MCUL & Affiliates’ comment letter to the Consumer Financial Protection Bureau on revisions to the 2013 Mortgage Service Rules could result in potential violations of the Gramm-Leach-Bliley Act, which requires strict privacy standards for financial institutions.
The CFPB is proposing to apply all Mortgage Servicing Rules to successors in interest regardless of whether the successor in interest assumed the obligations under the mortgage loan.
The term successor in interest means a successor to another's interest in property, such as a successor in ownership of a real estate or a business.
The proposed rules would require mortgage servicers to provide confirmed successors in interest with periodic statements from mortgage servicers in accordance with Section 1026.41 of Regulation Z. Additionally, under the proposed Section 1026.41(a)(11), a “non-obligor successor in interest” would be defined as a “consumer.”
In its letter, MCUL raised concern with the CFPB regarding the conflict such an amendment would have with GLBA, also known as the Financial Services Modernization Act. GLBA does not define a successor in interest that is not an obligor on a mortgage loan as a “customer” or a “consumer.” MCUL indicated periodic statements contain non-public personal information of an obligor and providing such periodic statements to a successor in interest would be a violation of GLBA.
MCUL’s letter also went on to raise concern regarding potential conflicts between the CFPB’s proposal to require servicers to provide modified periodic statements to borrowers in bankruptcy and existing bankruptcy laws. While the CFPB is proposing that the periodic statements be modified in a manner so as to not conflict with any existing bankruptcy laws, MCUL is still concerned about potential risks to credit unions that could be viewed as a violation of the automatic stay. Additionally, MCUL is concerned with operational difficulties that may occur as a result of adhering to the proposed mandate.
In addition to the above remarks, the MCUL commented on areas pertaining to forced placed insurance, loss mitigation and small servicer exemptions. A copy of the complete letter, dated March 16, can be found here.