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CFPB Proposes To Replace The Single-Billing-Cycle Exemption With A Single-Statement Exemption To Ease Timing Requirement For Servicers In Connection With Consumers’ Bankruptcy Cases

On October 4, 2017, the CFPB issued a proposed rule to amend the provisions of Regulation Z mortgage servicing rules, issued August 4, 2016 (“2016 Servicing Rule”), by replacing the single-billing-cycle exemption in the 2016 Servicing Rule with a single-statement exemption that would apply regardless of when in the billing cycle a consumer bankruptcy event triggering modified or unmodified periodic statement has occurred. The amended rule also provides amended and new staff commentary to clarify the operation of the proposed rule. The CFPB proposes that single-statement exemption become effective on April 19, 2018, which is the same date as the portion of 2016 Servicing Rule it is amending is scheduled to become effective. Comments can be submitted no later than 30 days from the date the proposed rule is published in the Federal Register.

This proposed amendment addresses concerns raised by the servicing industry regarding implementation challenges caused by the requirements as finalized in sections 1026.41(e)(5)(iv)(B) and 1026.41(e)(5)(iv)(C) of Regulation Z, amended by the 2016 Servicing Rule.

Pursuant to the 2016 Servicing Rule, section 1026.41(e)(5)(iv)(B) provides a single-billing-cycle exemption from the requirement to provide a periodic statement or coupon book 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 following three triggering events, listed under section 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 1026.41(e)(5)(i). Section 1026.41(e)(5)(iv)(C) establishes timing requirements for resuming compliance after the single-billing-cycle exemption.

The amendment proposes to replace the single-billing-cycle exemption with 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. Specifically, the proposal amends section 1026.41(e)(5)(iv)(B) to provide that, as of the date on which one of the events listed in section 1026.41(e)(5)(iv)(A) (above) occurs, a servicer is exempt from the requirements of section 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 section 1026.41. The proposal also revises and adds new staff commentary to section 1026.41(e)(5)(iv)(B), to explain how the new timing requirement operates. This proposed revision to section 1026.41(e)(5)(iv)(B) and its commentary, dispenses with the need for section 1026.41(e)(5)(iv)(C), which the CFPB proposes to remove.

Suggested Action

Servicers and loan servicing systems providers should review the proposed amendment and consider submitting comments if the proposed amendments results in new unintended challenges or complexities in qualifying for the exemption.

If you have any question regarding this proposed rule, please reach out to our Contact Attorney.

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