Before the Federal Communications Commission

Washington, DC 20554

In the Matter of

Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991

) ) ) ) CG Docket No. 02-278 ) ) )

PETITION FOR EXEMPTION

LAUREN E. CAMPISI McGlinchey Stafford PLLC lcampisi@mcglinchey.com 601 Poydras St., 12th Floor New Orleans, LA 70130 Telephone: (504) 596-2761 Facsimile: (504) 910-9121

DUSTIN C. ALONZO McGlinchey Stafford PLLC dalonzo@mcglinchey.com 601 Poydras St., 12th Floor New Orleans, LA 70130 Telephone: (504) 596-2782 Facsimile: (504) 910-8834

JUSTIN WISEMAN Mortgage Bankers Association jwiseman@mba.org 1919 M Street NW, 5th Floor Washington, DC 20036 Telephone: (202) 557-2854 Facsimile: (202) 289-3943

COUNSEL FOR THE MORTGAGE BANKERS ASSOCIATION

June 16, 2016

TABLE OF CONTENTS

Page

I. SUMMARY .. ... ......... ..... .. .......... ....... .. .... .... ... ...... .... .............. ...................... .. ............... ..... 2

A. THE COMMISSION IS AUTHORIZED TO EXEMPT MORTGAGE SERVICING CALLS ................. .... ........................ ... ......... ............................. ... ... 2

B. THE REQUESTED EXEMPTION FULFILLS THE GOALS OF THE TCPA AND OTHER FEDERAL AND STATE REQUIREMENTS TO CALL MORTGAGE BORROWERS ........ .... ............ 4

II. THE COMMISSION SHOULD EXEMPT FROM THE PRIOR EXPRESS CONSENT REQUIREMENTS RESIDENTIAL MORTGAGE SERVICING CALLS THAT ARE NOT CHARGED TO THE CALLED PARTY .... ... .... .. ...... .... ... 6

A. OUTBOUND CALLS TO RESIDENTIAL MORTGAGE BORROWERS ARE MANDATED BY FEDERAL AND STATE LAWS, REGULATIONS, AND OTHER REQUIREMENTS ..... .. .................. 7

B. THE BENEFITS OF MORTGAGE SERVICING CALLS OUTWEIGH PRIVACY INTERESTS ..... ........... ... .... ......... ... ....... ........ .. ........ 12

III. CONCLUSION ...... ...................... ... ..... ... ...... .. .. ..... ... ...................................................... 14

In the Matter of

Before the Federal Communications Commission

Washington, DC 20554

Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991

) ) ) ) CG Docket No. 02-278 ) ) )

PETITION FOR EXEMPTION

Outbound residential mortgage servicing calls are critical to ensure borrowers understand

available options to avoid foreclosure and its financially damaging repercussions. Given their

importance and benefit to borrowers, these communications are mandated by multiple federal

and state laws, regulations, and requirements. However, residential mortgage servicers face

uncapped statutory penalties for each call attempt made pursuant to these requirements. In

accordance with Section 1.2 of the Federal Communications Commission's (the "Commission")

rules, 1 the Mortgage Bankers Association ("MBA") hereby respectfully submits this petition and

requests the Commission exempt from the "prior express consent" requirements under the

Telephone Consumer Protection Act ("TCP A")2 certain non-telemarketing residential mortgage

servicing calls3 to cellular telephone numbers. MBA requests this exemption to ensure that the

TCP A does not restrict telephone communications with residential mortgage borrowers4 required

by other federal and state laws, regulations, or other requirements.

I 47 C.F.R. § 1.2. 2 47 U.S.C. § 227 3 The references to "calls" within this petition are intended to include text messages, consistent with the Commission's interpretation of the TCPA. See Declaratory Ruling & Order, Rules and Regs. Implementing the Tel. Cons. Prot. Act of 1991, 30 FCC Red. 7961 (2015). 4 The references to "borrowers" within this petition are intended to include calls to any obligor under the mortgage loan, their authorized representatives, and successors in interest. Borrowers may authorize a non-obligor third party to communicate with the servicer regarding the loan and may direct the servicer to communicate exclusively with that third party. Borrowers who choose this approach, or who may be required to use this approach due to

I. SUMMARY

MBA is the only association representing all segments of the real estate finance industry.

MBA balances the interests of diverse stakeholders, from main street to wall street, spanning all

aspects of real estate finance, including residential mortgages. MBA represents an industry that

specializes in fulfilling the American Dream and contributes to the economic ecosystem

throughout the country. The TCP A threatens that dream by impeding the ability of mortgage

servicers to fulfill federal and state requirements for communicating with borrowers by

telephone. These federal and state requirements mandate specific outbound telephone calls to

borrowers as frequently as twice per week to preserve homeownership. 5 MBA respectfully

submits this petition to ensure mortgage borrowers receive these important pro-consumer

communications regardless of who owns or insures their mortgage.

A. THE COMMISSION IS AUTHORIZED TO EXEMPT MORTGAGE SERVICING CALLS.

As the Commission recently explained, Congress enacted the TCP A in 1991 "to protect

consumers against a growing flood of invasive and unwanted telemarketing calls."6 To achieve

this goal, Congress prohibited any call (other than calls made for emergency purposes or with the

prior express consent of the called party) to residential landlines using a prerecorded or artificial

limitations on their personal ability to communicate by telephone, should not be disadvantaged or put at risk of not receiving these important communications. Similarly, in the event there is a succession of the interests of any borrower, that successor should be treated as the original borrower. See Reply Comments of the Mortgage Bankers Association to the Commission's Notice of Proposed Rulemaking on the TCP A's Budget Act Amendment, CG Docket No. 02-278 (filed June 16, 2016). 5 Federal Housing Administration ("FHA") Single Family Housing Policy Handbook, 4000. l(III)(A)(2)(h). The FHA requires telephone contact within the 20th day of delinquency, at least 2 times per week until contact is established or the property is deemed vacant or abandoned. See also, infra, pp. 10-11 for chart detailing numerous federal and state laws, regulations, and rule requiring outbound telephone contact. 6 Brief for Respondents, at I, ACA Int '/, et al., v. F.C.C., No. 15-121 1 (D.C. Cir.), (l / 15/2016) (emphasis added).

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voice ("prerecorded calls") and calls to cellular telephone numbers 7 made using an automatic

telephone dialing system ("autodialer") or a prerecorded call.

However, these restrictions are not absolute. Congress authorized the Commission to

create exemptions from the consent requirements. This authority differs for calls to residential

landlines and calls to cellular telephones.

With respect to prerecorded calls to residential landlines, the Commission is authorized to

exempt: (1) calls that are not made for a commercial purpose; and (2) such classes or categories

of calls made for commercial purposes as the Commission determines (i) will not adversely

affect the privacy rights that the TCPA is intended to protect and (ii) do not include the

transmission of any unsolicited advertisement. Currently, mortgage servicing calls to residential

landlines are exempt from the consent requirements because they do not include an

advertisement and do not constitute telemarketing. 8

The Commission also is authorized to exempt autodialed or prerecorded calls to cellular

telephone numbers "that are not charged to the called party, subject to such conditions as the

Commission may prescribe as necessary in the interest of the privacy rights [the TCPA] is

intended to protect."9 To date, the Commission has exercised this authority with respect to

certain communications made by package delivery services, healthcare providers, and financial

institutions. 10

More recently, Congress recognized the need for telephonic communications m

connection with the collection of debts. In response, Congress created a statutory exemption

7 This protection applies to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call. 47 U.S.C. § 227(b)( I )(A)(iii). 8 47 C.F.R. § 64. I 200(a)(3)(iii). 9 47 U.S.C. § 227(2)(C). 10 See Cargo Airline Association Petition for Expedited Declaratory Ruling Rules and Regs. Implementing the Tel. Cons. Prot. Act of 1991, Order, 29 FCC Red 3432 ~ 20 (2014); Declaratory Ruling & Order, Rules and Regs. Implementing the Tel. Cons. Prot. Act of 1991, 30 FCC Red. 7961 (2015).

3

from the consent requirements for calls made solely pursuant to the collection of a debt owed to

or guaranteed by the United States.11 Many residential mortgages are owed to or guaranteed by

the United States and appear to fall within this exemption. However, other residential mortgages

are not owed to or guaranteed by the United States, regardless of how the Commission interprets

that phrase. 12 These loans include, for example, residential mortgages made and retained by

local banks or credit unions that service the loans throughout their duration.

Recognizing the conflict between certain federal laws, regulations, and requirements and

the TCPA prior express consent requirements, the Federal Housing Finance Agency ("FHFA")

has recommended that the Commission "exempt entities that service one to four unit residential

mortgage loans." 13 The FHF A seeks this exemption to enable servicers to manage delinquent

mortgage loans in compliance with federal regulations and other servicing requirements without

the potential for conflict with the Commission's substantive TCPA requirements.

Borrowers generally have no control over the identity of the owner of their loan, whether

the owner may sell their loan, or who their servicer may be at any point during the term of their

loan. Accordingly, consistent with the FHFA's recommendation, the exemption MBA seeks

within this petition would ensure the TCP A does not impact mortgage servicing calls to any

borrower, not just those whose mortgage loans are owed to or guaranteed by the United States.

B. THE REQUESTED EXEMPTION FULFILLS THE GOALS OF THE TCPA AND OTHER FEDERAL AND STATE REQUIREMENTS TO CALL MORTGAGE BORROWERS.

Mortgage servicing calls are required by federal and state laws, regulations, and

requirements other than the TCP A. A host of federal regulators have jurisdiction over residential

11 47 U.S.C. §§ 227(b)(l)(A); (b)( l )(B). 12 Congress directed the Commission to promulgate a regulation implementing this amendment. The Commission issued its Notice of Proposed Rulemaking on May 6, 2016. See In the Matter of Rules & Regs. Implementing the Tel. Cons. Prot. Act of 199 I, CG Docket No. 02-278, FCC 16-57 (May 6, 2016). 13 Comments of the FHFA to the Commission's Notice of Proposed Rulemaking on the TCP A's Budget Act Amendment, CG Docket No. 02-278 (filed June 6, 2016).

4

mortgage loans, including the FHF A, Consumer Financial Protection Bureau ("CFPB"),

Department of Housing and Urban Development ("HUD"), Department of Treasury

("Treasury"), Department of Agriculture ("USDA"), and Department of Veterans Affairs

("VA"). The federal agencies responsible for regulating residential mortgages learned through

the experience of the financial crisis that telephonic communications with borrowers are critical

to maintaining homeownership. These agencies require mortgage servicers to place outbound

telephone calls to borrowers at various times throughout a loan.

These requirements were carefully designed by federal agencies and state legislatures

with primary jurisdiction to effectively communicate important information to residential

mortgage borrowers to help borrowers avoid foreclosure and its grave financial consequences.

Foreclosure has a devastating impact that harms the broader economy. 14 According to

Americans for Financial Reform, "Each foreclosure leads to a drop of about I percent in the

value of nearby homes. Using these estimates, the Center for Responsible Lending has

calculated that over the 2009-2012 period foreclosures will cut house values by some $1.9

trillion in total."15 Foreclosures also impose significant direct costs on local governments. It

costs a city approximately $5,400 to secure and conserve a foreclosed property, but that cost

jumps to $19,000 when the property is abandoned prior to foreclosure. 16 Consequently,

mortgage servicing calls to borrowers have an undeniably positive micro- and macro-economic

impact.

As recently requested by the FHF A, MBA now asks the Commission to exempt from the

TCPA's consent requirements non-telemarketing autodialed or prerecorded mortgage servicing

calls to cellular telephone numbers placed without charge to borrowers. This exemption will

14 Americans For Fin. Reform, We All Pay A Price For the Foreclosure Crisis, ourfinancialsecurity.org (Feb. 28, 20 I I, 9:39 AM), http://ourfinancialsecurity.org/2011 /02/we-all-pay-a-price-for-the-foreclosure-crisis/. ts Id. 16 Id.

5

confirm that complying with borrower outreach requirements will not subject mortgage servicers

to liability under the TCP A and will ensure that calls to borrowers are treated uniformly under

the TCPA, regardless of who may own or insure the mortgage loan at any given time.

The TCP A was not intended to obstruct effective communications between mortgage

servicers and their borrowers. Today, potential TCPA liability puts homeowners at risk of not

receiving important information that could keep them in their homes. The benefits of these

communications far outweigh privacy interests. By granting the relief requested, the

Commission can ensure that the TCPA does not interfere with mortgage servicers' ability to

communicate with homeowners.

IL THE COMMISSION SHOULD EXEMPT FROM THE PRIOR EXPRESS CONSENT REQUIREMENTS RESIDENTIAL MORTGAGE SERVICING CALLS THAT ARE NOT CHARGED TO THE CALLED PARTY.

Consistent with the FHFA's recommendation, MBA requests that the Commission

exercise its authority to exempt autodialed and prerecorded residential mortgage servicing calls

to cellular telephone numbers that are not charged to the called party and that do not contain an

advertisement or constitute telemarketing. As explained below, these calls are required by

various federal and state requirements and are of critical importance to mortgage borrowers.

Further, the benefits of these calls far outweigh potential privacy interests. These calls deserve

the same protection from the prior express consent requirements as the Commission provided to

calls from package delivery services, healthcare providers, and financial institutions.

6

A. OUTBOUND CALLS TO RESIDENTIAL MORTGAGE BORROWERS ARE MANDATED BY FEDERAL AND STATE LAWS, REGULATIONS, AND OTHER REQUIREMENTS.

The mortgage market is the single largest market for consumer financial products and

services in the United States. 17 The CFPB, an agency Congress specially created to protect

consumers, has acknowledged mortgage servicers "play a vital role within the broader market by

undertaking the day-to-day management of mortgage loans on behalf of lenders who hold the

loans in their portfolios or (where a loan has been securitized) investors who are entitled to the

loan proceeds."18 These day-to-day management responsibilities include billing borrowers for

amounts due, collecting and allocating payments, maintaining and disbursing funds from escrow

accounts, reporting to creditors or investors, and contacting borrowers to pursue collection and

loss mitigation activities (including foreclosures and loan modifications) with respect to

delinquent borrowers. 19

Mortgage servicers have a "direct and profound impact on borrowers"20 because they are

the personal interface between borrowers and the owners of their loans. To fulfill their duties,

17 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X); Final Rule, Bureau of Consumer Financial Protection, 78 Fed. Reg. 10696, at 10699 (Feb. 14, 2013) (to be codified at 12 C.F.R. Part 1024). 18 Id. "As of June 2012, approximately 36 percent of outstanding mortgage loans were held in portfolio; 54 percent of mortgage loans were owned through mortgage-backed securities issued by Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), together referred to as the government-sponsored enterprises (GSEs), as well as securities issued by the Government National Mortgage Association (Ginnie Mae); and 10 percent of loans were owned through private label mortgage-backed securities. Strengthening the Housing Market and Minimizing Losses to Taxpayers , Hearing Before the S. Comm. on Banking, Housing, and Urban Affairs SubComm. on Housing, Transp. , and Cmty. Dev., (Mar. 15, 2012, 2:30 PM) (Testimony of Laurie Goodman, Amherst Securities), available at http://www.banking.senate.gov/public/index.cfm/hearings?ID=53 BDA60F-64C l -43D8-9ADF-A693C31 EB56B. A securitization results in the economic separation of the legal title to the mortgage loan and a beneficial interest in the mortgage loan obligation. In a securitization transaction, a securitization trust is the owner or assignee of a mortgage loan. An investor is a creditor of the trust and is entitled to cash flows that are derived from the proceeds of the mortgage loans. In general, certain investors (or an insurer entitled to act on behalf of the investors) may direct the trust to take action as the owner or assignee of the mortgage loans for the benefit of the investors or insurers. See, e.g., Adam Levitin & Tara Twomey, Mortgage Servicing, 28 Yale J. on Reg. l , 11 (2011)." 19 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X); Final Rule, Bureau of Consumer Financial Protection, 78 Fed. Reg. 10696, at 10699 (Feb. 14, 2013) (to be codified at 12 C.F.R. Part 1024). 20 Id.

7

mortgage servicers answer calls from borrowers and place outbound calls. These outbound

mortgage servicing calls include calls to inform consumers about mortgage servicing transfers,

options in the event of damage to the property (whether by fire, flood, earthquake, hurricane or

other loss event), and options in the event of a default.

While all of these communications are important, mortgage servicers must be able to

speak to a delinquent borrower as early as possible after a payment default to explain available

options. These calls directly benefit borrowers by allowing the mortgage servicer to work with

the borrower to, among other things:

• determine the reason for the delinquency and whether the reason is temporary or permanent in nature;

• determine whether the borrower has abandoned or vacated the property;

• determine the borrower' s current perception of their financial circumstances and ability to repay the debt;

• set payment expectations and educate the borrower on the availability of alternatives to foreclosure;

• provide homeowner counseling information;

• discuss options upon the death of a borrower;

• discuss missing documentation needed to complete a loss mitigation application; and

• address misconceptions or misinformation about the effect of not making payments and other bad advice from debt relief scams.

Effectively communicating with borrowers who are delinquent on their payment obligations is

critical to keeping borrowers in their homes and protecting their credit histories. The benefits of

proactive and successful loss mitigation strategies go beyond the borrower to avoid blight in

neighborhoods and communities, to maintain home values, and to protect our economy. The

consequences of foreclosure are profoundly negative for homeowners, and our current housing

8

market regulation encourages or requires outbound calls designed to ensure that borrowers are

aware of their options to possibly avoid it.21

The sort of timely, real-time interaction that occurs on a telephone call is particularly

important. Length of delinquency is the second-most significant factor that drives the

performance of the loan modifications necessary to keep a consumer in his or her home. 22 In

fact, one mortgage servicer' s internal review noted a 50 percent increase in borrowers who

became current on their loan when the servicer made up to five calls in the two weeks prior to

the customer becoming 60 days delinquent, compared to those customers who were not called

during the same time period. 23 Time is of the essence in loss mitigation efforts, and discouraging

telephone contact creates obstacles to a borrower getting a modification or keeping his or her

home.

In the wake of the most recent housing crisis, Treasury highlighted the benefits of

mortgage serv1cmg calls: "The issue of how well mortgage servicers communicate with

homeowners has been fundamental to our nation's ability to address the housing crisis. The

reason is simple: unless mortgage servicers communicate successfully with at-risk homeowners,

there can be no modification of a mortgage and no path to avoiding a foreclosure."24 Consistent

21 "The financial losses associated with foreclosure are substantial. For homeowners, credit ratings are damaged, which affects their ability to move on to a new home and lessens their ability to get loans for other purchases. Poor credit ratings may also negatively influence terms and prices for services such as insurance and may impede efforts to get jobs, because some employers access credit ratings for new hires. The net worth for homeowners in foreclosure decreases, since they lose their home as an asset along with any accumulated equity and the tax advantages of homeownership. In the mid- l 990s, the Family Housing Fund in Minneapolis estimated the average family lost $7,200 through foreclosure. Current estimates are most likely higher, as figures are adjusted for inflation and recent decreases in housing values further erode equity and negate previous financial investments in the foreclosed home. One observer noted, 'foreclosure can wipe out the homeowners' savings and leave them owing debt on homes they no longer own."' G. Thomas Kingsley, Robin Smith, and David Price, Urban Institute, The Impact of Foreclosures on Families and Communities, May 2009, p. 14 (citations omitted). 22 Only the amount of payment reduction provided by the modification was more significant the length of the pre­modification delinquency. Scott, Walter, Treatment Effects of Subprime Mortgage Modifications Under the Home Affordable Modification Program, p. 28, March 2015. 23 Comments of Quicken Loans Inc. to the Commission' s Notice of Proposed Rulemaking on the TCPA's Budget Act Amendment, CG Docket No. 02-278 (filed June 6, 2016), at p. 3. 24 U.S. Dep't of the Treasury, Making Contact: The Path to Improving Mortgage Industry Communication with Homeowners, A Report on the U.S. Department of the Treasury's Guidance on Homeowner Single Point of Contact,

9

with Treasury' s experience during the housing crisis and given the effectiveness of these calls,

various federal agencies and state governments now require outbound mortgage servicing calls.

The following chart, which was provided to the Commission prior to the release of its

recent Notice of Proposed Rulemaking, provides examples of these requirements.

Federal Agency I State Government Required Contact

CFPB Mortgage Servicing Rules Telephone or in-person contact by the 36th day of delinquency25

Federal Housing Administration ("FHA") Telephone contact within 20th day of delinquency; at least 2 times per week until contact established or determine property is vacant or abandoned26

Fannie Mae and Freddie Mac Outbound contact attempts, including text and telephone, by the 36th day of delinquency; every 5 days until contact made, delinquency resolved or certain other events occur27

Treasury - Home Affordable Modification Minimum of 4 telephone calls to the last known Program ("HAMP") phone numbers of record, at different times of the

day, within 30 day period28

VA Mortgage Servicing Rules Telephone contact no later than the 20th day of delinquency29

United States Department of Agriculture Attempt telephone or written contact before the Rural Development ("USDA") account becomes 20 days past due; USDA

recommends making personal contact with a delinquent borrower until the delinquency is cured30

(Nov. 14, 20 I 2), available at https://www.treasury.gov/ initiatives/financial­stability/reports/Documents/SPOC%20Special%20Report Final.pdf. 25 12 C.F.R. § 1024.39(a). 26 Federal Housing Administration ("FHA") Single Family Housing Policy Handbook, 4000.1 (III)(A)(2)(h). FHA's programs are designed to extend credit to lower/middle-class Americans and first-time home buyers, and in many cases, those who would find it difficult to find an alternative means of purchasing a home. 27 Fannie Mae Servicing Guide, D2-2-02 (12/16/2015); Freddie Mac Servicing Guide, 9101.2 (3/2/2016). 28 HAMP Handbook, 2 .2. 1 (0I /06/16). 29 38 C.F.R. § 36.4278(g). 30 USDA Single Family Housing Guaranteed Loan Program Technical Handbook at§ 18.3.

10

Federal Agency I State Government Required Contact

California, Nevada, and Washington State Telephone and I or in-person "initial contact" or Pre-Foreclosure Rules due diligence required before issuing or recording

a Notice of Default31

Due diligence requires telephone contact at the primary telephone number on file at least three times at different hours and on different days32

In fact, when promulgating its mortgage servicing rule, the CFPB noted that "[ c ]onsumer

advocacy groups were uniformly in favor of both an oral and written notice requirement."33 The

CFPB also cited a joint comment letter from the Center for Responsible Lending, Consumer

Federation of America, and Center for American Progress supporting the CFPB's mortgage

servicing rule' s early intervention requirements, including outbound calls with delinquent

borrowers, because research shows that borrowers have a lower re-default rate the earlier they

are reached in delinquency.34 The CFPB further explained that "delinquent borrowers may not

make contact with servicers to discuss their options because they may be unaware that they have

options or that their servicer is able to assist them. There is a risk to borrowers who do not make

contact with servicers and remain delinquent; the longer a borrower remains delinquent, the more

difficult it can be to avoid foreclosure."35 These are calls that delinquent borrowers welcome and

need to possibly save their homes.

31 Cal. Civ. Code § 2923.5(a)(l)(A), (a)(2); Nev. Rev. Stat.§ 107.510(l)(b), (2); Wash. Rev. Code§ 61.24.03l(l)(a)(i-ii), ( l )(b). Washington State requires "initial contact" by both telephone and letter. Further, although the Nevada statutes do not explicitly use the phrase "due diligence," the outbound telephone call requirements are the same. 32 Cal. Civ. Code § 2923.5(e)(2)(A); Nev. Rev. Stat.§ 107.510(5)(b); Wash. Rev. Code§ 61.24.031(5)(b)(i). Washington State requires telephone calls to both the primary and secondary telephone numbers on file. Other states require telephone or in-person contact prior to foreclosure. See, e.g., Conn. Gen. Stat. § 8-265ee(a); D.C. Mun. Regs. tit. 26-C § 2710.18; Idaho Code§ 45-1506C(4)(a); R.l. Gen. Laws§ 34-27-3.2(t). 33 78 Fed. Reg. 10696, at 10788. 34 Id. (citing Laurie S. Goodman et al., Amherst Securities Group LP, Modification Effectiveness: The Private Label Experience and Their Public Policy Implications (June 19, 2012), at 5-6). 35 Id. (citing, e.g., John C. Dugan, Comptroller, Office of the Comptroller of the Currency, Remarks Before the Neighbor Works America Symposium on Promoting Foreclosure Solutions (June 25, 2007), available at

11

B. THE BENEFITS OF MORTGAGE SERVICING CALLS OUTWEIGH PRIVACY INTERESTS.

While the TCP A was created to protect privacy interests, Congress made clear from the

beginning that this goal must be balanced against the important need to allow businesses to

communicate with their own customers. This balance is evident in the authority granted to the

Commission to create certain exemptions from the consent requirements and the more recent

amendment to the TCP A exempting from the consent requirements calls made solely to collect a

debt owed to or guaranteed by the United States.

MBA appreciates the Commission's mandate to protect privacy interests and requests a

limited exemption from the prior express consent requirements consistent with those applicable

to package delivery services, healthcare providers, and financial institutions. MBA suggests the

following conditions for each free-to-end-user mortgage servicing call:

1. voice calls and text messages must state the name and contact information of the mortgage servicer (for voice calls, these disclosures must be made at the beginning of the call);

2. voice calls and text messages must not include any telemarketing, cross­marketing, solicitation, or advertising content;

3. text messages and prerecorded calls must be concise, generally one minute or less in length for prerecorded voice messages and one message of 160 characters or less in length for text messages, unless a longer message is required by other applicable law, regulation or requirement;

4. mortgage servicers must offer within each message an easy means to opt out of future messages, including for telephone calls either an automated, interactive voice and/or key press-activated opt-out mechanism that enables the call recipient to make an opt-out request prior to terminating the call or a toll-free number that the consumer can call to opt out of future calls, and text messages must inform recipients of the ability to opt out by replying "STOP," which will be the exclusive means by which consumers may opt out of such messages; and

http://www.occ.gov/news-issuances/speeches/2007/pub-speech-2007-61.pdf; Laurie S. Goodman et al., Amherst Securities Group LP, Modification Effectiveness: The Private Label Experience and Their Public Policy Implications (June 19, 2012), at 5-6; Michael A. Stegman et al., Preventative Servicing, 18 Hous. Policy Debate 245 (2007); Amy Crews Cutts & William A. Merrill, Interventions in Mortgage Default: Policies and Practices to Prevent Home Loss and Lower Costs 11-12 (Freddie Mac, Working Paper No. 08-0 I, 2008)).

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5. mortgage servicers must honor opt-out requests promptly.

MBA requests that for the purposes of this exemption the Commission define "mortgage

servicing" as "all actions, including all communications, related to the receipt and application of

payments pursuant to the terms of any loan or security agreement, execution of other rights and

obligations owed under the loan or security agreement, the modification of any terms of the loan

or security agreement, and any other loss mitigation options."36 The Commission should

confirm that the definition includes cails made to borrowers by HUD-approved housing

counselors. 37

The mortgage servicing calls subject to this exemption will help millions of American

borrowers. As of December 31 , 2015, the total amount of residential mortgage debt outstanding

nearly approached $10 trillion.38 Of this total, nearly $2.5 trillion was held by depository

institutions, $5 trillion was held by federal and related agencies, and just over $2 trillion was held

by private mortgage conduits, individuals and others.39 Since 2007, mortgage servicers have

36 MBA proposes that this definition is consistent with the federal Real Estate Settlement Procedures Act ("RESP A"), 12 U.S.C. §2605(i)(3), and its implementing regulation, Regulation X, 12 C.F.R. § 1024.2(b). See 12 U.S.C. §2605(i)(3)(defining servicing as "receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts described in section 10, and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan"); 12 C.F.R. § 1024.2(b) ("Servicing means receiving any scheduled periodic payments from a borrower pursuant to a federally related mortgage loan, including amounts for escrow accounts under section 10 of RESP A (12 U.S.C. 2609), and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract. In the case of a home equity conversion mortgage or reverse mortgage as referenced in this section, servicing includes making payments to the borrower."). 37 Mortgage servicers are required to send written notice to borrowers within 45 days of delinquency that, among other things, identifies a website address and the HUD toll-free telephone number where the borrower can access the CFPB or HUD list of housing counselors and organizations. 12 C.F.R. § 1024.39(b)(2)(v). These counselors work with borrowers to better understand their options to avoid foreclosure and assist borrowers with the process of applying for loss mitigation options. 38 Board of Governors of the Federal Reserve System (US), Mortgage Debt Outstanding by Type of Property: One­to Four-Family Residences, www.federalreserve.gov (May 19, 2016 at 11 :32 AM), https://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm. 39 Id.

13

been able to create nearly 25 million solutions to avoid foreclosure.40 In the fourth quarter of

2015 alone, more than 35,000 mortgage loan modifications were completed by just eight national

banks.41

Mortgage servicers must be able to use modem, efficient telephone systems to place these

calls given the volume of mortgage borrowers. Modem telephone systems ensure the accuracy

of telephone numbers dialed (as opposed to manually dialed calls) and allow for additional

compliance functions, including call recording and controls on timing and frequency. As the

Commission is aware, the use of such equipment alone (without prerecorded messages or the use

of random or sequential number generators) potentially triggers the consent provisions of the

TCP A and has subjected mortgage servicers to a multitude of lawsuits alleging TCP A violations.

Given the significant statutory penalties and the costs of defending such actions, mortgage

servicers face the potential for devastating monetary damages when attempting to comply in

good faith both with the TCP A and other federal and state requirements to place outbound calls

to borrowers. Exposing mortgage servicers to this type of liability is not consistent with the

goals of the TCP A and threatens to chill the provision of critical communications that is proven

to keep borrowers in their homes and is required by both the federal regulators and state

legislatures that govern our housing market.

III. CONCLUSION

For the reasons stated above and consistent with the FHF A's recommendation, MBA

respectfully urges the Commission to provide a limited exemption from the consent requirements

40 HOPE NOW Data Report: February 2016, Industry Extrapolations and HAMP Metrics, (Feb. 2016), available at http://www.hopenow.com/industry-data.php. 41 OCC Mortgage Metrics Report, Fourth Quarter 2015, (Mar. 30, 2016), available at http://www.occ.treas.gov/publications/publications-by-type/other-publications-reports/mortgage-metrics/index­mortgage-metrics.html. The eight national banks are Bank of America, JPMorgan Chase, CIT Bank (formerly OneWest), Citibank, HSBC, PNC, U.S. Bank, and Wells Fargo. As of December 31, 2015, the reporting banks serviced approximately 21.5 million first-lien mortgage loans with $3. 7 trillion in unpaid principal balances or 41 % of all first-lien residential mortgage debt outstanding in the United States.

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under the TCP A for autodialed and prerecorded mortgage servicing calls to cellular telephone

numbers that are not charged to the called party and that do not contain an advertisement or

constitute telemarketing.

JUSTIN WISEMAN Mortgage Bankers Association jwiseman@mba.org 1919 M Street NW, 5th Floor Washington, DC 20036 Telephone: (202) 557-2854 Facsimile: (202) 289-3943

1598981 .6

Respectfully submitted,

By: L McGlinchey Stafford lcampisi@mcglinchey.com 601 Poydras St., 121

h Floor New Orleans, LA 70130 Telephone: (504) 596-2761 Facsimile: (504) 910-9121

DUSTIN C. ALONZO McGlinchey Stafford PLLC dalonzo@mcglinchey.com 601 Poydras St., 12th Floor New Orleans, LA 70130 Telephone: (504) 596-2782 Facsimile: (504) 910-8834

COUNSEL FOR THE MORTGAGE BANKERS ASSOCIATION

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