RESPA AND TILA MORTGAGE SERVICING FINAL RULES
ERROR RESOLUTION AND INFORMATION REQUESTS
** Small servicers are NOT exempt from the error resolution and information request rules.
Loans Covered
The error resolution and information request requirements of the Mortgage Servicing Rules apply to all federally related mortgage loans, as defined in 12 C.F.R. § 1024.2(b), except for the exemptions in 12 C.F.R. § 1024.5(b) and open-end lines of credit. To determine whether a credit union meets the definition of one of these exemptions, you should review the regulations in detail.
Notice of Error
A “notice of error” is defined as, “a written notice from a borrower that asserts an error” that includes:
The name of the borrower;
Information that allows the credit union to identify the borrower’s mortgage loan; and
The error the borrower believes has occurred.
433 12 C.F.R. § 1024.37(d)(2)(i).
434 Id.
435 12 C.F.R. § 1024.17(k)(5).
89 A notice on a payment coupon or other payment form supplied by a credit union need not be treated as a notice of error.436
Error
When dealing with a notice of error, an “error” refers to the following categories of errors:
1. Failure to accept a payment that conforms to the credit union’s written requirements for the borrower to follow in making payments;
2. Failure to apply an accepted payment to principal, interest, escrow, or other charges under the terms of the mortgage loan and applicable law;
3. Failure to credit a payment to a borrower’s mortgage loan as of the date of receipt;
4. Failure to pay taxes, insurance premiums or other charges including charges that the borrower and credit union have voluntarily agreed that the service should collect and pay in a timely manner, or to refund an escrow account balance when required;
5. Imposing a fee or charge that the credit union lacks a reasonable basis to impose;
6. Failure to provide an accurate payoff balance amount upon a borrower’s request;
7. Failure to provide accurate information to a borrower regarding loss mitigation options and foreclosure;
8. Failure to transfer accurately and timely information relating to the servicing of a borrower’s mortgage loan account to a transferee;
9. Making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process in violation of law;
10. Moving for foreclosure judgment or order of sale, or conducting a foreclosure sale, in violation of law;
11. Any other error relating to the servicing of a mortgage loan.437
Specific Location for Notices of Error
A credit union may, by written notice to a borrower, establish an address that must be used to submit a notice of error. The credit union’s notice must include a specific statement that the borrower must use the address stated. In addition, if a credit union designates a specific address for receiving a notice of error, the credit union shall also designate the same address for receiving information requests.438
436 12 C.F.R. § 1024.35(a).
437 12 C.F.R. § 1024.35(b).
438 2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules – Small Entity Compliance Guide, Consumer Financial Protection Bureau, (June 7, 2013), p. 59-60.
90 Acknowledging Receipt
Within five (5) days of receiving a notice of error from a borrower, the credit union must provide the borrower a written response acknowledging receipt of the notice of error.439
Response to Notice of Error
In general, a credit union must respond to a notice of error by either: correcting the error or errors identified by the borrower, providing the borrower with a written notification of the correction, the effective date of the correction, and contact information, including a telephone number, for further assistance; or conduct a reasonable investigation, and provide the borrower with a written notification that includes a statement that the servicer has determined that no error occurred, a statement of the reason or reasons for this determination, a statement of the borrower's right to request documents relied upon by the servicer in reaching its determination, information regarding how the borrower can request such documents, and contact information, including a telephone number, for further
assistance.440
Credit Union Finds Additional Errors
During the investigation, if the credit union concludes that errors occurred other than or in addition to the error or errors reported by the borrower, the credit union must correct these errors and provide the borrower with written notification describing the errors, the actions taken to correct the errors, the effective date of correction and contact information, including telephone number, for further assistance.441
Requesting Information from the Borrower
A credit union may request documentation from the borrower in connection with the investigation of an asserted error. However, the credit union may not require the borrower to provide the information as a condition of investigating the error, or determine that no error occurred, because the borrower failed to provide any requested information, without also conducting a reasonable investigation.442
439 12 C.F.R. § 1024.35(d).
440 12 C.F.R. § 1024.35(e).
441 12 C.F.R. § 1024.35(e)(1)(ii).
442 12 C.F.R. § 1024.35(e)(2).
91 Timing
A credit union must respond no later than seven (7) days after the servicer receives notice of error for errors related to failure to provide an accurate payoff balance.443
A credit union must respond prior to the date of foreclosure sale or within thirty (30) days after the credit union receives notice of the error, whichever is earlier, for errors related to making the first notice or filing required by applicable law for any judicial or non-judicial foreclosure or related to moving for foreclosure judgment or order of sale, or conducting a foreclosure sale in violation of law.444
A credit union must respond not later than thirty (30) days after the credit union receives a notice of error for all other above listed errors.445 A credit union may extend the time period for responding by an additional fifteen (15) days if, before the end of the thirty (30) day period, the credit union notifies the borrower, in writing, of the extension and the reasons for the extension. This extension does not apply to notices of error asserted under 12 C.F.R. § 1024.35(b)(6), (9) or (10).446
For purposes of the timing requirements, “days” excludes legal public holidays, Saturdays and Sundays.447
Copies of Documents
Within fifteen (15) days of receiving a borrower’s request, a credit union must provide, at no charge, copies of documents and information relied upon in making a determination that no error occurred.
Credit unions do not have to provide confidential, proprietary or privileged information; however, the credit union must still notify the borrower of this determination within the relevant time frame.448
Alternative Compliance Early Correction
Credit unions are not required to follow the acknowledgement of receipt or response to notices of errors requirements, if the credit union corrects the error or errors and notifies the borrower of the correction in writing within five (5) days of receiving the notice of error.449
Error Asserted Prior to Foreclosure Sale
Credit unions are not required to follow the acknowledgement or receipt or response to notice of errors requirements for errors asserted under 12 C.F.R. § 1024.35(b)(9) or (10), if the credit
443 2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules – Small Entity Compliance Guide, Consumer Financial Protection Bureau, (June 7, 2013),p. 61.
444 Id.
445 12 C.F.R. § 1024.35(e)(3).
446 12 C.F.R. § 1024.35(e)(3)(ii).
447 12 C.F.R. § 1024.35(d) and (e).
448 12 C.F.R. § 1024.35(e)(4).
449 12 C.F.R. § 1024.35(f)(1).
92 union receives the notice seven (7) or fewer days before a foreclosure sale. For any such notice, a credit union must make a good faith attempt to respond to the borrower and correct the error, or state the reason the credit union has determined no error has occurred.450
Reasons under Which a Response is Not Required
There are a number of scenarios under which a credit union is not required to respond, that are detailed below.
Duplicate Notice
A credit union does not have to comply with the notice of error requirements if the asserted error is substantially the same as an error previously asserted by the borrower, unless the borrower provides new and material information to support the asserted error. “New and material information” means information that was not reviewed by the credit union regarding a prior notice of the same error and is reasonably likely to change the credit union’s
determination.451 Overbroad Notice
A credit union does not have to comply with the notice of error requirements if the asserted error is overbroad. It is considered “overbroad” if the credit union cannot reasonably determine from the borrower’s notice of error the specific error that is being asserted.452 To the extent a credit union can reasonably identify a valid assertion of error in a notice that is otherwise overbroad, the credit union must comply with the requirements. Examples of overbroad notices of error include:
An assertion that errors were made in all aspects of the loan including origination, servicing, and foreclosure;
An assertion in the form of a judicial action complaint, subpoena, or discovery request;
An assertion that is incomprehensible.453 Untimely Notice
A credit union does not have to comply with the notice of error requirements, if a notice of error is delivered to the credit union more than one year after servicing of the mortgage loan subject to the assertion was transferred from the credit union to a transferee, or more than one year after the mortgage loan was paid in full.454
450 12 C.F.R. § 1024.35(f)(2).
451 12 C.F.R. § 1024.35(g)(1)(i).
452 12 C.F.R. § 1024.35(g)(1)(ii).
453 Comment 12 C.F.R. § 1024.35(g)(1)(ii).
454 12 C.F.R. § 1024.35(g)(1)(iii).
93 Notice Requirement if Credit Union Not Responding
If a credit union determines that it does not have to respond to a notice of error, the credit union must notify the borrower of its determination, in writing, not later than five (5) days after making such determination. The response must set forth the basis for such non-response to the asserted error(s).455
Prohibitions
A credit union cannot charge a fee or require a borrower to make a payment that may be owed as a condition of responding to a notice of error. In addition, a credit union cannot furnish adverse information to a consumer reporting agency regarding any payment that is subject to a notice of error for sixty (60) days after receipt of the notice of error.456