Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.
Date: May 15, 2018
To: All Scheer Law Group Clients and Affiliates:
Subject: Servicers “Caught between a rock and hard place” under new TILA/RESPA Mortgage Servicing Rules.
For a good example of how lender/servicers are caught between a “rock and hard place” under the new Mortgage Servicing Rules (“MSR”), you need not look farther than Portfolio Lear v. Select Portfolio Servicing, Inc. (S.D. Fla., Apr. 25, 2018, No. 17-62206-CIV) 2018 WL 1960108, at *1.
A borrower sued a lender/servicer asserting that payment statements received violated the Fair Debt Collection Practices Act (“FDCPA”) and its Florida corollary. The servicer’s offense: It sent required periodic payment statements required under MSR (See 12 CFR § 1026.41), to a borrower who it knew was represented by counsel. Under the MSR, the servicer was required to communicate with the borrower. Under the FDCPA, the communications were prohibited.
The Court upheld the borrower’s rights to sue and held that:
“A loan servicer must perform its duties under TILA, but a periodic statement that is sent pursuant to TILA may violate the FCCPA and FDCPA, causing the servicer to be liable under the latter statutes. The mere fact that a periodic statement complies with TILA does not exonerate the sender. Lear v. Select Portfolio Servicing, Inc. (S.D. Fla., Apr. 25, 2018, No. 17-62206-CIV) 2018 WL 1960108, at *2.”
This illustrates a big problem under the new MSR. Servicers that respond mechanically to the MSR requirements or who hope they can disclaim liability under the FDCPA, by including rote disclaimers are in for rude awakenings. Add to this the certainty that the new periodic statement requirements in bankruptcy are a “tar baby” for accounting problems and bankruptcy discharge violations, and servicers are in a host of problems. Covered servicers must adequately identify their obligations under both the MSR and other applicable laws and develop policies and procedures to ensure that they are not violating one law while complying with another.
Under the recently enacted MSR (effective April 19, 2018) requirements, clarifications and safe harbors related providing period statements in bankruptcy and when a borrower has invoked FCDPA cease communication directives have been enacted. SLG has received numerous inquiries on the subject. The best advise we can give is to ensure that either you (as a larger servicer, which includes smaller lenders who have another unaffiliated servicer, servicing its loans), “train, train, train” to ensure that your policies and procedures (and that your servicer’s policies and procedures) adequately address these issues. Now is the time to prepare.
If you are interested in purchasing a live webinar from SLG on the subject which will help you to prepare and respond.
Please call or email if you would like to discuss.
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