New CFPB Amendments Affect Borrowers in Bankruptcy

The Consumer Financial Protection Bureau (CFPB) has two sets of new amendments to its RESPA and TILA mortgage servicing rules that will go into effect on April 19. One set of these amendments affects borrowers who are in or have been in bankruptcy.

New Amendments

This set of amendments gives homeowners who are in or have been in a bankruptcy the right to receive monthly mortgage statements. In 2014, the CFPB issued a periodic mortgage statement rule that requires mortgage servicers to send monthly statements with detailed information about a borrower’s loan.  The rule has a broad exemption for a borrower who was in a bankruptcy case or had a mortgage debt that was discharged in bankruptcy.

Under the new rule, a servicer can only avoid sending monthly statements if both elements of the following test are met:  First, the borrower must be a debtor in an active bankruptcy or has discharged his or her personal liability on the mortgage loan in a bankruptcy.  Secondly, one of the following must have allow occurred:

1. The borrower requested in writing that the servicer stop sending statements,
2. The borrower’s most recent Chapter 13 plan provides for a surrender of the property, avoids the mortgage lien, or does not provide for a cure of defaulted arrearage or maintenance payments of the loan,
3. A court enters an order avoiding the mortgage lien, lifts the automatic stay, or requires the servicer to stop sending statements, or
4. The borrower in a Chapter 7 case files a statement of intention to surrender the property and no payments had been made since the Chapter 7 filing.

Additionally, a borrower who meets this exemption under the new rule will have a right to “opt-in” to receiving periodic statements from the mortgage servicer.  The right can be exercised in any time by submitting a written request.  Any consumer on the loan can make the request, even if there are multiple people on the loan.

When the statements must be provided to borrowers in bankruptcy, RESPA does require some modification of the content of the statement.  For instance, the statements must include a statement identifying that the borrower is a debtor in bankruptcy, and it must say that the statement is for informational purposes only.

If you are in need of an attorney to help you navigate your mortgage and bankruptcy, please contact one of our offices to set up a free consultation with one of our experienced attorneys.