The national servicing standards drafted by the Consumer Financial Protection Bureau are finally making their way across the mortgage industry.
One of the significant legal questions is whether an individual borrower, who claims a CFPB servicing rule has been violated, can bring the issue into court.
In other words, do the CFPB guidelines — like the California Homeowner Bill of Rights — create a private right of action for borrowers to challenge servicing issues in court?
A CFPB summary of the servicing guidelines says no private right of action exists for alleged violations of the agency's general servicing policies, procedures and requirements. Furthermore, violations of the 'continuity of contact requirements' do not create a private right of action for borrowers.
The CFPB offered some clarity Thursday on when a borrower can obtain a private right of action under the rules to challenge an issue in court.
"Certain protections in the new rules for delinquent borrowers are subject to a private right of action," the CFPB said.
"These include the early intervention requirements and the loss mitigation procedures. The loss mitigation procedures provide protections regarding the foreclosure alternatives evaluation process. They do not provide a private right of action to enforce an investor or guarantor's guidelines regarding when a servicer shall offer any particular loss mitigation option."