Home Mortgage Consumer Protection

RESPA: Rule Text

Text of Proposed Revisions

Certain conventions have been used to highlight the proposed changes to the text of the regulation and official interpretation. New language is shown inside ►bold-faced arrows◄, while language that would be deleted is set off with [bold-faced brackets]. In certain cases deemed appropriate by the Bureau to aid understanding, redesignated text, such as text moved from one paragraph to another, is also shown inside arrows and brackets.

List of Subjects in 12 CFR Part 1024

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

Authority and Issuance

For the reasons set forth above, the Bureau proposes to amend part 1024 of Chapter X in Title 1 of the Code of Federal Regulations as follows:

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

1. The authority citation for part 1024 is revised to read as follows:

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

2. Add subpart A to part 1024, titled “General” and consisting of §§ 1024.1 through 1024.5.

3. In § 1024.2:

a. Revise the definition of “Federally related mortgage loan” as follows:

Federally related mortgage loan [or mortgage loan] means as follows:

(1) Any loan (other than temporary financing, such as a construction loan):

(i) That is secured by a first or subordinate lien on residential real property, including a refinancing of any secured loan on residential real property upon which there is either:

(A) Located or, following settlement, will be constructed using proceeds of the loan, a structure or structures designed principally for occupancy of from one to four families (including individual units of condominiums and cooperatives and including any related interests, such as a share in the cooperative or right to occupancy of the unit); or

(B) Located or, following settlement, will be placed using proceeds of the loan, a manufactured home; and

(ii) For which one of the following paragraphs applies. The loan:

(A) Is made in whole or in part by any lender that is either regulated by or whose deposits or accounts are insured by any agency of the Federal Government;

(B) Is made in whole or in part, or is insured, guaranteed, supplemented, or assisted in any way:

(1) By the Secretary of the Department of Housing and Urban Development (HUD) or any other officer or agency of the Federal Government; or

(2) Under or in connection with a housing or urban development program administered by the Secretary of HUD or a housing or related program administered by any other officer or agency of the Federal Government;

(C) Is intended to be sold by the originating lender to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation (or its successors), or a financial institution from which the loan is to be purchased by the Federal Home Loan Mortgage Corporation (or its successors);

(D) Is made in whole or in part by a “creditor”, as defined in section 103(g) of the Consumer Credit Protection Act (15 U.S.C. 1602(g)), that makes or invests in residential real estate loans aggregating more than $1,000,000 per year. For purposes of this definition, the term “creditor” does not include any agency or instrumentality of any State, and the term “residential real estate loan” means any loan secured by residential real property, including single-family and multifamily residential property;

(E) Is originated either by a dealer or, if the obligation is to be assigned to any maker of mortgage loans specified in paragraphs (1)(ii) (A) through (D) of this definition, by a mortgage broker; or

(F) Is the subject of a home equity conversion mortgage, also frequently called a “reverse mortgage,” issued by any maker of mortgage loans specified in paragraphs (1)(ii) (A) through (D) of this definition.

(2) Any installment sales contract, land contract, or contract for deed on otherwise qualifying residential property is a federally related mortgage loan if the contract is funded in whole or in part by proceeds of a loan made by any maker of mortgage loans specified in paragraphs (1)(ii) (A) through (D) of this definition.

(3) If the residential real property securing a mortgage loan is not located in a State, the loan is not a federally related mortgage loan.

b. Revise the definition of “Mortgage broker” to read as follows:

Mortgage broker means a person (not an employee of a lender) or entity that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan, including such a person or entity that closes the loan in its own name in a table funded transaction. [A loan correspondent approved under HUD regulation 24 CFR 202.8 for Federal Housing Administration programs is a mortgage broker for purposes of this part.]

c. Revise the definition of “Origination service” to read as follows:

Origination service means any service involved in the creation of a ►federally related◄ mortgage loan, including but not limited to the taking of the loan application, loan processing, the underwriting and funding of the loan, and the processing and administrative services required to perform these functions.

d. Revise the definition of “Public Guidance Documents” to read as follows:

Public Guidance Documents means Federal Register documents adopted or published, that the Bureau may amend from time-to-time by publication in the Federal Register. These documents are also available from the Bureau [at the address indicated in § 1024.3]. ► Requests for copies of Public Guidance Documents should be directed to the Associate Director, Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street, NW, Washington, DC 20552.◄

e. Revise the definition of “Servicer” to read as follows:

Servicer means the person responsible for the servicing of a federally related mortgage loan (including the person who makes or holds such loan if such person also services the loan). The term does not include:

(1) The Federal Deposit Insurance Corporation (FDIC), in connection with assets acquired, assigned, sold, or transferred pursuant to section 13(c) of the Federal Deposit Insurance Act or as receiver or conservator of an insured depository institution; [and]

►(2) The National Credit Union Administration (NCUA), in connection with assets acquired, assigned, sold, or transferred pursuant to section 208 of the Federal Credit Union Act or as conservator or liquidating agent of an insured credit union; and◄

([2]►3◄) The Federal National Mortgage Corporation (FNMA); the Federal Home Loan Mortgage Corporation (Freddie Mac); the FDIC; HUD, including the Government National Mortgage Association (GNMA) and the Federal Housing Administration (FHA) (including cases in which a mortgage insured under the National Housing Act (12 U.S.C. 1701 et seq.) is assigned to HUD); the [National Credit Union Administration (]NCUA[)]; the Farm Service Agency; and the Department of Veterans Affairs (VA), in any case in which the assignment, sale, or transfer of the servicing of the ►federally related◄ mortgage loan is preceded by termination of the contract for servicing the loan for cause, commencement of proceedings for bankruptcy of the servicer, [or] commencement of proceedings by the FDIC for conservatorship or receivership of the servicer (or an entity by which the servicer is owned or controlled) ►, or commencement of proceedings by the NCUA for appointment of a conservator or liquidating agent of the servicer (or an entity by which the servicer is owned or controlled)◄.

f. Revise the definition of “Servicing” to read as follows:

Servicing means receiving any scheduled periodic payments from a borrower pursuant to the terms of any ►federally related◄ mortgage loan, including amounts for escrow accounts under section 10 of RESPA (12 U.S.C. 2609), and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract. In the case of a home equity conversion mortgage or reverse mortgage as referenced in this section, servicing includes making payments to the borrower.

4. Revise § 1024.3 to read as follows:

§ 1024.3 [Questions or suggestions from public and copies of public guidance documents] ►E-Sign applicability◄.

[Any questions or suggestions from the public regarding RESPA, or requests for copies of Public Guidance Documents, should be directed to the Associate Director, Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street, NW, Washington, DC 20006. Legal questions concerning the interpretation of this part may be directed to the same address.] ► The disclosures required by this part may be provided to a borrower in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).◄

5. In § 1024.4, revise paragraph (a)(1) to read as follows:

In § 1024.4, revise paragraph (a)(1) to read as follows:

(a) Rule, regulation or interpretation. (1) For purposes of sections 19(a) and (b) of RESPA (12 U.S.C. 2617(a) and (b)), only the following constitute a rule, regulation or interpretation of the Bureau:

(i) All provisions, including appendices ►and supplements◄, of this part. Any other document referred to in this part is not incorporated in this part unless it is specifically set out in this part;

(ii) Any other document that is published in the Federal Register by the Bureau and states that it is an “interpretation,” “interpretive rule,” “commentary,” or a “statement of policy” for purposes of section 19(a) of RESPA. [Such documents will be prepared by Bureau staff and counsel. Such documents may be revoked or amended by a subsequent document published in the Federal Register by the Bureau.] ►Except in unusual circumstances, interpretations will not be issued separately but will be incorporated in an official interpretation to this part, which will be amended periodically.◄

6. In § 1024.4, remove paragraph (b) and redesignate paragraph (c) as paragraph (b).

7. In § 1024.5(b)(7), revise as follows:

§ 1024.5 Coverage of RESPA.

* * * * *

(b) Exemptions.

* * *

(7) Secondary market transactions. A bona fide transfer of a loan obligation in the secondary market is not covered by RESPA and this part, except as set forth in section 6 of RESPA (12 U.S.C. 2605) and [§ 1024.21] ►Subpart C of this part (§§ 1024.30-1024.41)◄. In determining what constitutes a bona fide transfer, the Bureau will consider the real source of funding and the real interest of the funding lender. Mortgage broker transactions that are table-funded are not secondary market transactions. Neither the creation of a dealer loan or dealer consumer credit contract, nor the first assignment of such loan or contract to a lender, is a secondary market transaction (see § 1024.2).

8. In § 1024.7, revise paragraph (f)(3) as follows:

§ 1024.7 Good faith estimate.

* * * * *

(f) * * *

(3) Borrower-requested changes. If a borrower requests changes to the ►federally related◄ mortgage loan identified in the GFE that change the settlement charges or the terms of the loan, the loan originator may provide a revised GFE to the borrower. If a revised GFE is to be provided, the loan originator must do so within 3 business days of the borrower’s request. The revised GFE may increase charges for services listed on the GFE only to the extent that the borrower-requested changes to the mortgage loan identified on the GFE actually resulted in higher charges.

9. Amend § 1024.17 as follows.

a. Revise paragraph (c)(8) to read as follows:

§ 1024.17 Escrow accounts.

* * * * *

(c) * * *

(8) Provisions in ►federally related◄ mortgage documents. The servicer must examine the ►federally related◄ mortgage loan documents to determine the applicable cushion for each escrow account. If the ►federally related◄ mortgage loan documents provide for lower cushion limits, then the terms of the loan documents apply. Where the terms of any [mortgage loan] ►such◄ document allow greater payments to an escrow account than allowed by this section, then this section controls the applicable limits. Where [the mortgage loan] ►such◄ documents do not specifically establish an escrow account, whether a servicer may establish an escrow account for the loan is a matter for determination by other Federal or State law. If [the mortgage loan] ►such◄ document►s are◄ [is] silent on the escrow account limits and a servicer establishes an escrow account under other Federal or State law, then the limitations of this section apply unless applicable Federal or State law provides for a lower amount. If [the loan] ►such◄ documents provide for escrow accounts up to the RESPA limits, then the servicer may require the maximum amounts consistent with this section, unless an applicable Federal or State law sets a lesser amount.

b. Revise paragraph (f)(2)(ii) to read as follows:

§ 1024.17 Escrow accounts.

* * * * *

(f) * * *

(2) * * *

(ii) These provisions regarding surpluses apply if the borrower is current at the time of the escrow account analysis. A borrower is current if the servicer receives the borrower’s payments within 30 days of the payment due date. If the servicer does not receive the borrower’s payment within 30 days of the payment due date, then the servicer may retain the surplus in the escrow account pursuant to the terms of the ►federally related◄ mortgage loan documents.

c. Revise paragraph (f)(4)(iii) to read as follows:

§ 1024.17 Escrow accounts.

* * * * *

(f) * * *

(4) * * *

(iii) These provisions regarding deficiencies apply if the borrower is current at the time of the escrow account analysis. A borrower is current if the servicer receives the borrower’s payments within 30 days of the payment due date. If the servicer does not receive the borrower’s payment within 30 days of the payment due date, then the servicer may recover the deficiency pursuant to the terms of the ►federally related◄ mortgage loan documents.

d. Revise paragraph (i)(2) to read as follows:

§ 1024.17 Escrow accounts.

* * * * *

(i) * * *

(2) No annual statements in the case of default, foreclosure, or bankruptcy. This paragraph (i)(2) contains an exemption from the provisions of § 1024.17(i)(1). If at the time the servicer conducts the escrow account analysis the borrower is more than 30 days overdue, then the servicer is exempt from the requirements of submitting an annual escrow account statement to the borrower under § 1024.17(i). This exemption also applies in situations where the servicer has brought an action for foreclosure under the underlying ►federally related◄ mortgage loan, or where the borrower is in bankruptcy proceedings. If the servicer does not issue an annual statement pursuant to this exemption and the loan subsequently is reinstated or otherwise becomes current, the servicer shall provide a history of the account since the last annual statement (which may be longer than 1 year) within 90 days of the date the account became current.

e. Revise paragraph (i)(4)(iii) to read as follows:

§ 1024.17 Escrow accounts.

* * * * *

(i) * * *

(4) * * *

(iii) Short year statement upon loan payoff. If a borrower pays off a ►federally related◄ mortgage loan during the escrow account computation year, the servicer shall submit a short year statement to the borrower within 60 days after receiving the pay-off funds.

f. Add paragraph (k)(5) to read as follows:

§ 1024.17 Escrow accounts.

* * * * *

(k) * * *

►(5) Notwithstanding paragraphs (k)(1) and (k)(2) of this section, a servicer must make payments from a borrower’s escrow account in a timely manner to pay the premium charge on a borrower’s hazard insurance, as defined in § 1024.31, unless the servicer has a reasonable basis to believe that the borrower’s hazard insurance has been canceled or not renewed for reasons other than nonpayment of premium charges. If the borrower’s escrow account does not contain sufficient funds to pay the premium charge, the servicer must advance funds to make such payment.◄

g. Remove paragraph (l) and redesignate paragraph (m) as paragraph (l).

9. Add subpart B to part 1024, titled “Mortgage settlement and escrow accounts” and consisting of §§ 1024.6 through 1024.21.

10. Remove and reserve § 1024.21.

11. Remove § 1024.22.

12. Remove § 1024.23.

13. Add subpart C to part 1024, titled “Mortgage Servicing” to read as follows:

►Subpart C—Mortgage Servicing

1024.30 Scope

This subpart applies to any mortgage loan, as that term is defined in § 1024.31.

1024.31 Definitions. For purposes of this subpart:

Consumer reporting agency has the meaning set forth in section 603 of the Fair Credit Reporting Act, 15 U.S.C. 1681a.

Day means calendar day, except where legal public holidays, Saturdays, and Sundays are expressly excluded.

Hazard insurance means insurance on the property securing a mortgage loan that protects the property against loss caused by fire, wind, flood, earthquake, theft, falling objects, freezing, and other similar hazards for which the owner or assignee of such loan requires insurance.

Loss mitigation application means a submission from a borrower requesting evaluation for a loss mitigation option, as that term is defined in this section, in accordance with procedures established by the servicer for the submission of such requests.

Loss mitigation options means alternatives available from the servicer to the borrower to avoid foreclosure.

Master servicer means the owner of the right to perform servicing. A master servicer may perform the servicing itself or do so through a subservicer.

Mortgage loan means any federally related mortgage loan, as that term is defined in § 1024.2 subject to the exemptions in § 1024.5(b), but does not include open-end lines of credit (home equity plans).

Qualified written request means a written correspondence from the borrower to the servicer that enables the servicer to identify the name and account of the borrower, and either:

(1) States the reasons the borrower believes an error relating to the servicing of the loan has occurred; or

(2) Provides sufficient detail to the servicer regarding information relating to the servicing of the mortgage loan sought by the borrower.

Reverse mortgage transaction has the meaning set forth in 12 CFR 1026.33(a).

Service provider means any party retained by a servicer that interacts with a borrower or provides a service to a servicer for which a borrower may incur a fee.

Subservicer means a servicer who does not own the right to perform servicing, but who performs servicing on behalf of the master servicer.

Transferee servicer means a servicer who obtains or who will obtain the right to perform servicing pursuant to an agreement or understanding with the owner or assignee of a mortgage loan.

Transferor servicer means a servicer, including a table funding mortgage broker or dealer on a first lien dealer loan, who transfers or will transfer the right to perform servicing pursuant to an agreement or understanding with the owner or assignee of a mortgage loan.

1024.32 General disclosure requirements.

(a) Disclosure requirements.(1) Form of disclosures. Disclosures and notices required under this subpart must be clear and conspicuous, in writing, and in a form the consumer may keep, except as otherwise provided in this subpart. The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act, as set forth in § 1024.3. A servicer may use commonly accepted or readily understandable abbreviations in complying with the disclosure requirements of this subpart.

(2) Foreign language disclosures. Disclosures required under this subpart may be made in a language other than English, provided that the disclosures are made available in English upon the borrower’s request.

(b) Additional information; disclosures required by other laws. Nothing in this subpart shall be construed as prohibiting a servicer from including additional information with a disclosure required by applicable law. Nothing in this subpart shall be construed as prohibiting a servicer from combining disclosures required by other laws (such as the Truth in Lending Act (15 U.S.C. 1601 et seq.) or the Truth in Savings Act (12 U.S.C. 4301 et seq.)) or the terms of an agreement with a federal or state regulatory agency with the disclosures required by this subpart, unless such prohibition is expressly set forth in this subpart, applicable law, or the terms of an agreement with a federal or state regulatory agency.

1024.33 Mortgage servicing transfers.

(a) Servicing disclosure statement. Within 3 days (excluding legal public holidays, Saturdays, and Sundays) after a person applies for a reverse mortgage transaction, the lender, table funding mortgage broker, or dealer in a first lien dealer loan shall provide to the person a servicing disclosure statement that states whether the servicing of the reverse mortgage transaction may be assigned, sold, or transferred to any other person at any time. Appendix MS-1 of this part contains a model form for the disclosures required under this paragraph. If an application is denied credit within the 3-day period, a servicing disclosure statement is not required to be delivered.

(b) Notices of transfer of loan servicing. (1) Requirement for notice. Except as provided in this section, each transferor servicer and transferee servicer of any mortgage loan shall provide to the borrower a notice of transfer for any assignment, sale, or transfer of the servicing of the mortgage loan. The notice must contain the information described in paragraph (b)(4) of this section. Appendix MS-2 of this part contains a model form for the disclosures required under this paragraph.

(2) Certain transfers excluded. (i) The following transfers are not considered an assignment, sale, or transfer of mortgage loan servicing for purposes of this section if there is no change in the payee, address to which payment must be delivered, account number, or amount payment due:

(A) A transfer between affiliates;

(B) A transfer that results from mergers or acquisitions of servicers or subservicers; or

(C) A transfer that occurs between master servicers without changing the subservicer.

(ii) The Federal Housing Administration (FHA) is not required to provide to the borrower a notice of transfer where a mortgage insured under the National Housing Act is assigned to the FHA.

(3) Time of notice. (i) In general. Except as provided in paragraph (2)(ii) of this section, the transferor servicer shall provide the notice of transfer to the borrower not less than 15 days before the effective date of the transfer of the servicing of the mortgage loan. The transferee servicer shall provide the notice of transfer to the borrower not more than 15 days after the effective date of the transfer. The transferor and transferee servicers may provide a single notice, in which case the notice shall be provided not less than 15 days before the effective date of the transfer of the servicing of the mortgage loan.

(ii) Extended time. The notice of transfer shall be provided to the borrower by the transferor servicer or the transferee servicer not more than 30 days after the effective date of the transfer of the servicing of the mortgage loan in any case in which the transfer of servicing is preceded by:

(A) Termination of the contract for servicing the loan for cause;

(B) Commencement of proceedings for bankruptcy of the servicer;

(C) Commencement of proceedings by the FDIC for conservatorship or receivership of the servicer or an entity that owns or controls the servicer; or

(D) Commencement of proceedings by the NCUA for appointment of a conservator or liquidating agent of the servicer or an entity that owns or controls the servicer.

(4) Contents of notice. The notices of transfer shall include the following information:

(i) The effective date of the transfer of servicing;

(ii) The name, address, and a toll-free telephone number for an employee or department of the transferee servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;

(iii) The name, address, and a toll-free telephone number for an employee or department of the transferor servicer that can be contacted by the borrower to obtain answers to servicing transfer inquiries;

(iv) The date on which the transferor servicer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments. These dates shall either be the same or consecutive days;

(v) Whether the transfer will affect the terms or the continued availability of mortgage life or disability insurance, or any other type of optional insurance, and any action the borrower must take to maintain coverage; and

(vi) A statement that the transfer of servicing does not affect any term or condition of the mortgage loan other than terms directly related to the servicing of the loan.

(c) Borrower payments during transfer of servicing. (1) Payments not considered late. During the 60-day period beginning on the effective date of transfer of the servicing of any mortgage loan, if the transferor servicer (rather than the transferee servicer that should properly receive payment on the loan) receives payment on or before the applicable due date (including any grace period allowed under the mortgage loan instruments), a payment may not be treated as late for any purpose, except with respect to calculating the period of delinquency for purposes of § 1024.39.

(2) Treatment of payments. A transferor servicer shall promptly either (i) transfer a payment it has received incorrectly to the transferee servicer for application to a borrower’s mortgage loan account, or (ii) return the payment to the person that made the payment to the transferor servicer.

(d) Preemption of state laws. A lender who makes a mortgage loan or a servicer shall be considered to have complied with the provisions of any State law or regulation requiring notice to a borrower at the time of application for a loan or transfer of servicing of a loan if the lender or servicer complies with the requirements of this section. Any State law requiring notice to the borrower at the time of application or at the time of transfer of servicing of the loan is preempted, and there shall be no additional borrower disclosure requirements. Provisions of State law, such as those requiring additional notices to insurance companies or taxing authorities, are not preempted by section 6 of RESPA or this section, and this additional information may be added to a notice provided under this section, if permitted under State law.

1024.34 Timely payments by servicer.

(a) Timely escrow disbursements required. If the terms of a mortgage loan require the borrower to make payments to the servicer of the mortgage loan for deposit into an escrow account to pay taxes, insurance premiums, and other charges for the mortgaged property, the servicer shall make payments from the escrow account in a timely manner, that is, on or before the deadline to avoid a penalty, as governed by the requirements in § 1024.17(k).

(b) Refund of escrow balance. (1) In general. Within 20 days (excluding legal public holidays, Saturdays, and Sundays) of a borrower’s payment of a mortgage loan in full, any amounts remaining in the escrow account shall be returned to the borrower.

(2) Servicer may credit funds to a new escrow account. A servicer may credit funds in an escrow account balance to an escrow account for a new mortgage loan as of the date of the settlement of the new mortgage loan if the new mortgage loan is provided to the borrower by a lender that:

(i) Was also the lender to whom the prior mortgage loan was initially payable;

(ii) Is the owner or assignee of the prior mortgage loan; or

(iii) Uses the same servicer that serviced the prior mortgage loan to service the new mortgage loan.

1024.35 Error resolution procedures

(a) Notice of error. A servicer shall comply with the requirements of this section for any oral or written notice from the borrower that asserts a covered error and that includes the name of the borrower, information that enables the servicer to identify the borrower’s mortgage loan account, and the error the borrower believes has occurred. A notice on a payment coupon or other payment form supplied by the servicer need not be treated by the servicer as a notice of error. A qualified written request that asserts a covered error relating to the servicing of the mortgage loan is considered a notice of error and must comply with all requirements applicable to a notice of error.

(b) Scope of error resolution. For purposes of this section, the term “error” means the following categories of covered errors:

(1) Failure to accept a payment that conforms to the servicer’s written requirements for the borrower to follow in making payments;

(2) Failure to apply an accepted payment to principal, interest, escrow, or other charges under the terms of the mortgage loan and applicable law;

(3) Failure to credit a payment to a borrower’s mortgage loan account as of the date of receipt, where such failure has resulted in a charge to the consumer or the furnishing of negative information to a consumer reporting agency;

(4) Failure to pay taxes, insurance premiums, or other charges, including charges that the borrower and servicer have voluntarily agreed that the servicer should collect and pay, in a timely manner as required by § 1024.34(a), or to refund an escrow account balanced as required by § 1024.34(b);

(5) Imposition of a fee or charge that the servicer lacks a reasonable basis to impose upon the borrower;

(6) Failure to provide an accurate payoff balance amount upon a borrower’s request pursuant to 12 CFR 1026.36(c)(1)(iii);

(7) Failure to provide accurate information to a borrower for loss mitigation options and foreclosure, as required by §§ 1024.39 and 1024.40.

(8) Failure to accurately and timely transfer information relating to the servicing of a borrower’s mortgage loan account to a transferee servicer.

(9) Failure to suspend a scheduled foreclosure sale in the circumstances described in § 1024.41(g).

(c) Contact information for borrowers to assert errors. A servicer may, by notice provided to a borrower, establish a telephone number and address that a borrower must use to submit a notice of error in accordance with the procedures in this section. The notice shall include a statement that the borrower may assert an error by contacting the servicer through the telephone number or address established for that purpose. If a servicer designates a specific telephone number and address for receiving errors, a servicer shall designate the same telephone number and address for receiving information requests pursuant to § 1024.36(b) of this part. A servicer shall provide a notice to a borrower before any change in the telephone number or address used for receiving a notice of error.

(d) Acknowledgment of receipt. Within five days (excluding legal public holidays, Saturdays, and Sundays) of a servicer receiving a notice of an error from a borrower, the servicer shall provide to the borrower a response acknowledging receipt of the borrower’s notice of the asserted error.

(e) Response to notice of error. (1) Investigation and response requirements. (i) In general. A servicer must respond to a notice of error by either:

(A) Correcting the error identified by the borrower and providing the borrower with notification of the correction, the date of the correction, and contact information for further assistance; or

(B) Conducting a reasonable investigation and providing the borrower with a notification that includes a statement that the servicer has determined that no error occurred, a statement of the reason or reasons for this determination, a statement of the borrower’s right to request documents relied upon by the servicer in reaching its determination, information regarding how the borrower can request such documents, and contact information for further assistance.

(ii) Different or additional error. If during a reasonable investigation of a notice of error, a servicer concludes that an error occurred other than, or in addition to, the error alleged by the borrower, the servicer shall correct the error and provide the borrower with a notification that describes the error the servicer identified, the action taken to correct the error, the applicable date for the correction, and contact information for further assistance.

(2) Requesting information from borrower. A servicer may request supporting documentation from a borrower, but may not:

(i) Require a borrower to provide such information as a condition of investigating the alleged error; or

(ii) Determine that no error occurred because the borrower failed to provide any requested information without conducting a reasonable investigation pursuant to paragraph (e)(1)(i)(B) of this section.

(3) Time limits. (i) In general. A servicer must comply with the requirements of paragraph (e)(1) of this section:

(A) Not later than five days (excluding legal public holidays, Saturdays, and Sundays) after the servicer receives the asserted error, if a notice of error identifies an error in paragraph (b)(6) of this section;

(B) Prior to the date of a scheduled foreclosure sale or within 30 days (excluding legal public holidays, Saturdays, and Sundays) after the servicer receives the asserted error, whichever is earlier, if a notice of error identifies an error in paragraph (b)(9) of this section;

(C) For all other errors, not later than 30 days (excluding legal public holidays, Saturdays, and Sundays) after the servicer receives the asserted error.

(ii) Extension of time limits. The servicer may extend the time period for completing its investigation of a notice of error by an additional 15 days (excluding legal public holidays, Saturdays, and Sundays) if, before the end of the 30 day period set forth in paragraph (e)(3)(i)(C) of this section, the servicer notifies the borrower of the extension and the reasons for the extension. A servicer may not extend the time period for completing its investigation of an error identified in paragraphs (b)(6) or (b)(9) of this section.

(4) Copies of documentation. A servicer shall provide to the borrower, at no charge, copies of documents and information relied upon by the servicer in making its determination within 15 days (excluding legal public holidays, Saturdays, and Sundays) of receiving the borrower’s request for such documents.

(f) Alternative compliance. (1) Early correction. A servicer is not required to comply with paragraphs (d) and (e) of this section if the servicer corrects the error identified by the borrower within five days (excluding legal public holidays, Saturdays, and Sundays) of receiving the notice of error, and the borrower is notified of that correction in writing.

(2) Error asserted before foreclosure sale. A servicer is not required to comply with the requirements of paragraphs (d) and (e) of this section if the servicer receives a notice of an error in paragraph (b)(9) of this section seven days or less before a scheduled foreclosure sale, so long as prior to the scheduled foreclosure sale, the servicer responds to the borrower, orally or in writing, and corrects the error or states the reason the servicer has determined that no error has occurred.

(g) Requirements not applicable. (1) In general. A servicer is not required to comply with the requirements of paragraphs (d) and (e) of this section if the servicer reasonably determines that any of the following applies:

(i) Duplicative notice of error. An asserted error is substantially the same as an error previously asserted by the borrower for which the servicer has previously complied with its obligation to respond pursuant to paragraph (e)(1) of this section, unless the borrower provides new and material information to support the asserted error. New and material information means information that was not reviewed by the servicer in connection with investigating a prior notice of error and is reasonably likely to change a servicer’s prior determination about the error.

(ii) Overbroad or unduly burdensome notice of error. A notice of error is overbroad or unduly burdensome. A notice of error is overbroad if a servicer cannot reasonably determine from the notice of error the specific covered error that a borrower asserts has occurred on a borrower’s account. A notice of error is unduly burdensome if a diligent servicer could not respond to the notice of error without either exceeding the maximum timeframe permitted by paragraph (e)(3)(ii) of this section or incurring costs (or dedicating resources) that would be unreasonable in light of the circumstances. To the extent a servicer can identify a valid assertion of an error in a submission that is otherwise overbroad or unduly burdensome, the servicer shall comply with the requirements of paragraphs (d) and (e) of this section with respect to that asserted error.

(iii) Untimely notice of error. An error is untimely if the error is asserted more than one year after:

(A) Servicing for the mortgage loan that is the subject of asserted error was transferred from the servicer receiving the notice of error to a transferee servicer; or

(B) The mortgage loan amount was paid in full.

(2) Notice to borrower. A servicer shall notify the borrower of its determination that the servicer is not required to comply with the requirements of paragraphs (d) and (e) of this section in writing not later than five days (excluding legal public holidays, Saturdays, and Sundays) after making its determination. The notice to the borrower shall set forth the basis that is permitted under paragraph (g)(1) of this section upon which the servicer has made such determination.

(h) Payment requirements prohibited. A servicer shall not charge a fee, or require a borrower to make any payment that may be owed on a borrower’s account, as a condition of investigating and responding to a notice of error.

(i) Effect on servicer remedies. (1) Adverse information. After receipt of a notice of error, a servicer may not, for 60 days, furnish adverse information to any consumer reporting agency regarding any payment that is the subject of the notice of error.

(2) Remedies permitted. Except as set forth in this section with respect to an error identified in paragraph (b)(9) of this section, nothing in this section shall limit or restrict a lender or servicer from pursuing any remedy it has under applicable law, including initiating foreclosure or proceeding with a scheduled foreclosure sale.

1024.36 Requests for information.

(a) Information request. A servicer shall comply with the requirements of this section for any oral or written request for information (including a qualified written request for information related to the servicing of the mortgage loan) from a borrower that includes the name of the borrower, information that enables the servicer to identify the borrower’s mortgage loan account, and states the information the borrower is requesting with respect to the borrower’s mortgage loan. A request on a payment coupon or other payment form supplied by the servicer need not be treated by the servicer as a request for information. A qualified written request that requests information relating to the servicing of the mortgage loan is considered a request for information and must comply with all requirements applicable to a request for information.

(b) Contact information for borrowers to request information. A servicer may, by notice provided to a borrower, establish a telephone number and address that a borrower must use to request information in accordance with the procedures in this section. The notice shall include a statement that a borrower should request information by contacting the servicer through the telephone number or address established for that purpose. If a servicer designates a specific telephone number and address for receiving information requests, a servicer shall designate the same telephone number and address for receiving notices of error pursuant to § 1024.35(c) of this part. A servicer shall provide notice to a borrower before any change in the telephone number or address used for receiving an information request.

(c) Acknowledgment of receipt. Within five days (excluding legal public holidays, Saturdays, and Sundays) of a servicer receiving an information request from a borrower, the servicer shall provide to the borrower a response acknowledging receipt of the information request.

(d) Response to information request. (1) Investigation and response requirements. A servicer must respond to an information request by either:

(i) Providing the borrower with the requested information and contact information for further assistance either orally or in writing; or

(ii) Conducting a reasonable search for the requested information and providing the borrower with a notification that states that the servicer has determined that the requested information is not available to the servicer, provides the basis for the servicer’s determination, and provides contact information for further assistance.

(2) Time limits. (i) In general. A servicer must comply with the requirements of paragraph (d)(1) of this section:

(A) Not later than 10 days (excluding legal public holidays, Saturdays, and Sundays) after the servicer receives an information request for the identity of, and address or other relevant contact information for, the owner or assignee of a mortgage loan; and

(B) For all other information requests, not later than 30 days (excluding legal public holidays, Saturdays, and Sundays) after the servicer receives an information request.

(ii) Extension of time limit. For information requests governed by the time limit set forth in paragraph (d)(2)(i)(B) of this section, the servicer may extend the time period for completing its search for information by an additional 15 days (excluding legal public holidays, Saturdays, and Sundays) if, before the end of the 30 day period, the servicer notifies the borrower of the extension and the reasons for the extension.

(e) Alternative compliance. A servicer is not required to comply with paragraphs (c) and (d) of this section if the servicer provides the borrower with the information requested and contact information for further assistance within five days (excluding legal public holidays, Saturdays, and Sundays) of receiving an information request. A servicer may provide the borrower such information orally or in writing.

(f) Requirements not applicable. (1) In general. A servicer is not required to comply with the requirements of paragraphs (c) and (d) of this section if the servicer reasonably determines that any of the following applies:

(i) Duplicative information. A borrower requests information that is substantially the same as information previously requested by the borrower for which the servicer has previously complied with its obligation pursuant to paragraph (d)(1) of this section.

(ii) Confidential, proprietary, or general corporate information. The borrower requests confidential, proprietary, or general corporate information.

(iii) Irrelevant information. The borrower requests information that is not directly related to the borrower’s mortgage loan account.

(iv) Overbroad or unduly burdensome information request. An information request is overbroad or unduly burdensome. An information request is overbroad if a borrower requests a servicer provide an unreasonable volume of documents or information to a borrower. An information request is unduly burdensome if a diligent servicer could not respond to the information request without either exceeding maximum timeframe permitted by paragraph (d)(2)(ii) of this section or incurring costs (or dedicating resources) that would be unreasonable in light of the circumstances. To the extent a servicer can identify a valid information request in a submission that is otherwise overbroad or unduly burdensome, the servicer shall comply with the requirements of paragraphs (c) and (d) of this section with respect to that requested information.

(v) Untimely information request. An information request is delivered to a servicer more than one year after:

(A) Servicing for the mortgage loan that is the subject of the information request was transferred from the servicer receiving the request for information to a transferee servicer; or

(B) The mortgage loan amount was paid in full.

(2) Notice to borrower. A servicer shall notify the borrower of its determination that the servicer is not required to comply with the requirements of paragraphs (c) and (d) of this section in writing not later than five days (excluding legal public holidays, Saturdays, and Sundays) after making its determination. The notice to the borrower shall set forth the basis that is permitted under paragraph (f)(1) upon which the servicer has made such determination.

(g) Payment requirement limitations. (1) Fees prohibited. Except as set forth in paragraph (g)(2) of this section, a servicer may not charge a fee, or require a borrower to make any payment that may be owed on a borrower’s account, as a condition of responding to a valid information request.

(2) Fees permitted. Nothing in this section shall prohibit a servicer from charging a fee for providing a payoff statement or a beneficiary notice under applicable State law, if such fees are not otherwise prohibited by applicable law.

(h) Servicer remedies. Nothing in this section shall prohibit a servicer from furnishing adverse information to any consumer reporting agency or pursuing any of its remedies, including initiating foreclosure or proceeding with a scheduled foreclosure sale, allowed by the underlying mortgage loan instruments, during the time period that response to an information request notice is outstanding.

1024.37 Force-Placed Insurance.

(a) Definition of force-placed insurance. (1) In general. For the purposes of this section, the term “force-placed insurance” means hazard insurance obtained by a servicer on behalf of the owner or assignee of a mortgage loan on a property securing such loan.

(2) Types of insurance not considered force-placed insurance. The following insurance does not constitute “force-placed insurance” under this section:

(i) Hazard insurance to protect against flood loss obtained by a servicer as required by the Flood Disaster Protection Act of 1973.

(ii) Hazard insurance obtained by a borrower but renewed by the borrower’s servicer as required by § 1024.17(k)(1), (k)(2), or (k)(5).

(iii) Hazard insurance obtained by the borrower but renewed by the servicer at its discretion if the servicer is not required to renew the borrower’s hazard insurance as required by § 1024.17(k)(1), (k)(2), or (k)(5).

(b) Basis for obtaining force-placed insurance. A servicer may not obtain force-placed insurance unless the servicer has a reasonable basis to believe that the borrower has failed to comply with the mortgage loan contract’s requirement to maintain hazard insurance.

(c) Requirements for charging borrower for force-placed insurance. (1) In general. A servicer may not charge a borrower for force-placed insurance unless:

(i) The servicer delivers to the borrower or places in the mail a written notice with the disclosures set forth in paragraph (c)(2) of this section at least 45 days before the premium charge or any fee is assessed;

(ii) The servicer delivers to the borrower or places in the mail a written notice in accordance with paragraph (d)(1) of this section; and

(iii) During the 45-day notice period, the servicer has not received verification that the borrower has hazard insurance in place continuously. Determining whether the borrower has hazard insurance in place continuously shall take account of any grace period provided under State or other applicable law.

(2) Content of notice. The notice required under paragraph (c)(1)(i) of this section shall include the following:

(i) The date of the notice;

(ii) The servicer’s name and mailing address;

(iii) The borrower’s name and mailing address;

(iv) A statement that requests the borrower to provide hazard insurance information for the borrower’s property and identifies the property by its address;

(v) A statement that the borrower’s hazard insurance is expiring or expired, as applicable, and that the servicer does not have evidence that the borrower has hazard insurance coverage past the expiration date. For a borrower who has obtained more than one type of hazard insurance on the property, the servicer must identify the type of hazard insurance for which the servicer lacks evidence of coverage;

(vi) A statement that:

(A) Hazard insurance is required on the borrower’s property; and

(B) The servicer has obtained or will obtain, as applicable, insurance at the borrower’s expense;

(vii) A statement requesting the borrower to promptly provide the servicer with the insurance policy number, and the name, mailing address and phone number of the borrower’s insurance company or the borrower’s insurance agent;

(viii) A description of how the borrower may provide the information requested pursuant to paragraph (c)(2)(vii) of this section. A servicer that will only accept the requested information in writing must disclose that fact in the notice;

(ix) The cost of the force-placed insurance, stated as an annual premium. If the cost of the force-placed insurance is not known as of the date of the disclosure, a good faith estimate shall be disclosed and be identified as such;

(x) A statement that insurance the servicer obtains may:

(A) Cost significantly more than hazard insurance obtained by the borrower; and

(B) Not provide as much coverage as hazard insurance obtained by the borrower; and

(xi) The servicer’s telephone number for borrower questions.

(3) Format. The disclosures set forth in paragraph (c)(2) of this section must be in a format substantially similar to form MS-3(A), set forth in Appendix MS-3 of this part. Disclosures made pursuant to paragraphs (c)(2)(vi) and (c)(2)(ix) of this section must be in bold text. Disclosure made pursuant to paragraph (c)(2)(iv) of this section must be in bold text, except that the physical address of the borrower’s property may be in regular text.

(d) Reminder notice. (1) In general. One written notice in addition to the written notice required pursuant to paragraph (c)(1)(i) of this section must be delivered to the borrower or placed in the mail prior to the servicer charging a borrower for force-placed insurance. The servicer may not deliver to the borrower or place the written notice required pursuant to this paragraph (d)(1) in the mail until 30 days after delivering to the borrower or placing in the mail the written notice set forth in paragraph (c)(1)(i) of this section. A servicer that receives no insurance information after delivering to the borrower or placing in the mail the written notice set forth in paragraph (c)(1)(i) of this section must provide the disclosures set forth in paragraph (d)(2)(i) of this section. A servicer that receives insurance information after delivering to the borrower or placing in the mail the written notice set forth in paragraph (c)(1)(i) of this section but does not receive verification that the borrower has hazard insurance in place continuously must provide the disclosures set forth in paragraph (d)(2)(ii) of this section.

(2) Content of the reminder notice. (i) Servicer receiving no insurance information. A servicer that has not received any insurance information after delivering to the borrower or placing in the mail the written notice set forth paragraph (c)(1)(i) of this section must provide a written notice that shall include the following:

(A) The date of the notice;

(B) A statement that the notice is the second and final notice; and

(C) The disclosures set forth in paragraphs (c)(2)(ii) to (c)(2)(xi) of this section.

(ii) Servicer not receiving verification of continuous coverage. A servicer that has received insurance information after delivering to the borrower or placing in the mail the written notice required pursuant to paragraph (c)(1)(i) of this section, but not verification that the borrower has hazard insurance in place continuously, must deliver or place in the mail a written notice that shall include the following:

(A) The date of the notice;

(B) A statement that the notice is the second and final notice;

(C) The disclosures set forth in paragraphs (c)(2)(ii), (c)(2)(iii), (c)(2)(iv), and (c)(2)(xi) of this section;

(D) A statement that the servicer has received the hazard insurance information that the borrower provided;

(E) A statement that indicates to the borrower that the servicer is unable to verify that the borrower has hazard insurance in place continuously; and

(F) A statement that the borrower will be charged for insurance the servicer obtains for the period of time where the servicer is unable to verify hazard insurance coverage unless the borrower provides the servicer with hazard insurance information for such period.

(3) Format. The disclosures set forth in paragraph (d)(2)(i) of this section must be in a format substantially similar to form MS-3(B), and the disclosures set forth in paragraph (d)(2)(ii) of this section must be in a format be substantially similar to form MS-3(C). Both MS-3(B) and MS-3(C) are set forth in Appendix MS-3 of this part. Disclosures required by paragraphs (d)(2)(i)(B), (d)(2)(ii)(B), and (d)(2)(ii)(F) of this section must be in bold text.

(4) Updating notice with borrower information. If a servicer receives hazard insurance information from a borrower after a written notice required pursuant to paragraph (d)(1) of this section has been put into production, the servicer is not required to update the notice so long as the notice was put into production within a reasonable time prior to the servicer delivering the notice to the borrower or placing the notice in the mail.

(e) Renewal or replacing force-placed insurance. (1) In general. A servicer may not charge a borrower for renewing or replacing existing force-placed insurance unless:

(i) The servicer delivers or places in the mail a written notice to the borrower with the disclosures set forth in paragraph (e)(2) of this section at least 45 days before the premium charge or any fee is assessed; and

(ii) During the 45-day notice period, the servicer has not received evidence that the borrower has obtained hazard insurance.

(iii) Charging a borrower before end of notice period. Notwithstanding paragraphs (e)(1)(i) and (e)(1)(ii) of this section, a servicer that has renewed or replaced existing force-placed insurance during the 45-day notice period may charge the borrower for the renewal or replacement promptly after the servicer receives verification that hazard insurance obtained by the borrower did not provide the borrower with insurance coverage for any period of time following the expiration of the existing force-placed insurance.

(2) Content of renewal notice. A servicer must provide the following information in the notice required under paragraph (e)(1) of this section:

(i) The date of the notice;

(ii) The servicer’s name and mailing address;

(iii) The borrower’s name and mailing address;

(iv) A statement that requests the borrower to update the hazard insurance information for the borrower’s property and identifies the borrower’s property by its address;

(v) A statement that the servicer previously obtained insurance on the borrower’s property and assessed the cost of the insurance to the borrower because the servicer did not have evidence that the borrower had hazard insurance coverage for the property;

(vi) A statement that:

(A) The insurance the servicer obtained previously has expired or is expiring, as applicable; and

(B) Because hazard insurance is required on the borrower’s property, the servicer has the right to maintain insurance on the property by renewing or replacing the insurance it previously obtained;

(vii) The cost of the force-placed insurance, stated as an annual premium. If the cost of the force-placed insurance is not known as of the date of the disclosure, a good faith estimate shall be disclosed and be identified as such;

(viii) A statement reminding the borrower that insurance the servicer obtains may:

(A) Cost significantly more than hazard insurance obtained by the borrower; and

(B) Not provide as much coverage as hazard insurance obtained by the borrower.

(ix) A statement that if the borrower obtains hazard insurance, the borrower should promptly provide the servicer with the insurance policy number, and the name, mailing address and phone number of the borrower’s insurance company or the borrower’s insurance agent.

(x) A description of how the borrower may provide the information requested pursuant to paragraph (e)(2)(ix) of this section. A servicer that will only accept the requested information in writing must disclose that fact in the notice; and

(xi) The servicer’s telephone number for borrower questions.

(3) Format. The disclosures set forth in paragraph (e)(2) of this section must be in a format substantially similar to form MS-3(D), set forth in Appendix MS-3 to this part. Disclosures made pursuant to paragraphs (e)(2)(vi)(B) and (e)(2)(vii) of this section must be in bold text. Disclosures made pursuant to paragraph (e)(2)(iv) of this section must be in bold text, except that the physical address of the property may be in regular text.

(4) Compliance. Before the first anniversary of a servicer obtaining force-placed insurance on a borrower’s property, the servicer shall deliver to the borrower or place in the mail the notice required by paragraph (e)(1) of this section. Subsequently, a servicer is not required to comply with paragraph (e)(1) of this section before charging a borrower for renewing or replacing existing force-placed insurance more than once every 12 months.

(f) Mailing the notices. If a servicer mails a notice required pursuant to paragraphs (c)(1)(i), (d)(1) and (e)(1) of this section, as applicable, the servicer must use a class of mail not less than first-class mail.

(g) Cancellation of force-placed insurance. Within 15 days of receiving verification that the borrower has hazard insurance in place, a servicer must:

(1) Cancel force-placed insurance obtained for a borrower’s property; and

(2) For any period during which the borrower’s hazard insurance was in place, refund to the borrower all force-placed insurance premium charges and related fees paid by the borrower for such period and remove from the borrower’s account all force-placed insurance charges and related fees for such period that the servicer has assessed to the borrower.

(i) Limitations on force-placed insurance charges. (1) In general. Except for charges subject to State regulation as the business of insurance and charges authorized by the Flood Disaster Protection Act of 1973, all charges related to force-placed insurance assessed to a borrower by or through the servicer must be bona fide and reasonable.

(2) Bona fide and reasonable charge. A bona fide and reasonable charge is a charge for a service actually performed that bears a reasonable relationship to the servicer’s cost of providing the service, and is not otherwise prohibited by applicable law.

(j) Relationship to Flood Disaster Protection Act of 1973. If permitted by regulation under section 102(e) of the Flood Disaster Protection Act of 1973, a servicer subject to the requirements of this section may deliver to the borrower or place in the mail any notice required by this section together with the notice required by section 102(e) of the Flood Disaster Protection Act of 1973.

1024.38 Reasonable information management policies and procedures

(a) In general. (1) Reasonable policies and procedures. A servicer shall establish reasonable policies and procedures for maintaining and managing information and documents related to borrower mortgage loan accounts. A servicer meets this requirement if:

(i) The servicer’s policies and procedures are reasonably designed to achieve the objectives set forth in paragraph (b) of this section; and

(ii) The servicer’s policies and procedures are reasonably designed to ensure compliance with the standard requirements in paragraph (c) of this section.

(2) Safe harbor. A servicer satisfies the requirements in this section if it does not engage in a pattern or practice of failing to achieve any of the objectives set forth in paragraph (b) of this section and does not engage in a pattern or practice of failing to comply with any of the standard requirements in paragraph (c) of this section.

(b) Objectives. (1) Accessing and providing accurate information.

(i) Provide accurate and timely disclosures to borrowers as required by this subpart or other applicable law;

(ii) Investigate, respond to, and, as appropriate, correct errors asserted by borrowers in accordance with the procedures set forth in § 1024.35, including asserted errors resulting from actions of service providers;

(iii) Provide borrowers with accurate and timely information and documents in response to borrower requests made in accordance with the procedures set forth in § 1024.36;

(iv) Provide owners or assignees of mortgage loans with accurate and current information and documents about any mortgage loans they own; and

(v) Submit documents or filings required for a foreclosure process, including documents or filings required by a court of competent jurisdiction, that reflect accurate and current information and that comply with applicable law.

(2) Evaluating loss mitigation options. (i) Provide accurate information regarding loss mitigation options available to borrowers pursuant to §§ 1024.39 and 1024.40;

(ii) Identify all loss mitigation options for which a borrower may be eligible pursuant to any requirements imposed by an owner or assignee of a mortgage loan;

(iii) Provide prompt access to all documents and information submitted by a borrower in connection with a loss mitigation option to servicer personnel that are assigned to assist the borrower pursuant to § 1024.40;

(iv) Identify documents and information that a borrower is required to submit to make a loss mitigation application complete so that prompt notice of such requirements can be provided to the borrower pursuant to § 1024.41(b)(2); and

(v) Evaluate loss mitigation applications, and any appeals, pursuant to the requirements in § 1024.41.

(3) Facilitating oversight of, and compliance by, service providers. (i) Provide appropriate servicer personnel with access to accurate and current documents and information reflecting actions performed by service providers;

(ii) Facilitate periodic reviews of service providers, including by providing appropriate servicer personnel with documents and information necessary to audit compliance by service providers with the servicer’s contractual obligations and applicable law; and

(iii) Facilitate the sharing of accurate and current information regarding the status of an evaluation of a borrower’s completed loss mitigation application and the status of any foreclosure proceeding among servicer personnel assigned to a borrower pursuant to § 1024.40 and service providers responsible for handling foreclosure proceedings.

(4) Facilitating servicing transfers. Timely transfer all information and documents relating to a transferred mortgage loan to a transferee servicer in a form and manner that ensures the accuracy of the information and documents transferred and that enables a transferee servicer to comply with the requirements of this subpart and the terms of the transferee servicer’s contractual obligation to the owner or assignee of the mortgage loan. Such information and documents shall include any information reflecting the current status of discussions with a borrower regarding loss mitigation options, any agreements entered into with a borrower on a loss mitigation option, and any analysis by a servicer with respect to potential recovery from a non-performing mortgage loan, as appropriate.

(c) Standard requirements. (1) Record retention. A servicer shall retain records that document actions taken by the servicer with respect to a borrower’s mortgage loan account until one year after the date a mortgage loan is discharged or servicing of a mortgage loan is transferred by the servicer to a transferee servicer.

(2) Servicing file. A servicer shall provide a borrower with a servicing file upon request in accordance with the procedures set forth in § 1024.36. The servicing file shall contain:

(i) A schedule of all payments credited or debited to the mortgage loan account, including any escrow account as defined in § 1024.17(b) and any suspense account;

(ii) A copy of the borrower’s mortgage note;

(iii) A copy of the borrower’s deed of trust;

(iv) Any collection notes created by servicer personnel reflecting communications with borrowers about the mortgage loan account;

(v) A report of any data fields relating to a borrower’s mortgage loan account created by a servicer’s electronic systems in connection with collection practices, including records of automatically or manually dialed telephonic communications; and

(vi) Copies of any information or documents provided by a borrower to a servicer in accordance with the procedures set forth in §§ 1024.35 or 1024.41.

1024.39 Early intervention requirements for certain borrowers

(a) Oral notice. If a borrower is late in making a payment sufficient to cover principal, interest, and, if applicable, escrow for a given billing cycle, a servicer shall notify or make good faith efforts to notify the borrower orally not later than 30 days after the payment due date that the borrower is late and that loss mitigation options, if applicable, may be available. If the servicer attempts to notify the borrower by telephone, good faith efforts require calling the borrower on at least three separate days in order to reach the borrower. A servicer is not required to notify or make good faith efforts to notify the borrower under this paragraph if the borrower makes the payment within 30 days after the payment due date.

(b) Written notice. (1) In general. If a borrower is late in making a payment sufficient to cover principal, interest, and, if applicable, escrow for a given billing cycle, a servicer shall provide to the borrower a written notice that complies with paragraph (b)(2) of this section not later than 40 days after the payment due date. A servicer is not required to provide the written notice if the borrower makes the payment within 40 days after the payment due date. A servicer is not required to provide the written notice more than once during any 180-day period.

(2) Content of the written notice. The notice required by paragraph (b)(1) of this section shall include:

(i) A statement encouraging the borrower to contact the servicer;

(ii) The servicer’s mailing address and telephone number;

(iii) A statement, if applicable, providing a brief description of loss mitigation options that may be available from the servicer;

(iv) A statement, if applicable, informing the borrower how to obtain more information about loss mitigation options from the servicer;

(v) A statement explaining that foreclosure is a legal process to end the borrower’s ownership of the property and an estimate, expressed in a number of days from the date of a missed payment, of when the servicer makes the referral to foreclosure; and

(vi) The website address, if applicable, and telephone number to access:

(A) Any State housing finance authority (as defined in section 1301 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989) for the State in which the borrower’s property is located; and

(B) Either the Bureau list of homeownership counselors or counseling organizations or the HUD list of homeownership counselors or counseling organizations.

(3) Model clauses. Model Clauses MS-4(A), MS-4(B), MS-4(C), MS-4(D), and MS-4(E) in Appendix MS-4 to this part may be used to comply with the requirements of paragraphs (b)(1) and (b)(2) of this section.

1024.40 Continuity of contact

(a) Continuity of contact requirements. (1) In general. No later than five days after a servicer has notified or made a good faith effort to notify a borrower as required by § 1024.39(a), the servicer must assign personnel to respond to the borrower’s inquiries, and as applicable, assist the borrower with loss mitigation options. If a borrower has been assigned personnel as required by this paragraph and the assignment has not ended when servicing for borrower’s mortgage loan has transferred to a transferee servicer, subject to paragraphs (c)(1)-(c)(4) of this section, the transferee servicer must assign personnel to respond to the borrower’s inquiries, and as applicable, assist the borrower with loss mitigation options, within reasonable time of the transfer of servicing for the borrower’s mortgage loan.

(2) Access to assigned personnel. A servicer shall make access to the assigned personnel available via telephone. If a borrower contacts the servicer and does not receive a live response from the assigned personnel, the borrower must be able to record his or her contact information. The servicer must respond to the borrower within a reasonable time.

(b) Functions of servicer personnel. (1) Reasonable policies and procedures. A servicer shall establish policies and procedures reasonably designed to ensure the servicer personnel it makes available to the borrower pursuant to paragraph (a) of this section perform the following functions where applicable:

(i) Provide the borrower with accurate information about:

(A) Loss mitigation options offered by the servicer and available to the borrower, based on information in the servicer’s possession;

(B) Actions the borrower must take to be evaluated for such options, including actions the borrower must take to submit a complete loss mitigation application, as defined in § 1024.41, and if applicable, actions the borrower must take to appeal the servicer’s denial of the borrower’s loss mitigation application;

(C) The status of any loss mitigation application that the borrower has submitted to the servicer;

(D) The circumstances under which the servicer may make a referral to foreclosure; and

(E) Any loss mitigation deadlines established by the servicer that the borrower must meet.

(ii) Access:

(A) A complete record of the borrower’s payment history in the servicer’s possession;

(B) All documents the borrower has submitted to the servicer in connection with the borrower’s application for a loss mitigation option offered by the servicer; and

(C) If applicable, documents the borrower has submitted to prior servicers in connection with the borrower’s application for loss mitigation options offered by those servicers, to the extent that those documents are in the servicer’s possession;

(iii) Provide the documents in paragraphs (b)(2)(ii)(B) and (b)(2)(ii)(C) of this section to persons authorized to evaluate a borrower for loss mitigation options offered by the servicer if the servicer personnel assigned to the borrower are not authorized to evaluate a borrower for loss mitigation options; and

(iv) Within a reasonable time after a borrower request, as applicable, provide the information to the borrower or inform the borrower of the telephone number and address the servicer has established for borrowers to assert an error pursuant to § 1024.35 or make an information request pursuant to § 1024.36.

(2) Safe harbor. A servicer’s policies and procedures satisfy the requirements in paragraph (b)(1) of this section if servicer personnel do not engage in a pattern or practice of failing to perform the functions set forth in paragraph (b)(1) of this section where applicable.

(c) Duration of continuity of contact. A servicer shall ensure that the personnel it assigns and makes available to a borrower pursuant to paragraph (a) of this section remain assigned and available to the borrower until any of the following occurs:

(1) The borrower refinances the mortgage loan;

(2) The borrower pays off the mortgage loan;

(3) A reasonable time has passed since (i) the borrower has brought the mortgage loan current by paying all amounts owed in arrears; or

(ii) The borrower and the servicer have entered into a permanent loss mitigation agreement in which the borrower keeps the property securing the mortgage loan; or

(4) Title to the borrower’s property has been transferred to a new owner through, for example, a deed-in-lieu of foreclosure, a sale of the borrower’s property, including, as applicable, a short sale, or a foreclosure sale; or

(5) If applicable, a reasonable time has passed since servicing for the borrower’s mortgage loan was transferred to transferee servicer.

(d) Conditions beyond a servicer’s control. A servicer has not violated this section if the servicer’s failure to comply with this section is caused by conditions beyond a servicer’s control.

1024.41 Loss Mitigation Procedures.

(a) Scope. This section applies to any servicer that makes loss mitigation options available to borrowers in the ordinary course of business with respect to the procedures for reviewing and responding to a loss mitigation application. Nothing in this section shall be construed to impose an obligation on an owner, assignee, guarantor, or insurer of a mortgage loan, unless such entity is also a servicer of a mortgage loan.

(b) Loss mitigation application. (1) Complete loss mitigation application. A complete loss mitigation application means a borrower’s submission requesting evaluation for a loss mitigation option for which a servicer has received all the information the servicer regularly obtains and considers in evaluating loss mitigation applications by the deadline established by the servicer pursuant to paragraph (f) of this section.

(2) Incomplete loss mitigation application. (i) Upon receipt of an incomplete loss mitigation application, a servicer shall exercise reasonable diligence in obtaining information from a borrower to make the loss mitigation application complete.

(ii) If a servicer receives an incomplete loss mitigation application earlier than 5 days (excluding legal public holidays, Saturdays, or Sundays) before the deadline established pursuant to paragraph (f), the servicer shall notify the borrower orally or in writing within 5 days (excluding legal public holidays, Saturdays, or Sundays) after receiving the incomplete loss mitigation application, of the following:

(A) That the loss mitigation application is incomplete;

(B) The additional documents and information the borrower must submit to make the loss mitigation application complete; and

(C) The date by which the borrower must submit the additional documents and information.

(c) Review of loss mitigation applications. Within 30 days of receiving a borrower’s complete loss mitigation application that is submitted prior to the deadline established pursuant to paragraph (f) of this section, a servicer shall:

(1) Evaluate the borrower for all loss mitigation options available from the servicer for which the borrower may qualify; and

(2) Provide the borrower with a notice stating the servicer’s determination of whether it will offer the borrower a loss mitigation option.

(d) Denial of loan modification options. A servicer that denies a borrower’s loss mitigation application for any trial or permanent loan modification program offered by the servicer shall state in the notice provided to the borrower pursuant to paragraph (c)(2) of this section:

(1) The specific reasons for the servicer’s determination for each such trial or permanent loan modification program; and

(2) The fact that the borrower may appeal the servicer’s determination, the deadline for the borrower to make an appeal, and any requirements for making an appeal.

(e) Borrower response. (1) In general. A servicer may require that a borrower accept or reject an offer of a loss mitigation option by a deadline established by the servicer that is no earlier than 14 days after the servicer communicates the loss mitigation option to the borrower.

(2) Acceptance. A borrower that does not satisfy the servicer’s requirements for accepting a loss mitigation option, but submits the first payment that would be owed pursuant to any such loss mitigation option within the deadline established by the servicer, shall be deemed to have accepted the offer of a loss mitigation option.

(3) Rejection. A servicer may deem a borrower that has not accepted an offer of a loss mitigation option within 14 days after the servicer offers the loss mitigation option to the borrower to have rejected the offer of a loss mitigation option.

(4) Interaction with appeal process. A servicer shall permit a borrower to accept or reject a loss mitigation option concurrently with making an appeal pursuant to paragraph (h) of this section.

(f) Deadline for loss mitigation applications. A servicer may establish a deadline for a borrower to provide a complete loss mitigation application, which shall be no earlier than 90 days before a scheduled foreclosure sale.

(g) Prohibition on foreclosure sale. A servicer shall not conduct a foreclosure sale if a borrower has provided a complete loss mitigation application to the servicer for a loss mitigation option within the deadline established by the servicer pursuant to paragraph (e) of this section, unless:

(1) The servicer has provided the borrower a notice pursuant to paragraph (c)(2) of this section that the borrower is not eligible for a loss mitigation option and the appeal process in paragraph (h) of this section is not applicable, the borrower has not requested an appeal, or the time for requesting an appeal has expired;

(2) The servicer denies the borrower’s appeal, as applicable;

(3) The borrower rejects the servicer’s offer of a loss mitigation option;

(4) The borrower fails to perform under an agreement on a loss mitigation option.

(h) Appeal process. (1) Appeal process required for loan modification denials. A servicer that denies a borrower’s loss mitigation application for any trial or permanent loan modification program offered by the servicer shall permit a borrower to appeal the servicer’s determination.

(2) Deadlines. A servicer shall permit a borrower to make an appeal within at least 14 days after providing the notice required pursuant to paragraph (c)(2).

(3) Independent evaluation. An appeal shall be reviewed by different personnel than those responsible for evaluating the borrower’s complete loss mitigation application.

(4) Appeal determination. Within 30 days of a borrower making an appeal, the servicer shall provide a notice to the borrower stating the servicer’s determination of whether the servicer will offer the borrower a loss mitigation option. A servicer’s offer of a loss mitigation option after appeal shall be subject to paragraph (e). A servicer’s decision under this paragraph is not subject to another appeal.

(i) Duplicative requests. A servicer is only required to comply with the requirements of this provision for a single complete loss mitigation application for a borrower’s mortgage loan account.

(j) Other liens. (1) Duty to identify other servicers. Any servicer that receives a loss mitigation application shall:

(i) within 5 days, determine if any other servicers service mortgage loans that have senior or subordinate liens encumbering the property that is the subject of the loss mitigation application; and

(ii) Provide any other servicers identified pursuant to paragraph (j)(1)(i) with a copy of the loss mitigation application.

(2) Receipt of loss mitigation application. A servicer that offers loss mitigation options in the ordinary course of business shall comply with the requirements of this section with respect to any loss mitigation application received pursuant to paragraph (j)(1)(ii) of this section as if such loss mitigation application was provided by a borrower.◄