Regulation F

Changes to the Fair Debt Collection Practices Act (FDCPA) took effect in December of 2021 and re-set the rules of the road regarding the operations of debt collectors. While all servicers should be aware of the changes, not all servicers and loans are directly regulated by the FDCPA.  You will need to lean heavily on your legal counsel for this one.

As a general rule of thumb, if a loan boards on your system as an already-defaulted loan, it’s likely subject to these new guidelines. Here are three (not-so) easy steps to getting this right:

• Define. Work closely with your legal counsel to develop a clear, written definition of which loans do and do not fall under the FDCPA’s authority.
• Flag. We are seeing many servicers separate (“flag”) loans in their portfolio and subsequent collection strategies/ communication protocol to easily identify loans subject to Reg. F and we recommend you go and do likewise.
• Customize. Last, tailor your work queues and adapt them as you see fit for compliance. Matters such as disclosures, welcome letter timing, live-contact talk-offs for ESL borrowers, and many other components with regard to collection and communication have changed, and so too should all your buckets and work queues. Easier said than done!

Recap of some of Reg. F’s key changes:

• The information that the debt collector must provide to a consumer or a borrower at the beginning of the relationship or beginning of debt collection communications is clarified.
• The number of calls the debt collector can make to the borrower regarding the debt has been limited. Other communication methods have not been changed.
• The changes provided a regulatory framework for communicating via text and social media. This is a provision that certain servicers who meet the @FDCPA definition can start doing. #WhyNot
• There are other provisions like passive collections and collecting debt beyond the statute of limitations that your legal team should analyze. , among others, to review with your legal team.

Mortgagee Letter 2022-02

On February 7^th, FHA added clarification for first legal action and reasonable diligence timeframes due to COVID-19 in Mortgagee Letter 2022-02.

FHA has clarified that if a borrower is on a forbearance plan, then the deadline can be calculated 180 days based on the later date of either the end of the borrower’s COVID-19 forbearance or the expiration of the foreclosure moratorium. Servicers need to ensure they are calculating timelines accurately to incorporate this update accordingly.

FHA allows a 90-day automatic extension at the end of any federal prohibition. The CFPB rule is a federal prohibition that prohibited proceeding with foreclosure unless certain procedural safeguards were met. Loans that fall under the exceptions to this rule would not receive a 90-day automatic extension. Servicers can mitigate their risk by retaining clear documentation as to why they did not foreclosure those delinquent properties prior to March 1, 2020, or became vacant during the pandemic moratoriums. In these scenarios, it is recommended to request an extension from HUD.

For example, if a property was more than four months delinquent as of March 1, 2020, it fell under one of the exceptions from the CFPB rules, and the servicer was not prohibited from proceeding with foreclosure.  In this case, if there was no forbearance plan, the deadline would be January 27, 2022, which is 180 days after the end date of the moratorium.  However, if an occupied property had a forbearance end date of November 30, 2021, under Mortgagee Letter 2022-02, FHA grants an automatic 180-day extension to May 29, 2022.  

Keep in mind that there are a lot of details involved in accurately calculating the FHA foreclosure deadlines. These are only highlights. Don’t hesitate to contact us with any specific questions you may have!