(a) Definitions. As used in this section: Master servicer means the owner of the right to perform servicing,
which may actually perform the servicing itself or may do so through a
subservicer. Mortgage servicing loan means a federally related mortgage loan, as
that term is defined in Sec. 3500.2, subject to the exemptions in
Sec. 3500.5, when the mortgage loan is secured by a first lien. The
definition does not include subordinate lien loans or open-end lines of
credit (home equity plans) covered by the Truth in Lending Act and
Regulation Z, including open-end lines of credit secured by a first
lien. Qualified written request means a written correspondence from the
borrower to the servicer prepared in accordance with paragraph (e)(2) of
this section. Subservicermeans a servicer who does not own the right to perform
servicing, but who does so on behalf of the master servicer. Transferee servicer means a servicer who obtains or who will obtain
the right to perform servicing functions pursuant to an agreement or
understanding. Transferor servicer means a servicer, including a table funding
mortgage broker or dealer on a first lien dealer loan, who transfers or
will transfer the right to perform servicing functions pursuant to an
agreement or understanding.
(b) Servicing Disclosure Statement; Requirements . (1) At the time an application for a mortgage servicing loan is submitted, or within 3 business days after submission of the application, the lender, mortgage broker who anticipates using table funding, or dealer who anticipates a first lien dealer loan shall provide to each person who applies for such a loan a Servicing Disclosure Statement. A format for the Servicing Disclosure Statement appears as Appendix MS–1 to this part. The specific language of the Servicing Disclosure Statement is not required to be used. The information set forth in “Instructions to Preparer” on the Servicing Disclosure Statement need not be included with the information given to applicants, and material in square brackets is optional or alternative language. The model format may be annotated with additional information that clarifies or enhances the model language. The lender, table funding mortgage broker, or dealer should use the language that best describes the particular circumstances.
(2) The Servicing Disclosure Statement must indicate whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding. If the lender, table funding mortgage broker, or dealer in a first lien dealer loan will engage in the servicing of the mortgage loan for which the applicant has applied, the disclosure may consist of a statement that the entity will service such loan and does not intend to sell, transfer, or assign the servicing of the loan. If the lender, table funding mortgage broker, or dealer in a first lien dealer loan will not engage in the servicing of the mortgage loan for which the applicant has applied, the disclosure may consist of a statement that such entity intends to assign, sell, or transfer servicing of such mortgage loan before the first payment is due. In all other instances, the disclosure must state that the servicing of the loan may be assigned, sold or transferred while the loan is outstanding.
(c) Servicing Disclosure Statement; Delivery . The lender, table funding mortgage broker, or dealer that anticipates a first lien dealer loan shall deliver the Servicing Disclosure Statement within 3 business days from receipt of the application by hand delivery, by placing it in the mail, or, if the applicant agrees, by fax, e-mail, or other electronic means. In the event the borrower is denied credit within the 3 business-day period, no servicing disclosure statement is required to be delivered. If co-applicants indicate the same address on their application, one copy delivered to that address is sufficient. If different addresses are shown by co-applicants on the application, a copy must be delivered to each of the co-applicants.
(d) Notices of Transfer; loan servicing--(1) Requirement for notice.
(i) Except as provided in this paragraph (d)(1)(i) or paragraph
(d)(1)(ii) of this section, each transferor servicer and transferee
servicer of any mortgage servicing loan shall deliver to the
borrower a written Notice of Transfer, containing the information
described in paragraph (d)(3) of this section, of any assignment, sale,
or transfer of the servicing of the loan. The following transfers are
not considered an assignment, sale, or transfer of mortgage loan
servicing for purposes of this requirement if there is no change in the
payee, address to which payment must be delivered, account number, or
amount of payment due:
(A) Transfers between affiliates;
(B) Transfers resulting from mergers or acquisitions of servicers or
(C) Transfers between master servicers, where the subservicer
remains the same.
(ii) The Federal Housing Administration (FHA) is not required under
paragraph (d) of this section to submit to the borrower a Notice of
Transfer in cases where a mortgage insured under the National Housing
Act is assigned to FHA.
(2) Time of notice. (i) Except as provided in paragraph (d)(2)(ii)
of this section:
(A) The transferor servicer shall deliver the Notice of Transfer to
the borrower not less than 15 days before the effective date of the
transfer of the servicing of the mortgage servicing loan;
(B) The transferee servicer shall deliver the Notice of Transfer to
the borrower not more than 15 days after the effective date of the
(C) The transferor and transferee servicers may combine their
notices into one notice, which shall be delivered to the borrower not
less than 15 days before the effective date of the transfer of the
servicing of the mortgage servicing loan.
(ii) The Notice of Transfer shall be delivered to the borrower by
the transferor servicer or the transferee servicer not more than 30 days
after the effective date of the transfer of the servicing of the
mortgage servicing loan in any case in which the transfer of servicing
is preceded by:
(A) Termination of the contract for servicing the loan for cause;
(B) Commencement of proceedings for bankruptcy of the servicer; or
(C) Commencement of proceedings by the Federal Deposit Insurance
Corporation (FDIC) or the Resolution Trust Corporation (RTC) for
conservatorship or receivership of the servicer or an entity that owns
or controls the servicer.
(iii) Notices of Transfer delivered at settlement by the transferor
servicer and transferee servicer, whether as separate notices or as a
combined notice, will satisfy the timing requirements of paragraph
(d)(2) of this section.
(3) Notices of Transfer; contents. The Notices of Transfer required
under paragraph (d) of this section shall include the following
(i) The effective date of the transfer of servicing;
(ii) The name, consumer inquiry addresses (including, at the option
of the servicer, a separate address where qualified written requests
must be sent), and a toll-free or collect-call telephone number for an
employee or department of the transferee servicer;
(iii) A toll-free or collect-call telephone number for an employee
or department of the transferor servicer that can be contacted by the
borrower for answers to servicing transfer inquiries;
(iv) The date on which the transferor servicer will cease to accept
payments relating to the loan and the date on which the transferee
servicer will begin to accept such payments. These dates shall either be
the same or consecutive days;
(v) Information concerning any effect the transfer may have on the
terms or the continued availability of mortgage life or disability
insurance, or any other type of optional insurance, and any action the
borrower must take to maintain coverage;
(vi) A statement that the transfer of servicing does not affect any
other term or condition of the mortgage documents, other than terms
directly related to the servicing of the loan; and
(vii) A statement of the borrower's rights in connection with
complaint resolution, including the information set forth in paragraph
(e) of this section. Appendix MS-2 of this part illustrates a statement
satisfactory to the Secretary.
(4) Notices of Transfer; sample notice. Sample language that may be
comply with the requirements of paragraph (d) of this section is set
out in appendix MS-2 of this part. Minor modifications to the sample
language may be made to meet the particular circumstances of the
servicer, but the substance of the sample language shall not be omitted
or substantially altered.
(5) Consumer protection during transfer of servicing. During the 60-
day period beginning on the effective date of transfer of the servicing
of any mortgage servicing loan, if the transferor servicer (rather than
the transferee servicer that should properly receive payment on the
loan) receives payment on or before the applicable due date (including
any grace period allowed under the loan documents), a late fee may not
be imposed on the borrower with respect to that payment and the payment
may not be treated as late for any other purposes.
(e) Duty of loan servicer to respond to borrower inquiries-- (1)
Notice of receipt of inquiry. Within 20 business days of a servicer of a
mortgage servicing loan receiving a qualified written request from the
borrower for information relating to the servicing of the loan, the
servicer shall provide to the borrower a written response acknowledging
receipt of the qualified written response. This requirement shall not
apply if the action requested by the borrower is taken within that
period and the borrower is notified of that action in accordance with
the paragraph (f)(3) of this section. By notice either included in the
Notice of Transfer or separately delivered by first-class mail, postage
prepaid, a servicer may establish a separate and exclusive office and
address for the receipt and handling of qualified written requests.
(2) Qualified written request; defined. (i) For purposes of
paragraph (e) of this section, a qualified written request means a
written correspondence (other than notice on a payment coupon or other
payment medium supplied by the servicer) that includes, or otherwise
enables the servicer to identify, the name and account of the borrower,
and includes a statement of the reasons that the borrower believes the
account is in error, if applicable, or that provides sufficient detail
to the servicer regarding information relating to the servicing of the
loan sought by the borrower.
(ii) A written request does not constitute a qualified written
request if it is delivered to a servicer more than 1 year after either
the date of transfer of servicing or the date that the mortgage
servicing loan amount was paid in full, whichever date is applicable.
(3) Action with respect to the inquiry. Not later than 60 business
days after receiving a qualified written request from the borrower, and,
if applicable, before taking any action with respect to the inquiry, the
(i) Make appropriate corrections in the account of the borrower,
including the crediting of any late charges or penalties, and transmit
to the borrower a written notification of the correction. This written
notification shall include the name and telephone number of a
representative of the servicer who can provide assistance to the
(ii) After conducting an investigation, provide the borrower with a
written explanation or clarification that includes:
(A) To the extent applicable, a statement of the servicer's reasons
for concluding the account is correct and the name and telephone number
of an employee, office, or department of the servicer that can provide
assistance to the borrower; or
(B) Information requested by the borrower, or an explanation of why
the information requested is unavailable or cannot be obtained by the
servicer, and the name and telephone number of an employee, office, or
department of the servicer that can provide assistance to the borrower.
(4) Protection of credit rating. (i) During the 60-business day
period beginning on the date of the servicer receiving from a borrower a
qualified written request relating to a dispute on the borrower's
payments, a servicer may not provide adverse information regarding any
payment that is the subject of the qualified written request to any
consumer reporting agency (as that term is defined in section 603 of the
Fair Credit Reporting Act, 15 U.S.C. 1681a).
(ii) In accordance with section 17 of RESPA (12 U.S.C. 2615), the
protection of credit rating provision of paragraph (e)(4)(i) of this
section does not impede a lender or servicer from pursuing any of its
remedies, including initiating foreclosure, allowed by the underlying
mortgage loan instruments.
(f) Damages and costs. (1) Whoever fails to comply with any
provision of this section shall be liable to the borrower for each
failure in the following amounts:
(i) Individuals. In the case of any action by an individual, an
amount equal to the sum of any actual damages sustained by the
individual as the result of the failure and, when there is a pattern or
practice of noncompliance with the requirements of this section, any
additional damages in an amount not to exceed $1,000.
(ii) Class actions. In the case of a class action, an amount equal
to the sum of any actual damages to each borrower in the class that
result from the failure and, when there is a pattern or practice of
noncompliance with the requirements of this section, any additional
damages in an amount not greater than $1,000 for each class member.
However, the total amount of any additional damages in a class action
may not exceed the lesser of Sec. 500,000 or 1 percent of the net worth
of the servicer.
(iii) Costs. In addition, in the case of any successful action under
paragraph (f) of this section, the costs of the action and any
reasonable attorneys' fees incurred in connection with the action.
(2) Nonliability. A transferor or transferee servicer shall not be
liable for any failure to comply with the requirements of this section,
if within 60 days after discovering an error (whether pursuant to a
final written examination report or the servicer's own procedures) and
before commencement of an action under this section and the receipt of
written notice of the error from the borrower, the servicer notifies the
person concerned of the error and makes whatever adjustments are
necessary in the appropriate account to ensure that the person will not
be required to pay an amount in excess of any amount that the person
otherwise would have paid.
(g) Timely payments by servicer. If the terms of any mortgage
servicing loan require the borrower to make payments to the servicer of
the loan for deposit into an escrow account for the purpose of assuring
payment of taxes, insurance premiums, and other charges with respect to
the mortgaged property, the servicer shall make payments from the escrow
account in a timely manner for the taxes, insurance premiums, and other
charges as the payments become due, as governed by the requirements in
(h) Preemption of State laws. A lender who makes a mortgage
servicing loan or a servicer shall be considered to have complied with
the provisions of any State law or regulation requiring notice to a
borrower at the time of application for a loan or transfer of servicing
of a loan if the lender or servicer complies with the requirements of
this section. Any State law requiring notice to the borrower at the time
of application or at the time of transfer of servicing of the loan is
preempted, and there shall be no additional borrower disclosure
requirements. Provisions of State law, such as those requiring
additional notices to insurance companies or taxing authorities, are not
preempted by section 6 of RESPA or this section, and this additional
information may be added to a notice prepared under this section, if the
procedure is allowable under State law.
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