Just for fun, let’s break down thenew mortgage servicing rules that are due to be implemented next January. In this series of articles, we are going to look at the new amendments in the Dodd-Frank Legislation that are collectively referred to as the Mortgage Servicing Rules. There are roughly eight amendments to Regulation X and four amendments to Regulation Z (depending on how you count). These “amendments” are actually new rules grafted onto the former RESPA and Truth in Lending framework. The use of the original framework contributes significantly to the confusion about the Rules.
Let’s start with theError-Resolution and Information Requests Rule, which is exactly what its name implies. This rule establishes error-resolution procedural requirements for responding to (1) Notices of Error and (2) Information requests. Basically, there were a tremendous number of complaints during the mortgage foreclosure crisis about the lack of communication from lenders– horror stories about errors and borrowers unable to get basic information from lenders. Thus, we now have this rule. The rule applies to all federally related mortgage loans and closed-end lines of credit. It does not apply to HELOCs or open-end lines of credit. There is no small servicer exemption here.
The rule has specific definitions for what constitutes a “Notice of Error” and an “Information Request”. A notice of error is anywritten noticefrom the consumer that asserts specific errors and includes the consumer name along with enough information to identify the mortgage account and the error they believe has occurred. Similarly, an information request is anywritten requestfor information from a consumer relating to the servicing of their mortgage loan that includes: consumer name, enough information to identify the mortgage account, and a statement of the information requested. The Rule directly states that a note on a payment coupon or other payment form isnotconsidered a notice of error or an information request.
Once the servicer has received a notice of error or an informational request,you have 5 days to acknowledge it and 30 days to investigate, correct or otherwise respondto the consumer. Your response must have your contact information including a telephone number.
