Transcript Putting all the pieces of loan compliance together

Putting all the pieces of loan compliance
together
Rebecca Ketter, CCBCO 6/19/09
A Big Year for Changes
Unparalleled crisis brings
unparalleled reaction…
–HOEPA/HMDA
–TILA
–RESPA
–HVCC
–SAFE
An alphabet soup of changes!!!
“HIGHER PRICED” – 10/1/2009
“Higher-priced mortgage loans” “consumer credit transactions secured by
consumers’ principal dwellings” that are
– For first liens - 1.5 percentage points above
the “prime offer rate”
– For second-lien loans - 3.5 percentage
points over
• Came to be because of TIL changes.
Note: Requirements for “higher-priced
loans” extend to home purchase and
home improvement loans and refinances
as proposed
“HIGHER PRICED” Cont…
• Prohibits a lender from making a loan without regard to
borrowers' ability to repay the loan from income and
assets other than the home's value.
– A lender complies, in part, by assessing repayment ability
based on the highest scheduled payment in the first
seven years of the loan. To show that a lender violated this
prohibition, a borrower does not need to demonstrate that it
is part of a "pattern or practice."
• Prohibits a lender from relying on income or assets that it
does not verify to determine repayment ability.
• Bans any prepayment penalty if the payment can change
during the initial four years. For other higher-priced loans,
a prepayment penalty period cannot last for more than two
years.
• Requires that the lender establish an escrow account for
the payment of property taxes and homeowners'
insurance for first-lien loans.
HMDA - effective 10/1/09
Compliance is mandatory for loan applications taken on
or after October 1, 2009 and for all loans that close on
or after January 1, 2010 (regardless of the application
date).
 Currently a HMDA rate spread is reported if the yield
between the APR and Treasury Securities is 3% on
first liens and 5% on subordinate liens.
 This will be replaced with the “Average Prime Offer
Rate” and will now be a rate of 1.5% for first liens and
3.5% for subordinate liens.
 HMDA reporting for 2009 shall have January to
September 30 applications reported as the 3 to 5 rate
spread, and applications taken after October 1
reported using the new 1.5 to 3.5 rate spreads.
Truth In Lending changes
• Apply to dwelling-secured consumer loans for
which a creditor receives an application on or
after July 30, 2009.
• Early Disclosures are no longer just for
purchases; Truth in Lending now includes:
– Refinances
– Home Equity (closed-end)
• Dwelling secured = no longer just the primary
dwelling
– 2nd home, for example
– Business purpose is still exempt
Early disclosure timing
• Deliver or mail no later than three (3)
business days after we receive the
application.
– Applies to purchase.
– Applies to Non-purchase.
– Applies for primary dwelling.
– Applies for a dwelling other than the primary
dwelling.
Cannot Charge Fees!!!
We cannot charge the
customer any fees, other
than a credit report fee
Until early disclosures are
received by the customer.
We must make corrections!!
• Before closing (at least 3 days before)
• If the APR falls outside of tolerance limits
(more than 1/8 of 1 percentage point in a regular
transaction, or more than 1/4 of 1 percentage point in an
irregular transaction, as defined in §226.22(a)) – this limit
did not change
• New disclosures must be sent
– No later than 3 business days before closing
We must wait!
Seven (7) business
day waiting period
– Creditors must wait
seven business
days after they
provide the early
disclosures before
closing the loan
Waiting Period for Corrected
Disclosures
• Closing may not occur until 3 business
days after the consumer receives the
corrected disclosures.
• New rules assume receipt is 3 business
days after mailing,
– thus closing can be not sooner than 6 days
after sending the corrected disclosures.
• Board stated they will not adopt separate rules or
presumptions for overnight shipping or electronic
delivery.
Business Day –
Different Definitions
• Business Day for Early Disclosures
– 3 business days and uses the "days on which
a creditor’s offices are open to the public for
carrying on substantially all of its business
functions" definition (to remain consistency
between TILA and RESPA)
• Business Day for Waiting Periods
– (7 business days to consummation; 3
business days for corrected) = "all calendar
days except Sundays and specified legal
public holidays specified at 5 USC 6103(a)"
Reg Z - Early Disclosure and Loan Closing Timing Calendar
For this purpose - Does your institution count Saturdays as Business Days ?
If yes enter 1 here ; if no enter 2 here > > > >
2
Monday, August 03, 2009 <<< Enter the Date Application was received (mm-dd-yy)
Thursday, August 06, 2009 <<< Enter the Date Early Disclosures were Generated (mm-dd-yy)
Thursday, August 06, 2009
Friday, August 14, 2009
Last Date that Early Disclosures can be generated
First Date that Loan Can Close
USE THIS SECTION ONLY IF
Redisclosure was required. Enter date below, if not leave blank.
Monday, September 07, 2009 <<< Enter the Date Redisclosure was Generated (mm-dd-yy)
Was the Re-Disclosed Truth in Lending document . . . Mailed?
MAILED
First Date that Loan Can Close is the later of the two dates below
Monday, September 14, 2009
Friday, August 14, 2009
6 Business Days from Redisclosure
7 Business Days from Initial Disclosure
Given In Person
First Date that Loan Can Close is the later of the two dates below
Thursday, September 10, 2009
Friday, August 14, 2009
3 Business Days from Redisclosure
7 Business Days from Initial Disclosure
OR
Given in Person?
Clear as mud?
January 1, 2010 - RESPA
• New Application Definition
• New Good Faith Estimate (now 3 pages
long)
• New HUD-1 (also now 3 pages in length)
– New HUD-1a
• Servicing disclosure – was effective
January 16, 2009
Principles of RESPA Reform
• Help consumers shop for the best loan
• Shopping leads to greater competition & lower
prices
• Key final terms of the loan disclosed to the
borrower at closing
• Preserve a competitive market for all settlement
service providers
Application
Not until 1/1/2010
• Application means the submission of a
borrower’s financial information in anticipation of
a credit decision relating to a federally related
mortgage loan, which shall include:
– the borrower’s name,
– the borrower’s monthly income,
– the borrower’s social security number to obtain a credit
report, the property address,
– an estimate of the value of the property,
– the mortgage loan amount sought,
– and any other information deemed necessary by the
loan originator.
• An application may either be in writing or
electronically submitted, including a written
record of an oral application.
Good Faith Estimate Changes
Some closing costs will have tolerance levels; we will have
30 days from the date of closing to correct errors, and
repay consumers any overcharges, to avoid violations.
• Zero (0%) for:
– (i) The origination charge;
– (ii) While the borrower’s interest rate is locked, the credit or
charge for the interest rate chosen;
– (iii) While the borrower’s interest rate is locked, the adjusted
origination charge; and
– (iv) Transfer taxes.
• 10 % for:
– Lender required settlement services
– Lender-required services, title services and required title
insurance, and owner’s title insurance…
– Government recording charges.
Lets take a look.
Binding GFE –
effective 1/1/2010
The loan originator is bound,
within the tolerances, to the
settlement charges and
terms listed on the GFE
provided to the borrower,
unless a new GFE is
provided prior to settlement.
GFE Page 1
• Important dates
• Summary of loan terms
• Escrow account information
• Summary of settlement charges
GFE
Page 1
GFE Page 2
• contains all costs associated with the
loan
• two categories:
•Adjusted Origination Charges
•All Other Settlement Services
GFE
Page 2
GFE Page 3
•Primarily an instruction page
•List of which charges can change
•Table of other loan options
•Shopping chart
GFE
Page 3
Instructions
Moving on to the HUD
(settlement statement)
HUD-1
Settlement
Statement
In General
• revised to compare with GFE
• categorized - eliminate fee proliferation
• 3rd party charges listed outside column
• added page to HUD-1/1A
• highlights key loan terms
Right-to-Cure
Inadvertent or technical errors
not a violation of RESPA Section 4
IF revised HUD-1 is provided within
30 calendar days after settlement
HUD-1
Page 2
34
Fee Categories – 700s
• eliminated commission percentage
• Lines 701 & 702 = commission split
• Line 703 = disbursed commission
• Line 704 = if outside settlement; P.O.C.
35
Fee Categories – 1100s
“Title services”
Means any service involved
in the provision of title insurance
(Lender’s & Owner’s)
36
“Title Service”
Includes, but is not limited to…
• title examination & evaluation
• preparation & issuance of commitment
• preparation & issuance of policies
AND
• all administrative services & processing services
required to perform these functions
•(e.g. document delivery, preparation & copying, wiring,
endorsements, & notary)
37
HUD-1,
page 3
38
Comparison Chart
• compares charges listed on GFE &
actual charges listed on the HUD-1/1A
• identifies tolerance compliance
or violation
• 3 categories: charges that cannot
increase, sum of charges that cannot
increase more than 10% and charge
that can increase
39
Comparison
Chart
40
Loan Terms
•
ensures borrowers that they
received loan applied they
applied for
•
highlights key loan terms
41
Loan
Terms
42
HVCC
• Home Valuation Code of Conduct
– Loans originated on or after May 1, 2009, and
delivered to Fannie Mae or Freddie Mac.
– The purpose of HVCC is to preserve Appraiser
independence from improper influence by the parties
who order appraisals.
– Independence from Loan Production. All members of
a lender’s loan production staff are prohibited from
selecting or otherwise influencing the selection of an
appraiser, as well as having any substantive
communications with an appraiser relating to the
appraiser’s valuation.
– Borrower must be given a copy of any appraisal report
concerning the borrower's subject property, promptly
upon completion, and no less than three days prior to
the closing of the loan.
– Lenders are required to perform quality control tests
on a randomly selected 10 percent sample of the
appraisals or valuations used by the lender.
S.A.F.E. act of 2008
• Establishes Nationwide Mortgage Licensing System and
Registry comprehensive database
• Coverage – “Loan originators” - Takes loan applications
and offers or negotiates terms of loans for compensation
or gain. (Advising on loan terms, preparing loan packages,
or collecting information on behalf of the consumer would
qualify as “origination.”)
• Minimum Standards – For state licensing and registry
laws for “originators” include:
– Annual licensing and registration;
– Unique identifier; fingerprints and background checks:
– Demonstrated financial responsibility, character, and general
fitness
– Minimum educational requirements and written examination
– Restrictions against licensees being issued to persons that
have had license revoked, pled guilty or been convicted of a
financial crime or breach of trust
You’re SAFE for now…
• The federal agencies released a
proposed rule to implement S.A.F.E. on
June 1, 2009
• The database established by the
Conference of State Bank Supervisors
(CSBS) and the American Association of
Residential Mortgage Regulators
(AARMR) to support the licensing of
mortgage loan originators by the States
is not ready.