Skip to content
BOL Conferences
Thread Options
#1786036 - 02/14/13 03:37 PM Small Servicer exemption under Mortgage Servicing
loan1 Offline
New Poster
Joined: Feb 2006
Posts: 4
I have a couple questions regarding the small servicer exemption

1. Would we meet the small servicer exemption if we currently own or originate loans and sell these to Freddie Mac and/ or Fannie Mae, but retain the servicing and have less than 5,000 loans?

2. On the other hand, if we have broker agreements with other banks in which the loan closes in that banks's name and we then purchase the loan and retain the servicing, wouldn't we lose our small servicer exemption? If we would lose our small servicer exemption due to this, could we then sell these loans as servicing released to meet the definition of a small servicer or could these loans be grandfathered in?

Return to Top
Mortgage Servicing Rules
#1786083 - 02/14/13 04:08 PM Re: Small Servicer exemption under Mortgage Servicing loan1
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
1. Yes

2. If you are the creditor or assignee of the loan (you own both the loan and servicing rights), you can still be a small servicer, if you otherwise qualify.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1795370 - 03/15/13 05:36 PM Re: Small Servicer exemption under Mortgage Servicing loan1
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
We have a mortgage company affiliate. The bank also originates and services its own mortgage loans (mainly seconds, HELOCs, etc.) Would we need to add the total of loans for both entities or would we look at each separately to see if we could meet the small servicer exemption? Thank you.

Return to Top
#1795390 - 03/15/13 06:00 PM Re: Small Servicer exemption under Mortgage Servicing loan1
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
Since the definition of small servicer is found in Reg Z ยง1026.41 and that section only applies to closed-end consumer credit transactions secured by a dwelling, I assume that the small servicer exemption qualification only counts that type of mortgage loan toward the 5,000 limit. To determine if you qualify, combine the count of such loans serviced by you and your affiliate.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1795439 - 03/15/13 07:02 PM Re: Small Servicer exemption under Mortgage Servicing loan1
StevenD Offline
Gold Star
StevenD
Joined: Nov 2000
Posts: 489
KY
The term "mortgage loans" used in the exception is actually a 'defined term' for the purposes of that section.

1026.41 Periodic statements for residential mortgage loans.

(a) In general. (1) Scope. This section applies to a closed-end consumer credit transaction secured by a dwelling, unless an exemption in paragraph (e) of this section applies. Such transactions are referred to as mortgage loans for the purposes of this section.
. . .
(e)(4) Small servicers. (i) Exemption. A creditor, assignee, or servicer is exempt from the requirements of this section for mortgage loans serviced by a small servicer.
(ii) Small servicer defined. A small servicer is a servicer that either:
(A) Services 5,000 or fewer mortgage loans, for all of which the servicer (or an affiliate) is the creditor or assignee; or
Last edited by StevenD; 03/15/13 07:03 PM.
_________________________
Opinion expressed are my own and not necessarily those of my employer.

Return to Top
#1795653 - 03/18/13 01:08 PM Re: Small Servicer exemption under Mortgage Servicing loan1
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Thank you for your help. I didn't mean to confuse my question by throwing HELOCs into the mix and do understand those would not be included. I was trying to clarify that we would need to combine the number of closed-end mortgage loans for the bank and our mortgage affiliate to determine if we were elibile for the small bank exemption. Doesn't appear we are.

Return to Top
#1798887 - 03/27/13 06:30 PM Re: Small Servicer exemption under Mortgage Servicing loan1
kgreen Offline
Junior Member
Joined: May 2012
Posts: 32
I believe that we would still qualify as a small servicer, but just want to double check. We service less than 5,000 mortgage loans, but we take payments for a Scholarship Loan fund. We take their payments, but we do not take the action of a creditor.

Return to Top
#1798926 - 03/27/13 07:18 PM Re: Small Servicer exemption under Mortgage Servicing loan1
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
That's like a lock box service for non-mortgage payments on behalf of a third party. It would not affect your eligibility for the small mortgage servicer exemption.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#1804438 - 04/12/13 08:29 PM Re: Small Servicer exemption under Mortgage Servicing loan1
kgreen Offline
Junior Member
Joined: May 2012
Posts: 32
Some of them are secured by a primary residence, but we do not fund the loans, take any credit action, or report any interest to the IRS. Does the fact that they are real estate loans change the game?

Return to Top