§ 1024.35(g)(1)(i)

Section-by-section analysis


Proposed § 1024.35(g)(1)(i) would have provided that a servicer is not required to comply with the notice of error requirements in proposed § 1024.35(d) and (e) with respect to a notice of error to the extent that the asserted error is substantially the same as an error asserted previously by or on behalf of the borrower for which the servicer had previously complied with its obligation to respond to the notice of error pursuant to § 1024.35(e)(1), unless the borrower provides new and material information. The proposed rule would have defined new and material information as information that was not reviewed by the servicer in connection with investigating the prior notice of error and was reasonably likely to change a servicer's determination with respect to the existence of an error.

As stated in the proposal, the Bureau believes that both elements of this requirement are important. First, the information must not have been reviewed by the servicer. If the information was reviewed by the servicer, then such information is not new and requiring a servicer to re-open an investigation will create unwarranted burden and delay. Second, even if the information is new, it must be material to the asserted error. A servicer may not have reviewed information because the information may not have been material to the error asserted by the borrower. The Bureau proposed § 1024.35(g)(1)(i) to ensure that a servicer is not required to expend resources conducting duplicative investigations of notices of error unless there is a reasonable basis for re-opening a prior investigation because of new and material information.

The Bureau proposed comment 35(g)(1)(i)-1 to further clarify that a dispute regarding whether a servicer previously reviewed information or whether a servicer properly determined that information reviewed was not material to its determination of the existence of an error, will not itself constitute new and material information and, consequently, does not require a servicer to re-open a prior, resolved investigation of a notice of error.

While industry commenters supported the proposed exclusion, some consumer groups expressed concern. One consumer group commenter argued that the proposal effectively requires that borrowers describe alleged errors with more specificity than is appropriate, given that borrowers often do not fully understand the nature of the alleged error. Another consumer group commenter urged the Bureau to require servicers to inform borrowers that servicers will reconsider a duplicative error notice to the extent that the borrower is able to more concisely describe an alleged error. Another commenter asserted that the proposed exclusion shields servicers from the consequences of incompletely addressing a notice of error the first time it is received. Finally, an anonymous commenter questioned the Bureau's authority to create the exclusion altogether.

Having considered these comments, the Bureau believes that § 1024.35(g)(1)(i), as proposed, strikes the appropriate balance in that it requires servicers to respond to duplicative error notices only to the extent that such notices present new and material information. The Bureau recognizes that borrowers will assert errors in lay terms, and this section is not intended to require any particular level of specificity in the errors that borrowers assert. All that this section provides is that if a borrower submits a second error claim that the servicer reasonably determines is substantially the same as a previous submission, the servicer is not obligated to go back through the investigative process unless the borrower has presented new and material information. Thus, to the extent that a borrower initially lacks sufficient information to articulate clearly an alleged error but is later privy to new and material information that enables the borrower to describe the error more clearly, proposed § 1024.35(g)(1)(i) requires a servicer to reconsider new and material information subsequently put forward by the borrower. Thus, for the reasons outlined in the proposal and set forth above, the Bureau is adopting § 1024.35(g)(1)(i) and comment 35(g)(1)(i)-1 as proposed, with minor technical amendments.

The Bureau's authority for § 1024.35 is addressed above. Moreover, the Bureau finds that § 1024.35 is necessary and appropriate to achieve the purposes of RESPA, including ensuring responsiveness to consumer requests and complaints because the Bureau believes that this purpose will best be met if servicers are not required to waste resources responding to duplicative requests that will not benefit consumers, but rather are allowed to focus their resources on responding to error requests where such responses are most likely to result in consumer benefit.