Servicing Transfer Notices

There is a little bit of chaos regarding just what sort of servicing transfer notice is required when taking an application for a mortgage loan. The 1996 banking legislation made significant changes to the notice. Many of the required disclosures or explanations were eliminated and the law now merely requires the notice to inform the customer that the instrument can be sold and to indicate the whether the creditor is likely to sell it. Gone are the calculations, by quartiles, no less, of past sales practices.

That's the law. Unfortunately, the regulation hasn't gotten that far. HUD proposed a new form, but the proposal has gotten bogged down because of unrelated issues in the same document. At the moment, there is no clear guidance in sight. We are getting reports that examiners are taking a variety of positions on what you should disclose. At this point, everyone is right and everyone is wrong. We recommend stacking the odds in your favor by asking your regulator's advice. This is a good time to do it because updates to the old form would be due at the end of March.

Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 1, 1/98