What does “final” mean to you?
According to Merriam-Webster’s Dictionary, “final” means “not to be altered or undone.” It also means “coming at the end: being the last in a series, process or progress …”
For most of us, interpretation of the word “final” is straightforward and intuitive: There’s a clear reason when and why we use it. For example, we call it the Stanley Cup Finals because they are the last in a series of professional hockey games.
But in the world of the Consumer Financial Protection Bureau, “final” is apparently open to interpretation. It is a term that is loosely applied to works in progress, such as the bureau’s Final Mortgage Servicing Rules, which were adopted in June.
Personally, I think the CFPB should have dropped the word “Final” from the title and just called it “The Servicing Rules, As Adopted On [insert date here].” If you know you’re going to have to go back and constantly change something, why have “final” in its title?
In early October, the CFPB announced that it was “adding flexibility” to a new requirement in its final rules that servicers send intervention notices to borrowers who are at risk of foreclosure but have submitted a request to cease all communication. The confusing rule, which takes effect Oct. 19, requires servicers to send the notices – which inform borrowers of foreclosure prevention options – exactly every 45 days, including on weekends and holidays, but at the same time prohibits them from sending the notices more than once in a 180-day period.
The bureau’s proposed “interim final rule,” which also takes effect Oct. 19, gives servicers an extra 10 days in which to get these notices out to borrowers.
“The bureau believes that this change offers greater certainty for servicers’ ability to comply with the rule, without undermining important borrower protections,” the CFPB says.
Of course, the confusion over this rule was well-vocalized by many during recent industry conferences, in feedback entered during the rulemaking process and even in testimony before Congress.
In addition, the CFPB is proposing to change its rules pertaining to when servicers should provide periodic statements to borrowers in bankruptcy. Acknowledging that “certain technical aspects of the 2016 amendments regarding the timing for servicers to provide periodic statements in connection with a borrower’s bankruptcy case may create unintended challenges and be subject to different legal interpretations,” the bureau is “seeking public comment on a proposed rule that would provide greater certainty for mortgage servicers regarding the timing for providing periodic statements in those circumstances.”
The proposed effective date for the proposed rule is April 19, 2018: the same date that the sections of the 2016 “final” rule would become effective.
Although the bureau has done an admirable job of working with servicers and other mortgage industry stakeholders in developing its Final Mortgage Servicing Rules, it would seem that there is more work to be done in order to perfect the rules and eliminate confusion for servicers and borrowers.
As a journalist with more than 25 years of experience, I have followed various rulemaking processes on the local, state and federal levels, and I can tell you that it is not unusual for rules regulating industries to be continuously updated. The problem for the CFPB, in my view, is that its mandate is simply too broad and complex and, thus, is arguably too challenging for a single agency. While it is a good “student” of the mortgage banking industry and it involved the industry players in the rulemaking process, there have been times where its rulemaking has seemed rushed or at least incomplete. This lack of thoroughness, in my view, is what has resulted in the need for further revisions to the “final” rule.
Maybe one day, after a long period of stability and prosperity, there will be a truly “final” servicing rule. A set of standards that everyone in the industry – servicers and regulators alike – all agree work well and can comply with gracefully. Until that day, the CFPB should stop using the term “final” and continue to help the industry develop the best standards for everyone.