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If the bank sells a loan to another institution but retains the servicing rights for that loan, and the loan is put into a trust after the sale, does the bank still need to provide the borrower with the required contact information upon receiving the borrower’s request about the owner or assignee of that loan?

My servicing team has a question about information requests about the owner or assignee of a loan that is held in a trust. The Bureau’s Real Estate Settlement Procedures Act (RESPA and Regulation X) small entity compliance guide provides:

For any request for information where the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) is not the owner of the loan or the trustee of the securitization trust in which the loan is held, you must provide the name of the trust, and the name, address, and appropriate contact information for the trustee.

Similarly, pages of the ABA’s Reference Guide for Mortgage Servicing states:

For any request for information where Fannie Mae or Freddie Mac is not the owner or the trustee, the servicer complies by providing the name of the trust, and the name, address, and appropriate contact information for the trustee. For example, assume a mortgage loan is owned by Mortgage Loan Trust, Series ABC-1, for which XYZ Trust Company is the trustee. The servicer complies with the Information Request by identifying the owner as Mortgage Loan Trust, Series ABC-1, and providing the name, address, and appropriate contact information for XYZ Trust Company as the trustee.

My team’s question is: If the bank sells a loan to another institution but retains the servicing rights for that loan, and the loan is put into a trust after the sale, does the bank still need to provide the borrower with the required information (i.e., the name of the trust, and the name, address, and appropriate contact information for the trustee) upon receiving the borrower’s request about the owner or assignee of that loan? My team is concerned that the bank will not always be able to obtain the required trust information.

Yes. The rules expressly provide that, upon receipt of a request for information related to the owner, assignee, or trust of the loan and so long as the loan is not owned by FNMA or Freddie, the servicer must provide “the name of the trust, and the name, address, and appropriate contact information for the trustee.” Thus, if a servicer is servicing a loan held in a trust at the time of the information request, the servicer is obligated to provide information related to both the trust and trustee. This would be the case regardless of whether the servicer previously owned the loan and/or just recently placed the loan a trust. To the extent the trust information is not available, the Consumer Financial Protection Bureau (CFPB) rules provide that the servicer may respond that it conducted a reasonable search and has determined that the information is not available. The response must also provide the basis for the servicer’s determination and contact information, including a telephone number, for further assistance. However, both the CFPB and the borrower might take issue with such a response, as presumably the servicer is responsible for knowing who owns the loan, what trust it is held in, etc. (Response Provided by Jason R. Bushby, Partner, Bradley Arant Boult Cummings. This response is intended to convey general information only and not to provide legal advice or opinions.) (October 2016)

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