MBA: Telephone Rule Change Could Expose Servicers to Significant Liability

Recent developments with the Telephone Consumer Protection Act could expose mortgage servicers to significant liability, the Mortgage Bankers Association told several government agencies this week.

Last summer the Federal Communications Commission adopted a proposal intended to protect consumers from unwanted robocalls, but that proposal has an unintended consequence–it could harm mortgage servicers when they provide early intervention with homeowners with delinquent mortgages.

The federal RESPA statute and federal mortgage guarantors and government-sponsored enterprises actually require such intervention, so FCC rules should not discourage it, said MBA Senior Vice President Pete Mills.

MBA sent a letter to the secretaries of the Treasury and HUD, the directors of the Consumer Financial Protection Bureau and the Federal Housing Finance Agency, the heads of the Veterans Affairs and Agriculture Department lending programs and the Treasury Homeownership Preservation Office.

“MBA urges these agencies to work with the FCC as they seek to implement the recent amendments to the TCPA regarding federal debts and to continue to educate the FCC about the importance of their rules around borrower loss mitigation and early intervention efforts,” Mills said. “TCPA interpretations could have a chilling effect on telephone calls for these purposes.”

Mills noted that the FCC proposal has an immediate retroactive effect and exposes servicers to possible TCPA liability for making good faith attempts to contact borrowers about their home-retention options and to discharge their federally mandated loss mitigation obligations.

“Even if a servicer has prior express consent from their customer to contact them on their cell phone, a servicer is still at risk for violations of the TCPA,” Mills said. He noted that the FCC order allows only one call before it imposes strict liability for calls placed to numbers that–even without the caller’s knowledge–have been reassigned from a person who previously gave consent or where the customary user of the phone has changed. This applies even if the call goes unanswered. After that one call, penalties may accrue starting at $500 per call.

Mills said federal and state mortgage servicing rules require servicers to reach out to delinquent customers in an effort to avoid foreclosure. “For instance, FHA requires that a servicer call a borrower within 20 days of delinquency and must continue two times per week at varying days and times until contact is established or the servicer determines that the property is vacant or abandoned,” he said. “A servicer cannot rely solely on electronic contact and there are even more stringent requirements for loans at risk of early payment default and re-default following loss mitigation.”

The Consumer Financial Protection Bureau also recognizes the benefit of early intervention, Mills said. CFPB’s mortgage servicing rule requires that a mortgage servicer attempt to make “live” contact with the borrower within 36 days of a delinquency. While the rule does not require telephone contact, it endorses contact by telephone.

“These mortgage servicing rules and requirements are intended to benefit consumers, yet the FCC order discourages a primary and most efficient means of providing that benefit,” Mills said. He noted that experience during the financial crisis suggests that real-time conversations are the best way to head off serious issues before a delinquency becomes too grave.

“While the TCPA is generally thought of as a pro-consumer regulation, for Americans homeowners that are struggling financially the FCC’s recent interpretations may make the loss of a home or difficulties in resolving a delinquency more likely,” Mills said. He urged the FCC to develop regulations implementing the recent amendments “that make clear that Congress does not intend the TCPA to serve as a bar for communications with consumers regarding their federally insured or guaranteed mortgage loans.”

Mills encouraged regulators to work together to ensure that the TCPA and its interpretations do not become a bar to beneficial consumer communication for private mortgage loans particularly in the vital area of mortgage servicing loss mitigation. “The TCPA should not act as a source of unresolvable uncertainty for the mortgage industry as it works to implement mortgage servicing rules and serve our consumers,” he said.