IMO..that IS what it says.

We originate and sell the majority of our loans, many of which are sold to Fannie Mae and we retain the servicing. We utilize a subservicer to service a good portion of these loans. I am reviewing the interpretation which states that both a master servicer and a subservicer, as defined in 12 CFR 1024.31 must meet the requirements of a small servicer. I understand that the subservicer would not be considered a small servicer if they do not meet that definition, but would we as the master servicer still be considered a small servicer if we meet the definition (including the total loans serviced by us and by the subservicer)?

Thanks, RR Joker. That's what I was thinking, too. (but I was hoping that I was wrong)

If you own the loan, it does not matter how you acquired it. It is an "or" and not an "and". Basically, if you are servicing loans that you do not own or did not originally make (showing you or your affiliate as the original creditor) you can't be a small servicer.

I just talked to an attorney at the Bureau and he verified that if you either own the loan (even if you purchased it) or you originated it and sold it with servicing retained, then you can be a small servicer if you meet the less than 5,000 mtg ln part.

I had a question regarding the 5,000 mtg loans or less, it may be a little ignorant but I thought I would ask anyways. Last year our small community bank discontinued consumer mortgage loans. We have mortgage loans on our books that we orginated from previous years. Will this service rule affect us from the loans we currently service other than the new foreclosure rule about having to wait until a certain time to start the foreclosure process ? Or is this for loans that are newly orginated from the time this final rule goes into effect?

There is no grandfathering for existing loans being serviced. They will be counted as part of your total loans being serviced.

The rule looks at all of the loans you are servicing, not just the ones made after it becomes effective. If you qualify as a small servicer, you get an exemption from some of the subpart C rules in RESPA (Reg X), and some benefit under the new escrow servicing requirements in new section 1024.17(k)(5). You also get some relief under Reg Z's §1026.41 periodic statement rule.

First determine whether you are servicing any loans for which neither you nor an affiliate is the creditor or assignee. If the answer to that question is "Yes," you won't qualify as a small servicer as long as you service any of those loans. If you don't have any of those loans, then count the mortgage loans you service on January 1, 2014, you will be a small servicer for all of 2014.

I have been going through the final rule and we do fall under the small servicer exmemption. These are the section I have picked out that still apply to us:

1. Interest Rate adjustment notices for ARMS
2. Prompt crediting of payments
3. Error resolution
4. General servicing policies
5. Loss mitigation procedures

Have I missed anything?

This is what I came up with:

SUMMARY OF THE FINAL RULES

The final rules cover nine major topics, which are summarized below.

1. Periodic billing statements. 1026.41 – Small servicer exempt under 1026.41(e)

2. Interest-rate adjustment notices for ARMs. 1026.20 – No exemption for small servicers

3. Prompt payment crediting and payoff statements. 1026.36(c) - No exemption for small servicers

4. Force-placed insurance. 1024.37 - Still working on this one. There is some exemption for small servicers - it just is not crystal clear on what that exemption is in my mind yet.

5. Error resolution and information requests. 1024.35 - No exemption for small servicers

6. General servicing policies, procedures, and requirements. 1024.38 – Small servicer exempt under 1024.30(b)(1)

7. Early intervention with delinquent borrowers. 1024.39 - Small servicer exempt under 1024.30(b)(1)

8. Continuity of contact with delinquent borrowers. 1024.40 - Small servicer exempt under 1024.30(b)(1)

9. Loss Mitigation Procedures. 1024.41 – Only 1024.41(j) will apply to small servicers

Thanks! I missed the exemption for #6.

4. Force-placed insurance. 1024.37 - Still working on this one. There is some exemption for small servicers - it just is not crystal clear on what that exemption is in my mind yet.

I spent some more time this morning on this subject and I don’t see where a small servicer is exempt from all provisions of the force-placed insurance requirements.

A small servicer appears to only be exempt from two specific sections, 1024.17(k)(5)(i) and (k)(5)(ii)(B):

(5) Timely payment of hazard insurance. (i) In general. Except as provided in paragraph (k)(5)(iii) of this section, with respect to a borrower whose mortgage payment is more than 30 days overdue, but who has established an escrow account for the payment for hazard insurance, as defined in § 1024.31, a servicer may not purchase force-placed insurance, as that term is defined in § 1024.37(a), unless a servicer is unable to disburse funds from the borrower’s escrow account to ensure that the borrower’s hazard insurance premium charges are paid in a timely manner.

(ii) Inability to disburse funds. (B) When inability does not exist. A servicer shall not be considered unable to disburse funds from the borrower’s escrow account because the escrow account contains insufficient funds for paying hazard insurance premium charges.

This basically allows a small servicer to force place insurance without regard to renewing an existing policy of the homeowner if they are more than 30 days past due as long as the cost of the force placed insurance is less than the customer’s current policy.

I see no exemption from the notifications and other requirements of 1024.17 or 1024.37.

I didn't either, Randy...in fact, you through me for a bit of a loop even mentioning #4 up there...thanks for clarifying...I did note that small (odd) exemption, but since we don't escrow, I didn't think much about it!

this is very helpful - thank you