DS News - U.S. Bank

58 COUNSEL'S CORNER Bankruptcy Rules and the CFPB Sharmila Bharwani is an Assistant General Counsel for Citigroup Inc. in Irving, Texas. She has more than seven years of experience in mortgage servicing with extensive knowledge of federal and state laws impacting TILA, FCR A, RESPA and bankruptcy matters. Bharwani has participated in numerous banking regulators and managing examinations and has a vast amount of knowledge of the current policies and commentary from the OCC and CFPB. She has assisted in discussions with different legal groups regarding the proposed amendments to the federal bankruptcy code. Bharwani spoke to DS News to discuss the new updates for the bankruptcy rules and her perspec- tive on the work done by the CFPB. In your own words, what are the new proposed bankruptcy rules? e bank- ruptcy rules began last year or the year before. e bankruptcy rules were initially proposed to be changed in mid-2014 or mid-2015. ey were going to go ahead and create these very intricate rules for the periodic statements, and these are billing statements that go to bankruptcy customers while they're in active bankruptcy and the rules to them after they leave bankruptcy. ey released these rules and they got a huge uproar from NACTT, trustees, and creditor attorneys. All of them were saying, "Hey, did you think about this scenario? What about conver- sions? What about this? What about that?" ey went back and after the summer was over, they went ahead and redacted their rules and just said, "Look, at this point, we're going to hold off on bankruptcy statements because we just don't have enough information." More than that, they actually said, "For now, you are not required to send periodic statements to customers in active bankruptcy." e bank- ruptcy community was very satisfied, and then they went ahead and they did numerous differ- ent phone calls. ey submitted the proposal, they asked for commentary. ey did a focus group study to see how people feel about the bankruptcy rules, and overall, they did a really good job in getting into the weeds of it, going to the grass roots level and figuring out how they should identify or do the proposal. ey released their final rules on August 18th of this year. It does not have a publish date, but these are the final rules of the bankruptcy periodic statement requirement. e rules them- selves that were released were about 900 pages and about 280 pages of them are related to the bankruptcy periodic statement. What are your thoughts on the updated rules? e bankruptcy proposed rules or the final rules require periodic statements to go out to customers in active BK, but they do a really good job doing the "if, thens." ere are about eight exceptions that stop you from sending periodic statements. ey then go ahead and define when you're required to send it. You have 30 days from the change from one requirement of sending it to not sending it or a billing cycle, so all of that is defined in my outline that I can send to you if you want it. e CFPB's rules are really thorough, which has been really helpful to us. ey even gave a sample of what these statements should look like and with that responsiveness and openness to listening to all of our comments, I think the CFPB did a good job. What is the perceived impact in industry from these rules? ey've given us 18 months to implement the periodic statement rule, and I believe that servicers are still going to have quite a difficult time to automate this, so we're already doing certain projects and IT has already been called in and we're sort of working on these projects to see how fast we can implement these rules. 18 months sounds like a really long time. It's really difficult for servicers who automate a lot of their mortgage servicing process to go ahead and put this in, as well. e impact it will have on our servicing industry is first, customers will have or borrow- ers or getters, whatever you want to call them, will have a way better idea of how their bank- ruptcy payments are going as it pertains to their mortgage, which is great. I think the trustees will also have a better idea of how payments are being applied. Even though these statements don't go to trustees, I think the fact that they go to their customers and then they translate to their customer's attorneys, and then eventually to the trustees, will give a much more transpar- ent concept of how bankruptcy payments will be applied. We also probably will have a lot more consistency between servicers on how we are going to show payments to customers. SHARMILA BHARWANI: Assistant General Counsel for Citigroup Inc. "Overall, they did a really good job in getting into the weeds of it, going to the grass roots level and figuring out how they should identify or do the proposal."

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