Servicing Disclosure Statement is a disclosure wherein the lender indicates whether or not the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding. The disclosure is provided to the applicant by the processor or the loan originator/sales team of lender or the broker.
The lender or broker is required to send the disclosure is required as per Consumer Finance Protection Board (CFPB) Regulation X 12 CFR 1024. Regulation X implements Real Estate Settlement Procedures Act (RESPA).
The Appendix MS-1 of regulation X is a model template that provides the content requirements of the template. The regulations do not require the specific language in the model to be used. Also, the model format may be annotated with additional information that clarifies or enhances the model language and best describes the particular circumstances.
Based on the model format and requirements in Regulation X, the Servicing Disclosure Statement should contain the following:
Additionally, the disclosure may contain the following optional items:
Through this disclosure, the lender is informing you whether or not it will perform the servicing on the loan. If you are obtaining a loan from the lender because of its customer service and the lender is indicating on the disclosure that it may transfer or not service the loan, then it means you will have to deal with another institution and may not get the customer service that you had expected.
The disclosure must be given for loan applications that are covered under RESPA, which includes applications for all loans secured by real estate except for:
Refer to the details in regulation X to confirm whether the exemption applies to your specific circumstances.
The Servicing Disclosure Statement must be sent by the lender, table funding mortgage broker, or dealer that anticipates a first lien dealer loan. As a best practice, you must always deliver the disclosure to the loan applicants as part of your 3-day disclosure packet.
The Servicing Disclosure Statement must be delivered within three business days from receipt of the application. The disclosure is not required to be delivered if the loan application is denied within the 3 business-day period.
The disclosure may be delivered by hand delivery, by placing it in the mail, or, if the applicant agrees, by fax, e-mail, or other electronic means. If co-applicants provide the same address on their application, one copy delivered to that address is sufficient. If different addresses are provided by co-applicants on the application, a copy must be delivered to each of the co-applicants.
A copy of the Servicing Disclosure Statement should be maintained in the loan file, along with all other origination documents, as evidence of compliance with Regulation X. While, Regulation X does not specifically prescribe recordkeeping requirements for Servicing Disclosure Statement, it requires other documents to be retained for five years from the date of execution. Therefore, we recommend retaining the Servicing Disclosure Statement at a minimum of at least five years from closing date and preferably as long as the loan is outstanding.
As part of post-closing quality review, verify:
Updated: Sep 08, 2013