Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z), 48463-48469 [2017-21907]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)]
[Proposed Rules]
[Pages 48463-48469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21907]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / 
Proposed Rules

[[Page 48463]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2017-0030]
RIN 3170-AA75


Mortgage Servicing Rules Under the Truth in Lending Act 
(Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
proposing amendments to certain Regulation Z mortgage servicing rules 
issued in 2016 relating to the timing for servicers to transition to 
providing modified or unmodified periodic statements and coupon books 
in connection with a consumer's bankruptcy case. The Bureau requests 
public comment on these proposed changes.

DATES: Comments must be received on or before November 17, 2017.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2017-
0030 or RIN 3170-AA75, by any of the following methods:
     Email: FederalRegisterComments@cfpb.gov. Include Docket 
No. CFPB-2017-0030 or RIN 3170-AA75 in the subject line of the email.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     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 5:00 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: Joel L. Singerman, Counsel; or William 
R. Corbett or Laura A. Johnson, Senior Counsels, Office of Regulations, 
at 202-435-7700 or https://reginquiries.consumerfinance.gov/.

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule

    On August 4, 2016, the Bureau issued the Amendments to the 2013 
Mortgage Rules Under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z) (2016 
Mortgage Servicing Final Rule) amending certain of the Bureau's 
mortgage servicing rules.\1\ The Bureau has learned, through its 
outreach in support of industry's implementation of the 2016 Mortgage 
Servicing Final Rule, that certain technical aspects of the rule 
relating to the timing for servicers to transition to providing 
modified or unmodified periodic statements and coupon books in 
connection with a consumer's bankruptcy case may create unintended 
challenges in implementation. To alleviate any unintended challenges, 
the Bureau is proposing to address the timing provisions in this 
proposed rule.\2\
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    \1\ 81 FR 72160 (Oct. 19, 2016).
    \2\ The Bureau is addressing in a separate interim final rule 
another disclosure timing provision of the 2016 Mortgage Servicing 
Final Rule that would otherwise become effective October 19, 2017.
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    Among other things, the 2016 Mortgage Servicing Final Rule 
addresses Regulation Z's periodic statement and coupon book 
requirements when a person is a debtor in bankruptcy.\3\ It includes a 
single-billing-cycle exemption from the requirement to provide a 
periodic statement or coupon book in certain circumstances after one of 
several specific triggering events occurs resulting in a servicer 
needing to transition to or from providing bankruptcy-specific 
disclosures. The single-billing-cycle exemption applies only if the 
payment due date for that billing cycle is no more than 14 days after 
the triggering event. The 2016 Mortgage Servicing Final Rule also 
includes specific timing requirements for servicers to provide the next 
modified or unmodified statement or coupon book after the single-
billing-cycle exemption has applied.
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    \3\ The provisions of Regulation Z discussed herein were amended 
by the 2016 Mortgage Servicing Final Rule but are not effective 
until April 19, 2018. To simplify review of this document and 
differentiate between those amendments and this proposed rule, this 
document generally refers to the 2016 amendments as though they 
already are in effect.
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    Based on feedback received regarding implementation of the 2016 
Mortgage Servicing Final Rule, the Bureau understands that certain 
aspects of the single-billing-cycle exemption and timing requirements 
may be more complex and operationally challenging than the Bureau 
realized, and that the relevant provisions may be subject to different 
interpretations, as discussed more below. The Bureau is therefore 
proposing several revisions to Sec.  1026.41(e)(5)(iv)(B) and (C) and 
their official interpretations to replace the single-billing-cycle 
exemption with a single-statement exemption. The Bureau is proposing to 
revise Sec.  1026.41(e)(5)(iv)(B) and its related commentary to provide 
a single-statement exemption for the next periodic statement or coupon 
book that a servicer would otherwise have to provide, regardless of 
when in the billing cycle the triggering event occurs. The Bureau is 
also proposing to add new comments 41(e)(5)(iv)(B)-1 through -3 to 
clarify the operation of the proposed single-statement exemption. The 
Bureau is proposing to remove Sec.  1026.41(e)(5)(iv)(C) and its 
related commentary as no longer necessary in light of the changes to 
Sec.  1026.41(e)(5)(iv)(B) and its related commentary.

[[Page 48464]]

    The Bureau believes that these proposed changes would provide a 
clearer and more straightforward standard than the timing requirement 
adopted in the 2016 Mortgage Servicing Final Rule, offering greater 
certainty for implementation and compliance, without unnecessarily 
disadvantaging consumers. The Bureau seeks public comment on these 
proposed changes.

II. Background

A. 2016 Mortgage Servicing Final Rule and Implementation Support

    In August 2016, the Bureau issued the 2016 Mortgage Servicing Final 
Rule, which amends certain of the Bureau's mortgage servicing rules in 
Regulations X and Z.\4\ Most of these rules become effective on October 
19, 2017, except that the provisions relating to bankruptcy periodic 
statements and successors in interest become effective on April 19, 
2018. The Bureau has worked to support implementation by providing an 
updated compliance guide, other implementation aids, a technical 
corrections final rule,\5\ policy guidance regarding early 
compliance,\6\ and informal guidance in response to regulatory 
inquiries. Information regarding the Bureau's implementation support 
initiative and available implementation resources can be found on the 
Bureau's regulatory implementation Web site at https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/mortserv/. Based on its ongoing outreach, the Bureau believes 
that industry has made substantial implementation progress regarding 
the 2016 Mortgage Servicing Final Rule. However, the Bureau believes 
that a limited disclosure timing provision under Regulation Z from the 
2016 Mortgage Servicing Final Rule may pose unintended implementation 
challenges as discussed herein.
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    \4\ 81 FR 72160 (Oct. 19, 2016). The amendments cover nine major 
topics and focus primarily on clarifying, revising, or amending 
provisions regarding force-placed insurance notices, policies and 
procedures, early intervention, and loss mitigation requirements 
under Regulation X's servicing provisions; and prompt crediting and 
periodic statement requirements under Regulation Z's servicing 
provisions. The amendments also address proper compliance regarding 
certain servicing requirements when a person is a potential or 
confirmed successor in interest, is a debtor in bankruptcy, or sends 
a cease communication request under the FDCPA.
    \5\ Amendments to the 2013 Mortgage Rules Under the Real Estate 
Settlement Procedures Act (Regulation X) and the Truth in Lending 
Act (Regulation Z); Correction, 82 FR 30947 (July 5, 2017).
    \6\ Policy Guidance on Supervisory and Enforcement Priorities 
Regarding Early Compliance With the 2016 Amendments to the 2013 
Mortgage Rules Under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z), 82 FR 
29713 (June 30, 2017).
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B. Purpose and Scope of Proposal

    As a result of feedback and questions received from servicers, the 
Bureau has decided to propose amendments to Regulation Z provisions 
relating to the timing for servicers to transition to providing 
modified or unmodified periodic statements and coupon books under 
Regulation Z in connection with a consumer's bankruptcy case. The 
Bureau believes the proposal provides clearer and more straightforward 
standards than the timing requirements adopted in the 2016 Mortgage 
Servicing Final Rule, offering greater certainty for implementation and 
compliance, without unnecessarily disadvantaging consumers.
    The Bureau does not intend to revisit major policy decisions in 
this rulemaking or distract from industry's implementation efforts, 
which the Bureau believes have been moving forward. The Bureau 
continues to facilitate industry's implementation progress, including 
by responding to informal guidance inquiries and publishing additional 
implementation materials, as appropriate.

III. Legal Authority

    The Bureau is proposing this rule pursuant to its authority under 
TILA and the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act),\7\ including the authorities discussed below. In 
general, the provisions this proposed rule would amend were previously 
adopted by the Bureau in the 2016 Mortgage Servicing Final Rule. In 
doing so, the Bureau relied on one or more of the authorities discussed 
below, as well as other authority. The Bureau is issuing this proposed 
rule in reliance on the same authority and for the same reasons relied 
on in adopting the relevant provisions of the 2016 Mortgage Servicing 
Final Rule, as discussed in detail in the Legal Authority and Section-
by-Section Analysis parts of the 2016 Mortgage Servicing Final Rule.
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    \7\ Public Law 111-203, 1245 Stat. 11376 (2010).
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A. TILA

    Section 105(a) of TILA, 15 U.S.C. 1604(a), authorizes the Bureau to 
prescribe regulations to carry out the purposes of TILA. Under section 
105(a), such regulations may contain such additional requirements, 
classifications, differentiations, or other provisions, and may provide 
for such adjustments and exceptions for all or any class of 
transactions, as in the judgment of the Bureau are necessary or proper 
to effectuate the purposes of TILA, to prevent circumvention or evasion 
thereof, or to facilitate compliance therewith. Under section 102(a), 
15 U.S.C. 1601(a), the purposes of TILA are ``to assure a meaningful 
disclosure of credit terms so that the consumers will be able to 
compare more readily the various credit terms available and avoid the 
uninformed use of credit'' and to protect consumers against inaccurate 
and unfair credit billing practices. For the reasons discussed in this 
proposal, the Bureau is proposing to adopt amendments to Regulation Z 
to carry out TILA's purposes and such additional requirements, 
adjustments, and exceptions as, in the Bureau's judgment, are necessary 
and proper to carry out the purposes of TILA, prevent circumvention or 
evasion thereof, or to facilitate compliance therewith.
    Section 105(f) of TILA, 15 U.S.C. 1604(f), authorizes the Bureau to 
exempt from all or part of TILA any class of transactions if the Bureau 
determines that TILA coverage does not provide a meaningful benefit to 
consumers in the form of useful information or protection. For the 
reasons discussed in this document, the Bureau is proposing amendments 
relating to exemptions for certain transactions from the requirements 
of TILA pursuant to its authority under section 105(f) of TILA.
    This proposed rule also includes amendments to the official Bureau 
commentary in Regulation Z. Good faith compliance with the 
interpretations would afford protection from liability under section 
130(f) of TILA.

B. The Dodd-Frank Act

    Section 1022(b)(1) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(1), 
authorizes the Bureau to prescribe rules ``as may be necessary or 
appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of the Federal consumer financial laws, and to 
prevent evasions thereof.'' TILA and title X of the Dodd-Frank Act are 
Federal consumer financial laws.
    Section 1032(a) of the Dodd-Frank Act, 12 U.S.C. 5532(a), provides 
that the Bureau ``may prescribe rules to ensure that the features of 
any consumer financial product or service, both initially and over the 
term of the product or service, are fully, accurately, and effectively 
disclosed to consumers in a manner that permits consumers to understand 
the costs, benefits, and risks associated with the product or service, 
in light of the facts and circumstances.'' The authority granted to the 
Bureau in section 1032(a) of the Dodd-Frank Act is broad and empowers 
the Bureau to

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prescribe rules regarding the disclosure of the ``features'' of 
consumer financial products and services generally. Accordingly, the 
Bureau may prescribe rules containing disclosure requirements even if 
other Federal consumer financial laws do not specifically require 
disclosure of such features.
    Section 1032(c) of the Dodd-Frank Act, 12 U.S.C. 5532(c), provides 
that, in prescribing rules pursuant to section 1032 of the Dodd-Frank 
Act, the Bureau ``shall consider available evidence about consumer 
awareness, understanding of, and responses to disclosures or 
communications about the risks, costs, and benefits of consumer 
financial products or services.'' Accordingly, in proposing to amend 
provisions authorized under section 1032(a) of the Dodd-Frank Act, the 
Bureau has considered available studies, reports, and other evidence 
about consumer awareness, understanding of, and responses to 
disclosures or communications about the risks, costs, and benefits of 
consumer financial products or services.

IV. Proposed Effective Date

    Regulation Z Sec.  1026.41(e)(5), as amended by the 2016 Mortgage 
Servicing Final Rule, becomes effective April 19, 2018. The Bureau is 
not proposing to extend the effective date of that provision, as 
finalized in the 2016 Mortgage Servicing Final Rule, because if the 
Bureau were to issue a final rule based on this proposal (after 
considering comments), it expects to do so sufficiently before the 
April 19, 2018, effective date to enable servicers to meet that date.
    Thus, the Bureau is proposing an effective date of April 19, 2018, 
for the proposed revisions to Sec.  1026.41(e)(5)(iv). The Bureau 
believes that the proposed revisions should not require substantial 
reprogramming of systems and notes that the Regulation Z bankruptcy-
specific periodic statement requirements otherwise become effective 
April 19, 2018. The Bureau invites comment on the proposed effective 
date.

V. Section-by-Section Analysis

Section 1026.41 Periodic Statements for Residential Mortgage Loans

41(e) Exemptions
41(e)(5) Certain Consumers in Bankruptcy
41(e)(5)(iv) Timing of Compliance Following Transition
    The Bureau is proposing to revise Sec.  1026.41(e)(5)(iv)(B) and 
related commentary, and to remove Sec.  1026.41(e)(5)(iv)(C) and 
related commentary. Section 1026.41(e)(5)(iv)(B) sets forth a single-
billing-cycle exemption from the requirement to provide a periodic 
statement or coupon book in certain circumstances after one of several 
specific triggering events occurs resulting in a servicer needing to 
transition to or from providing bankruptcy-specific disclosures. The 
single-billing-cycle exemption applies only if the payment due date for 
that billing cycle is no more than 14 days after the triggering event. 
The Bureau is proposing to revise Sec.  1026.41(e)(5)(iv)(B) to instead 
provide a single-statement exemption for the next periodic statement or 
coupon book that a servicer would otherwise have to provide, regardless 
of when in the billing cycle the triggering event occurs. Section 
1026.41(e)(5)(iv)(C) establishes timing requirements for resuming 
compliance after the single-billing-cycle exemption. The Bureau is 
proposing to remove Sec.  1026.41(e)(5)(iv)(C) and its related 
commentary because proposed revisions to comment 41(e)(5)(iv)(B)-1 
would clarify the timing of the single-statement exemption and when a 
servicer must resume compliance. The Bureau is also proposing to add 
new comments 41(e)(5)(iv)(B)-2 and -3 to clarify how the proposed 
single-statement exemption would operate in specific circumstances. 
Proposed comment 41(e)(5)(iv)(B)-2 is similar in content to comment 
41(e)(5)(iv)(C)-3.
    Under existing Sec.  1026.41(a)(2), a servicer generally must 
provide a consumer, for each billing cycle, a periodic statement 
meeting certain requirements. Existing Sec.  1026.41(e)(5) provides a 
blanket exemption from Sec.  1026.41 for a mortgage loan while a 
consumer is a debtor in bankruptcy under title 11 of the United States 
Code. The 2016 Mortgage Servicing Final Rule, however, generally limits 
this exemption to only certain consumers in bankruptcy.\8\ When a 
consumer either is a debtor in bankruptcy under title 11 of the United 
States Code or has discharged personal liability for the mortgage loan 
pursuant to 11 U.S.C. 727, 1141, 1228, or 1328, so long as an exemption 
under Sec.  1026.41(e) does not otherwise apply, the 2016 Mortgage 
Servicing Final Rule requires a servicer to provide a periodic 
statement or coupon book with certain bankruptcy-specific 
modifications. In this circumstance, a servicer must transition from 
providing unmodified periodic statements or coupon books to providing 
periodic statements or coupon books with bankruptcy modifications. 
Similarly, when a consumer exits bankruptcy, a servicer generally must 
transition back to providing unmodified periodic statements or coupon 
books.
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    \8\ Section 1026.41(e)(5)(i) states that a servicer is generally 
exempt from the requirements of Sec.  1026.41 with regard to a 
mortgage loan if (A) any consumer on the mortgage loan is a debtor 
in bankruptcy under title 11 of the United States Code or has 
discharged personal liability for the mortgage loan pursuant to 11 
U.S.C. 727, 1141, 1228, or 1328; and (B) with regard to any consumer 
on the mortgage loan: (1) The consumer requests in writing that the 
servicer cease providing a periodic statement or coupon book; (2) 
the consumer's bankruptcy plan provides that the consumer will 
surrender the dwelling securing the mortgage loan, provides for the 
avoidance of the lien securing the mortgage loan, or otherwise does 
not provide for, as applicable, the payment of pre-bankruptcy 
arrearage or the maintenance of payments due under the mortgage 
loan; (3) a court enters an order in the bankruptcy case providing 
for the avoidance of the lien securing the mortgage loan, lifting 
the automatic stay pursuant to 11 U.S.C. 362 with regard to the 
dwelling securing the mortgage loan, or requiring the servicer to 
cease providing a periodic statement or coupon book; or (4) the 
consumer files with the court overseeing the bankruptcy case a 
statement of intention pursuant to 11 U.S.C. 521(a) identifying an 
intent to surrender the dwelling securing the mortgage loan and a 
consumer has not made any partial or periodic payment on the 
mortgage loan after the commencement of the consumer's bankruptcy 
case.
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    During the rulemaking process leading up to the 2016 Mortgage 
Servicing Final Rule, the Bureau learned that, after a consumer files 
for or exits bankruptcy, servicers sometimes need time to transition 
their systems to reflect the change in bankruptcy status. Industry 
representatives suggested that the rule should afford a servicer enough 
time to transition to providing modified statements after a consumer's 
bankruptcy filing.\9\ The Bureau therefore finalized a single-billing-
cycle exemption in the 2016 Mortgage Servicing Final Rule.\10\ Section 
1026.41(e)(5)(iv)(B) provides that a servicer is exempt from the 
requirements of Sec.  1026.41 with respect to a single billing cycle 
when the payment due date for that billing cycle is no more than 14 
days after the date on which one of the three triggering events listed 
under Sec.  1026.41(e)(5)(iv)(A) occurs: (1) A mortgage loan becomes 
subject to the requirement to provide a modified periodic statement; 
(2) a mortgage loan ceases to be subject to the requirement to provide 
a modified periodic statement; or (3) the servicer ceases to qualify 
for an exemption pursuant to Sec.  1026.41(e)(5)(i). Section 
1026.41(e)(5)(iv)(C) sets forth the timeframe within which a servicer 
must

[[Page 48466]]

provide the next periodic statement after an event listed in Sec.  
1026.41(e)(5)(iv)(A) occurs.\11\
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    \9\ See 81 FR 72160, 72325 (Oct. 19, 2016).
    \10\ See generally id. at 72324-26.
    \11\ Section 1026.41(e)(5)(iv)(C) provides that, when one of the 
triggering events listed in Sec.  1026.41(e)(5)(iv)(A) occurs, a 
servicer must provide the next modified or unmodified periodic 
statement by delivering it or placing it in the mail within a 
reasonably prompt time after the first payment due date, or the end 
of any courtesy period for the payment's corresponding billing 
cycle, that is more than 14 days after the date on which the 
applicable event listed in Sec.  1026.41(e)(5)(iv)(A) occurs.
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    In the preamble to the 2016 Mortgage Servicing Final Rule, the 
Bureau stated its belief that the exemption and timing set forth in 
Sec.  1026.41(e)(5)(iv) provide an appropriate transition period for a 
servicer while also not unnecessarily disadvantaging consumers. 
However, since issuing the 2016 Mortgage Servicing Final Rule, the 
Bureau has received questions indicating that the single-billing-cycle 
exemption may be more complex and operationally challenging than the 
Bureau realized, and that the provisions setting forth the exemption 
and transition timing requirements may be subject to different 
interpretations.
    The Bureau believes that addressing these concerns is appropriate. 
To provide a clearer standard and simplify compliance for servicers 
without unnecessarily disadvantaging consumers, the Bureau is proposing 
to revise Sec.  1026.41(e)(5)(iv)(B) to provide a single-statement 
exemption. As proposed, Sec.  1026.41(e)(5)(iv)(B) provides that, as of 
the date on which one of the events listed in Sec.  
1026.41(e)(5)(iv)(A) occurs, a servicer is exempt from the requirements 
of Sec.  1026.41 with respect to the next periodic statement or coupon 
book that would otherwise be required but thereafter must provide 
modified or unmodified periodic statements or coupon books that comply 
with the requirements of Sec.  1026.41.
    The Bureau also proposes to revise comment 41(e)(5)(iv)(B)-1 to 
clarify a servicer's obligations under proposed Sec.  
1026.41(e)(5)(iv)(B). Proposed comment 41(e)(5)(iv)(B)-1 explains that 
the exemption applies with respect to a single periodic statement or 
coupon book following an event listed in Sec.  1026.41(e)(5)(iv)(A) and 
provides two examples illustrating the timing. Both examples assume 
that a mortgage loan has a monthly billing cycle, each payment due date 
is on the first day of the month following its respective billing 
cycle, and each payment due date has a 15-day courtesy period.
    Proposed comment 41(e)(5)(iv)(B)-1.i explains that, if an event 
listed in Sec.  1026.41(e)(5)(iv)(A) occurs on October 6, before the 
end of the 15-day courtesy period provided for the October 1 payment 
due date, and the servicer has not yet provided a periodic statement or 
coupon book for the billing cycle with a November 1 payment due date, 
the servicer is exempt from providing a periodic statement or coupon 
book for that billing cycle. The comment further states that the 
servicer is required thereafter to resume providing periodic statements 
or coupon books that comply with the requirements of Sec.  1026.41 by 
providing a modified or unmodified periodic statement or coupon book 
for the billing cycle with a December 1 payment due date within a 
reasonably prompt time after November 1 or the end of the 15-day 
courtesy period provided for the November 1 payment due date.
    Proposed comment 41(e)(5)(iv)(B)-1.ii provides an example for when 
a servicer already timely provided a periodic statement or coupon book 
for a billing cycle in which an event listed in Sec.  
1026.41(e)(5)(iv)(A) occurs. It provides that, if an event listed in 
Sec.  1026.41(e)(5)(iv)(A) occurs on October 20, after the end of the 
15-day courtesy period provided for the October 1 payment due date, and 
the servicer timely provided a periodic statement or coupon book for 
the billing cycle with a November 1 payment due date, the servicer is 
not required to correct the periodic statement or coupon book already 
provided and is exempt from providing the next periodic statement or 
coupon book, which is the one that would otherwise be required for the 
billing cycle with a December 1 payment due date. The servicer is 
required thereafter to resume providing periodic statements or coupon 
books that comply with the requirements of Sec.  1026.41 by providing a 
modified or unmodified periodic statement or coupon book for the 
billing cycle with a January 1 payment due date within a reasonably 
prompt time after December 1 or the end of the 15-day courtesy period 
provided for the December 1 payment due date.
    Because proposed comments 41(e)(5)(iv)(B)-1.i and -1.ii describe 
when a servicer must provide periodic statements or coupon books 
following the exemption, Sec.  1026.41(e)(5)(iv)(C) and related 
commentary would be unnecessary. Thus, the Bureau is proposing to 
remove Sec.  1026.41(e)(5)(iv)(C) and related commentary.
    The Bureau is also proposing to add new comments 41(e)(5)(iv)(B)-2 
and -3 to clarify how the proposed exemption would operate in 
additional specific circumstances. Proposed comment 41(e)(5)(iv)(B)-2 
is similar in content to comment 41(e)(5)(iv)(C)-3. Proposed comment 
41(e)(5)(iv)(B)-2 states that, if a servicer provides a coupon book 
instead of a periodic statement under Sec.  1026.41(e)(3), Sec.  
1026.41 requires the servicer to provide a new coupon book after one of 
the events listed in Sec.  1026.41(e)(5)(iv)(A) occurs only to the 
extent the servicer has not previously provided the consumer with a 
coupon book that covers the upcoming billing cycle. Proposed comment 
41(e)(5)(iv)(B)-3 clarifies that the single-statement exemption in 
Sec.  1026.41(e)(5)(iv)(B) might apply more than once over the life of 
a loan. For example, assume the exemption applies beginning on April 14 
because the consumer files for bankruptcy on that date and the 
bankruptcy plan provides that the consumer will surrender the dwelling, 
such that the mortgage loan becomes subject to the requirements of 
Sec.  1026.41(f). If the consumer later exits bankruptcy on November 2 
and has not discharged personal liability for the mortgage loan 
pursuant to 11 U.S.C. 727, 1141, 1228, or 1328, such that the mortgage 
loan ceases to be subject to the requirements of Sec.  1026.41(f), the 
single-statement exemption would apply again beginning on November 2.
    The Bureau believes that the single-statement exemption in proposed 
Sec.  1026.41(e)(5)(iv)(B) would provide a more straightforward 
standard than the single-billing-cycle exemption adopted in the 2016 
Mortgage Servicing Final Rule. The Bureau also believes that the 
proposed exemption would still provide servicers enough time to 
transition their systems but not so long that it unnecessarily 
disadvantages consumers. Finally, the proposed exemption should provide 
servicers relief in more circumstances than the exemption adopted under 
the 2016 Mortgage Servicing Final Rule. Under this proposal, there 
would always be a single-statement exemption when servicers transition 
to providing modified or unmodified periodic statements or coupon books 
following one of the events listed in Sec.  1026.41(e)(5)(iv)(A). Under 
the 2016 Mortgage Servicing Final Rule, servicers would not necessarily 
have the benefit of the single-billing-cycle exemption because of its 
requirement that the payment due date fall no more than 14 days after 
the applicable triggering event.
    The Bureau solicits comment on the proposed changes, including 
whether they would pose operational challenges in implementation or 
execution.

[[Page 48467]]

VI. Dodd-Frank Act Section 1022(b) Analysis

    In developing this proposed rule, the Bureau has considered the 
potential benefits, costs, and impacts as required by section 
1022(b)(2) of the Dodd-Frank Act. Specifically, section 1022(b)(2) 
calls for the Bureau to consider the potential benefits and costs of a 
regulation to consumers and covered persons, including the potential 
reduction of consumer access to consumer financial products or 
services, the impact on depository institutions and credit unions with 
$10 billion or less in total assets as described in section 1026 of the 
Dodd-Frank Act, and the impact on consumers in rural areas. In 
addition, 12 U.S.C. 5512(b)(2)(B) directs the Bureau to consult, before 
and during the rulemaking, with appropriate prudential regulators or 
other Federal agencies, regarding consistency with the objectives those 
agencies administer. The Bureau consulted, or offered to consult with, 
the prudential regulators, the Securities and Exchange Commission, the 
Department of Housing and Urban Development (HUD), the HUD Office of 
Inspector General, the Federal Housing Finance Agency, the Federal 
Trade Commission, the Department of the Treasury, the Department of 
Agriculture, and the Department of Veterans Affairs, including 
regarding consistency with any prudential, market, or systemic 
objectives administered by these agencies.
    The Bureau previously considered the benefits, costs, and impacts 
of the 2016 Mortgage Servicing Final Rule's major provisions.\12\ The 
baseline \13\ for this discussion is the mortgage servicing market as 
it would exist ``but for'' this proposed rule; that is, the Bureau 
considers the benefits, costs, and impacts of this proposed rule on 
consumers and covered persons relative to the baseline established by 
the 2016 Mortgage Servicing Final Rule.
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    \12\ 81 FR 72160, 72351 (Oct. 19, 2016).
    \13\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits, 
costs, and impacts and an appropriate baseline.
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    In considering the relevant potential benefits, costs, and impacts 
of this proposed rule, the Bureau has used feedback received to date 
and has applied its knowledge and expertise concerning consumer 
financial markets. The discussion below of these potential costs, 
benefits, and impacts is qualitative, reflecting both the specialized 
nature of the proposed amendments and the fact that the 2016 Mortgage 
Servicing Final Rule, which establishes the baseline for the Bureau's 
analysis, is not yet in effect. The Bureau requests comment on this 
discussion generally as well as the submission of data or other 
information that could inform the Bureau's consideration of the 
potential benefits, costs, and impacts of this proposed rule.
    The proposed rule generally would decrease burden incurred by 
industry participants by clarifying the timing requirements for certain 
disclosures required under the 2016 Mortgage Servicing Final Rule. As 
is described in more detail below, the Bureau does not believe that 
these changes would have a significant enough impact on consumers or 
covered persons to affect consumer access to consumer financial 
products and services.
    Timing for servicers to transition to providing modified or 
unmodified periodic statements and coupon books in connection with a 
consumer's bankruptcy case. A mortgage servicer generally must provide 
a consumer, for each billing cycle, a periodic statement or coupon book 
meeting certain requirements. Under the 2016 Mortgage Servicing Final 
Rule, servicers generally must provide a modified periodic statement or 
coupon book to certain consumers who are debtors in bankruptcy or who 
have discharged personal liability for the mortgage loan. The Bureau is 
proposing to amend Sec.  1026.41(e)(5)(iv) to provide that, when a 
servicer must transition to sending either modified periodic statements 
or to sending unmodified periodic statements, the servicer is exempt 
from the requirements of Sec.  1026.41 with respect to the next 
periodic statement or coupon book that would otherwise be required but 
thereafter must provide modified or unmodified periodic statements or 
coupon books that comply with the requirements of Sec.  1026.41. This 
single-statement exemption would replace the single-billing-cycle 
exemption in the 2016 Mortgage Servicing Final Rule.
    The Bureau expects that these proposed changes would reduce the 
cost to servicers of providing periodic statements. The Bureau 
understands that implementing the single-billing-cycle exemption 
provided under the 2016 Mortgage Servicing Rule may prove more complex 
and operationally challenging for servicers than the Bureau realized 
and believes that a single-statement exemption would be clearer and 
operationally easier to implement. In addition, the single-billing-
cycle exemption would apply only when the payment due date falls no 
more than 14 days after the event that triggers the transition to or 
from modified periodic statements, whereas the proposed single-
statement exemption would apply to these transitions regardless of when 
during the billing cycle the triggering event occurs. The Bureau 
believes that servicers would benefit from the more straightforward 
proposed standard and from the additional time afforded for some 
transitions.
    The proposal could delay the transition to or from modified 
periodic statements for some consumers. This could disadvantage some 
consumers who could receive certain disclosures later than they might 
otherwise under the single-billing-cycle exemption. However, the delay 
would generally be at most one billing cycle, and servicers generally 
are required to provide consumers the information in periodic 
statements on request. Thus, the Bureau does not expect that the 
overall effect on consumers will be significant.
    Potential specific impacts of the proposed rule. The Bureau 
believes that a large fraction of depository institutions and credit 
unions with $10 billion or less in total assets that are engaged in 
servicing mortgage loans qualify as ``small servicers'' for purposes of 
the mortgage servicing rules because they service 5,000 or fewer loans, 
all of which they or an affiliate own or originated. Small servicers 
are not subject to Regulation Z Sec.  1026.41, and so would not be 
affected by the amendments in this proposed rule.
    With respect to servicers that are not small servicers as defined 
in Sec.  1026.41(e)(4), the Bureau believes that the consideration of 
benefits and costs of covered persons presented above provides a 
largely accurate analysis of the impacts of the final rule on 
depository institutions and credit unions with $10 billion or less in 
total assets that are engaged in servicing mortgage loans.
    The Bureau has no reason to believe that the additional timing 
flexibility offered to covered persons by this proposed rule would 
differentially impact consumers in rural areas. The Bureau requests 
comment regarding the impact of the proposed provisions on consumers in 
rural areas and how those impacts may differ from those experienced by 
consumers generally.

VII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act,\14\ as amended by the Small 
Business Regulatory Enforcement Fairness Act of

[[Page 48468]]

1996,\15\ (RFA) requires each agency to consider the potential impact 
of its regulations on small entities, including small businesses, small 
governmental units, and small not-for-profit organizations.\16\ The RFA 
defines a ``small business'' as a business that meets the size standard 
developed by the Small Business Administration (SBA) pursuant to the 
Small Business Act.\17\
---------------------------------------------------------------------------

    \14\ Public Law 96-354, 94 Stat. 1164 (1980).
    \15\ Public Law 104-21, section 241, 110 Stat. 847, 864-65 
(1996).
    \16\ 5 U.S.C. 601 through 612. The term ```small organization' 
means any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition under notice and comment].'' 
5 U.S.C. 601(4). The term ```small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' 5 U.S.C. 601(5).
    \17\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consulting with the SBA and providing an 
opportunity for public comment. Id.
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and- comment 
rulemaking requirements, unless the agency certifies that the rule 
would not have a significant economic impact on a substantial number of 
small entities.\18\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small entity representatives prior to proposing a rule for which 
an IRFA is required.\19\
---------------------------------------------------------------------------

    \18\ 5 U.S.C. 601 et seq.
    \19\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    As discussed above, the proposed rule would amend certain 
Regulation Z mortgage servicing rules issued in 2016 relating to the 
timing for servicers to transition to providing modified or unmodified 
periodic statements and coupon books under Regulation Z in connection 
with a consumer's bankruptcy case.
    When it issued the proposed rule that was finalized as the 2016 
Mortgage Servicing Final Rule, the Bureau concluded that those 
provisions would not have a significant economic impact on a 
substantial number of small entities and that an IRFA was therefore not 
required.\20\ That conclusion remained unchanged for the 2016 Mortgage 
Servicing Final Rule.\21\
---------------------------------------------------------------------------

    \20\ 79 FR 74176, 74279 (Dec. 15, 2014).
    \21\ 81 FR 72160, 72364 (Oct. 19, 2016).
---------------------------------------------------------------------------

    Similarly, the Bureau concludes that this proposed rule, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities, and therefore an IRFA is not required. As 
discussed above, the Bureau believes that the proposed changes would 
not create a significant economic impact on any covered persons, 
including small entities. In addition, the proposed amendments would 
not affect servicers that are ``small servicers'' for purposes of the 
mortgage servicing rules. Small servicers are exempt from the 
requirements that the proposed rule would amend, and the Bureau 
believes that a large fraction of small entities that are engaged in 
servicing mortgage loans qualify as small servicers because they 
service 5,000 or fewer loans, all of which they or an affiliate own or 
originated. Therefore, an IRFA is not required for this proposal.
    Accordingly, the undersigned certifies that this proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau requests comment on the analysis 
above and requests any relevant data.

VIII. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\22\ Federal 
agencies are generally required to seek Office of Management and Budget 
(OMB) approval for information collection requirements prior to 
implementation. The collections of information related to the 2016 
Mortgage Servicing Final Rule have been reviewed and approved by OMB 
previously in accordance with the PRA and assigned OMB Control Numbers 
3170-0016 (Regulation X) and 3170-0015 (Regulation Z). Under the PRA, 
the Bureau may not conduct or sponsor and, notwithstanding any other 
provision of law, a person is not required to respond to an information 
collection unless the information collection displays a valid control 
number assigned by OMB.
---------------------------------------------------------------------------

    \22\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The Bureau has determined that this proposed rule would provide 
firms with additional flexibility and clarity with respect to what must 
be disclosed under the 2016 Mortgage Servicing Final Rule; therefore, 
it would have only minimal impact on the industry-wide aggregate PRA 
burden relative to the baseline. The Bureau welcomes comments on this 
determination or any other aspects of this proposal for purposes of the 
PRA. Comments should be submitted to the Bureau as instructed in the 
ADDRESSES part of this document and to the attention of the Paperwork 
Reduction Act Officer. All comments will become a matter of public 
record.

List of Subjects in 12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banking, Banks, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

Authority and Issuance

    For the reasons set forth in the preamble, the Consumer Financial 
Protection Bureau proposes to amend 12 CFR part 1026 as follows:

PART 1026--TRUTH IN LENDING (REGULATION Z)

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

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
2. Amend Sec.  1026.41 by:
0
a. Revising paragraph (e)(5)(iv)(B); and
0
b. Removing paragraph (e)(5)(iv)(C).
    The revisions read as follows:


Sec.  1026.41  Periodic statements for residential mortgage loans.

* * * * *
    (e) * * *
    (5) * * *
    (iv) * * *
    (B) Single-statement exemption. As of the date on which one of the 
events listed in paragraph (e)(5)(iv)(A) of this section occurs, a 
servicer is exempt from the requirements of this section with respect 
to the next periodic statement or coupon book that would otherwise be 
required but thereafter must provide modified or unmodified periodic 
statements or coupon books that comply with the requirements of this 
section.
* * * * *
0
3. Amend Supplement I to Part 1026 as follows:
0
a. Under Section 1026.41--Periodic Statements for Residential Mortgage 
Loans:
0
i. 41(e)(5)(iv)(B) Transitional single-billing-cycle exemption is 
revised; and
0
ii. 41(e)(5)(iv)(C) Timing of first modified or unmodified statement or 
coupon book after transition, is removed.
    The revisions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Section 1026.41--Periodic Statements for Residential Mortgage Loans

* * * * *
    41(e)(5)(iv)(B) Single-statement exemption.

[[Page 48469]]

    1. Timing. The exemption in Sec.  1026.41(e)(5)(iv)(B) applies 
with respect to a single periodic statement or coupon book following 
an event listed in Sec.  1026.41(e)(5)(iv)(A). For example, assume 
that a mortgage loan has a monthly billing cycle, each payment due 
date is on the first day of the month following its respective 
billing cycle, and each payment due date has a 15-day courtesy 
period. In this scenario:
    i. If an event listed in Sec.  1026.41(e)(5)(iv)(A) occurs on 
October 6, before the end of the 15-day courtesy period provided for 
the October 1 payment due date, and the servicer has not yet 
provided a periodic statement or coupon book for the billing cycle 
with a November 1 payment due date, the servicer is exempt from 
providing a periodic statement or coupon book for that billing 
cycle. The servicer is required thereafter to resume providing 
periodic statements or coupon books that comply with the 
requirements of Sec.  1026.41 by providing a modified or unmodified 
periodic statement or coupon book for the billing cycle with a 
December 1 payment due date within a reasonably prompt time after 
November 1 or the end of the 15-day courtesy period provided for the 
November 1 payment due date. See Sec.  1026.41(b).
    ii. If an event listed in Sec.  1026.41(e)(5)(iv)(A) occurs on 
October 20, after the end of the 15-day courtesy period provided for 
the October 1 payment due date, and the servicer timely provided a 
periodic statement or coupon book for the billing cycle with the 
November 1 payment due date, the servicer is not required to correct 
the periodic statement or coupon book already provided and is exempt 
from providing the next periodic statement or coupon book, which is 
the one that would otherwise be required for the billing cycle with 
a December 1 payment due date. The servicer is required thereafter 
to resume providing periodic statements or coupon books that comply 
with the requirements of Sec.  1026.41 by providing a modified or 
unmodified periodic statement or coupon book for the billing cycle 
with a January 1 payment due date within a reasonably prompt time 
after December 1 or the end of the 15-day courtesy period provided 
for the December 1 payment due date. See Sec.  1026.41(b).
    2. Duplicate coupon books not required. If a servicer provides a 
coupon book instead of a periodic statement under Sec.  
1026.41(e)(3), Sec.  1026.41 requires the servicer to provide a new 
coupon book after one of the events listed in Sec.  
1026.41(e)(5)(iv)(A) occurs only to the extent the servicer has not 
previously provided the consumer with a coupon book that covers the 
upcoming billing cycle.
    3. Subsequent triggering events. The single-statement exemption 
in Sec.  1026.41(e)(5)(iv)(B) might apply more than once over the 
life of a loan. For example, assume the exemption applies beginning 
on April 14 because the consumer files for bankruptcy on that date 
and the bankruptcy plan provides that the consumer will surrender 
the dwelling, such that the mortgage loan becomes subject to the 
requirements of Sec.  1026.41(f). See Sec.  1026.41(e)(5)(iv)(A)(1). 
If the consumer later exits bankruptcy on November 2 and has not 
discharged personal liability for the mortgage loan pursuant to 11 
U.S.C. 727, 1141, 1228, or 1328, such that the mortgage loan ceases 
to be subject to the requirements of Sec.  1026.41(f), the single-
statement exemption would apply again beginning on November 2. See 
Sec.  1026.41(e)(5)(iv)(A)(2).
* * * * *

    Dated: October 2, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-21907 Filed 10-17-17; 8:45 am]
 BILLING CODE 4810-AM-P