The workout file is the only piece of evidence a regulator, a plaintiff’s lawyer, or a portfolio buyer reads when they want to know whether the servicer did the work. CFPB Spring 2024 Supervisory Highlights flagged 12 C.F.R. §1024.38(c) recordkeeping failures as a recurring exam finding — servicers that did not document the actions they took in loss-mit decisioning. This how-to walks the file structure that survives review. See also the pillar guide on borrower workout paths.

How do you set up the file before any borrower contact?

Before the first call, create the file with five labeled sections: (1) Borrower contact log, (2) Documents received, (3) Internal decisioning, (4) Borrower communications sent, (5) Final disposition. Every entry in every section needs a date, an author (by name and role), and a brief description. The structure makes a six-month-old file legible to someone who was not in the workout.

How do you document every borrower contact?

Contact log entries include: date, channel (phone, email, letter), direction (inbound, outbound), staff name, borrower identity confirmation method, substance of the conversation, and next-step commitments by both sides. For inbound calls, note the time the call was answered and the time it ended. For voicemail and missed calls, log the attempt with a timestamp. The CFPB and state examiners read these logs first to verify §1024.39 live-contact compliance.

How do you log documents the borrower sends?

Each document landing in the file gets a received date, a document type label, a borrower name and loan number, and a completeness assessment. For consumer-purpose loans under §1024.41, the completeness assessment starts the evaluation clock. If a document is incomplete, the file logs the missing items and the date a request-for-additional-information letter went out. Hold the request letter in section 4.

How do you record decisioning?

Internal decisioning entries cover: the loss-mit option evaluated, the financial analysis (income, hardship, capacity), the property analysis (value, occupancy, condition), and the final approve/deny/counter decision with a named decision-maker and a date. For denials, the denial reason references the specific criterion that drove the decision. The Fay Servicing 2024-CFPB-0007 order specifically called out denial notices that did not state evaluation criteria.

How do you communicate the outcome to the borrower?

Outbound communications include the offer or denial letter, the appeal rights notice (for consumer loans under §1024.41(h)), and any follow-up correspondence. Each gets a sent date, a method (certified mail, email, electronic delivery confirmation), and a copy in section 4. For consumer loans the letter must meet the §1024.41(d) content requirements; for business-purpose loans the same content discipline applies as best practice.

How do you close the file at disposition?

Section 5 records the final outcome — repayment plan executed, forbearance ended, modification recorded, short sale closed, deed-in-lieu accepted, foreclosure initiated. Include the document index for section 5 (recorded modification, executed deed-in-lieu, signed HUD-1 for short sale). Cross-reference any IRS forms (1099-C for forgiven principal) and credit-bureau reporting confirmations. A complete section 5 is what a note buyer reads when they price the file.

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