On June 27, 2017, the CFPB issued a non-binding policy guidance addressing mortgage servicing industry concerns regarding the implementation of final servicing rule issued by the CFPB in August 2016 (“2016 Mortgage Servicing Rule”), which is set to take effect on October 19, 2017 and April 19, 2018.
This guidance addresses mortgage servicers concerns regarding implementation of mortgage servicing rule on the effective dates which occur “mid-week”, on a Thursday, October 19, 2017, and on a Thursday, April 19, 2018. Mortgage servicers were concerned that implementation mid-week will not allow them sufficient time, less than half a day, to complete testing systems to avoid error, which could expose servicers and consumers to risk.
According to the guidance, the CFPB authorizes early implementation of servicing rule “up to three days before the applicable effective dates.” This means that for the parts of the 2016 Mortgage Servicing Rule that will take effect on:
- Thursday, October 19, 2017 – servicers can implement the changes as early as Monday, October 16, 2017 through Wednesday, October 18, 2017; and
- Thursday, April 19, 2018 – servicers can implement the changes as early as Monday April 16, 2018 through Wednesday, April 18, 2018.
The early implementation authorized by this guidance will allow servicers to transition over the weekend between the existing servicing requirements to the new servicing requirements, with hopefully enough time to test systems to reduce the possibility of errors.
Importantly, this guidance clarifies that the CFPB will not take supervisory or enforcement action for violation of existing servicing requirements (under Regulations X and Z), that would result from servicers early implementation of the 2016 Mortgage Servicing Rule in accordance with the requirements of the guidance.
Takeaways
Mortgage servicers should take advantage of the early implementation allowance and transition systems over the weekend prior to the relevant effective dates to ensure servicing system migration to new requirements are transitioning properly.
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