Compliance Bulletin and Policy Guidance-Mortgage Servicing Transfers, 63295-63299 [2014-24194]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 79, Number 205 (Thursday, October 23, 2014)]
[Rules and Regulations]
[Pages 63295-63299]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-24194]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1024


Compliance Bulletin and Policy Guidance--Mortgage Servicing 
Transfers

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Compliance Bulletin and Policy Guidance.

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SUMMARY: The Bureau of Consumer Financial Protection (CFPB) is issuing 
a compliance bulletin and policy guidance entitled ``Compliance 
Bulletin and Policy Guidance--Mortgage Servicing Transfers'' in light 
of potential risks to consumers that may arise in connection with 
transfers of residential mortgage servicing rights.

DATES: This bulletin is effective October 23, 2014 and applicable 
beginning August 19, 2014.

FOR FURTHER INFORMATION CONTACT: Allison Brown, Program Manager (202) 
435-7107; Yevgeny Shrago, Attorney, (202) 435-7098; or Whitney Patross, 
Attorney (202) 435-7057, Office of Supervision Policy.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The CFPB is issuing this compliance bulletin and policy guidance to 
residential mortgage servicers and subservicers (collectively, 
servicers), in light of potential risks to consumers that may arise in 
connection with transfers of residential mortgage servicing rights. The 
CFPB's concern in this area remains heightened due to the continuing 
high volume of servicing transfers.
    Servicers engaged in significant servicing transfers should expect 
that the CFPB will, in appropriate cases, require them to prepare and 
submit informational plans describing how they will be managing the 
related risks to consumers.
    The CFPB is continuing to monitor the mortgage servicing market and 
may engage in further rulemaking in this area.

II. Description of Compliance Bulletin and Policy Guidance

    This document replaces CFPB Bulletin 2013-01 (Mortgage Servicing 
Transfers), released in February 2013, which also addressed servicing 
transfers. This document advises mortgage servicers that the CFPB will 
be carefully reviewing servicers' compliance with Federal consumer 
financial laws applicable to servicing transfers. The revised 
Regulation X, implementing the Real Estate Settlement Procedures Act 
(RESPA) (new servicing rule), took effect on January 10, 2014. It 
requires servicers to, among other things, maintain policies and 
procedures that are reasonably designed to achieve the objectives of 
facilitating the transfer of information during mortgage servicing 
transfers and of properly evaluating loss mitigation applications.\1\ 
Section A of this document, ``General Transfer-Related Policies and 
Procedures'', provides examples of general transfer-related policies 
and procedures that CFPB examiners may consider in evaluating whether 
servicers have satisfied these requirements successfully. The examples 
listed in this section are not exhaustive and in future examinations 
CFPB examiners will consider a servicer's transfer-related policies and 
procedures as a whole in determining whether they are reasonably 
designed to achieve these objectives.
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    \1\ 12 CFR 1024.38(a), (b)(4).
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    Section B, ``Applicability of the New Servicing Rules to 
Transfers'', answers certain frequently asked questions about how the 
revised Regulation X applies in the area of servicing transfers. This 
section also describes certain focus areas for CFPB examiners and 
explains how entities can minimize compliance risk. Section C, 
``Protections under Federal Consumer Financial Law'', describes other 
Federal consumer financial laws applicable to servicing transfers and 
explains potential consequences if servicers are not fulfilling their 
obligations under the law. Section D, ``Plans for Handling Servicing 
Transfers'', informs servicers engaged in significant servicing 
transfers that the CFPB will, in appropriate cases, require them to 
prepare and submit informational plans describing how they will be 
managing the related risks to consumers.

III. Compliance Bulletin and Policy Guidance

    A mortgage servicer, among other things, collects and processes 
loan payments on behalf of the owner of the mortgage note. Servicing 
transfers are common and may occur in several ways. The mortgage owner 
may sell the rights to service the loan, called the Mortgage Servicing 
Rights (MSR), separately from the note ownership. The owner of the loan 
or MSR may, rather than servicing the loan itself, hire a vendor--
typically called a subservicer--to take on the servicing duties. MSR 
owners frequently sell MSR outright as an asset. Servicing transfers 
may also occur through whole loan servicing transfers or whole loan 
portfolio transfers, rather than through sales of MSR. In this 
document, we are using the term ``transfer'' broadly to cover transfers 
of servicing rights as well as transfers of servicing responsibilities 
through subservicing or whole loan servicing arrangements.
    The CFPB advises mortgage servicers that its examiners will be 
carefully reviewing servicers' compliance with Federal consumer 
financial laws applicable to servicing transfers. These may include, 
among others, the RESPA and its implementing regulation, Regulation X, 
the Truth in Lending Act (TILA) and its implementing regulation, 
Regulation Z, the Fair Credit Reporting Act (FCRA) and its implementing 
regulation, Regulation V, the Fair Debt Collection Practices Act 
(FDCPA), and the Dodd-Frank Wall Street Reform and Consumer Protection 
Act's prohibitions on unfair, deceptive, or abusive acts or practices 
(UDAAPs).
    The provisions of the new servicing rule and related commentary 
that relate to transfers can be found at 12 CFR 1024.33, 12 CFR 
1024.38, and 12 CFR 1024.41.\2\
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    \2\ 12 CFR 1024.30 defines the scope of application of these 
provisions. Note that small servicers, as defined in 12 CFR 
1026.41(e)(4), are exempt from certain provisions.
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A. General Transfer-Related Policies and Procedures

    CFPB mortgage servicing examinations now include reviews for 
compliance with the new servicing rule. Among other things, the rule 
requires servicers to maintain policies and procedures that are 
reasonably designed to achieve the objective of facilitating

[[Page 63296]]

the transfer of information during mortgage servicing transfers.\3\ The 
following are examples of policies and procedures that CFPB examiners 
may consider in future examinations as contributing to meeting these 
requirements: \4\
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    \3\ 12 CFR 1024.38(a), (b)(4).
    \4\ Section 1024.38(b)(4) does not prescribe any specific 
policies or procedures that a servicer must implement; the rule says 
that the policies and procedures must be ``reasonably designed'' to 
achieve the goal of facilitating the transfer of information during 
servicing transfers. CFPB examiners will consider a servicer's 
transfer-related policies and procedures as a whole, in light of the 
servicer's particular facts and circumstances, in determining 
whether they are reasonably designed to achieve the rule's 
objectives.
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     Ensuring that contracts require the transferor to provide 
all necessary documents and information at loan boarding.
     Developing tailored transfer instructions for each deal 
and conducting meetings to discuss and clarify key issues with 
counterparties in a timely manner; for large transfers, this could be 
months in advance of the transfer. Key issues may include descriptions 
of proprietary modifications, detailed descriptions of data fields, 
known issues with document indexing, and specific regulatory or 
settlement requirements applicable to some or all of the transferred 
loans.
     Using specifically tailored testing protocols to evaluate 
the compatibility of the transferred data with the transferee 
servicer's systems and data mapping protocols.
     Engaging in quality control work after the transfer of 
preliminary data to validate that the data on the transferee's system 
matches the data submitted by the transferor.
     Recognizing when the transfer cannot be implemented 
successfully in a single batch and implementing alternative protocols, 
such as splitting the transfer into several smaller transactions, to 
ensure that the transferee can comply with its servicing obligations 
for every loan transferred.

In future examinations, CFPB examiners may also consider the following 
post-transfer policies and procedures, among others, for transferee 
servicers as contributing to meeting this requirement:
     Implementing a post-transfer process for validating data 
to ensure it transferred correctly and is functional, as well as 
developing procedures for identifying and addressing data errors for 
inbound loans.
     Effectively organizing and labeling incoming information, 
as well as ensuring that the transferee servicer uses any transferred 
information before seeking information from borrowers.
     Conducting regularly scheduled calls with transferor 
servicers to identify any loan level issues and to research and resolve 
those issues within a few days of them being raised.

Moreover, the new servicing rule requires servicers, among other 
things, to maintain policies and procedures that are reasonably 
designed to achieve the objective of properly evaluating loss 
mitigation applications.\5\ There is heightened risk inherent in 
transferring loans in loss mitigation, including the risk that 
documents and information are not accurately transferred. CFPB 
examiners will therefore pay particular attention to servicers' 
handling of loss mitigation in the context of transfers. In cases where 
servicers choose to engage in transfers of loans with pending loss 
mitigation applications or approved trial modification plans, CFPB 
examiners may consider the following policies and procedures, among 
others, as contributing to meeting this requirement:
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    \5\ 12 CFR 1024.38(a), (b)(2).
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     As a transferor, specifically flagging all loans with 
pending loss mitigation applications (complete and incomplete), as well 
as approved loss mitigation plans (including trial modification plans) 
through a previously agreed upon means and assisting in ensuring that 
the transferee's systems can process the loss mitigation data upon 
transfer.
     As a transferee, requiring that the transferor servicer 
supply a detailed list of loans with pending loss mitigation 
applications, as well as approved loss mitigation plans.
     As a transferee, requiring that appropriate documentation 
for loans with pending loss mitigation applications, as well as 
approved loss mitigation plans, be transferred pre-boarding.
    [cir] For example, one transferor servicer that has engaged in 
large volumes of transfers has provided advance access to a web portal 
containing loan documentation for such loans 45-60 days before 
transfer.
     As a transferee, ensuring receipt of information regarding 
any loss mitigation discussions with borrowers, including any copies of 
loss mitigation documents.\6\
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    \6\ 12 CFR 1024, Supp. I, Comment 1024.38(b)(4)(ii)-1.
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    [cir] The transferee servicer's policies and procedures must 
address obtaining any such missing information or documents from a 
transferor servicer before attempting to obtain such information from 
borrowers.\7\
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    \7\ Id.
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    [cir] The CFPB expects transferee servicers to ensure that they 
review transferred documents to determine if the documents may be used 
in loss mitigation efforts. A transferee that, following a transfer, 
requires borrowers to resubmit loss mitigation application materials is 
unlikely to have policies and procedures that comply with 12 CFR 
1024.38(b)(4).
    [cir] A transferee that, following a transfer, fails to identify 
documents and information that borrowers are required to submit to 
complete loss mitigation applications is unlikely to have policies and 
procedures that comply with 12 CFR 1024.38(b)(2)(iv).
    [cir] A transferee that, following a transfer, fails to properly 
evaluate borrowers who submit loss mitigation applications is unlikely 
to have policies and procedures that comply with 12 CFR 
1024.38(b)(2)(v).
     As a transferee, monitoring newly transferred loans and 
determining if partial payments received are actually payments pursuant 
to trial or permanent modification agreements.

On the other hand, CFPB examiners may consider the following practices, 
among others, as indicating that a servicer's policies and procedures 
are not reasonably designed to achieve the rule's objectives of 
facilitating the transfer of information during mortgage servicing 
transfers or properly evaluating loss mitigation applications. During a 
number of examinations, CFPB examiners determined that servicers had 
failed to properly identify loans that were in a trial or permanent 
modification with the prior servicer at time of transfer. In other 
exams, CFPB examiners found that servicers had failed to honor trial or 
permanent modification offers unless they could independently confirm 
that the prior servicer properly offered a modification or that the 
offered modification met investor criteria. In some of these instances, 
CFPB's examination determined that the transferee servicers did not 
obtain all of the information they needed from the transferor servicer. 
As a result, the servicers required borrowers to submit additional 
paperwork or to provide copies of financial documents they had already 
submitted to the transferor servicer. These servicers also subjected 
some borrowers to substantial delays while re-underwriting their loans. 
In some cases, the borrowers subsequently received a new modification 
with inferior terms, and in others, the servicer actually

[[Page 63297]]

conducted a foreclosure sale. In all of the cases discussed above, CFPB 
examiners concluded, based on the particular facts, that the servicers 
had engaged in unfair practices and directed them to adopt policies and 
procedures to prevent continued unfair practices in this area and to 
remediate harmed consumers. CFPB has previously publicized these 
findings in Supervisory Highlights.\8\ Certain CFPB examinations, which 
occurred prior to the effective date of the new servicing rule, found 
that these practices violated the UDAAP prohibition; under the new 
servicing rule such practices may also constitute violations of 12 CFR 
1024.38.
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    \8\ Supervisory Highlights is a publication that periodically 
shares general information about examination findings without 
identifying specific companies. All editions of Supervisory 
Highlights are available at https://www.consumerfinance.gov/reports/.
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    Finally, CFPB has received questions regarding a policy of 
transferring relevant data or documents to a transferee during the days 
following loan boarding, even though the transferor had the information 
in its possession prior to boarding. Such a transfer practice may 
prevent the transferor servicer from complying with its obligation to 
have policies and procedures reasonably designed to timely transfer all 
information and documents. It also may prevent the transferee servicer 
from complying with its obligation to have policies and procedures 
reasonably designed to achieve the objective of properly evaluating 
loss mitigation applications. CFPB examiners will carefully scrutinize 
the policies and procedures of any institution that regularly waits 
until after loan boarding to transfer information that it had in its 
possession prior to boarding. The CFPB recognizes that servicers may 
not legally be able to provide certain information prior to the sale 
date; in that event, the CFPB will expect that servicers will still 
make every effort to transfer information prior to loan boarding, 
subject to those limitations.\9\
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    \9\ The sale date is the date that the money changes hands and 
the parties are legally committed to the servicing transfer.
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B. Applicability of Other Parts of the New Servicing Rule to Transfers

    In addition to the transfer-related policies and procedures 
requirements described above, transfers may implicate other 
requirements under the new servicing rule:
Error Resolution Procedures (12 CFR 1024.35) and Requests for 
Information (12 CFR 1024.36)
    Servicers are required to meet certain procedural requirements for 
responding to notices of error and written information requests.
     If the transferee servicer receives a notice of error or 
information request from the borrower or the borrower's agent, the 
transferee servicer must comply with all applicable requirements under 
12 CFR 1024.35 and .36 within the regulatory timeframes, even if the 
transferor was servicing the loan at the time of the alleged error or 
the event about which information is requested.
     A transfer does not relieve transferor servicers from 
their obligations under 12 CFR 1024.35 and .36. Transferor servicers 
are obligated to respond to notices of error and information requests 
received from the borrower or borrower's agent up to one year after the 
loan was transferred or discharged.\10\
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    \10\ 12 CFR 1024.35(g)(1)(iii) and 12 CFR 1024.36(f)(1)(v).
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     Servicers that transfer a mortgage loan shortly after 
receiving a notice of error or information request from the borrower or 
borrower's agent are still obligated to respond within the applicable 
timeframes, notwithstanding the servicing transfer.
Force-Placed Insurance (12 CFR 1024.37 and 12 CFR 1024.17(k))
    Before a servicer assesses any premium charge or fee related to 
force-placed insurance on a borrower, the servicer must comply with 
certain requirements, including sending notices to the borrower.
     If the transferee servicer replaces the existing force-
placed insurance policy with a new force-placed insurance policy,\11\ 
the transferee servicer must comply with Regulation X's requirements, 
including having a reasonable basis to conclude the borrower has failed 
to comply with the mortgage loan contract's requirement to maintain 
hazard insurance. The transferee servicer must also send the notice 
required by 12 CFR 1024.37(e) prior to assessing a premium charge or 
fee on the borrower.
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    \11\ Changes to the terms of an existing force-placed insurance 
policy, such as selecting a new provider, changing the scope of 
coverage, or changing the premium owed by the borrower, may meet the 
standards for replacement of the existing force-placed insurance 
policy depending on the particular circumstances.
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     If a servicer transfers a mortgage loan after mailing or 
delivering to the borrower one or both of the notices required by 12 
CFR 1024.37(c) and (d), the transferee servicer does not need to resend 
the notice(s) that the transferor already sent. However, the transferee 
servicer must ensure that the borrower has been sent all required 
notices within the applicable timeframes before it may assess any 
premium charge or fee related to force-placed insurance.
Early Intervention (12 CFR 1024.39)
    A servicer must establish or make good faith efforts to establish 
live contact with a delinquent borrower not later than the 36th day of 
the borrower's delinquency.\12\ As clarified in CFPB Bulletin 2013-
12,\13\ servicers are required to make good faith efforts to establish 
live contact for each billing cycle for which a borrower has been 
delinquent for at least 36 days.
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    \12\ 12 CFR 1024.39(a).
    \13\ CFPB Bulletin 2013-12 (Implementation Guidance for Certain 
Mortgage Servicing Rules), October 15, 2013.
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     A transferee servicer must begin or continue the good 
faith efforts regardless of whether the delinquency began while the 
loan was being serviced by the transferor servicer.
    A servicer must provide to a delinquent borrower a written notice 
containing certain information not later than the 45th day of the 
borrower's delinquency.\14\
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    \14\ 12 CFR 1024.39(b).
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     A transferee servicer must comply with the written notice 
requirement regardless of whether the delinquency began while the loan 
was being serviced by the transferor servicer.
Continuity of Contact (12 CFR 1024.40)
    Servicers must maintain policies and procedures that are reasonably 
designed to achieve certain objectives related to personnel assigned to 
assist delinquent borrowers.
     A transferee servicer's policies and procedures must be 
reasonably designed to achieve these objectives when delinquent loans 
are transferred. In future examinations, CFPB examiners may consider 
the following policies and procedures, among others, as contributing to 
meeting this requirement:
    [cir] Identifying which borrowers are 45 days or more delinquent at 
transfer and ensuring that personnel are available to assist such 
borrowers starting at loan boarding.\15\
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    \15\ 12 CFR 1024.40(a).
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    [cir] Ensuring that these servicer personnel can provide the 
borrower with accurate information as required by 12 CFR 1024.40(b)(1), 
including information relating to loss mitigation applications started 
at the transferor servicer.

[[Page 63298]]

    [cir] Ensuring, pursuant to 12 CFR 1024.40(b)(2), that servicer 
personnel can retrieve, in a timely manner:
    [ssquf] A complete record of the borrower's payment history, 
including with the transferor servicer and all prior servicers, and
    [ssquf] All written information the borrower has provided to the 
transferor servicer and all prior servicers in connection with a loss 
mitigation application.
     Servicers also should consider how to inform delinquent 
borrowers of the availability of servicer personnel. For example, the 
customer service telephone number could be included in the Welcome 
Letter or early intervention communications required by Regulation X or 
other communications following the transfer.
Loss Mitigation (12 CFR 1024.41)
    As stated above, CFPB examiners will pay particular attention to 
servicers' handling of loss mitigation in the context of transfers. A 
transferee that obtains the servicing of a mortgage loan for which an 
evaluation of a complete loss mitigation option is in process should 
continue the evaluation of the complete loss mitigation application to 
the extent practicable.\16\
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    \16\ 12 CFR pt. 1024, Supp. I, Comment 1024.41(i)-2.
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     CFPB examiners will carefully scrutinize any evaluations 
that take longer than 30 days from the date the transferor received the 
borrower's complete application, especially where the borrower suffered 
negative consequences attributable to the delay.
    As discussed above, in cases where servicers choose to engage in 
transfers of loans with pending loss mitigation applications or 
approved trial modification plans, among the policies and procedures 
that CFPB examiners may consider as contributing to meeting the 
requirements under 12 CFR 1024.38(b)(4), are whether the transferee 
servicer obtained information regarding loss mitigation discussions 
from the transferor before attempting to obtain such information from a 
borrower. If a loan is transferred with a loss mitigation application 
pending or when a borrower is in a loss mitigation program, the 
transferor and transferee should manage their risk of non-compliance 
with 12 CFR 1024.41. One way to help manage this risk is by ensuring 
that all applicable loss mitigation information was sent to the 
transferee by the date of transfer, including, for example:
Before the Borrower Accepts an Offer
     All applicable loss mitigation notices and when they were 
sent, including:
    [cir] Acknowledgment notices required by 12 CFR 
1024.41(b)(2)(i)(B);
    [cir] Notices stating the servicer's determination of which loss 
mitigation options, if any, it will offer to the borrower on behalf of 
the owner or assignee of the mortgage loan, as required by 12 CFR 
1024.41(c)(1)(ii);
    [cir] Denial notices as required by 12 CFR 1024.41(d), and 12 CFR 
1024(h)(4);
     All documents and information submitted by a borrower to 
be evaluated for loss mitigation options; and
     Documents and information sufficient to show, as 
applicable:
    [cir] If a borrower submitted an application and when that 
application was received by the transferor servicer;
    [cir] Whether documentation and information submitted by a borrower 
in response to the notice required by 12 CFR 1024.41(b)(2)(i)(B) 
constituted a complete application or not;
    [cir] The date the transferor servicer received a complete 
application;
    [ssquf] If, and when, the servicer requested additional documents 
or information, and if, and when, the borrower provided them;
    [cir] Whether an evaluation had been completed and if a loss 
mitigation offer was made to a borrower;
    [cir] If the borrower was denied for a loan modification option, 
whether the borrower appealed and, if so, the status of the appeal; and
    [cir] If a foreclosure sale is pending:
    [ssquf] The current date of the foreclosure sale;
    [ssquf] Whether a borrower submitted a complete application more 
than 37 days before the foreclosure sale; and
    [ssquf] Instructions to and from foreclosure counsel to ensure 
compliance with 12 CFR 1024.41(g), including instructions and status of 
all necessary stays, continuances and/or dismissals.
After the Borrower Accepts an Offer
     All loss mitigation agreements, including trial and 
permanent loan modification agreements, forbearance agreements, short 
sale agreements, deed-in-lieu of foreclosure agreements, or other 
applicable agreements;
     Documents and information sufficient to show, as 
applicable, whether the borrower accepted an offer; and whether the 
borrower was performing in accordance with the terms of the offer.

C. Protections Under Federal Consumer Financial Law

    Other federal consumer financial laws may also apply in the 
transfer context. The FCRA provides protection for consumers by 
generally prohibiting the furnishing of information to a consumer 
reporting agency that the furnisher knows or has reasonable cause to 
believe is inaccurate.\17\ A servicer that furnishes information to 
consumer reporting agencies must establish and implement reasonable 
written policies and procedures regarding the accuracy and integrity of 
the information furnished; in doing so, the servicer must consider 
applicable federal guidelines and must periodically review the policies 
and procedures and update them as necessary to ensure their continued 
effectiveness.\18\ The FCRA also gives consumers the ability to dispute 
credit reporting information with consumer reporting agencies and 
directly with their furnishers.\19\ Servicers, like other furnishers, 
must appropriately investigate such disputes and report their existence 
along with any other information reported to consumer reporting 
agencies.\20\
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    \17\ 15 U.S.C. 1681s-2(a)(1)(A). The requirement does not apply 
if the furnisher clearly and conspicuously specifies to the consumer 
an address for notices of errors. 15 U.S.C. 1681s-2(a)(1)(B)-(C).
    \18\ 15 U.S.C. 1681s-2(e); 12 CFR 1022.42.
    \19\ 15 U.S.C. 1681i(a)(1), 1681s-2(a)(8); 12 CFR 1022.43.
    \20\ 15 U.S.C. 1681s-2(a)(3), (8), (b).
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    The FDCPA imposes obligations on servicers to the extent they act 
as debt collectors within the meaning of the FDCPA.\21\ Among other 
obligations, the FDCPA requires that within five days after the initial 
communication with a borrower in connection with the collection of any 
debt, a debt collector must send the borrower a notice including the 
amount of the debt, the creditor's name, the borrower's right to 
request verification of the debt, and other required information.\22\ 
CFPB examiners have identified a number of entities that failed to send 
the notices within five days of initial contact and some entities that 
failed to send them at all. The FDCPA also prohibits deceptive 
representations, the use of unfair or unconscionable means, and 
harassing or abusive conduct in debt collection.\23\
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    \21\ 15 U.S.C. 1692a(6).
    \22\ 15 U.S.C. 1692g(a). The requirement does not apply if the 
information is contained in the initial communication or the 
consumer has paid the debt. Id.
    \23\ 15 U.S.C. 1692d, 1692e, 1692f.
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    In addition to the notice requirements and other consumer 
protections described above, servicers must avoid engaging in UDAAPs. 
The CFPB emphasizes that conduct that does not violate one of the 
specific prohibitions

[[Page 63299]]

in the laws discussed above may nonetheless constitute a UDAAP.\24\
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    \24\ The CFPB Supervision and Examination Manual provides 
further guidance on how the UDAAP prohibition applies to supervised 
entities. That examination manual is available at https://www.consumerfinance.gov/guidance/supervision/manual.
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    CFPB expects all servicers under its jurisdiction, including those 
with significant transfer volume, to maintain a robust Compliance 
Management System (CMS). A robust CMS must, among other things, both 
ensure that violations of Federal consumer financial law do not occur 
during a transfer and must contain mechanisms for promptly identifying 
and remediating any violations of Federal consumer financial law that 
do occur. Entities with a robust CMS have strong policies and 
procedures, effective board oversight, regular and properly directed 
training, internal monitoring, external audits and complaint review.
    CFPB expects servicers that identify any potential violations 
during a transfer to undertake all necessary corrective measures. Such 
corrective measures should include both steps to prevent the violation 
from occurring for subsequently transferred loans and to remediate any 
actual harm the violation may have caused the consumer whose loan was 
transferred. If the CFPB determines that a servicer has engaged in any 
acts or practices that violate the new servicing rule, that are unfair, 
deceptive, or abusive, or that otherwise violate Federal consumer 
financial law, it will take appropriate supervisory and enforcement 
actions to address violations and seek all appropriate corrective 
measures, including remediation of any harm to consumers. In 
determining the appropriate action, the CFPB will consider a variety of 
factors, including the timeliness of identification and the timeliness 
and scope of remediation of the violation by the servicer.

D. Plans for Handling Servicing Transfers

    As part of its efforts to focus supervisory attention on the topics 
described above, the CFPB will, in appropriate cases, require servicers 
engaged in significant servicing transfers to prepare and submit 
written plans to the CFPB detailing how they will manage the associated 
consumer risks. The CFPB will use these plans to assess consumer risk 
and inform further examination planning. Servicers do not need approval 
from the CFPB before moving forward with servicing transfers unless 
specifically required to do so (e.g., by a consent order).
    The information included in a plan would depend on the 
circumstances of the particular transfer. In general, however, the CFPB 
will request information regarding:
    1. The number of loans involved in the transfer;
    2. The total servicing volume being transferred (measured by unpaid 
principal balance);
    3. The name(s) of the servicing platform(s) on which the transferor 
stored all relevant account-level information for transferred loans 
prior to transfer and information about compatibility with the 
transferee's systems;
    4. A detailed description of how the servicer will ensure that it 
is complying with the applicable new servicing rule provisions on 
transfers;
    5. A detailed description of the transaction and system testing to 
be conducted to ensure accurate transfer of electronic information and 
a description of the summary report resulting from the transferee or 
transferor's testing;
    6. A description of how the transferee will identify and correct 
errors identified in connection with the transfer, including a 
specified time period for reviewing files and resolving errors;
    7. A description of the training plan and actual training materials 
for staff involved in reviewing, assessing, utilizing, or communicating 
information regarding the transferred loans; and
    8. A customer-service plan, specific to the transferred loans, that 
provides for responding to loss mitigation requests or inquiries and 
for identifying whether a loan is subject to a pending loss mitigation 
resolution or application.

IV. Regulatory Requirements

    This Compliance Bulletin and Policy Guidance is a non-binding 
compliance bulletin and policy guidance articulating considerations 
relevant to the CFPB's exercise of its supervisory authority under 
Regulation X and RESPA and reciting certain requirements of Regulation 
X and other Federal consumer financial laws applicable to servicing 
transfers. It is therefore exempt from the notice and comment 
rulemaking requirements under the Administrative Procedure Act pursuant 
to 5 U.S.C. 553(b).
    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).
    The CFPB has determined that this Compliance Bulletin and Policy 
Guidance does not impose any new or revise any existing recordkeeping, 
reporting, or disclosure requirements on covered entities or members of 
the public that would be collections of information requiring OMB 
approval under the Paperwork Reduction Act, 44 U.S.C. 3501, et seq.

    Dated: October 7, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-24194 Filed 10-22-14; 8:45 am]
BILLING CODE 4810-AM-P