On March 8, the Consumer Financial Protection Bureau (“CFPB”) finalized the amendment to its 2016 Mortgage Servicing Final Rule (“2016 Final Rule”) to clarify the transition timing for mortgage servicers to provide periodic statements and coupon books when a consumer enters or exits bankruptcy.
Under the 2016 Final Rule, mortgage servicers will be required (as of April 19, 2018) to provide modified periodic statements to borrowers who file for a bankruptcy plan and to provide unmodified (i.e., regular) statements to borrowers who subsequently exit such a plan.
However, servicers need time to transition between statement formats. As we described previously, the 2016 Final Rule would have given servicers a single billing cycle to switch the statement format. The industry informed the CFPB about operational complexities with that approach, so the CFPB proposed a rule on October 4, 2017 to address those challenges.
That proposal, which the CFPB has now finalized, replaces the single-billing-cycle transition period with a single-statement transition period. As of the date that a borrower becomes a debtor in bankruptcy, a servicer is exempt from providing the modified statement or coupon book with respect to the next periodic statement or book that would otherwise have been required, but thereafter must provide the modified statement or book. Similarly, a servicer has a single billing cycle before it must provide a borrower who exits a bankruptcy plan with an unmodified statement or coupon book. The Official Interpretations illustrate when and how a servicer must comply with those new requirements.
While this new transition period rule may alleviate certain operational challenges with transitioning between the modified and unmodified periodic statements, certain industry trade groups have called upon the CFPB to rethink many of the bankruptcy statement requirements altogether. With the April 19 deadline fast approaching, any additional guidance must come quickly.