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HW's 2021 Spring Summit

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CFPBÕ final mortgage servicing rule implementation possibly delayed

Possibly delayed 60 days for review by Trump administration

The implementation date of the Consumer Financial Protection Bureau’s final mortgage servicing rule lies in question after the Trump administration announced a freeze on federal regulations.

After a nearly four-month delay since the CFPB finished the final mortgage servicing rule, the Office of the Federal Register finally published the rule on Oct. 19, meaning it would go into effect one year later on Oct. 19, 2017.

While the extra time to adjust to the rule isn’t a bad thing, Nanci Weissgold, a member of Alston & Bird’s Financial Services & Products Group, said, “Given the operational complexities in implementing these rules, servicers should not delay in understanding the requirements and developing an implementation plan.”

The implementation date, however, could be delayed even further due to the regulatory freeze announced by Reince Priebus, assistant to the president and chief of staff, last Friday.

Here’s the section of the announcement that pertains to the servicing rule:

With respect to regulations that have been published in the OFR but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum, subject to the exceptions described in paragraph 1, for the purpose of reviewing questions of fact, law, and policy they raise.  Where appropriate and as permitted by applicable law, you should consider proposing for notice and comment a rule to delay the effective date for regulations beyond that 60-day period.  In cases where the effective date has been delayed in order to review questions of fact, law, or policy, you should consider potentially proposing further notice-and-comment rulemaking. 

The exceptions listed in the first paragraph include: Emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.

But the situation isn’t so clear-cut for the CFPB. According to the Consumer Financial Services Review blog post by Mayer Brown Lawyers Laurence Platt and Joy Tsai, “The newly announced freeze on federal regulations does not appear to apply across the board.  ‘Independent regulatory agencies,’ such as the Consumer Financial Protection Bureau, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission may be excluded from that moratorium.”

In a recent interview with The Wall Street Journal, “Cordray declined to answer questions about how a Trump order to freeze new regulations would affect the bureau’s planned rules. He said bureau lawyers are evaluating the directive signed Friday and how it might apply to independent agencies such as the CFPB.”

The Mayer Brown blog post noted, “It is too soon to tell if any particular ‘independent regulatory agency’ believes that it is exempt from the freeze or, even if it is, it nevertheless will honor the memorandum’s spirit.”

While there are several issues such as debt collection and payday lending that the bureau has identified as part of its rulemaking agenda, there are only two rules currently published but not yet effect in the Federal Register that this freeze applies to. 

The final mortgage servicing rule is one and the other is the rule on Prepaid Accounts under the Electronic Fund Transfer Act and Truth in Lending Act, published Nov. 22, 2016 and effective Oct. 1, 2017. 

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