2015 MS FAQ Operations
FREQUENTLY ASKED QUESTIONS
These questions and answers constitute informal guidelines only and do not constitute legal advice or rules by DFI. Any interpretations of Chapter 454M, HRS, are specific to the facts and circumstances in each particular situation. Questions and answers will be updated and supplemented as DFI develops additional guidance. Additional answers can be found using the NMLS Resource Center.
If additional guidance is required on a unique situation in your company or for yourself, you may send your inquiry via letter or email to:
Division of Financial Institutions
Department of Commerce and Consumer Affairs
P.O. Box 2054
Honolulu, HI 96805
MORTGAGE SERVICER REQUIREMENTS – OPERATIONS
What requirements apply to handling and processing mortgage payments?
Section 454M-5(c), HRS, requires a mortgage servicer to comply with specific requirements concerning handling and processing of mortgage payments, as follows:
(1) Except as provided in paragraph (4) below, all payments received by a mortgage servicer on a mortgage loan at the address where the borrower has been instructed in writing to make payments shall be accepted and credited, or treated as credited, on the business day received, to the extent that the borrower has provided sufficient information to credit the account. For all mortgage loans originated after July 1, 2015, except where inconsistent with federal law or regulation, payments shall be credited to the principal and interest due on the home loan before crediting the payments to taxes, insurance, or fees;
(2) Methods of payment and payment instruments shall be reasonable;
(3) If a mortgage servicer specifies in writing requirements for the borrower to follow in making payments, but accepts a payment that does not conform to the requirements, the mortgage servicer shall credit the payment as soon as commercially practicable, but in no event later than three business days after receipt;
(4) Late payments of principal and interest shall be credited before any late charge is collected; and
(5) If the mortgage servicer receives any payment on a mortgage loan and suspenses the payment, does not credit the payment, or does not treat the payment in accordance with Section 454M-, HRS, the mortgage servicer, within ten days of receipt, shall send the borrower notice by mail at the borrower’s last known address indicating the reason the payment was suspensed or was not credited or treated as credited to the account, and specifying any actions by the borrower necessary to make the loan current.
What requirements apply to payment of taxes and insurance?
Section 454M-5(d), HRS, requires a mortgage servicer to comply with specific requirements concerning escrows for the payment of taxes and insurance, as follows:
(1) A mortgage servicer who receives funds from a borrower to be held in escrow for payment of taxes and insurance premiums shall pay the taxes and insurance premiums of the borrower to the appropriate taxing authority and insurance company in the amount required and at the time the taxes and insurance premiums are due, in accordance with the requirements of RESPA, including title 12 C.F.R. section 17 , and shall be liable to the borrower as provided therein;
(2) If the amount held in the escrow account as of the date the taxes and insurance premiums are due is insufficient to pay the taxes and insurance premiums, the mortgage servicer shall pay the taxes and insurance premiums from the mortgage servicer’s own funds; provided that the borrower has paid to the mortgage servicer the amounts required to be paid into the escrow account, as determined by the mortgage servicer, for all amounts scheduled to be paid to the mortgage servicer prior to the date the taxes and insurance premiums are due; and
(3) Where an escrow account has been established and a mortgage servicer advances funds in paying a disbursement that is not the result of a borrower’s payment default under the underlying mortgage document, the mortgage servicer shall conduct an escrow account analysis to determine the reasons for and extent of the deficiency and shall provide a written explanation to the borrower before seeking repayment of the funds from the borrower. The mortgage servicer shall then give the borrower the option of paying the shortage over a period of not less than one year. The mortgage servicer shall not charge or collect interest on any shortage during the payment period.
Can the mortgage servicer be penalized for failure to comply with requirements for payment of taxes and insurance?
Yes. Any mortgage servicer who violates any provision of subsection (d) of Section 454M-5, HRS (see above), is liable to the borrower: for any penalties, interest, or other charges levied by the taxing authority or insurance company as a result of any violation; any actual damages suffered by the borrower as a result of the violation, including any amount that would have been paid by an insurer for a casualty or liability claim had the insurance policy not been canceled for nonpayment by the mortgage servicer; and, in the case of any successful action to enforce the foregoing liability, the costs of the action together with reasonable attorney’s fees as determined by the court. Section 454M-5(d), HRS.
What requirements apply to statements of account?
Section 454M-5(e), HRS, requires a mortgage servicer to comply with specific requirements concerning statements of account, as follows:
(1) At least once annually, within thirty days of the end of the computation year, a mortgage servicer shall deliver to the borrower a plain language statement of the borrower’s account showing the unpaid principal balance of the mortgage loan at the end of the immediately preceding twelve-month period, the interest paid during that period, and the amounts deposited into escrow and disbursed from escrow during the period. The annual escrow statement may be provided separately from the annual statement showing the unpaid principal and interest paid. The format and content of the annual escrow statement shall comply with RESPA, including title 12 C.F.R. section 17;
(2) A mortgage servicer shall promptly provide a borrower with an accurate accounting in plain English of the debt owed when requested by the borrower or borrower’s authorized representative. Within thirty days of receipt of a request from the borrower or the borrower’s authorized representative, a mortgage servicer shall deliver to the borrower a payment history for the last thirty-six months of the borrower’s account, unless a different period is requested, showing the date and amount of all payments made or credited to the account and the total unpaid balance. The mortgage servicer shall have sixty days to deliver a payment history where the request is for a period longer than the last thirty-six months;
(3) A fee shall not be charged to the borrower for the annual escrow statement or for one payment history furnished to a borrower in a twelve-month period; and
(4) A shortage, surplus, or deficiency in the escrow account shall be handled in accordance with RESPA, including title 12 C.F.R. section 1024.17. Alternatively, with the consent of the borrower, an excess balance may be applied to the principal balance.
What requirements apply to notifying a borrower of a late payment?
Under Section 454M-5(f), HRS, except where inconsistent with the automatic stay provisions of the Bankruptcy Code with respect to a borrower in a pending bankruptcy proceeding, a mortgage servicer shall send a payment reminder notice to a borrower at the borrower’s last known address no later than seventeen days after the payment becomes due and remains unpaid; provided that a mortgage servicer is not required to send a separate payment reminder notice for each consecutive month in which the mortgage loan continues to remain unpaid.
What requirements apply to loan pay-offs?
Section 454M-5(g), HRS, requires a mortgage servicer to comply with specific requirements concerning loan pay-offs, as follows. A mortgage servicer shall provide a clear, understandable, and accurate statement of the total amount that is required to pay off the mortgage loan as of a specified date, within a reasonable time, but in any event no more than five business days after receipt of a request from the borrower or borrower’s authorized representative. No borrower shall be charged a fee for being informed or receiving a payoff statement or for being provided with a release upon full prepayment; provided that a mortgage servicer may charge a reasonable fee for providing a payoff statement after five or more requests in any calendar year.
What requirements apply to fees?
Section 454M-5(i), HRS, requires a mortgage servicer to comply with specific requirements concerning fees, as follows:
(1) A mortgage servicer shall maintain and keep current a schedule of standard or common fees that the mortgage servicer charges borrowers for the servicer’s servicing-related activities, such as nonsufficient fund fees. The schedule shall identify each fee, provide a plain English explanation of the fee, and state the amount of the fee or range of amounts. If there is no standard fee, the schedule shall explain how the fee is calculated or determined. A mortgage servicer shall make its schedule available on the mortgage servicer’s website and to the borrower or the borrower’s authorized representative upon request;
(2) A mortgage servicer may only collect a fee if the fee is for services actually rendered and one of the following conditions is met:
(A) The fee is clearly and conspicuously disclosed by the loan instruments and not prohibited by law;
(B) The fee is expressly permitted by law and not prohibited by the loan instruments; or
(C) The fee is not prohibited by law or the loan instruments and is a reasonable fee for a specific service requested by the borrower that is assessed only after clear and conspicuous disclosure of the fee is provided to the borrower and the borrower expressly consents to pay the fee in exchange for the services;
(3) In addition to the limitations in paragraph (2), attorneys’ fees charged in connection with a foreclosure action shall not exceed reasonable and customary fees for the work. If a foreclosure action or proceeding is terminated prior to the public sale because of a loss mitigation option, a reinstatement, or payment in full, the borrower shall only be liable for reasonable and customary fees for work actually performed; and
(4) A mortgage servicer shall not impose any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period. Late charges shall not be:
(A) Based on an amount greater than the past due amount;
(B) Collected from the escrow account or from escrow surplus without the approval of the borrower; or
(C) Deducted from any regular payment.
Where are loan records stored?
Section 454M-5(j), HRS, requires each mortgage servicer licensee to maintain adequate records of each residential mortgage loan transaction at the office named in the mortgage servicer license.