1. John L. Culhane, Jr. culhane@ballardspahr.com 215.864.8535
CFPB’s Mortgage Rules – Reading the Tea Leaves in Terms of What’s Coming for Student Loans SLSA/SLSA Private Student Loan Committee Cincinnati, Ohio May
John L. Culhane, Jr.

2. Introduction
National mortgage loan servicing standards are now in effect
Given these standards, it’s not hard to read the tea leaves in terms of what’s likely to be coming for student loan servicers
In your future – required periodic statements, interest rate adjustment notices, prompt crediting and payoff statement requirements, error resolution and information request procedures, general servicing policies and procedures, early intervention requirements, continuity of contact requirements, and loss mitigation procedures

3. Periodic Statements –
Generally required for each billing cycle
Must be delivered or mailed no later than “a reasonably prompt time” (generally 4 days) after last payment due date (for credit cards – 21 days before next due date)
Must be clear and conspicuous and in a form that the borrower can keep
Must include the amount due, an explanation of same, a breakdown for any past payment, transaction activity, partial payment information, contact information, account information, and delinquency information

4. Rate Adjustment Notices – 1026.20(c)
Notice required if rate may increase after consummation and loan is greater than one year
Notice required at least 210 days but no more than 240 days before the first payment at a new level
Subsequent notices required when a rate adjustment results in a corresponding change in a minimum payment (different rules depending on timing of rate adjustments)
Notice must be clear and conspicuous and in a form that the borrower may keep (table format required)

5. Prompt Crediting – (c)
Periodic payments (full payment of principal and interest) must be credited as of the date of receipt (non-conforming, payments within 5 days of receipt) (credit cards same)
Partial payments may be held in suspense account but must be disclosed on periodic statement
Once suspense account holds enough funds, payment must be credited as of the date of receipt
Payoff statements must be sent within a reasonable time (generally no more than 7 business days) after receipt of written request

6. Error Resolution –
Requires a proper billing error notice with name, information necessary to identify account, and belief that error has occurred
Timing requirements generally follow those for what used to be “qualified written requests” – acknowledge within 5 days of receipt and respond within 30 business days (some shorter time frames)
Response requires written notification of correction of error or of reasons as to why no error occurred (reasonable investigation required) plus right to request documents and contact information for request

7. Information Requests – 1024.36
Requires a “valid information request” with name, information necessary to identify account, and information borrower is requesting
Must acknowledge request within 5 business days of receipt and, if requested, provide identity of and contact information for owner or assignee within 10 business days, and any other information within 30 business days
Cannot charge a fee or require a payment as a condition of investigating and responding to a valid information request (note that the door is open for requests for duplicate documents at no charge)

8. General Servicing Policies – 1024.38
Must maintain reasonable policies and procedures in five key areas
1. Providing timely and accurate information
2. Properly evaluating loss mitigation applications
3. Facilitating service provider oversight
4. Facilitating transfer of information during servicing transfers
5. Informing borrowers of error resolution and information request procedures

9. Early Intervention –
Written notice required not later than 45 days after delinquency
Notice must include a statement encouraging borrower to contact the servicer, telephone number for continuity of contact and servicer mailing address, brief description of loss mitigation options, application instructions for same or statement about obtaining loss mitigation information, and website for lists of counselors or counseling organizations and toll free number for accessing same

10. Continuity of Contact – 1024.40
Must assign personnel to delinquent borrower on or before providing written notice with early intervention
Must make available by telephone personnel assigned to respond to borrower inquiries and assist borrower with loss mitigation
Must provide timely live response to borrower who contacts assigned personnel but who does not immediately receive a live response
Service personnel must be able to provide information about loss mitigation options, status, and decisions

11. Loss Mitigation Procedures – 1024.41
Ban on dual tracking (pursuing collection while counseling on loss mitigation)
Requirements for processing applications generally parallel requirements of the ECOA and Regulation B but acknowledgment notice is required and decision generally cannot be made on an incomplete application
Otherwise start with facially complete application, followed by 30-day evaluation period, requirement to exercise diligence in obtaining information when application is incomplete, and adverse action notice requirement when denying loan modification

12. Thank you for inviting me to speak with you today
Thank you for inviting me to speak with you today. Please contact me if you have any questions!
John L. Culhane, Jr.
Partner
Consumer Financial Services

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15. Presenter – John L. Culhane, Jr.
Partner at Ballard Spahr and a member of the firm’s Consumer Financial Services, and Higher Education Groups as well as the firm’s Fair Lending Task Force and Collection Documentation Task Force
Higher education practice emphasizes counseling clients on the development, implementation and operation of innovative and traditional student loan programs, tuition payment plans, and school payment card programs
Regulatory practice includes preparing clients for banking agency and CFPB targeted and full spectrum compliance examinations as well as assisting in the defense of consumer class actions, attorney general investigations, and agency enforcement actions
Charter member of the American College of Consumer Financial Services Lawyers
Former Chair of the Subcommittee on Fair Lending of the ABA Committee on Consumer Financial Services