Congress originally enacted the Real Estate Settlement Procedures Act of 1974 (RESPA) based on findings that significant reforms in the real estate settlement process were needed to ensure that consumers are provided with greater and more timely information on the nature and costs of the residential real estate settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices found by Congress. See 12 U.S.C. 2601(a). In 1990, Congress amended RESPA by adding a new section 6 covering persons responsible for servicing federally related mortgage loans and imposing on such servicers certain obligations. These included required disclosures at application concerning whether the lender intended to service the mortgage loan and disclosures upon an actual transfer of servicing rights. RESPA section 6 further imposed substantive and disclosure requirements for escrow account management and required servicers to respond to “qualified written requests” – written error resolution or information requests relating to the “servicing” of the borrower’s mortgage loan.
The Dodd-Frank Act imposes certain new requirements related to mortgage servicing. As set forth above, some of these new requirements are amendments to RESPA addressed in this final rule and others are amendments to TILA, addressed in the 2013 TILA Servicing Final Rule. Section 1463 of the Dodd-Frank Act added new sections 6(k), 6(l), and 6(m) to RESPA. 12 U.S.C. 2605. Sections 6(k)(1)(A), 6(k)(2), 6(l) and 6(m) impose restrictions on servicers with respect to force-placed insurance. Specifically, section 6(k)(1)(A) of RESPA provides that a servicer may not obtain force-placed hazard insurance with respect to any property secured by a federally related mortgage unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract’s requirement to maintain property insurance. Further, under section 6(l) of RESPA, a servicer is deemed not to have a reasonable basis for obtaining forceplaced insurance, unless the servicer sends to the borrower, by first-class mail, two writtennotices. The first notice must be sent at least 45 days before imposing on the borrower any charge for force-placed insurance, and the second notice must be sent at least 30 days after the first written notice and at least 15 days before imposing on the borrower any charge for forceplaced insurance. The notices must remind borrowers of their obligation to maintain hazard insurance on the property, alert borrowers to the servicer’s lack of evidence of insurance coverage, tell borrowers what they must do to provide proof of hazard insurance coverage, and state that the servicer may obtain coverage at the borrower’s expense if the borrower fails to provide evidence of coverage.
Under section 6(l)(3) of RESPA, within fifteen days of receipt by a servicer of a borrower’s existing insurance coverage, servicers must terminate force-placed insurance coverage and refund to the borrower any premiums charged during any period when the borrower had hazard insurance in place. Finally, section 6(m) of RESPA requires that all charges imposed on the borrower related to force-placed insurance, apart from charges subject to State regulation as the business of insurance, must be bona fide and reasonable. Section 1463 of the Dodd-Frank Act further added section 6(k)(1)(B)-(D) of RESPA, which prohibits certain acts and practices by servicers of federally related mortgage loans with regard to responding to borrower assertions of error and requests for information. Specifically, section 6(k)(1)(B) of RESPA prohibits servicers from charging fees for responding to valid qualified written requests. Section 6(k)(1)(C) of RESPA provides that a servicer of a federally related mortgage loan must not fail to take timely action to respond to a borrower’s requests to correct errors relating to: (1) allocation of payments; (2) final balances for purposes of paying off the loan; (3) avoiding foreclosure; or (4) other standard servicer duties. Finally, section 6(k)(1)(D) provides that a servicer must respond within ten business days to a request from a borrower to provide the identity, address, and other relevant contact information about the owneror assignee of the loan. In addition, section 1463(c) amends section 6(e) of RESPA to reduce the amount of time within which servicers must correct errors and respond to requests for information. Section 1463(b) and (d) of the Dodd-Frank Act amended sections 6(f) and 6(g) of RESPA with respect to penalties for violation of section 6 of RESPA, and refund of escrow account balances, respectively.40 Finally, section 1463(a) of the Dodd-Frank Act adds section 6(k)(1)(E) to RESPA, which provides that a servicer of a federally related mortgage loan must “comply with any other obligation found by the [Bureau], by regulation, to be appropriate to carry out the consumer protection purposes of this Act.”41 This provision provides the Bureau authority to establish prohibitions on servicers of federally related mortgage loans appropriate to carry out the consumer protection purposes of RESPA. As discussed below, in light of the systemic problems in the mortgage servicing industry discussed above, the Bureau is exercising this authority in this rulemaking to implement protections for borrowers with respect to mortgage servicing.