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Oregon Department of Justice Issues Mortgage Servicing Rule, Take Two

February 23, 2012

On Friday, Jan. 27, the Oregon Department of Justice (DOJ) issued a temporary rule governing mortgage loan servicing. The rule had some implications regarding open-end home equity lines of credit (HELOC) and required compliance with Fannie Mae/Freddie Mac Delinquency Management and Default Prevention Guidelines.

Due to concerns expressed by a number of financial institutions, including credit unions, the Oregon DOJ has suspended the temporary rule OAR 137-020-0800 that it had issued in January. The DOJ has now issued a new rule, ORA 137-020-0805, to exempt open-end credit from the definition of a “residential mortgage loan” and remove the requirement that a mortgage servicer follow the Federal Home Financing Agency’s guidelines for borrowers pursuing an alternative to foreclosure. The new rule was issued on Feb. 15, 2012, and is effective immediately.

The new rule still prohibits mortgage loan servicers from engaging in unfair or deceptive conduct. Specifically, a mortgage loan servicer may not:

• Assess a late fee or delinquency charge for a payment received from a borrower by the payment’s due date or within any applicable grace period;
• Assess or collect any default-related fee or charge that the servicer is not legally authorized to assess or collect under the terms of the residential mortgage loan, deed of trust or mortgage;
• Misrepresent to a borrower any material information regarding a loan modification;
• Misrepresent any information set forth in an affidavit, declaration or other sworn statement detailing a borrower’s default and the servicer’s right to foreclose; and/or
• Fail to provide a borrower with notice that the borrower’s request for loan modification has been denied or rejected within 10 days of the denial or rejection, but in no event, less than 20 days before a scheduled trustee sale.

A mortgage loan servicer must also follow the mortgage servicing transfer requirements of the Real Estate Settlement Procedures Act (RESPA) 12 CFR 1024.21. The RESPA rules cover providing notice of servicing transfer, responding to qualified written requests and treatment of loan payments during the transfer period.

In addition, the mortgage loan servicer must deal with the borrower in good faith.

This temporary rule is set to expire on July 24, 2012. In the interim, the Oregon DOJ will be working to create a permanent rule to replace it.

Questions about complying with this rule should be directed to the NWCUA Compliance Department at compliance@nwcua.org or 800.546.4465.

Questions or comments about the advocacy process for the permanent rule should be directed to NWCUA Director of Regulatory Advocacy Jaycee Winn at jwinn@nwcua.org or 800-995-9064 x 209.

Posted on 02/22/2012