§ 1024.35(b)(11)

Section-by-section analysis


New § 1024.35(b)(11) includes a catch-all that applies error resolution procedures to errors relating to the servicing of a borrower's mortgage loan. As discussed above, the Bureau solicited comment regarding whether the list of covered errors should include a catch-all provision. The Bureau also requested comment as to whether to add additional specific errors to the list of errors under § 1024.35. In particular, the Bureau solicited comment regarding whether to include as an error a servicer's failure to correctly evaluate a borrower for a loss mitigation option.

Industry commenters supported the inclusion of a limited list of errors, citing certainty, clarity, and notice as its primary benefits. Consumer group commenters generally opposed limiting notices of error to a finite list. Consumer advocates asserted that the proposal was a departure from and offered fewer consumer protections than the existing qualified written request process under section 6 of RESPA, which applies to all errors relating to servicing. In addition, some consumer group commenters noted the fluid nature of mortgage servicing and cautioned that a finite list lacks the flexibility necessary to ensure that consumers will be adequately protected as servicing practices evolve.

As to whether the Bureau should add additional specific errors to the list of covered errors, some consumer groups suggested the addition of specific errors, including errors relating to escrow accounts, servicing transfer, disclosures, and loss mitigation, while also reiterating their support for a broad catch-all provision. While most industry commenters said the proposed list of covered errors was adequate, a credit union commenter suggested that the Bureau add requests to cancel liens once accounts have been paid in full. Both consumer groups and industry commented regarding whether to include a servicer's failure to correctly evaluate a borrower for a loss mitigation option as an error. One consumer group urged the Bureau to do so, asserting that because the Dodd-Frank Act requires servicers to take timely action to correct errors relating to avoiding foreclosure, the plain language of the statute suggests that borrowers should be able to assert errors related to loss mitigation before they get to the point of a foreclosure sale. The commenter further contended that the appeals process set forth in proposed § 1024.41(h) will not hold servicers sufficiently accountable for uncorrected errors. The commenter said that borrowers need a statutory remedy for uncorrected errors. Another consumer group advocated for a catch-all sufficiently broad to capture the array of servicer loss mitigation duties. An industry association took the opposing view, citing concerns about the inability to objectively measure whether a servicer evaluated a borrower for an option correctly. The industry commenter requested that should the Bureau add this category as a covered error, the Bureau also clarify that a servicer who complies with § 1024.41 has not committed the error.

As noted in the proposal, the Bureau believes that the appeals process set forth in § 1024.41(h) provides an effective procedural means for borrowers to address issues relating to a servicer's evaluation of a borrower for a loan modification program. For this reason, and the reasons stated below with respect to loss mitigation practices, the Bureau declines to add a servicer's failure to correctly evaluate a borrower for a loss mitigation option as a covered error in the final rule.

The Bureau is, however, adding new § 1024.35(b)(11), which includes a catch-all that defines as an error subject to the requirements of § 1024.35 errors relating to the servicing of a borrower's mortgage loan. The Bureau believes that any error related to the servicing of a borrower's mortgage loan also relates to standard servicer duties. The Bureau also agrees with consumer advocacy commenters that the mortgage market is fluid and constantly changing and that it is impossible to anticipate with certainty the precise nature of the issues that borrowers will encounter. The Bureau, therefore, believes that it is necessary and appropriate to achieve the purposes of RESPA to craft error resolution procedures that are sufficiently flexible to adapt to changes in the mortgage market and to encompass the myriad and diverse types of errors that borrowers may encounter with respect to their mortgage loans. At the same time, the Bureau believes the costs and burdens created by having a more expansive definition of error are significantly mitigated because, as discussed above, under the final rule the requirements under § 1024.35 apply only to written notices of error. Moreover, the final rule adopts a process that is consistent with the existing process for responding to qualified written requests under RESPA section 6, which likewise includes a catch-all for servicing-related errors. The Bureau declines to add additional covered errors beyond the catch-all.