CFPB Issues Guidance Regarding Mortgage Servicing Transfers

On August 19, 2014, the US Consumer Financial Protection Bureau ("CFPB") released Bulletin 2014-01,1 ("Bulletin"). The Bulletin replaces CPFB Bulletin 2013-1, which also addressed servicing transfers, and provides updated CFPB guidance and expectations with respect to mortgage servicing transfers.

The Bulletin highlights the CFPB's ongoing concern with servicing transfers given the continuing high volume of sales of residential mortgage servicing rights ("MSRs") in the marketplace. The CFPB states that it is issuing the Bulletin in light of the potential risks to consumers that may arise in connection with such MSR transfers and advises that it will be carefully reviewing servicers' compliance with Federal consumer protection laws applicable to servicing transfers, including the Real Estate Settlement Procedures Act and its implementing regulation, Regulation X, the Truth-in-Lending Act and its implementing regulation, Regulation Z, the Fair Credit Reporting Act and its implementing regulation, Regulation V, the Fair Debt Collection Practices Act, and the Dodd-Frank Act's prohibitions on unfair, deceptive, or abusive acts or practices. Importantly, the CFPB states that it is continuing to monitor the mortgage servicing market and may engage in further rulemaking in that area.

The Bulletin is set forth in four sections. Section A, "General Transfer-Related Policies and Procedures," provides examples of general transfer-related policies and procedures that CFPB examiners may consider in evaluating whether servicers have successfully met their obligations. Section B, "Applicability of the New Servicing Rules to Transfers," attempts to answer questions about how the new servicing rules apply to servicing transfers and also describes certain areas on which CFPB examiners will focus. Section C, "Protections under Federal Consumer Financial Law," describes other Federal consumer financial laws applicable to servicing transfers and explains potential consequences if servicers are not fulfilling their obligations under the law. Finally, Section D, ""Plans for Handling Servicing Transfers", informs servicers engaged in significant servicing transfers that the CFPB will, in appropriate cases, require them to prepare and submit informational plans describing how they will be managing the related risks to consumers. We have set forth a short summary discussion of each of these sections below.

Section A: General Transfer-Related Policies and Procedures

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