Will CFPB make handling delinquent loans even more difficult?
by: Henry Meier
They may-at least in relation to mortgage loans involving bankrupt borrowers.
Let’s recall that in passing Dodd Frank and promulgating its regulations Congress and the CFPB wanted to minimize potential dual track foreclosures whereby a bank agrees to modify a mortgage loan on a Friday only to foreclose on the same house the following Monday. As a result, the 2013 Mortgage servicing rules mandated that mortgage servicers make a “good faith efforts to establish live contact with a delinquent borrower not later than the 36th day of the borrower’s delinquency and, promptly after establishing live contact, inform such borrower about the availability of loss mitigation options if appropriate.” In addition servicers are required to provide to a delinquent borrower a written notice alerting a delinquent borrower to loss mitigation opportunities not later than 45 days of a borrowers delinquency (12 CFR 1024.39)
But what happens if the delinquent borrower has declared bankruptcy? What happens if the mortgage is owed by co-borrowers only one of whom has declared bankruptcy? These are the type of arcane riddles that keep compliance folks tossing and turning at night. They are very legitimate questions because trying to collect a debt subject to an automatic stay is illegal.