§ 1024.35(b)(7)

Section-by-section analysis


Proposed § 1024.35(b)(7) would have included as an error a servicer's failure to provide accurate information to a borrower with respect to loss mitigation options available to the borrower and foreclosure timelines that may be applicable to the borrower's mortgage loan account, as required by proposed §§ 1024.39 and 1024.40. The Bureau proposed § 1024.35(b)(7) to implement, in part, section 6(k)(1)(C) of RESPA with respect to borrower requests to correct errors relating to avoiding foreclosure, as well as errors relating to standard servicer duties.

In order to pursue loss mitigation options that may benefit both the borrower and the owner or assignee of the borrower's mortgage loan, a borrower requires accurate information about the loss mitigation options available to the borrower, the requirements for receiving an evaluation for any such loss mitigation option, and the applicable timelines relating to both the evaluation of the borrower for the loss mitigation options and any potential foreclosure process.

The Bureau believes that borrowers may benefit from asserting errors with respect to a servicer's failure to provide information regarding loss mitigation options that may be available to the borrower but for which the servicer has not provided information to the borrower. By correcting such errors and providing the borrower with accurate information regarding such loss mitigation options, a servicer can help a borrower receive an evaluation for available loss mitigation options pursuant to § 1024.41 and to potentially receive an offer of such an option, which may be mutually beneficial to the borrower and the owner or assignee of the borrower's mortgage loan.

Further, the Bureau believes that the National Mortgage Settlement, servicer participation in Home Affordable Modification Program (HAMP) sponsored by the U.S. Department of the Treasury (Treasury) and HUD, and servicer participation in other loss mitigation programs required by Fannie Mae and Freddie Mac demonstrate that, at present, servicers typically provide borrowers with information regarding loss mitigation options and foreclosure and that providing such information to borrowers is a standard servicer duty.

One non-bank servicer and one credit union commented on proposed § 1024.35(b)(7). Both advocated against inclusion of a servicer's failure to provide information regarding loss mitigation options as an error subject to error resolution procedures under § 1024.35. The credit union asserted that lenders are incentivized to provide accurate loss mitigation information, as they try to avoid foreclosing upon properties.

The Bureau believes it is critical for borrowers to have information regarding available loss mitigation options and requiring that a servicer comply with error resolution procedures as to a borrower assertion that a servicer failed to provide such information is important to ensure that borrowers receive this information. The Bureau does not believe there is significant risk that the rule will result in servicers limiting options offered to consumers, as investors and guarantors dictate the loss mitigation options available to borrowers. Further, the Bureau notes that the failure of a servicer to provide accurate information will create liability under this section only if the servicer fails to correct the error when called to its attention. Accordingly, the Bureau is adopting § 1024.35(b)(7) as proposed, except that the Bureau has removed the reference to § 1024.40 in light of other changes to the proposed rule.