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CFPB issues implementation date guidance to mortgage servicing rule

Along with technical corrections

The Consumer Financial Protection Bureau released updated guidance along with two technical corrections to the final mortgage servicing rule that is set to go into effect on Oct. 19.

The bureau released two documents that relate to the 2016 Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), collectively dubbed the 2016 Mortgage Servicing Final Rule.

While they are small changes, the first document addresses two typographical errors, the authority citation for Regulation Z, and several amendatory instructions relating to certain official commentary to apply the correct effective date.

Since there is minimal, if any, basis for substantive disagreement on the technical errors, the bureau stated that there is good cause to publish these corrections without seeking public comment.

The technical explanations start on page three, and include simple corrections such as fixing the word “contract” instead of “contact.”

Meanwhile, the second document is slightly more notable and addresses concerns raised by some industry participants.

Although it is a non-binding policy, the CFPB issued guidance relating to the implementation date of the servicing rule.  As it stands, the rule is set to go into effect on Thursday, Oct. 19.

“The Bureau has heard concerns that these midweek effective dates for the 2016 Mortgage Servicing Final Rule could create operational challenges for servicers. The Bureau understands that, for many servicers, the Thursday effective dates could afford less than a full day—from the close of business overnight on each of the preceding Wednesdays—to update and test systems in order to be compliant with the 2016 amendments. If servicers do not have sufficient time to complete these tasks, their systems may be more likely to produce errors, which could expose servicers and consumers to risk,” the CFPB document stated.

So to help, the CFPB said that it does not intend to take supervisory or enforcement action for violations of existing Regulation X or Regulation Z resulting from a servicer’s compliance with the 2016 Mortgage Servicing Final Rule occurring up to three days before the applicable effective dates.

This means, in essence, that servicers can start implementing the servicing rule a few days early without fear of a supervisory or enforcement action for violations from the bureau.

Mike Jones, director with Navigant, added, “While the substance of the policy guidance does not appear to have a lot of operational impact, it does send a clear signal that the bureau does not intend to extend the effective dates of the rule changes. In fact, the policy guidance encourages servicers to implement the rule changes over the weekend before the mid-week effective dates.”

“It’s also a good reminder that servicers don’t have a lot of time to spare as the deadlines approach,” said Jones. “There’s a lot to do to get ready.”

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