Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z), 10553-10559 [2018-04823]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 83, Number 48 (Monday, March 12, 2018)]
[Rules and Regulations]
[Pages 10553-10559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04823]



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Rules and Regulations
                                                Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
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under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 83, No. 48 / Monday, March 12, 2018 / Rules 
and Regulations

[[Page 10553]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

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


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

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this final rule amending certain Regulation Z mortgage 
servicing rules issued in 2016 relating to the timing for servicers to 
transition to providing modified or unmodified periodic statements and 
coupon books in connection with a consumer's bankruptcy case.

DATES: This rule is effective April 19, 2018.

FOR FURTHER INFORMATION CONTACT: Adam C. Mayle or Joel L. Singerman, 
Counsels; or Amanda Quester, Senior Counsel, Office of Regulations, at 
202-435-7700 or https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Summary of the Final Rule

    On August 4, 2016, the Bureau issued the Amendments to the 2013 
Mortgage Rules Under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z) (2016 
Mortgage Servicing Final Rule) amending certain of the Bureau's 
mortgage servicing rules.\1\ The Bureau learned, through its outreach 
in support of industry's implementation of the 2016 Mortgage Servicing 
Final Rule, that certain technical aspects of the rule relating to the 
timing for servicers to transition to providing modified or unmodified 
periodic statements and coupon books in connection with a consumer's 
bankruptcy case may create unintended challenges in implementation. To 
alleviate any unintended challenges, the Bureau issued a proposed rule 
on October 4, 2017, to address the timing provisions.\2\ The Bureau is 
now finalizing the proposed amendments without revision.
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    \1\ 81 FR 72160 (Oct. 19, 2016).
    \2\ 82 FR 48463 (Oct. 18, 2017).
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    Among other things, the 2016 Mortgage Servicing Final Rule 
addresses Regulation Z's periodic statement and coupon book 
requirements when a person is a debtor in bankruptcy.\3\ It includes a 
single-billing-cycle exemption from the requirement to provide a 
periodic statement or coupon book in certain circumstances after one of 
several specific triggering events occurs resulting in a servicer 
needing to transition to or from providing bankruptcy-specific 
disclosures. The single-billing-cycle exemption applies only if the 
payment due date for that billing cycle is no more than 14 days after 
the triggering event. The 2016 Mortgage Servicing Final Rule also 
includes specific timing requirements for servicers to provide the next 
modified or unmodified statement or coupon book after the single-
billing-cycle exemption has ended.
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    \3\ The provisions of Regulation Z discussed herein were amended 
by the 2016 Mortgage Servicing Final Rule but are not effective 
until April 19, 2018. To simplify review of this document and 
differentiate between those amendments and this final rule, this 
document generally refers to the 2016 amendments as though they 
already are in effect.
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    Based on feedback received regarding implementation of the 2016 
Mortgage Servicing Final Rule, the Bureau understands that certain 
aspects of the single-billing-cycle exemption and timing requirements 
may be more complex and operationally challenging than the Bureau 
realized, and that the relevant provisions may be subject to different 
interpretations, as discussed more below. The Bureau is therefore 
issuing this final rule revising Sec.  1026.41(e)(5)(iv)(B) and (C) and 
related commentary to replace the single-billing-cycle exemption with a 
single-statement exemption. This final rule provides a single-statement 
exemption for the next periodic statement or coupon book that a 
servicer would otherwise have to provide, regardless of when in the 
billing cycle the triggering event occurs. The Bureau is adding new 
comments 41(e)(5)(iv)(B)-1 through -3 to clarify the operation of the 
single-statement exemption. The Bureau is also removing Sec.  
1026.41(e)(5)(iv)(C) and its related commentary, as they are no longer 
necessary in light of the changes to Sec.  1026.41(e)(5)(iv)(B) and its 
related commentary.
    The Bureau believes this final rule provides a clearer and more 
straightforward standard than the timing requirement adopted in the 
2016 Mortgage Servicing Final Rule, offering greater certainty for 
implementation and compliance, without unnecessarily disadvantaging 
consumers.

II. Background

    In August 2016, the Bureau issued the 2016 Mortgage Servicing Final 
Rule, which amends certain of the Bureau's mortgage servicing rules in 
Regulations X and Z.\4\ Most of these amendments became effective 
October 19, 2017. Provisions relating to bankruptcy periodic statements 
and successors in interest become effective April 19, 2018.\5\
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    \4\ 81 FR 72160 (Oct. 19, 2016). The amendments cover nine major 
topics and focus primarily on clarifying, revising, or amending 
provisions regarding force-placed insurance notices, policies and 
procedures, early intervention, and loss mitigation requirements 
under Regulation X's servicing provisions; and prompt crediting and 
periodic statement requirements under Regulation Z's servicing 
provisions. The amendments also address proper compliance regarding 
certain servicing requirements when a person is a potential or 
confirmed successor in interest, is a debtor in bankruptcy, or sends 
a cease communication request under the Fair Debt Collection 
Practices Act.
    \5\ In June 2017, the Bureau issued policy guidance on its 
supervisory and enforcement priorities regarding early compliance 
with the 2016 Mortgage Servicing Final Rule. Policy Guidance on 
Supervisory and Enforcement Priorities Regarding Early Compliance 
With the 2016 Amendments to the 2013 Mortgage Rules Under the Real 
Estate Settlement Procedures Act (Regulation X) and the Truth in 
Lending Act (Regulation Z), 82 FR 29713 (June 30, 2017). The Bureau 
indicated in the guidance that it does not intend to take 
supervisory or enforcement action for violations of Regulation X or 
Regulation Z resulting from a servicer's compliance with the 2016 
Mortgage Servicing Final Rule occurring up to three days before the 
applicable effective dates. Id. at 29713.
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    Under existing Sec.  1026.41(a)(2) in Regulation Z, a servicer 
generally must provide a consumer, for each billing cycle, a periodic 
statement meeting certain requirements. Existing Sec.  1026.41(e)(5) 
provides a blanket

[[Page 10554]]

exemption from Sec.  1026.41 for a mortgage loan while a consumer is a 
debtor in bankruptcy under title 11 of the United States Code. The 2016 
Mortgage Servicing Final Rule, however, generally limits this exemption 
to only certain consumers in bankruptcy.\6\ When a consumer either is a 
debtor in bankruptcy under title 11 of the United States Code or has 
discharged personal liability for the mortgage loan pursuant to 11 
U.S.C. 727, 1141, 1228, or 1328, so long as an exemption under Sec.  
1026.41(e) does not otherwise apply, the 2016 Mortgage Servicing Final 
Rule requires a servicer to provide a periodic statement or coupon book 
with certain bankruptcy-specific modifications. In these circumstances, 
once a consumer enters bankruptcy, a servicer must transition from 
providing unmodified periodic statements or coupon books to providing 
periodic statements or coupon books with bankruptcy modifications. 
Similarly, when a consumer exits bankruptcy, a servicer generally must 
transition back to providing unmodified periodic statements or coupon 
books.
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    \6\ See Sec.  1026.41(e)(5)(i) (81 FR 72388-89, Oct. 19, 2016).
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    To allow servicers time to make this transition in their systems, 
the Bureau finalized a single-billing-cycle exemption in the 2016 
Mortgage Servicing Final Rule.\7\ Section 1026.41(e)(5)(iv)(B) in the 
2016 Mortgage Servicing Final Rule provides that a servicer is exempt 
from the requirements of Sec.  1026.41 with respect to a single billing 
cycle when the payment due date for that billing cycle is no more than 
14 days after the date on which one of the three triggering events 
listed under Sec.  1026.41(e)(5)(iv)(A) occurs: (1) A mortgage loan 
becomes subject to the requirement to provide a modified periodic 
statement; (2) a mortgage loan ceases to be subject to the requirement 
to provide a modified periodic statement; or (3) the servicer ceases to 
qualify for an exemption pursuant to Sec.  1026.41(e)(5)(i). Section 
1026.41(e)(5)(iv)(C) sets forth the timeframe within which a servicer 
must provide the next periodic statement after an event listed in Sec.  
1026.41(e)(5)(iv)(A) occurs.\8\
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    \7\ See generally 81 FR 72160, 72324-26 (Oct. 19, 2016).
    \8\ See Sec.  1026.41(e)(5)(iv)(C) (81 FR 72389, Oct. 19, 2016).
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    Since issuing the 2016 Mortgage Servicing Final Rule, the Bureau 
received questions indicating that the single-billing-cycle exemption 
may be more complex and operationally challenging than the Bureau 
realized, and that the provisions setting forth the exemption and 
transition timing requirements may be subject to different 
interpretations. The Bureau therefore proposed to replace the single-
billing-cycle exemption with a single-statement exemption, which the 
Bureau believed would be a clearer and more straightforward standard.

III. Summary of the Rulemaking Process

    The Bureau has supported implementation of the 2016 Mortgage 
Servicing Final Rule by providing an updated compliance guide, other 
implementation aids, a technical corrections final rule,\9\ an interim 
final rule related to timing for certain early intervention 
notices,\10\ policy guidance regarding early compliance,\11\ and 
informal guidance in response to regulatory inquiries. Information 
regarding the Bureau's implementation support initiative and available 
implementation resources can be found on the Bureau's regulatory 
implementation website at https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/mortserv/. The Bureau 
continues to facilitate industry's implementation progress, including 
by responding to informal guidance inquiries and publishing additional 
implementation materials, as appropriate. Based on its ongoing 
outreach, the Bureau believes that industry has made substantial 
implementation progress regarding the 2016 Mortgage Servicing Final 
Rule.
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    \9\ Amendments to the 2013 Mortgage Rules Under the Real Estate 
Settlement Procedures Act (Regulation X) and the Truth in Lending 
Act (Regulation Z); Correction, 82 FR 30947 (July 5, 2017).
    \10\ 82 FR 47953 (Oct. 16, 2017).
    \11\ Policy Guidance on Supervisory and Enforcement Priorities 
Regarding Early Compliance With the 2016 Amendments to the 2013 
Mortgage Rules Under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z), 82 FR 
29713 (June 30, 2017).
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    The Bureau also learned, through its outreach in support of 
industry's implementation of the 2016 Mortgage Servicing Final Rule, 
that certain technical aspects of the rule relating to the timing for 
servicers to transition to providing modified or unmodified periodic 
statements and coupon books in connection with a consumer's bankruptcy 
case may create unintended challenges in implementation. As a result, 
and to alleviate any unintended challenges, the Bureau issued a 
proposed rule on October 4, 2017, published in the Federal Register on 
October 18, 2017, to address the timing provisions.\12\ The comment 
period on the proposed rule ended on November 17, 2017. The Bureau 
received ten comments, including seven from industry trade 
associations, two from individual consumers, and one from consumer 
advocacy groups. As discussed in more detail below, the Bureau has 
considered these comments in adopting this final rule.
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    \12\ 82 FR 48463 (Oct. 18, 2017).
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IV. Legal Authority

    The Bureau is finalizing this rule pursuant to its authority under 
the Truth in Lending Act (TILA) \13\ and the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act),\14\ including the 
authorities discussed below. In general, the provisions in this final 
rule amend certain provisions previously adopted by the Bureau in the 
2016 Mortgage Servicing Final Rule. In doing so, the Bureau relied on 
one or more of the authorities discussed below, as well as other 
authority. The Bureau is issuing this final rule in reliance on the 
same authority and for the same reasons relied on in adopting the 
relevant provisions of the 2016 Mortgage Servicing Final Rule, as 
discussed in detail in the Legal Authority and Section-by-Section 
Analysis parts of the 2016 Mortgage Servicing Final Rule.
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    \13\ 15 U.S.C. 1601 et seq.
    \14\ Public Law 111-203, 124 Stat. 1376 (2010).
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A. TILA

    Section 105(a) of TILA, 15 U.S.C. 1604(a), authorizes the Bureau to 
prescribe regulations to carry out the purposes of TILA. Under section 
105(a), such regulations may contain such additional requirements, 
classifications, differentiations, or other provisions, and may provide 
for such adjustments and exceptions for all or any class of 
transactions, as in the judgment of the Bureau are necessary or proper 
to effectuate the purposes of TILA, to prevent circumvention or evasion 
thereof, or to facilitate compliance therewith. Under section 102(a), 
15 U.S.C. 1601(a), the purposes of TILA are to assure a meaningful 
disclosure of credit terms so that the consumer will be able to compare 
more readily the various available credit terms and avoid the 
uninformed use of credit and to protect the consumer against inaccurate 
and unfair credit billing practices. For the reasons discussed in this 
document, the Bureau is adopting these amendments to Regulation Z to 
carry out TILA's purposes and such additional requirements, 
adjustments, and exceptions as, in the Bureau's

[[Page 10555]]

judgment, are necessary and proper to carry out the purposes of TILA, 
prevent circumvention or evasion thereof, or to facilitate compliance 
therewith.
    Section 105(f) of TILA, 15 U.S.C. 1604(f), authorizes the Bureau to 
exempt from all or part of TILA any class of transactions if the Bureau 
determines that TILA coverage does not provide a meaningful benefit to 
consumers in the form of useful information or protection. For the 
reasons discussed herein, the Bureau is finalizing the amendments 
relating to exemptions for certain transactions from the requirements 
of TILA pursuant to its authority under section 105(f) of TILA.
    This final rule also includes amendments to the official Bureau 
commentary in Regulation Z. Good faith compliance with the 
interpretations would afford protection from liability under section 
130(f) of TILA.

B. The Dodd-Frank Act

    Section 1022(b)(1) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(1), 
authorizes the Bureau to prescribe rules ``as may be necessary or 
appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of the Federal consumer financial laws, and to 
prevent evasions thereof.'' TILA and title X of the Dodd-Frank Act are 
Federal consumer financial laws.
    Section 1032(a) of the Dodd-Frank Act, 12 U.S.C. 5532(a), provides 
that the Bureau ``may prescribe rules to ensure that the features of 
any consumer financial product or service, both initially and over the 
term of the product or service, are fully, accurately, and effectively 
disclosed to consumers in a manner that permits consumers to understand 
the costs, benefits, and risks associated with the product or service, 
in light of the facts and circumstances.'' The authority granted to the 
Bureau in section 1032(a) of the Dodd-Frank Act is broad and empowers 
the Bureau to prescribe rules regarding the disclosure of the 
``features'' of consumer financial products and services generally. 
Accordingly, the Bureau may prescribe rules containing disclosure 
requirements even if other Federal consumer financial laws do not 
specifically require disclosure of such features.
    Section 1032(c) of the Dodd-Frank Act, 12 U.S.C. 5532(c), provides 
that, in prescribing rules pursuant to section 1032 of the Dodd-Frank 
Act, the Bureau ``shall consider available evidence about consumer 
awareness, understanding of, and responses to disclosures or 
communications about the risks, costs, and benefits of consumer 
financial products or services.'' Accordingly, in proposing to amend 
provisions authorized under section 1032(a) of the Dodd-Frank Act, the 
Bureau has considered available studies, reports, and other evidence 
about consumer awareness, understanding of, and responses to 
disclosures or communications about the risks, costs, and benefits of 
consumer financial products or services.

V. Section-by-Section Analysis

Section 1026.41 Periodic Statements for Residential Mortgage Loans

41(e) Exemptions
41(e)(5) Certain Consumers in Bankruptcy
41(e)(5)(iv) Timing of Compliance Following Transition
    As finalized in the 2016 Mortgage Servicing Final Rule, Sec.  
1026.41(e)(5)(iv)(B) set forth a single-billing-cycle exemption from 
the requirement to provide a periodic statement or coupon book in 
certain circumstances after one of several specific triggering events 
occurs; and Sec.  1026.41(e)(5)(iv)(C) established timing requirements 
for resuming compliance after that exemption. The Bureau proposed to 
revise Sec.  1026.41(e)(5)(iv)(B) and related commentary, and to remove 
Sec.  1026.41(e)(5)(iv)(C) and related commentary. Instead of a single-
billing-cycle exemption, proposed Sec.  1026.41(e)(5)(iv)(B) would have 
provided a single-statement exemption for the next periodic statement 
or coupon book that a servicer would otherwise have to provide 
following a triggering event, regardless of when in the billing cycle 
the triggering event occurs. Proposed comments 41(e)(5)(iv)(B)-1 
through -3 would have clarified how the single-statement exemption 
would operate in specific circumstances. For the reasons discussed 
below, the Bureau is finalizing Sec.  1026.41(e)(5)(iv)(B) and related 
commentary as proposed, and is removing Sec.  1026.41(e)(5)(iv)(C) and 
related commentary, as proposed.
    The Bureau received ten comments on the proposal, including seven 
from industry trade associations, two from individual consumers, and 
one from consumer advocacy groups. All comments addressing the 
substance of the proposal supported replacing the single-billing-cycle 
exemption with the proposed single-statement exemption. Several 
industry trade association commenters stated that the proposed changes 
would simplify implementation or improve compliance. They stated, for 
example, that the proposed single-statement exemption was clearer and 
more straightforward than the single-billing-cycle exemption, or that 
the proposed single-statement exemption would vastly reduce the 
complexity of compliance. The consumer advocacy groups and two consumer 
commenters also expressed general support for the proposal. One 
industry trade association supporting the proposal also suggested that 
the Bureau clarify in commentary that a servicer would not violate 
proposed Sec.  1026.41(e)(5)(iv)(B) by providing a periodic statement 
or coupon book while the single-statement exemption applies, and that 
the servicer would not be required to correct such a statement. The 
Bureau also received several comments from industry trade associations 
that requested amendments to aspects of the periodic statement 
requirements other than the timing requirements addressed in the 
proposal, as discussed further below.
    The Bureau is adopting Sec.  1026.41(e)(5)(iv)(B) and related 
commentary as proposed. As finalized, Sec.  1026.41(e)(5)(iv)(B) 
provides that, as of the date on which one of the triggering events 
listed in Sec.  1026.41(e)(5)(iv)(A) occurs, a servicer is exempt from 
the requirements of Sec.  1026.41 with respect to the next periodic 
statement or coupon book that would otherwise be required but 
thereafter must provide modified or unmodified periodic statements or 
coupon books that comply with the requirements of this section. 
Comments 41(e)(5)(iv)(B)-1 through -3 describe how the single-statement 
exemption operates in specific circumstances. Comment 41(e)(5)(iv)(B)-1 
explains that the exemption applies with respect to a single periodic 
statement or coupon book following an event listed in Sec.  
1026.41(e)(5)(iv)(A) and provides two examples illustrating the timing. 
Both examples assume that a mortgage loan has a monthly billing cycle, 
each payment due date is on the first day of the month following its 
respective billing cycle, and each payment due date has a 15-day 
courtesy period.
    Comment 41(e)(5)(iv)(B)-1.i explains that, if an event listed in 
Sec.  1026.41(e)(5)(iv)(A) occurs on October 6, before the end of the 
15-day courtesy period provided for the October 1 payment due date, and 
the servicer has not yet provided a periodic statement or coupon book 
for the billing cycle with a November 1 payment due date, the servicer 
is exempt from providing a periodic statement or coupon book for that 
billing cycle. The servicer is required thereafter to resume providing 
periodic statements or coupon books that comply with the requirements 
of Sec.  1026.41 by providing a modified or unmodified periodic 
statement or

[[Page 10556]]

coupon book for the billing cycle with a December 1 payment due date 
within a reasonably prompt time after November 1 or the end of the 15-
day courtesy period provided for the November 1 payment due date.
    Comment 41(e)(5)(iv)(B)-1.ii provides an example for when a 
servicer already timely provided a periodic statement or coupon book 
for a billing cycle in which an event listed in Sec.  
1026.41(e)(5)(iv)(A) occurs. It provides that, if an event listed in 
Sec.  1026.41(e)(5)(iv)(A) occurs on October 20, after the end of the 
15-day courtesy period provided for the October 1 payment due date, and 
the servicer timely provided a periodic statement or coupon book for 
the billing cycle with a November 1 payment due date, the servicer is 
not required to correct the periodic statement or coupon book already 
provided and is exempt from providing the next periodic statement or 
coupon book, which is the one that would otherwise be required for the 
billing cycle with a December 1 payment due date. The servicer is 
required thereafter to resume providing periodic statements or coupon 
books that comply with the requirements of Sec.  1026.41 by providing a 
modified or unmodified periodic statement or coupon book for the 
billing cycle with a January 1 payment due date within a reasonably 
prompt time after December 1 or the end of the 15-day courtesy period 
provided for the December 1 payment due date.
    Because comments 41(e)(5)(iv)(B)-1.i and -1.ii describe when a 
servicer must provide periodic statements or coupon books following the 
exemption, Sec.  1026.41(e)(5)(iv)(C) and related commentary are 
unnecessary. The Bureau is removing Sec.  1026.41(e)(5)(iv)(C) and 
related commentary.
    The Bureau is also adopting as proposed comments 41(e)(5)(iv)(B)-2 
and -3 to clarify how the single-statement exemption would operate in 
additional specific circumstances. Comment 41(e)(5)(iv)(B)-2 states 
that, if a servicer provides a coupon book instead of a periodic 
statement under Sec.  1026.41(e)(3), Sec.  1026.41 requires the 
servicer to provide a new coupon book after one of the events listed in 
Sec.  1026.41(e)(5)(iv)(A) occurs only to the extent the servicer has 
not previously provided the consumer with a coupon book that covers the 
upcoming billing cycle. Comment 41(e)(5)(iv)(B)-3 clarifies that the 
single-statement exemption in Sec.  1026.41(e)(5)(iv)(B) might apply 
more than once over the life of a loan. For example, assume the 
exemption applies beginning on April 14 because the consumer files for 
bankruptcy on that date and the bankruptcy plan provides that the 
consumer will surrender the dwelling, such that the mortgage loan 
becomes subject to the requirements of Sec.  1026.41(f). If the 
consumer later exits bankruptcy on November 2 and has not discharged 
personal liability for the mortgage loan pursuant to 11 U.S.C. 727, 
1141, 1228, or 1328, such that the mortgage loan ceases to be subject 
to the requirements of Sec.  1026.41(f), the single-statement exemption 
would apply again beginning on November 2.
    The Bureau believes that these amendments will provide a clearer 
and more straightforward standard than the timing requirement finalized 
in the 2016 Mortgage Servicing Final Rule. The Bureau anticipates that 
the amendments will offer greater certainty for implementation and 
compliance, without unnecessarily disadvantaging consumers.
    The Bureau declines to adopt one commenter's recommendation to 
clarify in commentary that a servicer does not violate Sec.  
1026.41(e)(5)(iv)(B) by providing a periodic statement or coupon book 
while the single-statement exemption applies. This clarification is 
unnecessary because Regulation Z does not prohibit a servicer from 
providing a periodic statement or coupon book while the single-
statement exemption applies. The Bureau notes, however, that servicers 
choosing to provide a periodic statement or coupon book while an 
exemption applies should provide accurate disclosures and comply with 
other applicable laws. The Bureau also notes that Sec.  1026.41 does 
not prohibit servicers from adding language to a periodic statement or 
coupon book that may be helpful in limiting any potential liability.
    As stated above, the Bureau also received several comments from 
industry trade associations that requested amendments to aspects of the 
periodic statement requirements other than the timing requirements 
addressed in the proposal. For example, one industry trade association 
recommended expanding the small servicer exemption set forth in Sec.  
1024.41(e)(4). Another suggested that, when a consumer files a chapter 
12 or 13 bankruptcy case, the servicer should be exempt from providing 
bankruptcy-specific periodic statements or coupon books under Sec.  
1026.41(f) until the consumer's bankruptcy plan is confirmed. The 
Bureau's proposal did not address the small servicer exemption, nor did 
it raise the question whether the periodic-statement requirement should 
apply only after a plan is confirmed in chapter 12 or 13 bankruptcies. 
Because these comments are beyond the scope of the proposal, the Bureau 
declines to adopt their recommendations.
    One industry trade association also requested that the Bureau 
include language in the final rule that could help insulate a servicer 
that is unable to suppress a periodic statement when an exemption 
applies. The commenter stated that events triggering an exemption 
sometimes occur near-in-time to when a servicer is scheduled to provide 
the periodic statement. The commenter indicated that, because servicers 
sometimes do not learn of the triggering events in real-time, a 
servicer might provide a periodic statement containing inaccurate 
information. The commenter stated that this could be particularly 
problematic if the servicer provides a standard periodic statement to a 
consumer who has recently filed for bankruptcy, instead of a periodic 
statement containing bankruptcy-specific disclosures and disclaimers 
under Sec.  1026.41.
    This recommendation broaches issues beyond the narrow timing 
requirements addressed in the proposal, and the Bureau is not adopting 
it. To the extent servicers are concerned about exposure to liability 
for providing a periodic statement that becomes inaccurate before it 
reaches the consumer, the Bureau notes that Regulation Z does not 
prohibit a servicer from adding language that may be helpful in 
limiting any potential liability. Further, the Bureau learned during 
outreach before issuing the 2016 Mortgage Servicing Rule that servicers 
often learn of new bankruptcy filings, important case activity, and 
case closings quickly, usually within approximately a day.\15\ Although 
some servicers may manually review bankruptcy filings,\16\ which may 
take longer, the Bureau believes that a servicer would typically learn 
of a consumer's bankruptcy filing with enough time to suppress periodic 
statements and make use of the single-statement exemption.
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    \15\ See 81 FR 72160, 72317.
    \16\ See id.
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VI. Effective Date

    Regulation Z Sec.  1026.41(e)(5), as amended by the 2016 Mortgage 
Servicing Final Rule, becomes effective April 19, 2018, along with the 
rest of the Regulation Z bankruptcy-specific periodic statement 
requirements. Thus, the Bureau proposed an April 19, 2018, effective 
date for the proposed revisions to Sec.  1024.41(e)(5)(iv).
    One commenter requested that the Bureau postpone the effective date 
of all

[[Page 10557]]

the provisions relating to bankruptcy periodic statements in both the 
2016 Mortgage Servicing Final Rule and this final rule.\17\ This 
comment is beyond the scope of the proposal, and the Bureau did not 
receive any comments requesting that the Bureau extend the effective 
date of only the proposed revisions to Sec.  1024.41(e)(5)(iv).
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    \17\ After the close of the comment period, the Bureau received 
additional feedback related to the effective date of all the 
provisions relating to bankruptcy periodic statements in the 2016 
Mortgage Servicing Final Rule. As noted above, this feedback is 
beyond the scope of the proposal.
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    The Bureau is adopting, as proposed, an April 19, 2018, effective 
date for this final rule and believes that there is no need to delay 
the effective date of this final rule. The Bureau believes that the 
revisions to Sec.  1026.41(e)(5)(iv) would not require substantial 
reprogramming of systems by industry. The Bureau also believes it is 
issuing this final rule with sufficient time before the April 19, 2018, 
effective date to enable servicers to meet the requirements of the 
final rule.

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

    In developing this final rule, the Bureau considered the potential 
benefits, costs, and impacts as required by section 1022(b)(2) of the 
Dodd-Frank Act. Specifically, section 1022(b)(2) calls for the Bureau 
to consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
consumer access to consumer financial products or services, the impact 
on depository institutions and credit unions with $10 billion or less 
in total assets as described in section 1026 of the Dodd-Frank Act, and 
the impact on consumers in rural areas. In addition, 12 U.S.C. 
5512(b)(2)(B) directs the Bureau to consult, before and during the 
rulemaking, with appropriate prudential regulators or other Federal 
agencies, regarding consistency with the objectives those agencies 
administer. The Bureau consulted, or offered to consult with, the 
prudential regulators, the Securities and Exchange Commission, the 
Department of Housing and Urban Development (HUD), the HUD Office of 
Inspector General, the Federal Housing Finance Agency, the Federal 
Trade Commission, the Department of the Treasury, the Department of 
Agriculture, and the Department of Veterans Affairs, including 
regarding consistency with any prudential, market, or systemic 
objectives administered by these agencies.
    The Bureau previously considered the benefits, costs, and impacts 
of the 2016 Mortgage Servicing Final Rule's major provisions.\18\ The 
baseline \19\ for this discussion is the mortgage servicing market as 
it would exist ``but for'' this final rule; that is, the Bureau 
considered the benefits, costs, and impacts of this final rule on 
consumers and covered persons relative to the baseline established by 
the 2016 Mortgage Servicing Final Rule.
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    \18\ 81 FR 72160, 72351 (Oct. 19, 2016).
    \19\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits, 
costs, and impacts and an appropriate baseline.
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    In considering the relevant potential benefits, costs, and impacts 
of this final rule, the Bureau reviewed the comments received and has 
applied its knowledge and expertise concerning consumer financial 
markets. The discussion below of these potential costs, benefits, and 
impacts is qualitative, reflecting both the specialized nature of the 
final amendments and the fact that the 2016 Mortgage Servicing Final 
Rule, which establishes the baseline for the Bureau's analysis, is not 
yet in effect.
    The Bureau requested comment on the discussion of costs, benefits, 
and impacts in the preamble to the proposed rule as well as the 
submission of data or other information that could inform the Bureau's 
consideration of the potential benefits, costs, and impacts of this 
final rule. The Bureau did not receive any such comments, data, or 
other information.
    This final rule seeks to decrease burden incurred by industry 
participants by clarifying the timing requirements for certain 
disclosures required under the 2016 Mortgage Servicing Final Rule. As 
is described in more detail below, the Bureau does not believe that 
these changes will have a significant enough impact on consumers or 
covered persons to affect consumer access to consumer financial 
products and services.
    A mortgage servicer generally must provide a consumer, for each 
billing cycle, a periodic statement or coupon book meeting certain 
requirements. Under the 2016 Mortgage Servicing Final Rule, servicers 
generally must provide a modified periodic statement or coupon book to 
certain consumers who are debtors in bankruptcy or who have discharged 
personal liability for the mortgage loan. The Bureau is amending Sec.  
1026.41(e)(5)(iv), as proposed, to provide that, when a servicer must 
transition to sending either modified periodic statements or to sending 
unmodified periodic statements, the servicer is exempt from the 
requirements of Sec.  1026.41 with respect to the next periodic 
statement or coupon book that would otherwise be required but 
thereafter must provide modified or unmodified periodic statements or 
coupon books that comply with the requirements of Sec.  1026.41. This 
single-statement exemption replaces the single-billing-cycle exemption 
in the 2016 Mortgage Servicing Final Rule.
    The Bureau expects that these changes will reduce the cost to 
servicers of providing periodic statements. The Bureau understands, 
based on comments received in response to the proposed rule and through 
other industry outreach that implementing the single-billing-cycle 
exemption provided under the 2016 Mortgage Servicing Rule might have 
proved more complex and operationally challenging for servicers than 
the Bureau realized and believes that a single-statement exemption will 
be clearer and operationally easier to implement. In addition, the 
single-billing-cycle exemption would have applied only when the payment 
due date falls no more than 14 days after the event that triggers the 
transition to or from modified periodic statements, whereas the final 
single-statement exemption will apply to these transitions regardless 
of when during the billing cycle the triggering event occurs. The 
Bureau believes that servicers will benefit from the more 
straightforward single-statement exemption standard and from the 
additional time afforded for some transitions.
    Relative to the baseline established by the 2016 Mortgage Servicing 
Final Rule, the final rule could sometimes afford servicers a longer 
exemption than the standard provided in the 2016 Mortgage Servicing 
Final Rule. As a result, the final rule might extend the period of time 
some consumers go without receiving any periodic statement or coupon 
book, which could disadvantage those consumers. However, any such delay 
would generally be at most one billing cycle, and servicers generally 
are required to provide consumers the information in periodic 
statements on request. Thus, the Bureau does not expect that the 
overall effect on consumers will be significant, and there is no basis 
to believe that these changes will have a significant enough impact on 
consumers or covered persons to affect consumer access to consumer 
financial products and services.
    Potential specific impacts of the final rule. The Bureau believes 
that a large fraction of depository institutions and credit unions with 
$10 billion or less in total assets that are engaged in servicing 
mortgage loans qualify as ``small servicers'' for purposes of the 
mortgage

[[Page 10558]]

servicing rules because they service 5,000 or fewer loans, all of which 
they or an affiliate own or originated. The Bureau has estimated that 
96 percent of insured depositories and credit unions with $10 billion 
or less in total assets service 5,000 mortgage loans or fewer.\20\ 
Small servicers are not subject to Regulation Z Sec.  1026.41, and so 
are not affected by the amendments in this final rule.
---------------------------------------------------------------------------

    \20\ Based on an analysis of December 2015 Call Report data as 
compiled by SNL Financial.
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    With respect to servicers that are not small servicers as defined 
in Sec.  1026.41(e)(4), the Bureau believes that the consideration of 
benefits and costs of covered persons presented above provides an 
accurate analysis of the impacts of the final rule on depository 
institutions and credit unions with $10 billion or less in total assets 
that are engaged in servicing mortgage loans.
    The Bureau requested comment regarding the impact of the proposed 
provisions in rural areas and how those impacts may differ from those 
experienced by consumers generally. After careful consideration of the 
comments received and based on the Bureau's knowledge and expertise 
concerning consumer financial markets, the Bureau has no reason to 
believe that the additional timing flexibility offered to covered 
persons by this final rule will differentially impact consumers in 
rural areas.

VIII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act,\21\ as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996,\22\ (RFA) 
requires each agency to consider the potential impact of its 
regulations on small entities, including small businesses, small 
governmental units, and small not-for-profit organizations.\23\ The RFA 
defines a ``small business'' as a business that meets the size standard 
developed by the Small Business Administration (SBA) pursuant to the 
Small Business Act.\24\
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    \21\ Public Law 96-354, 94 Stat. 1164 (1980).
    \22\ Public Law 104-21, section 241, 110 Stat. 847, 864-65 
(1996).
    \23\ 5 U.S.C. 601 through 612. The term `` `small organization' 
means any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition under notice and comment].'' 
5 U.S.C. 601(4). The term `` `small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' 5 U.S.C. 601(5).
    \24\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consulting with the SBA and providing an 
opportunity for public comment. Id.
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and- comment 
rulemaking requirements, unless the agency certifies that the rule 
would not have a significant economic impact on a substantial number of 
small entities.\25\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small entity representatives prior to proposing a rule for which 
an IRFA is required.\26\
---------------------------------------------------------------------------

    \25\ 5 U.S.C. 601 et seq.
    \26\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    As discussed above, the final rule amends certain Regulation Z 
mortgage servicing rules issued in 2016 relating to the timing for 
servicers to transition to providing modified or unmodified periodic 
statements and coupon books under Regulation Z in connection with a 
consumer's bankruptcy case.
    When the Bureau issued the proposed rule that was finalized as the 
2016 Mortgage Servicing Final Rule, it concluded that those provisions 
would not have a significant economic impact on a substantial number of 
small entities and that an IRFA was therefore not required.\27\ That 
conclusion remained unchanged for the 2016 Mortgage Servicing Final 
Rule.\28\
---------------------------------------------------------------------------

    \27\ 79 FR 74176, 74279 (Dec. 15, 2014).
    \28\ 81 FR 72160, 72364 (Oct. 19, 2016).
---------------------------------------------------------------------------

    Similarly, when the Bureau issued the proposed rule in this 
rulemaking, it concluded that the proposal would not have a significant 
economic impact on a substantial number of small entities and that an 
IRFA was therefore not required.\29\ For the same reasons, the Bureau 
concludes that this final rule, as adopted, will not have a significant 
economic impact on a substantial number of small entities, and 
therefore a FRFA is not required. As discussed above, the Bureau 
expects that this final rule will reduce costs to servicers, including 
small entities, of providing periodic statements. In addition, the 
final amendments do not affect servicers that are ``small servicers'' 
for purposes of the mortgage servicing rules. Small servicers are 
exempt from the requirements that the final rule would amend, and the 
Bureau believes that a large fraction of small entities that are 
engaged in servicing mortgage loans qualify as small servicers because 
they service 5,000 or fewer loans, all of which they or an affiliate 
own or originated. Therefore, a FRFA is not required for this final 
rule.
---------------------------------------------------------------------------

    \29\ 82 FR 48463, 48468 (Oct. 18, 2017).
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    Accordingly, the undersigned certifies that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\30\ Federal 
agencies are generally required to seek Office of Management and Budget 
(OMB) approval for information collection requirements prior to 
implementation. Further, the Bureau may not conduct or sponsor an 
information collection unless the OMB approves the collection under the 
PRA and the information collection displays a currently valid OMB 
control number. Notwithstanding any other provision of law, no person 
is required to comply with, or is subject to penalty for failure to 
comply with, a collection of information if the collection instrument 
does not display a currently valid OMB control number. The collections 
of information related to the 2016 Mortgage Servicing Final Rule have 
been reviewed and approved by OMB previously in accordance with the PRA 
and assigned OMB Control Numbers 3170-0016 (Regulation X) and 3170-0015 
(Regulation Z).
---------------------------------------------------------------------------

    \30\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The Bureau has determined that this final rule will provide firms 
with additional flexibility and clarity with respect to what must be 
disclosed under the 2016 Mortgage Servicing Final Rule. It does not 
materially change the underlying information collections in terms of 
who is responding or when they must provide the disclosures. 
Additionally the Bureau believes this will have de minimis impact on 
the reported PRA burden for this collection.

X. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Bureau will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the rule's 
published effective date. The Office of Information and Regulatory 
Affairs has designated this rule as not a ``major rule'' as defined by 
5 U.S.C. 804(2).

List of Subjects in 12 CFR Part 1026

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

[[Page 10559]]

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 12 CFR 
part 1026 as follows:

PART 1026--TRUTH IN LENDING (REGULATION Z)

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

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

Subpart E--Special Rules for Certain Home Mortgage Transactions

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


Sec.  1026.41   Periodic statements for residential mortgage loans.

* * * * *
    (e) * * *
    (5) * * *
    (iv) * * *
    (B) Single-statement exemption. As of the date on which one of the 
events listed in paragraph (e)(5)(iv)(A) of this section occurs, a 
servicer is exempt from the requirements of this section with respect 
to the next periodic statement or coupon book that would otherwise be 
required but thereafter must provide modified or unmodified periodic 
statements or coupon books that comply with the requirements of this 
section.
* * * * *

0
3. Amend Supplement I to Part 1026 as follows:
0
a. Under Section 1026.41--Periodic Statements for Residential Mortgage 
Loans:
0
i. 41(e)(5)(iv)(B) Transitional single-billing-cycle exemption is 
revised; and
0
ii. 41(e)(5)(iv)(C) Timing of first modified or unmodified statement or 
coupon book after transition is removed.
    The revision reads as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Section 1026.41 Periodic Statements for Residential Mortgage Loans

* * * * *

41(e)(5)(iv)(B) Single-Statement Exemption.

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

    Dated: March 6, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-04823 Filed 3-9-18; 8:45 am]
 BILLING CODE 4810-AM-P