I. INTRODUCTION
The Federal Reserve Board has published an interim final rule amending Regulation Z (Truth in Lending). The interim rule implements provisions of the Helping Families Save Their Homes Act which was enacted on May 20, 2009. These provisions became effective immediately upon enactment and established a new requirement for notifying consumers of the sale or transfer of their mortgage loans. The purchaser or assignee that acquires the loan must provide the required disclosures in writing no later than 30 days after the date on which the loan is sold or otherwise transferred or assigned. The interim rule is designed to provide parties subject to the statutory requirement with guidance on how to comply.
The interim final rule became effective November 20, 2009.
II. NOTICE OF SALE OR TRANSFER OF MORTGAGE LOANS (MORTGAGE TRANSFER DISCLOSURES)
The Helping Families Save Their Homes Act of 2009 amended the Truth in Lending Act to establish a new requirement for notifying consumers of the sale or transfer of their mortgage loans. The purchaser or assignee that acquires the loan must provide the required disclosures no later than 30 days after the date on which the loan is acquired. This provision is contained in TILA Section 131(g), 15 U.S.C. 1641(g), which applies to any consumer credit transaction secured by the principal dwelling of a consumer. Consequently, the disclosure requirements in Section 131(g) apply to both closed-end mortgage loans and open-end home equity lines of credit (HELOCs).
The new disclosure requirements apply to any person or entity that acquires ownership of an existing consumer mortgage loan, whether the acquisition occurs as a result of a purchase or other transfer or assignment. A person is covered by the rule only if the person acquires legal title to the debt obligation. As a result, notice is not required when a transaction does not involve a change in the ownership of the physical note, such as when the note holder issues mortgage-backed securities but does not transfer legal title to the loan.
To comply with the interim rule, a covered person must mail or deliver the required disclosures on or before the 30th day following the date that the covered person acquired the loan. The disclosure need not be given, however, if the covered person transfers or assigns the loan to another party on or before that date. This exception seeks to prevent the confusion that could result if consumers receive outdated contact information for parties that no longer own their loan. For example, a covered person that acquires a mortgage loan on March 1 must mail or deliver the disclosures on or before March 31. However, if the covered person sells or assigns the loan to a third party on March 31 (or earlier), the covered person need not provide the disclosures, but subsequent purchasers would have to comply with the rule.
The transfer of ownership of a mortgage loan is subject to the disclosure requirements of this section when the acquiring party is a separate legal entity from the transferor, even if the parties are affiliated entities. However, if a covered person acquires a mortgage loan and subsequently transfers the loan to another entity, the regulation does not prohibit the two entities from combining their disclosures on a single document. Comment 39(b)-2 clarifies how two entities may comply with the rules in certain circumstances by providing a single form that covers both entities. For example, a covered person that acquires a loan on August 31 might mail a single disclosure on or before September 30 with the knowledge that it will assign the loan to another entity on October 15. The covered person could mail a single disclosure providing the required information for both entities and indicating when the subsequent transfer will occur.
A. Content of Required Disclosures
The notice that must be provided must identify the loan that was acquired or transferred and contain the following: (1) the identity, address, and telephone number of the covered person that owns the mortgage loan (the covered person has the option of also providing an electronic mail address or Internet Web site address but is not required to do so); (2) the date of the acquisition or transfer; (3) contact information that the consumer can use to reach an agent or party having authority to act on behalf of the covered person; (4) the location of the place where the transfer of the ownership of the debt is recorded.
B. Acquisition Date
The interim final rule requires disclosure of the date that the covered person acquired the loan. For purposes of the interim final rule, this is defined as the date of acquisition recognized in the books and records of the covered person.
C. Agent’s Contact Information
A covered person must identify and provide contact information for the agent or party having authority to act on behalf of the covered person. The notice must identify one or more persons who are authorized to receive legal notices on behalf of the covered person and resolve issues concerning the consumer’s payments on the loan. The interim final rule does not require that the owner of a loan designate an agent or other party for any specific purpose. The rule simply requires that the owner disclose contact information when there is such an agent, so that consumers can direct their inquiries to the appropriate party.
The board recognizes that separate entities may be authorized by the owner of the loan to act on its behalf for different purposes. Identifying the party authorized to receive legal notices is intended to ensure that consumers have sufficient information to assert legal claims, including a right to rescind the loan, if applicable. However, a covered person might appoint a different agent to resolve loan-servicing issues. In such cases, the covered person must provide contact information for each agent. If multiple agents are listed, the disclosure must state the extent to which the authority of each agent differs, for example, by indicating if only one of the agents is authorized to receive legal notices or only one is authorized to resolve issues concerning payments.
D. Recording Location
The interim final rule requires covered persons to disclose the location where their ownership of the debt is recorded. However, if the transfer of ownership has not been recorded in public records at the time the disclosure is provided, the covered person can comply with the rule by stating this fact. Whether or not the transfer of ownership has been recorded in public records at the time the disclosure is made, the disclosure may state that the transfer “is or may be recorded” at the specified location. For example, it would be sufficient in all cases to disclose that the transaction is or may be recorded in the office of public land records or the recorder of deeds office “for the county or local jurisdiction where the property is located.”
E. Optional Disclosures
The board also indicated that covered persons are permitted, in their sole discretion, to include additional information that they might deem relevant or helpful to consumers. For example, the covered person may choose to inform consumers that the location where they should send mortgage payments has not changed.