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#1810101 - 05/02/13 12:26 PM Small Servicer Exemption
kgreen Offline
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We are a small community bank with well under 5,000 mortgage loans. We do, however, take payments for a scholarship loan program funded by a local attorney--some of which are secured by the borrower's primary residence. We do not fund the loans, take action on the loans, report to the IRS or act as the creditor in any way aside from taking their payments. We do not own any servicing rights. Does this knock us out of the Small Servicer Exemption? Thoughts?

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Mortgage Servicing Rules
#1810564 - 05/03/13 12:54 AM Re: Small Servicer Exemption kgreen
rlcarey Offline
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Galveston, TX
What do you mean, you take payments??
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#1810585 - 05/03/13 12:07 PM Re: Small Servicer Exemption kgreen
kgreen Offline
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The loans are put "on" our system so that we can receive payments for them. That is the extent of our dealings with them. We process the loans (as in produce the paperwork), put them on, then receive payments.

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#1810592 - 05/03/13 12:25 PM Re: Small Servicer Exemption kgreen
rlcarey Offline
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Galveston, TX
Well, you definitely are servicing the loans:

Servicing means receiving any scheduled periodic payments from a borrower pursuant to the terms of any mortgage loan, including amounts for escrow accounts under section 10 of RESPA (12 U.S.C. 2609), and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract.

How you do this without a servicing contract is a little beyond me.

However, you might have an out here:

Servicer means a person responsible for the servicing of a federally related mortgage loan (including the person who makes or holds such loan if such person also services the loan).

You are going to have to look at that definition very carefully to determine the status of these loans.

If they are not federally related mortgage loans, it will be an interesting argument the first time the regulators claim that these invalidate any small servicer exemption you choose to claim, as they are sometimes not that great at nuances.
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#1810603 - 05/03/13 01:03 PM Re: Small Servicer Exemption kgreen
kgreen Offline
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Thanks, rlcarey. Based upon that definition, the "lender" is not a federally regulated or insured agency. That may be our loophole.

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#1810607 - 05/03/13 01:07 PM Re: Small Servicer Exemption kgreen
rlcarey Offline
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Well, it does also depend on volumes - make sure you read all the definitions.
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#1810626 - 05/03/13 01:34 PM Re: Small Servicer Exemption kgreen
kgreen Offline
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Thank you!

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#1812371 - 05/08/13 07:15 PM Re: Small Servicer Exemption kgreen
Ninky Offline
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We are not an exempt servicer, way over the volume limit. Is there any exemption for loans that we service for free, that we receive no compensation for? We collect payments for a non-profit housing org. We collect the payments and send them monthly to the non-profit. Is there any exemption for the periodic statement/coupon book or the servicing/collection requirements for such loans? I have found none. This is a strictly pass-through process and we do not even perform collection services for these loans.

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#1812381 - 05/08/13 07:20 PM Re: Small Servicer Exemption Ninky
GoJays Offline
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We are in the same position. I have not been able to find a way that we would be exempt. The collections aspect is what concerns me as we essentially turn the loan back to the non-profit once it goes 60 days delinquent.

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#1812459 - 05/08/13 08:48 PM Re: Small Servicer Exemption kgreen
kgreen Offline
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There is a proposed rule that would eliminate having to count the mortgages that you service charitably. I believe it's in the comment period now.

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#1812483 - 05/08/13 09:12 PM Re: Small Servicer Exemption kgreen
GoJays Offline
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I was under the impression that just applied to small servicers who service for charitable organizations?

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#1812584 - 05/09/13 02:32 PM Re: Small Servicer Exemption kgreen
kgreen Offline
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Hopefully there will be clarification on that.

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#1817763 - 05/28/13 03:41 PM Re: Small Servicer Exemption rlcarey
Puzzled Offline
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We are also in a similar type position. We are a small community bank that is well under 5000 limit; however, we have a small number of contract collections that are lease to own deals. I am hoping that we might find a loophole and qualify for the small servicer exemption.

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#1817793 - 05/28/13 05:03 PM Re: Small Servicer Exemption kgreen
Dazed & Confused Offline
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Dazed & Confused
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KY
There is debate in our institution if we are qualified for the small servicer exemption. We have 450+ mortgages that we have hired a company to service (which services over 5000 loans so they don't have the exemption).

Since we are the creditor and the assignee and have less then 5000 aren't we considered exempt? A consultant indicated to another officer at our institution that we are a sub servicer so we aren't exempt.

What's your take?

Thanks you in advance for any responses and comments!

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#1818143 - 05/29/13 03:28 PM Re: Small Servicer Exemption Puzzled
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Originally Posted By: RunningSuz
We are also in a similar type position. We are a small community bank that is well under 5000 limit; however, we have a small number of contract collections that are lease to own deals. I am hoping that we might find a loophole and qualify for the small servicer exemption.

We stopped accepting these several years ago but we do have about 5 left.

I have reviewed the applicable sections and IMHO these would be exempt provided the person selling the property on contract does not have an aggregate of $1,000,000 in such transaction per year. If you wish to continue these contracts it would also be my opinion that you would have to monitor them to insure no one seller crosses the threshold to fall into the “creditor” category.

Based on how I’m interpreting the following section it is my opinion these transactions would not qualify as servicing mortgage loans and would not cause you to lose the small servicer exemption.

1024.2

Federally related mortgage loan means:

(2) Any installment sales contract, land contract, or contract for deed on otherwise qualifying residential property is a federally related mortgage loan if the contract is funded in whole or in part by proceeds of a loan made by any maker of mortgage loans specified in paragraphs (1)(ii) (A) through (D) of this definition.

(D) Is made in whole or in part by a “creditor,” as defined in section 103(g) of the Consumer Credit Protection Act (15 U.S.C. 1602(g)), that makes or invests in residential real estate loans aggregating more than $1,000,000 per year. For purposes of this definition, the term “creditor” does not include any agency or instrumentality of any State, and the term “residential real estate loan” means any loan secured by residential real property, including single-family and multifamily residential property;


103(g)

(g) The term "creditor" refers only to a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end credit plan involving a credit card, the card issuer and any person who honors the credit card and offers a discount which is a finance charge are creditors. For the purpose of the requirements imposed under chapter 4 and sections 127(a)(5), 127(a)(6), 127(a)(7), 127(b)(1), 127(b)(2), 127(b)(3), 127(b)(8), and 127(b)(10) of chapter 2 of this title, the term "creditor" shall also include card issuers whether or not the amount due is payable by agreement in more than four installments or the payment of a finance charge is or may be required, and the Bureau shall, by regulation, apply these requirements to such card issuers, to the extent appropriate, even though the requirements are by their terms applicable only to creditors offering open-end credit plans. Any person who originates 2 or more mortgages referred to in subsection (aa) in any 12-month period or any person who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of this title. The term "creditor" includes a private educational lender (as that term is defined in section 140) for purposes of this title.


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#1860485 - 10/10/13 07:06 PM Re: Small Servicer Exemption kgreen
ahou Offline
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ahou
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Anyone read the Bankers Compliance Group letter on contract collections? The Bureau told them that servicing contract collections makes a bank ineligible for the sm servicer exemption under Reg Z.
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#1866595 - 10/30/13 04:57 PM Re: Small Servicer Exemption kgreen
layers Offline
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Joined: Apr 2013
Posts: 32
Our institution currently has 38 RE loans on the books. However we will originate loans and sell to the secondary market before the first payment is ever received. Since we sell to the secondary market would we still fall under the small servicer exemption. For some reason I was thinking we wouldn't qualify for it, but my head is going in circles with everything i've read so I just want to double check.

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#1866678 - 10/30/13 06:21 PM Re: Small Servicer Exemption kgreen
QCL Offline
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QCL
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NW IL
We included the loans sold on the secondary market when determining if we are a small servicer.

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#1866724 - 10/30/13 07:10 PM Re: Small Servicer Exemption kgreen
John Burnett Offline
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Cape Cod
Count them if you are servicing them on January 1 pending transfer of servicing to a third party. But if you sell them "servicing released," once they are gone, you don't service them any more, and you don't count them.

On the other hand, if you sell loans you originate but retain the servicing, you count them.
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#1866788 - 10/30/13 08:24 PM Re: Small Servicer Exemption kgreen
layers Offline
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Joined: Apr 2013
Posts: 32
That's fantastic! Thanks for the input! Glad to know we will be able to qualify for the exemption!

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#1889979 - 01/24/14 03:28 PM Re: Small Servicer Exemption kgreen
80's Girl Offline
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Does anyone know if there have been any changes regarding the viewpoint by the CFPD that contract for deed loans automatically kick you out of the small servicer exemption? If the process were to stop immediately, or fees were not charged starting immediately, could the small servicer exemption be reclaimed?
Thanks for any information.

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#1889984 - 01/24/14 03:32 PM Re: Small Servicer Exemption kgreen
JWills, CRCM Offline
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JWills, CRCM
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The Mitten State
WE serviced land contracts for some customers, which took us out of the small servicer exemption. We have since discontinued them.
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#1889993 - 01/24/14 03:40 PM Re: Small Servicer Exemption 80's Girl
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,277
Originally Posted By: Junior M&M
Does anyone know if there have been any changes regarding the viewpoint by the CFPD that contract for deed loans automatically kick you out of the small servicer exemption? If the process were to stop immediately, or fees were not charged starting immediately, could the small servicer exemption be reclaimed?
Thanks for any information.


Only a response right from the CFPB can really answer your question. Contact them, they will respond.
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#1890222 - 01/24/14 07:33 PM Re: Small Servicer Exemption kgreen
John Burnett Offline
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Cape Cod
CFPD? Really? Consumer Financial Police Department? LOL.
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#1890227 - 01/24/14 07:36 PM Re: Small Servicer Exemption kgreen
JWills, CRCM Offline
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JWills, CRCM
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The Mitten State
Good one John!
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