Today's Trends in Credit Regulation

Massachusetts Finalizes Revisions to Servicing Regulation
By Thomas P. Quinn, Jr.

Nearly a year ago we published a summary of a series of proposed revisions to the Massachusetts debt collector and third party loan servicer regulation (209 Code of Massachusetts Regulations Part 18). On October 11th what once were proposed revisions were finalized and immediately effective. The regulations cover three general areas.

The first are a series of provisions amending the unfair servicing practices section that generally applies to "third party loan servicers." For purpose of the regulation, a "third party loan servicer" means using interstate commerce or the mails to directly or indirectly service a loan that is owed or due (or asserted to be owed or due) to another party. (209 C.M.R. § 18.02.) The act of "servicing" is inclusive of the act of receiving consumer payments and remitting them to the owner of the loan (or another third party). If the loan is a home equity conversion or reverse mortgage "servicing" also includes making payments to the borrower. (Id.)

The unfair servicing provisions, which apply to the third party servicing of loans generally, have been amended to include the following illustrations of acts that would be considered "unfair or unconscionable":

  • Misrepresenting any material information in connection with loan servicing including (but not limited to) the misrepresentation of any amount, nature or the terms of any fee or payment that is due or alleged to be due, the terms of the servicing contract or any obligations under the loan;
  • Failing to maintain procedures that are designed to ensure the accuracy and timely updating of a borrower's account information (including the posting of payments and imposition of fees);
  • Requiring borrowers to remit funds by means that are more costly than a bank or certified check, or by an attorney's check from an attorney's account;
  • Refusing to communicate with an authorized representative of a borrower who provides a written authorization signed by the borrower (so long as the third party loan servicer has procedures that reasonably verify the authorization); and
  • Failing to establish and implement policies and procedures to effectively monitor and oversee law firms, subservicers, foreclosure firms and other parties that the third party loan servicer may retain to ensure that they are complying with applicable law.

Coupled with these additions to the general servicing requirements, the regulation also was amended to add a new section (209 C.M.R. § 18.21A) that is specific to the servicing of a mortgage loan by a third party loan servicer. The new provisions list the following acts as a violation of law:

  • Failing to provide loan payoff information to a consumer;
  • Collecting private mortgage insurance beyond the date for with PMI is no longer required;
  • Failing to comply with the right to cure, right to modify and additional provisions of the commonwealth's statutory foreclosure requirements;
  • Knowingly or recklessly facilitating illegal foreclosures;
  • Failing to comply with RESPA requirements regarding loan modification (to become effective January 2014); and
  • Failing to comply with RESPA "point of contact requirements" (to become effective January 2014).

The new mortgage loan servicing provisions also impose a series of documentation requirements in connection with foreclosure proceedings on behalf of a mortgagee. Among them:

  • The third party loan servicer must ensure that all foreclosure affidavits (or other sworn statements) are based on personal knowledge.
  • Third party loan servicers must ensure that the foreclosure affidavits (or other sworn statements) contain a detailed description of the basis of the affiant's claimed personal knowledge that is contained in the affidavit (including the sources of the information recited and a statement as to why the sources are accurate and reliable).
  • Third party loan servicers must certify in writing that the foreclosing party has the right to foreclose. This certification must include a full chain of ownership and title of the note and the mortgage from the date of recording forward. The third party loan servicer is required to provide this written certification to the borrower along with the right to cure notice required under the foreclosure statute, and a copy of the note with all required endorsements.
  • Finally, the Massachusetts regulation requires that third party loan servicers also comply with all applicable federal and state laws governing the rights of tenants living in foreclosed residential properties.

Violations of the new general servicing requirements, or the new mortgage loan servicing requirements are considered an unfair and deceptive act or practice under the Massachusetts UDAP statute (Chapter 93A of the General Laws).

To the extent that you are a third party loan servicer (or outsource your servicing) these new requirements apply immediately. The regulation as amended also immediately imposes these new conduct-regulating requirements to parties exempt from registration as a third party loan servicer (such as banks) if such parties are servicing loans owed to another creditor. However, if you are a creditor who services your own loans and mortgage loans, it is unclear what impact these new rules will have on your operations. We will need to wait and see whether these new requirements will generally become a standard of care adhered to by the industry as a whole.

Thomas P. Quinn, Jr. is a Partner of Hudson Cook, LLP, in the firm's Fall River, Massachusetts office. Tom can be reached at 774-365-4758 or by email at

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