BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
DIVISION OF CONSUMER
AND COMMUNITY AFFAIRS
CA 03-9
September 10, 2003
TO THE OFFICERS AND MANAGERS IN CHARGE OF CONSUMER AFFAIRS SECTIONS:
SUBJECT: Revised Examiner Guidance on Mortgage Loan Servicing Disclosure Statements Required Under the Real Estate Settlement Procedures Act ("RESPA")
In 1990, Congress amended RESPA to include a disclosure that informs borrowers that their loan or the servicing of their loan may be sold (12 USC 2605, Public Law 101-625 section 6, 11/28/1990). In 1996, Congress again amended RESPA to simplify the mortgage servicing disclosure (Public Law 104-208, section 2103(a), September 30, 1996). The 1996 amendment to RESPA eliminated the historical data provisions and the acknowledgement requirement for mortgage servicing transfer notices.
The Department of Housing and Urban Development (HUD) proposed an amendment to Regulation X to implement the 1996 amendments to section 6 of the statute on May 9, 1997 (FR Vol. 62, No. 90). However, HUD never finalized the proposed regulation. Consequently, Regulation X (3500.21(b)) currently requires a detailed notice that includes historical percentages for a three-year period, as well as the applicant's acknowledgement.
HUD addressed the discrepancy between the RESPA statute and Regulation X in the supplementary information to the July 29, 2002 proposed revision of Regulation X (07/29/02, Vol. 67, No. 145, p. 49152) by stating:
The Department plans to finalize the 1997 proposed rule shortly. However, in the meantime, the Section 6 language in the statute may be provided in conjunction with the GFE instead of the language currently indicated in §3500.21 and Appendix MS-1. |
Given HUD's stated position on this issue, Board staff has determined that examiners should implement the following guidance when reviewing loans for compliance with section 24 CFR 3500.21(b) of HUD's Regulation X. Effective immediately, examiners should not cite violations of the following sections of RESPA:
| Reg. X/CARES Acceptable Cite |
Description |
|---|---|
| X 21(b)(2) | Mortgage servicing transfers - servicing disclosure statement - must have applicant's acknowledgement portion |
| X 21(b)(3)(ii) | Mortgage servicing transfers - servicing disclosure statement - must have % of lender's loans assigned, sold, transferred |
| X 21(b)(3)(ii)(A) | Mortgage servicing transfer notice - percentage of loans transferred should be for the last 3 years, updated each year by March 31, and calculated according to formula in reg |
| X 21(b)(3)(iii) | Mortgage servicing transfer notice should include best estimate of percentage of loans made in upcoming year that will be transferred |
| X 21(b)(3)v) | Mortgage servicing transfers - servicing disclosure statement - include written acknowledgement (& signature) of applicant |
In addition, violations of the above five sections of Regulation X no longer should be referred to the Board as provided for in CA Letter 01-2 . Beginning on October 1, 2003, these five cites will be disabled on the CARES system.
Keep in mind that Regulation X still retains a mortgage servicing disclosure requirement. Specifically, examiners should determine that borrowers are given the following disclosures (as applicable):
| Reg. X/CARES Acceptable Cite |
Description |
|---|---|
| X 21(b)(1) | Mortgage servicing transfers - servicing disclosure statement- must be provided at time of application or within 3 business days |
| X 21(b)(3)(i) | Mortgage servicing transfers - servicing disclosure statement - must disclose whether servicing may be assigned, sold or transferred |
As a reminder, violations of the above two sections of Regulation X should continue to be cited and referred to the Board as provided for in CA Letter 01-2.
If you have any questions regarding this RESPA matter, they should be directed to the review examiner assigned to your district or to Tracy Anderson at (202) 736-1921.
Sincerely,
(signed)
Shawn McNulty
Associate Director
CA letters | 2003 Letters