TOPICS

Friday, September 28, 2018

Mortgage Servicing Disclosure – State Law and Preemption

QUESTION
We are a bank that has its headquarters in New York. We really like your newsletter. Our servicing department asked about how to handle the Servicing Disclosure Statement if there are conflicts with state law. So, are there state laws that actually conflict with the Servicing Disclosure Statement rules preempted?

ANSWER
Thank you for reading our newsletter! We’re glad you find it helpful and informative.

With respect to a mortgage servicing loan, a lender or servicer is considered to have compliance with provisions of any state law or regulation required notice to a borrower at the time of application for a loan if the lender or servicer complies with the Servicing Disclosure Statement requirements.

Any state law requiring notice to the borrower at the time of application regarding the potential for servicing transfer is preempted, and there may be no additional borrower disclosure requirements regarding the potential for a servicing transfer under state law.

But, keep this in mind, provisions of state law requiring additional notices to insurance companies or taxing authorities are not preempted, and the additional information may be added to a Servicing Disclosure Statement if the procedure is allowable under state law. [24 CFR § 3500.21(h)]

Jonathan Foxx
Managing Director
Lenders Compliance Group