Mortgage Servicing Bankruptcy Reaffirmation 1 – Can a borrower’s reaffirmation of personal liability for the mortgage loan affect whether a servicer is exempt from the periodic statement requirements?

Compliance > Regulation X and Z - Servicing
Q:   Can a borrower’s reaffirmation of personal liability for the mortgage loan affect whether a servicer is exempt from the periodic statement requirements?
 
A:   (UPDATED 3/20/2018): Yes. Regulation Z, § 1026.41(e)(5)(ii) provides that the bankruptcy exemption for providing periodic statements and coupon books ceases to apply if the borrower reaffirms personal liability for the loan. For purposes of the modified periodic statement requirements in § 1026.41(f), Comment 41(f)-6 explains that a consumer who has reaffirmed personal liability for the loan is not considered a debtor in bankruptcy.
 
Regulation Z, Comment 41(e)(5)(ii)-2 explains that, upon a consumer’s reaffirmation, the servicer must provide a periodic statement or coupon book but without the bankruptcy-specific modifications described in § 1026.41(f).
 
For general information about the exemption and modifications to the periodic statement or coupon book when a borrower is in bankruptcy, see section 5.10 of the Mortgage Servicing Small Entity Compliance Guide.
 
 
This Q&A was contained in the CFPB’s Mortgage Servicing FAQs – version 3, as of June 2, 2021 (which may be updated from time to time).  This may be found on the CFPB’s website here:  https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing_frequently-asked-questions.pdf
 

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