§ 1024.35(f)(1)

Section-by-section analysis

35(f)(1) Early Correction

The Bureau proposed § 1024.35(f)(1) to permit alternative compliance as to errors resolved within the first five days. This provision is consistent with section 6(e)(1)(A) of RESPA, which requires servicers to provide written acknowledgment of a qualified written request within five days (excluding legal public holidays, Saturdays, and Sundays) “unless the action requested is taken within such period.” In addition, the alternative compliance mechanism in proposed § 1024.35(f)(1) was based on feedback from servicers during outreach, and especially small servicers, which indicated that the majority of errors are addressed promptly after a borrower's communication and generally within five days. Small entity representatives communicated to the Small Business Review Panel that small servicers have a high-touch customer service model, which made it very easy for borrowers to report errors or make inquiries, and to receive real-time responses. The Bureau believed the alternative compliance method was necessary and appropriate to reduce the unwarranted burden of an acknowledgement and other response requirements on servicers, and especially small servicers, that are able to correct borrower errors within five days consistent with the Small Business Review Panel recommendation that the Bureau consider requirements that provide flexibility to small servicers.

Industry commenters supported the proposal's exemption of servicers from complying with paragraphs (d) and (e) where the servicer corrects the error identified by the borrower within five days of receiving the notice of error. However, industry commenters opposed the requirement that servicers notify borrowers of the correction in writing. Commenters reasoned that a significant number of errors are asserted and quickly resolved in a single telephone call. Accordingly, commenters argued that the requirement to advise borrowers of the correction in writing would be burdensome.

The Bureau believes that because the final rule subjects written but not oral notices to error resolution requirements under § 1024.35, the commenters' concerns regarding written notice of correction has been significantly mitigated. To the extent that a borrower asserts an error in writing which the servicer resolves within five days, the Bureau believes the borrower will benefit from receiving the written notification. For these reasons, the Bureau adopts § 1024.35(f)(1) as proposed, except that the Bureau has revised the provision to make clear that the servicer must provide such notification within five days of receiving the notice of error.