QUESTION
We recently sold a portfolio of mortgage loans to a third party. We
believe the third party is a “covered person” as defined by the statute. What
we want to know is who must notify the borrower if the loan is sold to a third
party? Also, when does the third party have to provide the mortgage transfer
disclosure?
ANSWER
A “covered person” is a person who acquires more than one mortgage loan
in a twelve-month period and becomes the owner of an existing mortgage loan by
acquiring legal title to the debt obligation, whether through purchase,
assignment or other transfer. [75 FR 58489, 58501, codified at 12 CFR §
226.39(a)(1)]
However, a servicer is not treated as the owner of an obligation if the
servicer holds title to the loan, or title is assigned to the servicer, solely
for the administrative convenience of the servicer in servicing the obligation.
[75 FR 58489, 58501, codified at 12 CFR § 226.39(a)(1)]
Unless there is an exception, a covered person must provide a notice to
the consumer when the covered person becomes the owner of an existing
home-equity plan or mortgage loan by acquiring legal title to the debt
obligation, whether through purchase, assignment or other transfer. [75 FR
58489, 58501, codified at 12 CFR §§ 226.39(a), 226.39(b)]
For the purposes of the transfer obligations, a mortgage loan is any
open-end or closed-end consumer credit transaction that is secured by the
principal dwelling of a consumer. [75 FR 58489, 58501, 58502, codified at 12
CFR § 226.39(a)(2); 12 CFR Supplement I to Part 226, Official Staff Commentary
§ 226.39(a)(2)-1]
With respect to when a covered person must provide the mortgage
transfer disclosure, unless an exception applies, a covered person must provide
this disclosure on or before the thirtieth calendar day following the date of
transfer. [75 FR 58489, 58501, codified at 12 CFR § 226.39(b)]
As to determining a date of transfer, this date is at the option of the
covered person, as either the date of acquisition of the mortgage loan
recognized in the books of the acquiring party, or the date of transfer of the
mortgage loan recognized in the books of the transferring party. [75 FR 58489,
58501, codified at 12 CFR § 226.39(b)(2)]
Jonathan Foxx
President & Managing Director
Lenders Compliance Group
