RESPA Servicing Final Rule, industry 
stakeholders expressed continued concerns to the Bureau about complying 
with certain servicing requirements for borrowers under the protection 
of bankruptcy law. In general, and as discussed further below with 
regard to periodic statement requirements, servicers asserted that 
simply providing flexibility in accommodating bankruptcy law 
restrictions on communications with borrowers was not sufficient 
because they faced a substantial legal burden in determining when and 
how bankruptcy law provisions applied in the first instance. Servicers 
also expressed concern about how to fulfill the servicing rules' 
requirements in a way that did not confuse borrowers with regard to 
their status in bankruptcy and the fact that servicers were not 
attempting to collect on accounts. Bankruptcy trustees raised similar 
concerns about the likelihood of servicers providing information that 
will be confusing to borrowers/debtors, debtor attorneys, and even 
courts and trustees. Specifically, with regard to early intervention, 
industry sought additional guidance on whether the Bureau would require 
some attempt at compliance even if there was an automatic stay and 
whether servicers would be subject to claims by private litigants 
asserting that bankruptcy was not an excuse for a servicer's lack of 
performance under Sec.  1024.39.
    Based on these inquiries, the Bureau believes that the potential 
interactions between the Sec.  1024.39 early intervention requirements 
and bankruptcy law requirements can be highly varied and complex. The 
Bankruptcy Code itself provides a robust set of consumer protections 
for debtors, including oversight of debt repayment plans, where 
applicable. However, whether certain communications with the borrower 
may violate an automatic stay or discharge injunction are fact-specific 
inquiries and can vary depending on the Chapter of the Bankruptcy Code 
at issue, the intention of the debtor to retain the property, and the 
frequency and detailed contents of the communications.\18\ Uncertainty 
with respect to loss mitigation-related communications has led federal 
regulators \19\ and several bankruptcy courts \20\ to issue guidelines 
or rules for servicers on the interaction between those communications 
and bankruptcy law. While some sources identified by the Bureau suggest 
that it is permissible for servicers to engage in loss mitigation 
negotiations with borrowers who have invoked bankruptcy protections, 
they do not address affirmative outreach directly to the borrower to 
solicit discussions about loss mitigation options.
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    \18\ See infra note 35; see also In re Duke, 79 F.3d 43 (7th 
Cir. 1996) (holding creditor does not violate automatic stay when 
sending ``nonthreatening and non-coercive'' offer to reaffirm 
Chapter 7 debtor's pre-petition debt); In re Silva, No. 09-02504, 
2010 WL 605578 (Bankr. D. Haw. Feb. 19, 2010) (``Nothing in the 
Bankruptcy Code prevents or prohibits a chapter 7 or chapter 13 
debtor or its secured creditors from entering into communications or 
negotiations about the possibility of a loan modification.'')
    \19\ See, e.g., HUD, Mortgagee Letter 2008-32 (Oct. 17, 2008) 
(``[M]ortgagees must, upon receipt of notice of a bankruptcy filing, 
send information to debtor's counsel indicating that loss mitigation 
may be available, and provide instruction sufficient to facilitate 
workout discussions including documentation requirements, timeframes 
and servicer contact information . . . . Nothing in this mortgagee 
letter requires that mortgagees make direct contact with any 
borrower under bankruptcy protection.'') (emphasis added) available 
at https://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2008ml.cfm; U.S. Dep't of Treasury, Making Home Affordable Program 
Handbook for Servicers of Non-GSE Loans, v.4.3 at 77, 80 (Sept. 16, 
2013) (``Borrowers in active Chapter 7 or Chapter 13 bankruptcy 
cases are eligible for HAMP at the servicer's discretion in 
accordance with investor guidelines, but servicers are not required 
to solicit these borrowers proactively for HAMP . . . . Borrowers 
who have received a Chapter 7 bankruptcy discharge in a case 
involving the first lien mortgage who did not reaffirm the mortgage 
debt under applicable law are eligible for HAMP . . . . [A] servicer 
is deemed to have made a Reasonable Effort to solicit [those] 
borrower[s] after sending two written notices to the last address of 
record in addition to the two required written notices. . . .'') 
(emphasis added) available at https://www.makinghomeaffordable.gov/for-partners/understanding-guidelines/Documents/mhahandbook_43.pdf.
    \20\ See, e.g., Amended General Order Regarding Negotiations 
Between Debtor(s) and Mortgage Servicer(s) to Consider Loan 
Modifications (Bankr. D.N.J. July 24, 2009) (``[C]ommunications and/
or negotiations between debtors and mortgagees/mortgage servicers 
about loan modification shall not be deemed as a violation of the 
automatic stay . . . . [A]ny such communication or negotiation shall 
not be used by either party against the other in any subsequent 
litigation . . . .'') available at https://www.njb.uscourts.gov/sites/default/files/general-ordes/2009_07_27_generalOrderLoanModify2.pdf; Bankr. W.D. Wash. R. 4001-2(b) (``A 
mortgage creditor's contact with the debtor and/or the debtor's 
counsel for the purposes of negotiating a loan modification shall 
not be considered a violation of the automatic stay imposed by 11 
U.S.C. 362.''). While these two courts' rules might permit some 
communications regarding loan modifications, their approach is not 
necessarily generally accepted.
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    In addition, when a borrower is under bankruptcy protections, the 
benefits of continuing early intervention contacts may depend on the 
context. Borrowers who became delinquent on their mortgage loans prior 
to filing bankruptcy will likely already have received early 
intervention contacts from the servicer and thus will already be on 
notice about the availability of potential loss mitigation options. In 
such cases, continuing contacts may have limited if any utility. And 
while the small group of borrowers who file bankruptcy without first 
becoming delinquent on their mortgage loans might benefit from 
information regarding the availability of loss mitigation information, 
the Bureau is concerned that additional guidance is needed to ensure 
that any early intervention contacts communicate effectively regarding 
the borrower's status in bankruptcy and do not instead create borrower 
confusion.
    The Bureau believes that further study of these issues is warranted 
but cannot be concluded quickly enough to provide further calibration 
of the requirements before January 2014. Therefore, the interim final 
rule adds Sec.  1024.39(d)(1), which exempts servicers from the 
requirements of Sec.  1024.39 for a mortgage loan while the borrower is 
a debtor in bankruptcy. However, the Bureau is not taking any position 
on whether early intervention efforts generally may violate an 
automatic stay or discharge injunction and encourages servicers who 
communicate with borrowers in bankruptcy about loss mitigation options 
to continue such tailored communications so far as bankruptcy law 
permits. The Bureau believes that some borrowers facing the 
complexities of bankruptcy could benefit from receiving loss mitigation 
information in some tailored form that is appropriate to their 
circumstances.
    Because of the new exemption addressing bankruptcy in Sec.  
1024.39(d)(1), the interim final rule removes comment 39(c)-1 and 
incorporates it into new commentary in Sec.  1024.39(d)(1)-2, as 
discussed below. Comment 39(d)(1)-1 clarifies that the exemption begins 
once a petition has been filed commencing a case under Title 11 of the 
United States Code in which the borrower is a debtor. Comment 39(d)(1)-
2 clarifies that with respect to any portion of the mortgage debt that 
is not discharged, a servicer must resume compliance with Sec.  1024.39 
after the first delinquency that follows the earliest of any of three 
potential outcomes in the borrower's bankruptcy

[[Page 62998]]

case: (i) the case is dismissed, (ii) the case is closed, or (iii) the 
borrower receives a discharge under 11 U.S.C. Sec. Sec.  727, 1141, 
1228, or 1328. However, this requirement to resume compliance does not 
require a servicer to communicate with a borrower in a manner that 
would be inconsistent with applicable bankruptcy law or a court order 
in a bankruptcy case. To the extent permitted by such law or court 
order, a servicer may adapt the requirements of Sec.  1024.39 in any 
manner believed necessary. Compliance with Sec.  1024.39 is not 
required for any portion of the mortgage debt that is discharged under 
applicable provisions of the U.S. Bankruptcy Code. If the borrower's 
bankruptcy case is revived--for example if the court reinstates a 
previously dismissed case, reopens the case, or revokes a discharge--
the servicer is again exempt from the requirement in Sec.  1024.39. 
Comment 39(d)(1)-3 clarifies that the exemption applies when any of the 
borrowers who are joint obligors with primary liability on the mortgage 
loan is a debtor in bankruptcy.
    For the reasons discussed, the Bureau is providing this exemption 
at this time, particularly because of the complex compliance concerns 
and the impending effective date of the 2013 RESPA Servicing Final 
Rule. The Bureau will continue to examine this issue and may reinstate 
an early intervention requirement with respect to borrowers in 
bankruptcy, but it will not reinstate any such requirement without 
notice and comment rulemaking and an appropriate implementation period. 
The Bureau solicits comment on the scope of the exemption, the triggers 
for meeting the exemption and having to resume early intervention, and 
how the early intervention communications might be tailored to meet the 
particular needs of borrowers in bankruptcy. The Bureau also seeks 
comment on other factors the Bureau should take into consideration in 
determining whether to reinstate any type of early intervention 
requirement with respect to borrowers in bankruptcy.
    Legal Authority. The Bureau uses its authority under RESPA sections 
6(j)(3) and 19(a) to exempt servicers from the early intervention 
requirements in Sec.  1024.39 for a mortgage loan while the borrower is 
a debtor in bankruptcy and to adopt related official Bureau 
interpretations in Supplement I to Part 1024. For the reasons discussed 
above, the Bureau does not believe at this time that the consumer 
protection purposes of RESPA would be furthered by requiring servicers 
to comply with Sec.  1024.39 for a mortgage loan while the borrower is 
a debtor in bankruptcy.

1024.39(d)(2) Fair Debt Collection Practices Act

    A servicer of defaulted mortgage loans may also be a debt collector 
under the FDCPA. The FDCPA grants debtors the right generally to bar 
debt collectors from communicating with them regarding the debt by 
sending a written ``cease communication'' request.\21\ As discussed 
above, the Bureau is separately issuing a bulletin that concludes that 
the FDCPA ``cease communication'' provision does not override 
servicers' obligations to have various communications with borrowers 
that are specifically mandated by the Dodd-Frank Act or to respond to 
certain borrower-initiated communications in accordance with the 2013 
Mortgage Servicing Final Rules.\22\ However, because the early 
intervention requirements are neither statutorily mandated nor 
borrower-initiated, the interplay between the early intervention 
requirements and the ``cease communication'' provision of the FDCPA is 
less clear than it is with the servicing provisions discussed in the 
bulletin.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 1692c(c).
    \22\ The new mortgage servicing rules that do not exempt 
servicers based on their status as debt collectors under the FDCPA 
are, in Regulation X, 12 CFR 1024.35 (error resolution), 1024.36 
(requests for information), 1024.37 (force-place insurance), and 
1024.41 (loss mitigation) and, in Regulation Z, 12 CFR 1026.20(d) 
(ARM initial interest rate adjustment) and 1026.41 (periodic 
statement). See CFPB Bulletin 2013-12, available at https://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf. Note that, elsewhere in this interim final rule, the 
Bureau is issuing an exemption for Sec.  1026.20(c) similar to the 
one for Sec.  1024.39.
---------------------------------------------------------------------------

    Therefore, new Sec.  1024.39(d)(2) exempts a servicer that is a 
debt collector under the FDCPA with respect to a borrower from the 
requirements of Sec.  1024.39 after the borrower has exercised this 
``cease communication'' right. The exemption provides a servicer that 
is a debt collector under the FDCPA with certainty that it has no 
obligations under Sec.  1024.39 with regard to a borrower who has 
followed FDCPA procedure and instructed the servicer/debt collector to 
stop communicating with the borrower about the debt. The Bureau is not, 
however, making a determination as to the legal status of intervention 
efforts following receipt of proper cease communication requests, and 
servicers are encouraged to pursue loss mitigation options to the 
extent that the FDCPA permits.
    The CFPB will be exploring the legal issues and practical benefits 
of requiring some type of early intervention to notify borrowers of the 
potential availability of loss mitigation options, in an upcoming 
rulemaking on debt collection. Balancing the rights of debtors to 
protect themselves against certain debt collector practices with the 
consumer protections afforded by servicer-borrower contact that may 
lead to the resolution of borrower default is more appropriately 
addressed in the broader context of a notice-and-comment rulemaking. 
For this reason, the interim final rule revises Sec.  1024.39 to add 
the exemption discussed above and provide clarity to stakeholders, but 
the Bureau notes that the future rulemaking on debt collection may 
alter or eliminate this exemption.
    Legal Authority. The Bureau uses its authority under RESPA sections 
6(j)(3) and 19(a) to exempt a servicer that is a debt collector 
pursuant to the FDCPA with regard to a mortgage loan from the early 
intervention requirements in Sec.  1024.39 when a borrower has 
exercised the ``cease communication'' right under the FDCPA prohibiting 
the servicer/debt collector from communicating with the borrower 
regarding the debt. For the reasons discussed above, the Bureau 
believes at this time that the consumer protection purposes of RESPA 
would not be furthered by requiring compliance with Sec.  1024.39 at a 
time when a borrower has specifically requested the servicer/debt 
collector to stop communicating with the borrower about the debt.

B. Regulation Z

Section 1026.20 Disclosure Requirements Regarding Post-Consummation 
Events
20(c) Rate Adjustments With a Corresponding Change in Payment
20(c)(1)(ii) Exemptions
20(c)(1)(ii)(C)
    In this interim final rule, the Bureau is adding a third exemption 
to Sec.  1026.20(c), the regulation requiring disclosures to consumers 
with adjustable-rate mortgages (ARMs) each time an interest rate 
adjustment causes a corresponding change in payment.\23\ Servicers of 
defaulted mortgage loans may be debt collectors under the FDCPA.\24\ As 
discussed above, the FDCPA grants debtors the right generally to bar 
debt collectors from communicating with them by sending a written 
``cease communication'' request.\25\ New Sec.  1026.20(c)(1)(ii)(C) 
exempts servicers, creditors and assignees on an ARM from the

[[Page 62999]]

requirements of Sec.  1026.20(c) when the servicer for that ARM is a 
debt collector under the FDCPA and the consumer has exercised this 
``cease communication'' right.
---------------------------------------------------------------------------

    \23\ 12 CFR 1026.20(c), as revised by 78 FR 10901 (Feb. 14, 
2013) (2013 TILA Servicing Final Rule).
    \24\ 15 U.S.C. 1692 et seq.
    \25\ 15 U.S.C. 1692c(c).
---------------------------------------------------------------------------

    As discussed above, the Bureau is separately issuing a bulletin 
that concludes that the FDCPA ``cease communication'' provision does 
not override servicers' obligations to have various communications with 
borrowers that are specifically mandated by the Dodd-Frank Act or to 
respond to certain borrower-initiated communications in accordance with 
the 2013 Mortgage Servicing Final Rules.\26\ However, because the 
notice requirements of Sec.  1026.20(c) are neither statutorily 
mandated nor borrower-initiated, the interplay between those 
requirements and the ``cease communication'' provision of the FDCPA is 
less clear than it is with the servicing provisions discussed in the 
bulletin.
---------------------------------------------------------------------------

    \26\ The new mortgage servicing rules that do not exempt 
servicers based on their status as debt collectors under the FDCPA 
are, in Regulation X, 12 CFR 1024.35 (error resolution), 1024.36 
(requests for information), 1024.37 (force-place insurance), and 
1024.41 (loss mitigation) and, in Regulation Z, 12 CFR 1026.20(d) 
(ARM initial interest rate adjustment) and 1026.41 (periodic 
statement). See CFPB Bulletin 2013-12, available at https://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf. Note that, elsewhere in this interim final rule, the 
Bureau is issuing an exemption for Sec.  1024.39 similar to the one 
for Sec.  1026.20(c).
---------------------------------------------------------------------------

    Therefore, new Sec.  1026.20(c)(1)(ii)(C) exempts servicers, 
creditors and assignees on an ARM from the requirements of Sec.  
1026.20(c) when the servicer for that ARM is a debt collector under the 
FDCPA and the consumer has exercised this ``cease communication'' 
right. The exemption provides a servicer that is a debt collector under 
the FDCPA with certainty that it has no obligations under Sec.  
1026.20(c) with regard to a borrower who has followed FDCPA procedure 
and instructed the servicer/debt collector to stop communicating with 
the borrower about the debt. The Bureau is not, however, making a 
determination as to the legal status of Sec.  1026.20(c) requirements 
following receipt of proper cease communication requests, and servicers 
are encouraged to provide ARM adjustment notices to the extent that the 
FDCPA permits.
    The CFPB will be exploring the legal issues and practical benefits 
of requiring some form of Sec.  1026.20(c) notice following a cease 
communication request, in an upcoming rulemaking on debt collection. 
Balancing the rights of debtors to protect themselves against certain 
debt collector practices with the consumer protection afforded by 
timely notice of interest rate and payment adjustments is more 
appropriately addressed in the broader context of a notice-and-comment 
rulemaking. For this reason, the interim final rule revises Sec.  
1026.20(c) to add the exemption discussed above and provide clarity to 
stakeholders, but the Bureau notes that the future rulemaking on debt 
collection may alter or eliminate this exemption.
    Legal Authority. The Bureau uses its authority under TILA section 
105(a) to provide an exemption from the ARM disclosures required by 
Sec.  1026.20(c) when a servicer that is a debt collector pursuant to 
the FDCPA with regard to an adjustable-rate mortgage loan receives a 
``cease communication'' notice. For the reasons discussed above, the 
Bureau believes this exemption is necessary and proper under TILA 
section 105(a) to effectuate the purposes of and to facilitate 
compliance with TILA.
Section 1026.32 Requirements for Certain High-Cost Mortgages
32(b) Definitions
32(b)(1)
    This interim final rule makes a technical correction to comment 
32(b)(1)(ii)-4.iii, as revised by the May 2013 ATR Final Rule and the 
September 2013 Final Rule Amendments to the 2013 Mortgage Rules. Among 
other things, the May 2013 ATR Final Rule substantially revised Sec.  
1026.32(b)(1)(ii) and, with it, comment 32(b)(1)(ii)-4. However, the 
September 2013 Final Rule Amendments to the 2013 Mortgage Rules 
inadvertently replaced comment 32(b)(1)(ii)-4.iii with the comment 
language that was in place before the May 2013 ATR Final Rule revision. 
This rule restores the May 2013 language.
    This rule also makes a minor adjustment to the May 2013 language to 
remove an extraneous reference to compensation paid by ``a consumer.'' 
Comment 32(b)(1)(ii)-4.iii is intended to focus on how compensation 
paid by a creditor to a loan originator is included in the calculation 
of points and fees. The reference to compensation paid by ``a 
consumer'' in this particular context is not relevant and could have 
been misread to suggest that mortgage broker compensation already 
included in the points and fees calculation under Sec.  
1026.32(b)(1)(i) should be counted again under Sec.  1026.32(b)(1)(ii). 
Such an interpretation would not have been consistent with Sec.  
1026.32(b)(1)(ii)(A), as both the regulatory text and comment 32(b)(1)-
4.i make plain. This rule makes the technical correction of removing 
the phrase ``consumer or'' in comment 32(b)(1)(ii)-4.iii to avoid such 
potential confusion.
Section 1026.34 Prohibited acts or practices in connection with high-
cost mortgages
34(a) Prohibited acts or practices for high-cost mortgages
34(a)(5) Pre-loan counseling
    The Dodd-Frank Act provides that a creditor shall not extend a 
high-cost mortgage to a consumer without obtaining certification from 
an approved housing counselor that the consumer has received counseling 
on the advisability of the mortgage.\27\ The Dodd-Frank Act also 
requires that (1) the counselor not be employed by or affiliated with 
the creditor; and (2) the counselor not certify that a consumer has 
received counseling unless the consumer has received the appropriate 
required disclosures. The statutory section requiring pre-loan 
counseling authorizes the Bureau to prescribe regulations to carry out 
the requirement.
---------------------------------------------------------------------------

    \27\ Dodd-Frank Act section 1433(e), TILA section 129(u), 15 
U.S.C. 1639(u).
---------------------------------------------------------------------------

    The Bureau implemented the pre-loan counseling requirement in Sec.  
1026.34(a)(5) of the 2013 HOEPA Final Rule. In order to ensure that a 
consumer would receive useful counseling on the advisability of the 
particular loan offered, Sec.  1026.34(a)(5)(ii) required that the 
counseling occur after the consumer receives the initial disclosure 
under RESPA (currently the GFE \28\), or the TILA disclosures for open-
end credit under Regulation Z section 1026.40. However, the rule 
inadvertently failed to address a very narrow category of closed-end 
transactions that are neither covered by RESPA nor subject to the 
disclosures for open-end credit under Regulation Z. These other high-
cost loans are typically secured by manufactured housing but do not 
involve residential real property, and therefore are not federally 
related mortgage loans subject to RESPA.\29\ Such loans also are not 
covered by Regulation Z section 1026.40. Consequently, Sec.  
1026.34(a)(5) could be read to make such closed-end, non-RESPA 
transactions impossible, or to require a RESPA or open-end disclosures 
for transactions that would otherwise not require such disclosures and 
for which such disclosures would

[[Page 63000]]

be unduly burdensome and unsuitable for consumers.
---------------------------------------------------------------------------

    \28\ The Bureau notes that the adoption of the forthcoming TILA/
RESPA integrated disclosure, required by Dodd-Frank Act section 
1098, will not affect this requirement. The new Loan Estimate 
integrated disclosure will satisfy the requirement for a good faith 
estimate under RESPA section 5(c), and will be provided prior to 
counseling on closed-end RESPA transactions.
    \29\ See 12 CFR 1024.2(b).
---------------------------------------------------------------------------

    To address these concerns, this interim final rule amends Sec.  
1026.34(a)(5) to require that counseling for high-cost loans that are 
not covered by either RESPA or section 1026.40 must occur after the 
consumer receives the HOEPA disclosure required under Sec.  1026.32(c). 
The interim final rule clarifies that RESPA or open-end disclosures are 
not required for these transactions.
    The Bureau notes that the HOEPA disclosures are not required to be 
provided until three business days before consummation of the loan, 
which may cause some difficulties in obtaining the counseling and in 
ensuring that consummation is not unnecessarily or unduly delayed. 
Therefore, new comment 34(a)(5)(ii)-2 states that creditors are 
encouraged but not required to provide the disclosures in Sec.  
1026.32(c) earlier than three business days before consummation in 
order to facilitate the counseling and timely consummation of covered 
transactions. In addition, conforming changes have been made to comment 
34(a)(5)(ii)-1, renumbered comment 34(a)(5)(ii)-3 and comment 
34(a)(5)(iv)-1.
    The Bureau seeks comment on this provision of the interim final 
rule and whether it ensures that consumers can both receive meaningful 
counseling based on disclosures of their loan terms and proceed with 
consummation in a timely manner. The Bureau also solicits comment on 
any burdens the interim final rule imposes on industry and how such 
burdens could be mitigated, keeping in mind the consumer benefits of 
timely and meaningful counseling.
    The Bureau is also making a small technical correction to comment 
34(a)(5)(v)-1.
Section 1026.41 Periodic Statements for Residential Mortgage Loans
41(e) Exemptions
41(e)(5) Consumers in bankruptcy
    Dodd-Frank Act section 1420 established TILA section 128(f) 
requiring periodic statements for mortgage loans. On January 17, 2013, 
the Bureau issued the 2013 TILA Servicing Final Rule implementing the 
periodic statement requirements and exemptions in Sec.  1026.41. The 
periodic statements required in Sec.  1026.41 are intended to provide 
consumers with useful information about the amounts they have paid as 
well as the amounts they owe and other information. In this interim 
final rule, the Bureau is adding new Sec.  1026.41(e)(5), exempting a 
servicer \30\ from the periodic statement requirements in Sec.  1026.41 
for a mortgage loan while the consumer is a debtor in bankruptcy.
---------------------------------------------------------------------------

    \30\ ``Servicer'' is defined for purposes of Sec.  1026.41 as 
including the creditor, assignee or servicer. To increase 
readability, this interim final rule also uses the term servicer in 
the preamble to describe those same entities covered by Sec.  
1026.41.
---------------------------------------------------------------------------

    On August 10, 2012, the Bureau proposed implementing the periodic 
statement requirements and exemptions in Sec.  1026.41. The proposed 
rule and preamble did not specifically address any relationship between 
the periodic statement requirements and consumers in bankruptcy. The 
Bureau received several comments on the proposed rule that presented 
opposing views about the issue. Some consumer advocates felt it was 
essential that statements be provided to consumers in bankruptcy to 
ensure they are kept informed on the status of their loans and have a 
record of the account, while industry commenters insisted that 
providing statements for loans in bankruptcy might cause confusion or 
violate court orders or the FDCPA.\31\ One commenter added that if 
statements must be provided to consumers in bankruptcy, the statements 
should be allowed to contain any information, disclosures or messaging 
required under bankruptcy rules or court orders.
---------------------------------------------------------------------------

    \31\ The Bureau has addressed the concern about the relationship 
between the periodic statement requirements and the FDCPA in CFPB 
Bulletin 2013-12, available at https://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf.
---------------------------------------------------------------------------

    In the preamble to the 2013 TILA Servicing Final Rule, the Bureau 
acknowledged that the Bankruptcy Code might prevent attempts to collect 
a debt from a consumer in bankruptcy, but stated that it did not 
believe the Bankruptcy Code would prevent a servicer from sending a 
consumer a statement on the status of the mortgage loan. The Bureau 
further specified that the final rule allows servicers to make changes 
to the periodic statement they believe are necessary when a consumer is 
in bankruptcy. Specifically, servicers may include a message about the 
bankruptcy and alternatively present the amount due to reflect payment 
obligations determined by the individual bankruptcy proceeding.
    After publication of the final rule, industry stakeholders 
expressed more detailed concerns to the Bureau about providing periodic 
statements to consumers under bankruptcy protection. The Bureau 
received comments on this issue in response to its proposed rules 
published on May 2, 2013, and July 2, 2013, even though those proposed 
rules did not address periodic statements provided to consumers in 
bankruptcy. One commenter expressed support for the Bureau's suggested 
message language as a way to satisfy the requirements of Sec.  1026.41 
and bankruptcy law. Most of the commenters, however, expressed 
continued concerns about potential conflicts with bankruptcy law and 
indicated that the periodic statement would need to be redesigned for 
consumers in bankruptcy.
    In addition, the Bureau has received numerous specific guidance 
questions and requests for clarification about how to reconcile the 
periodic statement requirements in the final rule with various 
bankruptcy law requirements. Industry stakeholders have expressed 
concerns that bankruptcy courts, under certain circumstances, may find 
servicers in violation of an automatic stay \32\ or discharge 
injunction \33\ if servicers provide a periodic statement, whether or 
not it includes a disclaimer.\34\ They have asked for guidance on 
whether and how servicers would be able to permit consumers to request 
that they receive no more statements. Bankruptcy trustees raised 
similar concerns that sending a periodic statement designed to 
communicate information that does not recognize the unique character of 
the Chapter 13

[[Page 63001]]

treatment of mortgages in default may arguably violate the automatic 
stay.
---------------------------------------------------------------------------

    \32\ See 11 U.S.C. 362(a)(6) (prohibiting ``any act to collect, 
assess, or recover a claim against the debtor that arose before the 
commencement of the case under this title'').
    \33\ See 11 U.S.C. 524(a)(2)-(3) (discharge ``operates as an 
injunction against the commencement or continuation of an action, 
the employment of process, or an act, to collect . . . .''); but see 
11 U.S.C. 524(j) (exception from 11 U.S.C. 524(a)(2) injunction for 
``an act by a creditor that is the holder of a secured claim, if--
(1) such creditor retains a security interest in real property that 
is the principal residence of the debtor; (2) such act is in the 
ordinary course of business between the creditor and the debtor; and 
(3) such act is limited to seeking or obtaining periodic payments 
associated with a valid security interest in lieu of pursuit of in 
rem relief to enforce the lien.'').
    \34\ See, e.g., In re Brown, 481 B.R. 351, 361 (Bankr. W.D. Pa. 
2012) (Statements without a bankruptcy disclaimer sent after a 
Chapter 7 discharge of the mortgage debt that ``provide the amount 
of the payment and when it is due, a late charge if the payment is 
not received by a certain date, and the past due amount'' were found 
to ``seek payment from the Debtor and violate the discharge 
injunction.''); In re Joens, No. 03-02077, 2003 WL 22839822 at *2 
(Bankr. N.D. Iowa Nov. 21, 2003) (Statements including a bankruptcy 
disclaimer sent to debtors in a Chapter 7 case who stated their 
intent to surrender the home violated the automatic stay. ``Only if 
a Chapter 7 debtor's statement of intention indicates the intent to 
continue to make payments and retain property may a creditor 
continue to send monthly statements postpetition.''); In re Draper, 
237 B.R. 502, 506 (Bankr. M.D. Fla. 1999) (Statements including a 
bankruptcy disclaimer sent to a debtor in a Chapter 13 case violated 
the automatic stay because ``[t]he only credible reason to send such 
invoices on a monthly basis is to try to collect payments from 
debtors protected by the automatic stay.'').
---------------------------------------------------------------------------

    Industry stakeholders have also asked how to comply with several 
disclosure requirements in the periodic statement under specific 
circumstances that can arise depending on the type of bankruptcy 
proceeding. For example, the Bureau received questions from industry 
and bankruptcy trustees about possible consumer confusion depending on 
what ``amount due'' and ``payment due date'' servicers would disclose 
in a Chapter 13 case that has different pre-petition arrearage cure 
payments and post-petition monthly payments, which may be due on 
different dates. Servicers also expressed concern about how to fulfill 
the servicing rules' requirements in a way that did not confuse 
consumers with regard to their status in bankruptcy and the fact that 
servicers were not attempting to collect on accounts. Bankruptcy 
trustees also raised concerns about the likelihood of servicers 
providing information that will be confusing to borrowers/debtors, 
debtor attorneys, and even courts and trustees. In addition, the Bureau 
received requests to delay the effective date of the periodic statement 
requirement with respect to consumers in bankruptcy and to exclude 
those consumers from the periodic statement requirements.
    Based on the detailed questions received, the Bureau believes that 
the potential interactions between the Sec.  1026.41 periodic statement 
requirements and bankruptcy law requirements can be highly varied and 
complex. The Bankruptcy Code itself provides a robust set of consumer 
protections for debtors, including oversight of debt repayment plans, 
where applicable. However, whether any periodic statement provided may 
violate an automatic stay or discharge injunction are fact-specific 
inquiries and can vary depending on the Chapter of the Bankruptcy Code 
at issue, the intention of the debtor to retain the property, and the 
frequency and detailed contents of the periodic statement provided.\35\
---------------------------------------------------------------------------

    \35\ Compare, e.g., In re Zotow, 432 B.R. 252, 259-60 (B.A.P. 
9th Cir. 2010) (Notice to debtors showing an increase to 
postpetition mortgage payments to reflect prepetition escrow arrears 
``was informational in nature and thus not in violation of the stay 
. . . First, [it] was not in the nature of an invoice . . . Second, 
[the creditor] did not send the Notice with a payment coupon or 
envelope . . . Third and last, [the creditor] sent a single Notice . 
. . prior to confirmation of Debtors' Chapter 13 plan.''); and 
Pearson v Bank of America, No. 3:12-cv-00013, 2012 WL 2804826, at *6 
(W.D. Va. July 10, 2012) (Statements with bankruptcy disclaimers did 
not violate the Chapter 7 discharge injunction even though the 
statements also provided ``principal balances, estimated payments, 
payment instructions, information on how [the creditor] will post 
any payments made, and other remarks that could surely be construed, 
by themselves, as attempts to collect an already-discharged 
debt.''); with, e.g., In re Cousins, 404 B.R. 281, 284, 288 (S.D. 
Ohio 2009) (Statements with the past and current balance, 
``voluntary payment coupon,'' and bankruptcy disclaimer sent to the 
debtor whose Chapter 13 plan provided for mortgage payments through 
the trustee violated the automatic stay. ``The fact is that 
statements containing conflicting information like those allegedly 
sent in this case may be confusing to a debtor. Although the 
document states that it is an account statement for informational 
purposes only, it also includes a `current balance' and a payment 
coupon.''); In re Draper, 237 B.R. 502, 506 (Bankr. M.D. Fla. 1999) 
(Statements including the amount due, a detachable payment coupon, 
return envelope, and bankruptcy disclaimer sent to a debtor in a 
Chapter 13 case whose plan provided for the cure of defaults under 
his mortgage debt violated the automatic stay because ``[t]he only 
credible reason to send such invoices on a monthly basis is to try 
to collect payments from debtors protected by the automatic 
stay.''). See also n re Connor, 366 B.R. 133, 134-38 (Bankr. D. Haw. 
2007) (Statements with the principal balance, amount due, 
instructions on how to make a payment, a perforated, detachable 
payment coupon, return envelope and bankruptcy disclaimer did not 
violate the automatic stay while the Chapter 13 plan was pending but 
did violate the automatic stay once the debtor converted to Chapter 
7 and stated his intent to surrender the property. ``In order to 
formulate a confirmable chapter 13 plan, [the debtor] needed to know 
the amount of his mortgage arrears and current payments . . . After 
[the debtor] converted his case to chapter 7 and stated his 
intention to surrender the mortgaged property, . . . [he] no longer 
needed to know the status of the mortgage payments. The only purpose 
for sending the monthly statements after that point was to induce 
[the debtor] to make payments on a prepetition debt which was 
dischargeable and has now been discharged.'').
---------------------------------------------------------------------------

    In addition, when a consumer is under bankruptcy protections, the 
benefits of periodic statements may depend on the context. The Bureau 
has indicated that servicers may take a flexible approach in complying 
with Sec.  1026.41 for consumers in bankruptcy. However, without 
providing additional guidance about how servicers can tailor their 
periodic statements to communicate effectively the status of a 
consumer's loan in light of the bankruptcy, it is not clear whether a 
servicer's tailored periodic statements would provide a meaningful 
benefit for that consumer in the form of useful information. Indeed, 
the statements could provide that consumer with information that may be 
confusing.
    The Bureau believes that further study of these issues is warranted 
but cannot be concluded quickly enough to provide further calibration 
of the requirements before January 2014. Therefore, the interim final 
rule exempts servicers from the requirements of Sec.  1026.41 for a 
mortgage loan while the consumer is a debtor in bankruptcy. However, 
the Bureau is not taking any position on whether periodic statements 
generally may violate an automatic stay or discharge injunction and 
does not discourage servicers who send tailored periodic statements or 
communications to consumers in bankruptcy from continuing such 
communications so far as bankruptcy law permits. The Bureau still 
believes that some consumers facing the complexities of bankruptcy 
could benefit from receiving information in some tailored form of a 
periodic statement that is appropriate to their circumstances.
    The interim final rule also adds new commentary to Sec.  
1026.41(e)(5). Comment 41(e)(5)-1 clarifies that the exemption begins 
once a petition has been filed commencing a case under Title 11 of the 
United States Code in which the consumer is a debtor. Comment 41(e)(5)-
2 clarifies that with respect to any portion of the mortgage debt that 
is not discharged, a servicer must resume sending periodic statements 
in compliance with Sec.  1026.41 within a reasonably prompt time after 
the next payment due date that follows the earliest of any of three 
potential outcomes in the consumer's bankruptcy case: (i) the case is 
dismissed, (ii) the case is closed, or (iii) the consumer receives a 
discharge under 11 U.S.C. 727, 1141, 1228, or 1328. However, this 
requirement to resume sending periodic statements does not require a 
servicer to communicate with a consumer in a manner that would be 
inconsistent with applicable bankruptcy law or a court order in a 
bankruptcy case. To the extent permitted by such law or court order, a 
servicer may adapt the requirements of Sec.  1026.41 in any manner 
believed necessary. The periodic statement is not required for any 
portion of the mortgage debt that is discharged under applicable 
provisions of the U.S. Bankruptcy Code. If the consumer's bankruptcy 
case is revived--for example if the court reinstates a previously 
dismissed case, reopens the case, or revokes a discharge--the servicer 
is again exempt from the requirement in Sec.  1026.41. Comment 
41(e)(5)-3 clarifies that the exemption applies when any consumer who 
is among the joint obligors with primary liability on the transaction 
is a debtor in bankruptcy.
    For the reasons discussed, the Bureau is providing this exemption 
at this time, particularly because of the complex compliance concerns 
and the impending effective date of the 2013 TILA Servicing Final Rule. 
The Bureau will continue to examine this issue and may reinstate a 
periodic statement requirement with respect to consumers in bankruptcy, 
but it will not reinstate any such requirement without notice and 
comment rulemaking and an appropriate implementation period. The

[[Page 63002]]

Bureau solicits comment on the scope of the exemption, the triggers for 
meeting the exemption and having to resume sending periodic statements, 
and how the content of the periodic statement might be tailored to meet 
the particular needs of consumers in bankruptcy. The Bureau also seeks 
comment on other factors it should take into consideration in 
determining whether to reinstate any type of periodic statement 
requirement with respect to consumers in bankruptcy.
    Legal Authority. The Bureau uses its authority under TILA sections 
105(a) and (f) and Dodd-Frank Act section 1405(b) to exempt servicers 
from the requirement in TILA section 128(f) to provide periodic 
statements for a mortgage loan while the consumer is a debtor in 
bankruptcy and to adopt related official Bureau interpretations in 
Supplement I to Part 1026. For the reasons discussed above, the Bureau 
believes this exemption is necessary and proper under TILA section 
105(a) to facilitate compliance. In addition, consistent with TILA 
section 105(f) and in light of the factors in that provision, the 
Bureau believes that imposing the periodic statement requirement for 
consumers in bankruptcy may not currently provide a meaningful benefit 
to those consumers in the form of useful information. Consistent with 
Dodd-Frank Act section 1405(b), the Bureau also believes that the 
modification of the requirements in TILA section 128(f) to provide this 
exemption is in the interest of consumers and in the public interest.
Section 1026.43 Minimum standards for transactions secured by a 
dwelling
43(e) Qualified mortgages
43(e)(4) Qualified mortgage defined--special rules
43(e)(4)(ii)(C)
    The September 2013 Final Rule Amendments to the 2013 Mortgage Rules 
inadvertently replaced the language at Sec.  1026.43(e)(4)(ii)(C) as 
revised in July with the earlier version of the language. This rule 
restores the language as revised in July.

VII. Section 1022(b)(2) of the Dodd-Frank Act

A. Overview

    The Bureau has conducted an analysis of the potential benefits, 
costs, and impacts of the interim final rule.\36\ The Bureau has 
consulted, or offered to consult with, the prudential regulators, SEC, 
HUD, FHFA, the Federal Trade Commission, and the Department of the 
Treasury, including regarding consistency with any prudential, market, 
or systemic objectives administered by such agencies.
---------------------------------------------------------------------------

    \36\ Section 1022(b)(2)(A) of the Dodd-Frank Act, 12 U.S.C. 
5521(b)(2), directs the Bureau, when prescribing a rule under the 
Federal consumer financial laws, to consider the potential benefits 
and costs of regulation to consumers and covered persons, including 
the potential reduction of access by consumers to consumer financial 
products or services; the impact on insured 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. Section 1022(b)(2)(B) of the Dodd-Frank 
Act directs the Bureau to consult with appropriate prudential 
regulators or other Federal agencies regarding consistency with 
prudential, market, or systemic objectives that those agencies 
administer.
---------------------------------------------------------------------------

    As noted above, the interim final rule makes amendments to the 2013 
RESPA Servicing Final Rule, 2013 TILA Servicing Final Rule, 2013 HOEPA 
Final Rule, and makes two technical corrections to Regulation Z and the 
commentary as revised by the May 2013 ATR Final Rule, the July 2013 
Final Rule Amendments to the 2013 Mortgage Rules, and the September 
2013 Final Rule Amendments to the 2013 Mortgage Rules. These changes 
clarify, correct, or amend provisions or commentary on (1) The scope of 
the requirement to engage in early intervention with delinquent 
borrowers under 12 CFR 1024.39, (2) the scope of the requirement to 
provide a notice to consumers with adjustable-rate mortgages when an 
interest rate adjustment causes a corresponding change in payment under 
12 CFR 1026.20, (3) compensation to be included in points and fees for 
loan originators that are not employees of the creditor, (4) the 
federally required disclosure that must be used in pre-loan counseling 
required under 12 CFR 1026.34(a)(5) for a closed-end HOEPA loan not 
subject to RESPA, and (5) the scope of the requirement to provide a 
periodic statement under 12 CFR 1026.41.\37\
---------------------------------------------------------------------------

    \37\ The interim final rule also restores the proper version of 
Sec.  1026.43(e)(4)(ii)(C), as revised in the July 2013 Final Rule 
Amendments to the 2013 Mortgage Rules, which was inadvertently 
changed in the September 2013 Final Rule Amendments to the 2013 
Mortgage Rules. No change was intended or made by the September 
amendment, as is clear from the interpretation of Sec.  
1026.43(e)(4)(ii)(C) contained in the commentary. Nevertheless, as 
compared to the baseline established by the September amendment, the 
revision made by the interim final rule may benefit consumers and 
covered persons by reducing compliance costs.
---------------------------------------------------------------------------

B. Potential Benefits and Costs to Consumers and Covered Persons

    Compared to the baseline established by the September 2013 Final 
Rule Amendments to the 2013 Mortgage Rules (for (3)) or the baseline 
established by the final rules issued in January 2013 (for (1), (2), 
(4) and (5)), the Bureau believes that the interim final rule generally 
reduces burden on covered persons. The impact on consumers is nuanced, 
as explained above and discussed further below, but there are benefits 
to consumers considering certain high-cost loans.
    The interim final rule adds a new provision Sec.  1024.39(d)(1) 
which exempts a servicer from the early intervention requirements in 
Sec.  1024.39 for a mortgage loan while the borrower is a debtor in 
bankruptcy. The Bureau is adding this exemption in light of detailed 
questions received since issuing the 2013 RESPA Servicing Final Rule 
concerning potential conflicts between this provision and bankruptcy 
law and concerning how to tailor servicing communications for borrowers 
who have invoked bankruptcy protections. This exemption will obviate 
the need for servicers to analyze their Sec.  1024.39 early 
intervention activities to account for the requirements of bankruptcy 
law and to provide Sec.  1024.39 early intervention activities 
consistent with the requirements of bankruptcy law. The new provision 
therefore reduces burden on servicers.
    The impact on borrowers of the exemption is less clear in light of 
the continued uncertainty expressed by servicers about how to comply 
with both the early intervention requirement and bankruptcy law and 
because the Bureau cannot at this time provide guidance to servicers 
about how to comply. As a result, there is significant uncertainty 
regarding the impact of the early intervention activities that would 
have been provided under the baseline rule if any on borrowers who were 
debtors in bankruptcy and therefore significant uncertainty regarding 
the impact of the exemption. For example, borrowers might not have 
received significant benefit under the baseline rule, either because 
servicers determined that early intervention contacts were prohibited 
by bankruptcy law or because the contacts confused borrowers regarding 
the status of their accounts, in which case the exemption imposes 
little if any cost on these borrowers. The Bureau will continue to 
examine this issue.
    The interim final rule also adds a new provision Sec.  
1024.39(d)(2) which exempts a servicer that is a debt collector under 
the FDCPA with respect to a borrower who has exercised his or her 
``cease communication'' right under the FDCPA from the requirements of 
Sec.  1024.39. This exemption will obviate the need for servicers to 
analyze their Sec.  1024.39 early intervention activities to account 
for this requirement of the

[[Page 63003]]

FDCPA and to provide Sec.  1024.39 early intervention activities 
consistent with this requirement of the FDCPA. The new provision 
therefore reduces burden on servicers.
    The impact on borrowers of the exemption is less clear in light of 
continued uncertainty about how servicers would have complied with both 
the early intervention requirement and the FDCPA. As a result, there is 
uncertainty regarding the impact of the early intervention activities 
if any that would have been provided under the baseline rule on 
borrowers who had exercised their ``cease communication'' right and 
therefore uncertainty regarding the impact of the exemption. For 
example, a borrower might benefit from certain types of early 
intervention notwithstanding a request that the servicer/debt collector 
stop communicating with the borrower about the debt. If such early 
intervention would have been provided under the baseline rule, then the 
exemption imposes a cost on these borrowers. Balancing protections 
provided by early intervention against the protections provided by the 
``cease communication'' right requires a complex analysis more 
appropriate in the broader context of a separate rulemaking on debt 
collection. The Bureau will continue to examine this issue.
    The interim final rule adds a new provision Sec.  
1026.20(c)(1)(ii)(C) which exempts a servicer who is a debt collector 
under the FDCPA with respect to a borrower who has an adjustable rate 
mortgage from the requirement to provide a notice when an interest rate 
adjustment causes a corresponding change in payment if the borrower has 
exercised his or her ``cease communication'' right. As explained in the 
2013 TILA Servicing Final Rule, this disclosure modified an existing 
disclosure that was provided when interest rate adjustments resulted in 
a corresponding payment change. Servicers who were debt collectors 
presumably complied with the ``cease communication'' requirement of the 
FDCPA. Under the baseline, such servicers are presumed to have incurred 
the cost of determining whether the modifications to the disclosure in 
the 2013 TILA Servicing Final Rule changed the circumstances under 
which the disclosure needed to be provided to consumers who had 
exercised their ``cease communication'' right. The exemption does, 
however, obviate the need for servicers to provide the Sec.  1026.20(c) 
disclosures. The exemption therefore reduces burden on servicers.
    The impact on consumers of the exemption is less clear given 
uncertainty about the impact of the disclosures on consumers who have 
exercised their ``cease communication'' right. Some consumers who, 
under the baseline rule, would have received the disclosure after 
having requested the cessation of communication about the debt might 
benefit from not receiving the disclosure under the exemption. Other 
consumers might be made worse off from not receiving the disclosure 
under the exemption. The Bureau will continue to examine this issue.
    The interim final rule restores comment 32(b)(1)(ii)-4.iii as it 
was established by the May 2013 ATR Final Rule in Supplement I to Part 
1026 while removing an extraneous phrase that might have been 
misinterpreted to conflict with the regulatory text. The technical 
correction in the interim final rule conforms the comment to the 
purpose intended by the May 2013 ATR Final Rule. Thus, the interim 
final rule restores and clarifies the intended comment and may benefit 
consumers and covered persons by reducing compliance costs.
    As discussed above, under the Bureau's 2013 HOEPA Final Rule, the 
pre-loan counseling requirement in Sec.  1026.34(a)(5) could be read 
either to make certain closed-end non-RESPA transactions impossible or 
to require creditors to provide either a GFE or TILA open-end 
disclosure. The interim final rule removes the uncertainty about 
compliance and specifies that the counseling requirement in Sec.  
1026.34(a)(5) is met after the consumer receives the HOEPA disclosure 
required by TILA section 129(a) and Regulation Z Sec.  1026.32(c).
    The requirement under the interim final rule reduces burden on 
covered persons by clarifying that these closed-end non-RESPA 
transactions are allowed and that providers satisfy the counseling 
requirement by providing counseling prior to consummation and 
subsequent to furnishing the Sec.  1026.32(c) disclosure. The Bureau 
recognizes that there may be as few as three days between the time 
creditors furnish the Sec.  1026.32(c) disclosure and consummation of 
the mortgage loan. As a result, some providers may choose to offer the 
Sec.  1026.32(c) disclosure earlier to make it more feasible to meet 
the counseling requirement. The Bureau believes that any costs 
associated with earlier provision of the Sec.  1026.32(c) disclosure 
are likely less than the cost of providing a new GFE or TILA open-end 
disclosure. Consumers benefit from the requirements in the interim 
final rule compared to the baseline in which the loans within the scope 
of the requirement might not be offered or in which consumers would be 
provided a less suitable disclosure as the basis for counseling.
    The interim final rule adds a new provision Sec.  1026.41(e)(5) 
which exempts a servicer from the periodic statement requirements in 
Sec.  1026.41 for a mortgage loan while the consumer is a debtor in 
bankruptcy. The Bureau has made this decision in light of detailed 
questions received since issuing the 2013 TILA Servicing Final Rule 
concerning potential conflicts between this provision and bankruptcy 
law and concerning how to tailor servicing communications for borrowers 
who have invoked bankruptcy protections. This exemption will obviate 
the need for servicers to analyze and potentially adjust the content of 
the Sec.  1026.41 periodic statements to account for the requirements 
of bankruptcy law and to provide the Sec.  1026.41 periodic statements 
consistent with the requirements of bankruptcy law. The exemption 
therefore reduces burden on servicers.
    The impact on consumers of the exemption is less clear in light of 
the continued uncertainty expressed by servicers about how to comply 
with both the periodic statement requirement and bankruptcy law and 
because the Bureau cannot at this time provide guidance to servicers 
about how to comply. As a result, there is significant uncertainty 
regarding the impact of the periodic statements that would have been 
provided under the baseline rule to consumers who were debtors in 
bankruptcy and therefore significant uncertainty regarding the impact 
of the exemption. For example, borrowers might not have received 
significant benefit under the baseline rule, either because servicers 
determined that periodic statements were prohibited by bankruptcy law 
or because the statements confused borrowers regarding the status of 
their accounts, in which case the exemption would impose little if any 
cost on these consumers. The Bureau will continue to examine this 
issue.
    The interim final rule is generally not expected to have a 
differential 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. The main exception is for those depository institutions 
and credit unions which by virtue of their size are more likely to 
already be exempt from the periodic statement and early intervention

[[Page 63004]]

requirements.\38\ These institutions derive no additional benefit from 
the exemptions for consumers in bankruptcy or (for early intervention 
requirements) from the FDCPA. The interim final rule may have some 
differential impacts on consumers in rural areas. To the extent that 
liens on a dwelling that are not federally related mortgage loans are 
more prevalent in these areas, the provisions on pre-loan counseling 
may have slightly greater impacts. As discussed above, costs for 
creditors in these areas should be reduced and consumers should benefit 
from increased access to credit without any loss in consumer 
protections.
---------------------------------------------------------------------------

    \38\ A creditor, assignee, or servicer is exempt from the 
periodic statement requirement for mortgage loans serviced by a 
small servicer. A small servicer is a servicer that either services 
5,000 or fewer mortgage loans, for all of which the servicer (or an 
affiliate) is the creditor or assignee; or is a Housing Finance 
Agency, as defined in 24 CFR 266.5. See the 2013 TILA Servicing 
Final Rule, section 1026.41(e).
---------------------------------------------------------------------------

    Given the nature and limited scope of the changes in the interim 
final rule, the Bureau does not believe that the final rule will reduce 
consumers' access to consumer financial products and services. Rather, 
the reduced burden in certain changes in this rule should generally 
help to improve access to credit.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, 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.\39\ 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 will not have a significant economic impact on a 
substantial number of small entities. The CFPB is subject to certain 
additional procedures under the RFA involving the convening of a panel 
to consult with small business representatives regarding any rule for 
which an IRFA is required.
---------------------------------------------------------------------------

    \39\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    The RFA requirements do not apply in cases in which an agency finds 
good cause to issue an interim final rule without a notice of proposed 
rulemaking.\40\ As discussed above in Section IV, the CFPB has made 
such a finding. Moreover, the CFPB believes that any delay in the 
issuance of the interim final rule would be contrary to the interests 
of small businesses insofar as the provisions should generally reduce 
the costs of compliance for covered persons.
---------------------------------------------------------------------------

    \40\ 5 U.S.C. 553(b)(B); 5 U.S.C. 605(b); 62 FR 23,538 (April 
30, 1997); 66 FR 37,752 (July 19, 2001); 64 FR 3865 (Jan. 26, 1999).
---------------------------------------------------------------------------

    Further, this rulemaking is part of a series of rules that have 
revised and expanded the regulatory requirements for entities that 
originate or service mortgage loans. Because this interim final rule 
generally makes clarifying changes to conform these rules to their 
intended purposes, the RFA analyses associated with those rules 
generally take into account the impact of the changes made by this 
interim final rule. Because these rules qualify as ``a series of 
closely related rules,'' for purposes of the RFA, the Bureau relies on 
those analyses and determines that it has met or exceeded the IRFA and 
FRFA requirements.
    In the alternative, the Bureau also concludes that the interim 
final rule will not have a significant impact on a substantial number 
of small entities. As noted, this interim final rule generally 
clarifies the existing rule and to the extent any changes are 
substantive, these changes will not have a material impact on small 
entities. The provision related to servicing does not apply to many 
small entities under the small servicer exemption (and to the extent 
that they do, small entities will benefit), while the provisions 
related to loan originator compensation and counseling lower the 
regulatory burden and possible compliance costs for affected entities. 
Therefore, the undersigned certifies that the rule will not have a 
significant impact on a substantial number of small entities.

IX. Paperwork Reduction Act

    This interim final rule amends 12 CFR part 1024 (Regulation X), 
which implements the Real Estate Settlement Procedures Act (RESPA) and 
12 CFR part 1026 (Regulation Z), which implements the Truth in Lending 
Act (TILA). Regulations X and Z currently contains collections of 
information approved by OMB. The Bureau's OMB control number for 
Regulation X is 3170-0016 and for Regulation Z is 3170-0015. Regarding 
new Sec.  1026.41(e)(5) and new Sec.  1024.39(d)(1), which respectively 
exempt servicers from the periodic statement requirements in Sec.  
1026.41 and early intervention requirements in Sec.  1024.39 for 
homeowners who are debtors in bankruptcy, the Bureau cannot separately 
assess the burden associated with these consumers from other 
homeowners. Similarly, new Sec.  1024.39(d)(2) and new Sec.  
1026.20(c)(1)(ii)(C), which respectively exempt servicers from the 
early intervention requirements in Sec.  1024.39 and the notice 
requirements in Sec.  1026.20(c) for mortgagors who have exercised the 
``cease communication'' right under FDCPA, the Bureau cannot separately 
assess the burden associated with these consumers from other 
homeowners. Thus, the Bureau has determined that this interim final 
rule would not materially alter these collections of information nor 
impose any new recordkeeping, reporting, or disclosure requirements on 
the public that would constitute collections of information requiring 
approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

List of Subjects

12 CFR Part 1024

    Condominiums, Consumer protection, Housing, Mortgage servicing, 
Mortgagees, Mortgages, Reporting and recordkeeping requirements.

12 CFR Part 1026

    Advertising, Consumer protection, Mortgages, Reporting and 
recordkeeping requirements, Truth in lending.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau further 
amends Regulation X, 12 CFR part 1024 and Regulation Z, 12 CFR part 
1026, as amended by the final rules published on January 30, 2013, at 
78 FR 6407, on January 31, 2013, at 78 FR 6855, on February 14, 2013, 
at 78 FR 10901 and 78 FR 10695, on June 12, 2013, at 78 FR 35429, on 
July 24, 2013, at 78 FR 44685, on July 30, 2013, at 78 FR 45842, and on 
October 1, 2013, at 78 FR 60382, as set forth below:

PART 1024--REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X)

0
1. The authority citation for part 1024 continues to read as follows:

    Authority:  12 U.S.C. 2603-2605, 2607, 2609, 2617, 5512, 5532, 
5581.

Subpart C--Mortgage Servicing

0
2. Section 1024.39, as added at 78 FR 10876 (Feb. 14, 2013), is amended 
by adding paragraph (d) to read as follows:


Sec.  1024.39  Early intervention requirements for certain borrowers.

* * * * *
    (d) Exemptions--(1) Borrowers in bankruptcy. A servicer is exempt 
from

[[Page 63005]]

the requirements of this section for a mortgage loan while the borrower 
is a debtor in bankruptcy under Title 11 of the United States Code.
    (2) Fair Debt Collections Practices Act. A servicer subject to the 
Fair Debt Collections Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) 
with respect to a borrower is exempt from the requirements of this 
section with regard to a mortgage loan for which the borrower has sent 
a notification pursuant to FDCPA section 805(c) (15 U.S.C. 1692c(c)).

0
3. In Supplement I to Part 1024, as added February 14, 2013, at 78 FR 
10887:
0
a. Under Section 1024.39--Early intervention requirements for certain 
borrowers:
0
i. The heading Paragraph 39(c) and paragraph 1 is removed.
0
ii. The heading 39(d)(1) Borrowers in bankruptcy and paragraphs 1, 2, 
and 3 are added.

Supplement I to Part 1024--Official Bureau Interpretations

* * * * *

Subpart C--Mortgage Servicing

* * * * *

Section 1024.39--Early intervention requirements for certain borrowers

* * * * *

39(d)(1) Borrowers in bankruptcy.

    1. Commencing a case. The requirements of Sec.  1024.39 do not 
apply once a petition is filed under Title 11 of the United States 
Code, commencing a case in which the borrower is a debtor.
    2. Obligation to resume early intervention requirements. i. With 
respect to any portion of the mortgage debt that is not discharged, 
a servicer must resume compliance with Sec.  1024.39 after the first 
delinquency that follows the earliest of any of three potential 
outcomes in the borrower's bankruptcy case: the case is dismissed, 
the case is closed, or the borrower receives a discharge under 11 
U.S.C. 727, 1141, 1228, or 1328. However, this requirement to resume 
compliance with Sec.  1024.39 does not require a servicer to 
communicate with a borrower in a manner that would be inconsistent 
with applicable bankruptcy law or a court order in a bankruptcy 
case. To the extent permitted by such law or court order, a servicer 
may adapt the requirements of Sec.  1024.39 in any manner believed 
necessary.
    ii. Compliance with Sec.  1024.39 is not required for any 
portion of the mortgage debt that is discharged under applicable 
provisions of the U.S. Bankruptcy Code. If the borrower's bankruptcy 
case is revived--for example if the court reinstates a previously 
dismissed case, reopens the case, or revokes a discharge--the 
servicer is again exempt from the requirement in Sec.  1024.39.
    3. Joint obligors. When two or more borrowers are joint obligors 
with primary liability on a mortgage loan subject to Sec.  1024.39, 
the exemption in Sec.  1024.39(d)(1) applies if any of the borrowers 
is in bankruptcy. For example, if a husband and wife jointly own a 
home, and the husband files for bankruptcy, the servicer is exempt 
from complying with Sec.  1024.39 as to both the husband and the 
wife.
* * * * *

0
4. In FR Doc. 2013-22752 appearing on page 60382 in the Federal 
Register on October 1, 2013, the following correction is made:

Supplement I to Part 1024 [Corrected]

0
On page 60438, in the third column, amendatory instruction 11.g is 
corrected to read as follows:
0
g. Under Section 1024.41--Loss Mitigation Procedures:
0
i. Under Paragraph 41(b)(1), paragraph 4 is revised.
0
ii. Paragraphs 41(b)(2), 41(b)(3), 41(c)(2)(iii), and 41(c)(2)(iv) are 
added.
0
iii. The heading for paragraph 41(c) is revised.
0
iv. The heading Paragraph 41(d)(1) is removed.
0
v. Under Paragraph 41(d), paragraph 3 is redesignated as paragraph 
41(c)(1), paragraph 4; and paragraph 4 is redesignated as paragraph 3.
0
vi. Under paragraph 41(d), paragraph 4 is added.
0
vii. Under paragraph 41(f), heading 41(f)(1) is removed, and paragraph 
1 is redesignated as 41(f) paragraph 1 and republished.

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
5. The authority citation for part 1026 continues to read as follows:

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 5511, 
5512, 5532, 5581; 15 U.S.C. 1601 et seq.

Subpart C--Closed-End Credit

0
6. Section 1026.20, as amended by 78 FR 11004 (Feb. 14, 2013), is 
amended by:
0
a. Removing ``or'' from the end of paragraph (c)(1)(ii)(A).
0
b. Removing the period from the end of paragraph (c)(1)(ii)(B) and 
adding in its place ``; or''.
0
c. Adding paragraph (c)(1)(ii)(C) to read as follows:


Sec.  1026.20  Disclosure requirements regarding post-consummation 
events.

* * * * *
    (c) * * *
    (1) * * *
    (ii) * * *
    (C) The creditor, assignee or servicer of an adjustable-rate 
mortgage when the servicer on the loan is subject to the Fair Debt 
Collections Practices Act (FDCPA) (15 U.S.C. 1692 et seq.) with regard 
to the loan and the consumer has sent a notification pursuant to FDCPA 
section 805(c) (15 U.S.C. 1692c(c)).
* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
7. Section 1026.34, as amended at 78 FR 6964 (Jan. 31, 2013), is 
amended by revising paragraphs (a)(5)(ii), (a)(5)(iv)(D), and 
(a)(5)(iv)(E), and adding paragraph (a)(5)(iv)(F), to read as follows:


Sec.  1026.34  Prohibited acts or practices in connection with high-
cost mortgages.

    (a) * * *
    (5) * * *
    (ii) Timing of counseling. The counseling required under this 
paragraph (a)(5) must occur after:
    (A) The consumer receives either the disclosure required by section 
5(c) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 
2604(c)) or the disclosures required by Sec.  1026.40; or
    (B) The consumer receives the disclosures required by Sec.  
1026.32(c), for transactions in which neither of the disclosures listed 
in paragraph (a)(5)(ii)(A) of this section are provided.
* * * * *
    (iv) * * *
    (D) A statement that the consumer(s) received counseling on the 
advisability of the high-cost mortgage based on the terms provided in 
either the disclosure required by section 5(c) of the Real Estate 
Settlement Procedures Act of 1974 (12 U.S.C. 2604(c)) or the 
disclosures required by Sec.  1026.40.
    (E) For transactions for which neither of the disclosures listed in 
paragraph (a)(5)(ii)(A) of this section are provided, a statement that 
the consumer(s) received counseling on the advisability of the high-
cost mortgage based on the terms provided in the disclosures required 
by Sec.  1026.32(c); and
    (F) A statement that the counselor has verified that the 
consumer(s) received the disclosures required by either Sec.  
1026.32(c) or the Real Estate Settlement Procedures Act of 1974 (12 
U.S.C. 2601 et seq.) with respect to the transaction.
* * * * *

0
8. Section 1026.41, as added at 78 FR 11007 (Feb. 14, 2013), is amended 
by adding paragraph (e)(5) to read as follows:


Sec.  1026.41  Periodic statements for residential mortgage loans.

* * * * *

[[Page 63006]]

    (e) * * *
    (5) Consumers in bankruptcy. A servicer is exempt from the 
requirements of this section for a mortgage loan while the consumer is 
a debtor in bankruptcy under Title 11 of the United States Code.

0
9. Section 1026.43(e)(4)(ii)(C), as added at 78 FR 6584 (Jan. 30, 2013) 
and amended at 78 FR 44718 (July 24, 2013) and 78 FR 60442 (Oct. 1, 
2013), is revised to read as follows:


Sec.  1026.43  Minimum standards for transactions secured by a 
dwelling.

* * * * *
    (e) * * *
    (4) * * *
    (ii) * * *
    (C) A loan that is eligible to be guaranteed, except with regard to 
matters wholly unrelated to ability to repay, by the U.S. Department of 
Veterans Affairs;
* * * * *

0
10. In Supplement I to Part 1026, as amended at 78 FR 6589, Jan. 30, 
2013; 78 FR 6967, Jan. 31, 2013; 78 FR 11019, Feb. 14, 2013; and 78 FR 
35504, June 12, 2013:
0
A. Under Section 1026.32--Requirements for High-Cost Mortgages:
0
i. Under 32(b) Definitions:
0
a. Under Paragraph 32(b)(1)(ii), paragraph 4.iii is revised.
0
B. Under Section 1026.34--Prohibited Acts or Practices for High-Cost 
Mortgages:
0
i. Under 34(a)(5) Pre-loan counseling:
0
a. Under Paragraph 34(a)(5)(ii), paragraph 1 is revised, paragraph 2 is 
redesignated as paragraph 3 and revised, and new paragraph 2 is added.
0
b. Under paragraph 34(a)(5)(iv), paragraph 1 is revised.
0
c. Under paragraph 34(a)(5)(v), paragraph 1 is revised.
0
C. Under Section 1026.41--Periodic Statements for Residential Mortgage 
Loans:
0
i. The heading 41(e)(5) Consumers in bankruptcy and paragraphs 1, 2, 
and 3 are added.
    The additions and revisions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.32--Requirements for High-Cost Mortgages

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    32(b) Definitions
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    Paragraph 32(b)(1)(ii).
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    4. Loan originator compensation--calculating loan originator 
compensation in connection with other charges or payments included 
in the finance charge or made to loan originators.
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    iii. Creditor's origination fees--loan originator not employed 
by creditor. Compensation paid by a creditor to a loan originator 
who is not employed by the creditor is included in the calculation 
of points and fees under Sec.  1026.32(b)(1)(ii). Such compensation 
is included in points and fees in addition to any origination fees 
or charges paid by the consumer to the creditor that are included in 
points and fees under Sec.  1026.32(b)(1)(i). For example, assume 
that a consumer pays to the creditor a $3,000 origination fee and 
that the creditor pays a mortgage broker $1,500 in compensation 
attributed to the transaction. Assume further that the consumer pays 
no other charges to the creditor that are included in points and 
fees under Sec.  1026.32(b)(1)(i) and that the mortgage broker 
receives no other compensation that is included in points and fees 
under Sec.  1026.32(b)(1)(ii). For purposes of calculating points 
and fees, the $3,000 origination fee is included in points and fees 
under Sec.  1026.32(b)(1)(i) and the $1,500 in loan originator 
compensation is included in points and fees under Sec.  
1026.32(b)(1)(ii), equaling $4,500 in total points and fees, 
provided that no other points and fees are paid or compensation 
received.
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Section 1026.34--Prohibited Acts or Practices for High-Cost 
Mortgages

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    34(a)(5) Pre-loan counseling.
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    34(a)(5)(ii) Timing of counseling.
    1. Disclosures for open-end credit plans. Section 
1026.34(a)(5)(ii) permits receipt of either the disclosure required 
by section 5(c) of RESPA or the disclosures required under Sec.  
1026.40 to allow counseling to occur. Pursuant to 12 CFR 1024.7(h), 
the disclosures required by Sec.  1026.40 can be provided for open-
end plans in lieu of the usual disclosure required by section 5(c) 
of RESPA.
    2. Transactions not subject to RESPA or Sec.  1026.40. For 
closed-end mortgage transactions that are not subject to RESPA, the 
counseling certification must include a statement that the 
consumer(s) received counseling on the advisability of the high-cost 
mortgage based on the terms provided in the disclosures required by 
Sec.  1026.32(c). (Reference to counseling on advisability using the 
disclosures required by Sec.  1026.32(c) is not required for 
transactions subject to RESPA or Sec.  1026.40.) The disclosures 
required by Sec.  1026.32(c) must be furnished to the consumer at 
least three business days prior to consummation of the mortgage. The 
creditor may wish to furnish the disclosures sooner, to provide 
sufficient time for counseling and certification.
    3. Initial disclosure. Counseling may occur after receipt of 
either an initial disclosure required by section 5(c) of RESPA, the 
disclosures required by Sec.  1026.40, or the disclosures required 
by Sec.  1026.32(c), regardless of whether revised versions of such 
disclosures are subsequently provided to the consumer.
    34(a)(5)(iv) Content of certification.
    1. Statement of counseling on advisability. A statement that a 
consumer has received counseling on the advisability of the high-
cost mortgage means that the consumer has received counseling about 
key terms of the mortgage transaction, as set out in either the 
disclosure required by section 5(c) of RESPA or the disclosures 
provided to the consumer pursuant to Sec.  1026.40, or, for closed-
end transactions not subject to RESPA, the disclosures required by 
Sec.  1026.32(c); the consumer's budget, including the consumer's 
income, assets, financial obligations, and expenses; and the 
affordability of the mortgage transaction for the consumer. Examples 
of such terms of the mortgage transaction include the initial 
interest rate, the initial monthly payment, whether the payment may 
increase, how the minimum periodic payment will be determined, and 
fees imposed by the creditor, as may be reflected in the applicable 
disclosure. A statement that a consumer has received counseling on 
the advisability of the high-cost mortgage does not require the 
counselor to have made a judgment or determination as to the 
appropriateness of the mortgage transaction for the consumer.
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    34(a)(5)(v) Counseling fees.
    1. Financing. Section 1026.34(a)(5)(v) does not prohibit a 
creditor from financing the counseling fee as part of the 
transaction for a high-cost mortgage, if the fee is a bona fide 
third-party charge as provided by Sec.  1026.32(b)(5)(i).
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Section 1026.41--Periodic Statements for Residential Mortgage Loans

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    41(e)(5) Consumers in bankruptcy.
    1. Commencing a case. The requirements of Sec.  1026.41 do not 
apply once a petition is filed under Title 11 of the United States 
Code, commencing a case in which the consumer is a debtor.
    2. Obligation to resume sending periodic statements. i. With 
respect to any portion of the mortgage debt that is not discharged, 
a servicer must resume sending periodic statements in compliance 
with Sec.  1026.41 within a reasonably prompt time after the next 
payment due date that follows the earliest of any of three potential 
outcomes in the consumer's bankruptcy case: the case is dismissed, 
the case is closed, or the consumer receives a discharge under 11 
U.S.C. 727, 1141, 1228, or 1328. However, this requirement to resume 
sending periodic statements does not require a servicer to 
communicate with a consumer in a manner that would be inconsistent 
with applicable bankruptcy law or a court order in a bankruptcy 
case. To the extent permitted by such law or court order, a servicer 
may adapt the requirements of Sec.  1026.41 in any manner believed 
necessary.
    ii. The periodic statement is not required for any portion of 
the mortgage debt that is

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discharged under applicable provisions of the U.S. Bankruptcy Code. 
If the consumer's bankruptcy case is revived--for example if the 
court reinstates a previously dismissed case, reopens the case, or 
revokes a discharge--the servicer is again exempt from the 
requirement in Sec.  1026.41.
    3. Joint obligors. When two or more consumers are joint obligors 
with primary liability on a closed-end consumer credit transaction 
secured by a dwelling subject to Sec.  1026.41, the exemption in 
Sec.  1026.41(e)(5) applies if any of the consumers is in 
bankruptcy. For example, if a husband and wife jointly own a home, 
and the husband files for bankruptcy, the servicer is exempt from 
providing periodic statements to both the husband and the wife.
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    Dated: October 15, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-24521 Filed 10-22-13; 8:45 am]
BILLING CODE 4810-AM-P