The New CFPB Rules: Increasing Transparency

By: E. Jason Billick

5/19/14

The Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) are now even more powerful in protecting consumers in their dealings with lenders and creditors. As of July 21, 2011, the rulemaking authority under the act was transferred to the Consumer Financial Protection Bureau (CFPB), the brainchild of Sen. Elizabeth Warren (D-Mass) (created through the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011.) The CFPB was created to adopt regulations that may contain additional requirements or clarifications that are necessary to effectuate the purposes of RESPA and TILA.

Effective January 10, 2014, the CFPB re-codified 12 C.F.R. part 1026, commonly known as “Regulation Z”, with the intent to add quality, accuracy and transparency between a homeowner and their mortgage servicer.(See 12 C.F.R. 1026.1). RESPA, known as “Regulation X” was also re-codified as 12 C.F.R. part 1024 (See 12 C.F.R. 1024.1).

There is a lot to digest in the new CFPB rules, but there are a few items worth highlighting here from the perspective of the homeowner, most notably the error-resolution procedures. The real “golden nugget” for consumer advocate attorneys lies with how the new rules regulate communication between the homeowner and servicer. Specifically, the homeowner is now presented with two very powerful tools to obtain transparency with their mortgage servicer regarding their loan:

1.)    The Notice of Error. If a homeowner believes an error was committed by the servicer regarding his or her loan, he or she may submit a written request to the servicer demanding that the error be fixed. Once received, the servicer has five (5) days to acknowledge receipt and then thirty (30) days to issue a substantive response. Failure to follow these deadlines may result in a private cause of action against the servicer and/or suspension of a foreclosure sale.

2.)    The Information Request. The written Information Request acts like an informal discovery tool for the homeowner to gather information on their loan, such as a full accounting and/or specific information pertaining to the mortgagee. The same deadlines for a Notice of Error apply to an Information Request.

These two tools only scratch the surface of what the new rules can do for a homeowner. Many of these changes are designed to require a servicer to keep a homeowner apprised of significant changes on the loan. The “early intervention” rule, for example, requires servicers to make a reasonable, good faith effort to make “live contact” with a borrower by the 36th day of the initial time of delinquency.

Over the next two months CenTexFD will make the new CFPB rules the focus of their monthly CLE seminars. Interested attorneys should contact the Gammon Law Office, PLLC for more details. For more information on the rules, visit http://www.consumerfinance.gov/regulatory-implementation/title-xiv/.