Most of the CFPB’s new mortgage rules take effect today, January 10, 2014. The CFPB has rejected congressional and financial industry’s repeated calls for a one-year mortgage regulation delay. However, Director Cordray expressed that, at least in the early days, the CFPB’s examiners will not be looking for compliance perfection but for a good faith effort from lenders.

Practical Implications

The same degree of understanding should not be expected from plaintiffs’ attorneys who are likely to begin filing claims for any and all violations of the CFPB’s rules no matter how technical. Plaintiffs’ bar will be aided by an “in-depth training presentation” titled “Protecting homeowners: New tools for empowering consumers and advocates” that the CFPB is holding today for the “advocates” of the new mortgage rules.

Among the new origination rules is a requirement that, before originating the loan, the creditor must make a reasonable and good faith determination that the consumer has the ability to repay the loan unless the loan falls within the definition of a “qualified mortgage.” The new servicing rules mandate the loss mitigation opportunities that must be provided to the borrowers and restrict the loan servicers’ rights to pursue foreclosures until all loss mitigation options have been exhausted. The rules also prescribe the contents of monthly mortgage statements and other loan-related notices, restrict the servicers’ ability to force-place insurance, and require prompt crediting of borrowers’ payments even if they are insufficient to cover late fees and other charges. The CFPB will test compliance with these rules in accordance with its 924-page Examination Manual and additional examination procedures that the CFPB issued after the Examination Manual’s original release in October 2012.

Loan originators and servicers should seek professional advice to ensure compliance with the CFPB’s origination and servicing rules.  The editors and contributors of this update, include:   David N. Anthony, Alan D. Wingfield, Jake Lutz, James Stevens, Maryia Y. Jones, and Virginia Bell Flynn. Please do not hesitate to contact our team of lawyers if you have questions or would like additional information on compliance with the CFPB’s origination and servicing rules.