CFPB issues final rule on borrower notice of foreclosure prevention options

Mortgage servicers will now have more latitude in providing periodic statements to consumers entering or exiting bankruptcy under a final rule issued by the Consumer Financial Protection Bureau.

The final rule helps mortgage servicers communicate with certain borrowers facing bankruptcy by amending mortgage servicing rule released by the CFPB in 2016.

The rule takes effect April 19. Other sections of the 2016 rule relating to bankruptcy-specific periodic statements and coupon books also become effective on the same date.

Under the CFPB’s 2016 rule, servicers are required to send modified periodic statements or coupon books to certain consumers in bankruptcy starting April 19. The requirement is in line with a requirement under the Truth in Lending Act for mortgage servicers to provide periodic statements to borrowers. The CFPB developed sample forms for servicers to use.

The rule also addressed the timing for servicers to transition to providing or ceasing to provide modified periodic statements to consumers entering or exiting bankruptcy. However, the CFPB later learned that certain technical aspects of the timing of this transition may create unintended challenges and be subject to different legal interpretations.

In October, the CFPB proposed a rule that would provide greater certainty to help servicers comply and sought public comment. The latest action finalizes the proposed rule and institutes a clear single-statement exemption for servicers to make the transition, superseding the single-billing-cycle exemption included in the 2016 rule.

"Today’s action should make it easier for mortgage borrowers to receive timely information from their mortgage servicers about available options for saving their home, even if they have submitted a request to cease communication," then-CFPB Director Richard Cordray said when the proposal was announced in October.