Source: https://nafcucomplianceblog.typepad.com/nafcu_weblog/mortgage-reform-appraisals/
Timestamp: 2019-04-19 03:15:54+00:00

Document:
Regulation X requires mortgage servicers to maintain policies and procedures to provide timely and accurate information. See, 12 C.F.R. § 1024.38. Allegedly, Ocwen loaded incorrect information into its loan servicing system and also managed to change correct information because of system errors and deficient programming. Ocwen's own Head of Servicing described Ocwen’s technology as "[a]n absolute train wreck." The CFPB claims that even though Ocwen was aware of these deficiencies, it used the faulty information to service borrowers’ loans. Some of the issues caused by using the erroneous information was failing to cancel borrowers’ private mortgage insurance (PMI) in a timely manner which caused borrowers to overpay about $1.2 million for PMI premiums. Ocwen did eventually refund this money, but only after the CFPB called it to its attention.
Section 1024.41 of Regulation X has requirements for loss mitigation procedures. Under the rule, if a mortgage servicer offers loss mitigation options and receives a completed application more than 37 days before foreclosure, it must evaluate the borrower for all loss mitigation options and notify the borrower of its determination. See, 12 C.F.R. § 1024.41(c). Ocwen allegedly failed to provide required foreclosure protections and wrongfully initiated foreclosure proceedings and sales on at least 1,000 borrowers. More specifically, the bureau claims that Ocwen initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications and foreclosed on those who were fulfilling their obligations under a loss mitigation agreement.
Regulation X has error resolution procedures that generally require the servicer to investigate and correct servicing errors within 7 days of receiving a notice of error. See, 12 C.F.R. § 1024.35(a)-(e). Ocwen received numerous error notices on inappropriately credited payments and allegedly failed to correct these billing and payment crediting errors. The CFPB claims that Ocwen's policies and procedures required that borrowers complained at least five times in nine days before Ocwen automatically escalates their complaint to be resolved.
There are several requirements associated with escrow accounts, such as providing an annual escrow account statement; conducting an analysis to resolve escrow surpluses or shortages and notifying borrowers of shortage or deficiencies in the account. See, 12 C.F.R. § 1024.17(f)-(g). Even though Ocwen manages escrow accounts for the majority of the loans it services, the servicer allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly failed to resolve escrow shortages by misapplying borrowers' payments resulting in some borrowers paying inaccurate amounts towards their escrow accounts.
Servicers that administer escrow accounts must also make timely insurance and tax payments on behalf of the borrower. In addition to the other escrow managing deficiencies, Ocwen allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums which led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Because of this error, some of these borrowers had to pay for force-placed insurance.
Current mortgage servicing rules require the servicer to "promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower's mortgage loan." 12 C.F.R. § 1024.38(b)(1)(vi). Once these successors in interest are identified, the servicer is supposed to evaluate loss mitigation options for those who may be eligible. Ocwen allegedly mishandled accounts for successors-in-interest by failing to properly recognize individuals as heirs, denying assistance to help avoid foreclosure and in some instances, foreclosing on individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.
The CFPB also claims that Ocwen took some other lenders' playbook and enrolled some consumers in add-on products through deceptive solicitations or without the consumer's consent. Ocwen then billed and collected payments for these ad-on products that the borrowers had not requested.
CFPB's complaint against Ocwen is a great example of when a mortgage servicer does not have proper internal controls, policies and procedures or a culture of compliance.
Greetings compliance fans! On March 8, 2016, the CFPB issued its latest supervisory report sharing observations from recent examinations and other supervisory activities. The report covers issues observed by the Bureau in the areas of consumer reporting, debt collection, mortgage origination, remittances, student loan servicing, and fair lending.
Consumer Reporting. CFPB examiners found that one or more furnishers of information to consumer reporting agencies failed to have policies and procedures addressing the furnishing of information related to deposit accounts. For example, these furnishers would update their own systems when customers paid charged-off accounts in full but would not provide updated information to the consumer reporting agencies. The CFPB recently issued Compliance Bulletin 2016-01 (Feb. 3, 2016), reminding furnishers of their responsibilities under the Fair Credit Reporting Act (FCRA) and Regulation V regarding specialty consumer reporting agencies such as ChexSystems.
Debt Collection. CFPB examiners also determined that some debt collectors failed to honor written requests to cease communications. While credit unions collecting on their own debts are not considered “debt collectors” under the Fair Debt Collection Practices Act (FDCPA), the CFPB and NCUA have separately signaled that credit unions should still strive to comply with the requirements of the FDCPA to avoid any liability for committing unfair or deceptive acts or practices (UDAAPs). See, CFPB Compliance Bulletin 2013-07 (July 10, 2013) and NCUA Consumer Compliance Handbook, p. 98. Some debt collectors also made false, deceptive or misleading representations regarding garnishment when attempting to collect on student loan debt.
Mortgage Origination. In general, the Bureau noted overall compliance with its Title XIV rules (loan originator compensation, ability-to-repay, appraisals and valuations, high-cost mortgages and escrows for higher-priced mortgage loans). Some exceptions included the absence of written policies and procedures for loan originator activities under the loan originator rule and some deficiencies in compliance management systems. The loan originator rule makes it an independent regulatory requirement that credit unions establish policies and procedures reasonably designed to ensure and monitor the compliance with the prohibited payment, anti-steering, qualification and identification requirements of the rule. See, 12 C.F.R. § 1026.32(j). The CFPB maintains a landing page with resources that credit unions can use to comply with these rules, including compliance guides and quick reference charts, here.
Remittances. As the CFPB noted in its press release touting the Supervisory Highlights report, this is the first report on exams of financial institutions in the remittance market since the CFPB issued its remittance transfer rule. While the Bureau noted overall compliance with the remittance transfer rule, a few trouble spots identified by examiners included providing incomplete or inaccurate disclosures, failing to adhere to regulatory timeframes for refunding cancelled transactions, failure to communicate the results of error investigations, or failure to promptly credit consumer accounts. Like the Title XIV rules, the CFPB maintains a landing page with resources credit unions can use to help comply with the remittance transfer rule here.
Student Loan Servicing. In the report, the CFPB noted that supervising the student loan servicing market has been a priority for its Supervision program. CFPB examiners cited private student lenders for taking advantage of auto-default clauses in student loans where either the borrower or a cosigner declared bankruptcy. The effect of the auto-default clause was to place both the borrower and the cosigner immediately into default and make the loan payable in full immediately. The Bureau found this practice to be a UDAAP. In addition, CFPB examiners “determined that servicers committed unfair practices by failing to disclose a significant adverse consequence of forbearance.” Namely, the inability of some borrowers to take advantage of cosigner release clauses in student loan contracts following the borrower’s use of forbearance.
Fair Lending. The report also provided updates on the Bureau’s administration of its fair lending enforcement settlement agreements with Ally Financial, Inc. and Ally Bank, and with Synchrony Bank, formerly known as GE Capital Retail Bank.
As this report shows, the Bureau has been very aggressive in several key areas – particularly consumer reporting, loan servicing, mortgage origination, and debt collection. The Bureau has repeatedly emphasized these areas as focal points for its supervision and enforcement activities for the next two years.. One thing to keep in mind is that the Bureau repeatedly emphasized the requirement to furnish accurate information to consumer reporting agencies under the FCRA and Regulation V throughout the report and not just as part of the consumer reporting section. This signals that the Bureau is likely to remain laser-focused on the accurate reporting of consumer information likely as part of a larger effort to examine ways to bring financial services to unbanked and underbanked populations.
Major CFPB rule changes brought new HMDA reporting procedures your credit union must comply with. Join this webcast for a comprehensive overview of the final rule, revision of Regulation C, and data collection requirements. You’ll discover the new data credit unions are required to collect and report, when these requirements will be active, and more.
With several of the new mortgage rules set to go into effect tomorrow, including ability-to-repay and qualified mortgages, the NAFCU compliance team wanted to take a moment to reach out to those that have been tirelessly involved in implementing compliance programs to address the numerously burdensome changes. It has been a long, hard (and of course expensive) journey, and unfortunately, it’s not over.
We have heard that there are credit unions (or really, in many cases, their vendors) that aren’t going to be ready by tomorrow. As scary as this can be, the credit union still has a leg to stand on: the CFPB and NCUA have both assured credit unions that good faith efforts of compliance will be acceptable in the early months after the new rules become effective.
Having this leg to stand on is indeed comforting, but only time will tell how this will pan out with the examiners of each agency. As many credit unions have encountered in the past, examiners from different agencies, or even individual examiners within the same agency, are not always on the same page, especially where there isn’t a detailed definition of “good faith efforts of substantial compliance” available.
Escrow Requirements for Higher-Priced Mortgage Loans.
NAFCU’s Online Learning options, including its unlimited webcast subscription.
The CFPB also has numerous resources for complying with the mortgage rules, including a central page for their mortgage rule implementation resources. This page includes compliance guides, videos and other resources. Additionally, NCUA issued a regulatory alert and supervisory letter to examiners that both provide general guidance for credit unions to comply with the CFPB’s ability-to-repay/qualified mortgage rule for all loan applications received on or after Jan. 10. NCUA also issued a regulatory alert on mortgage servicing and a regulatory alert on homeownership counseling requirements.
NAFCU’s Compliance Team. You may have noticed some new names on the blog. NAFCU’s compliance team has made some additions in an effort to continue to provide our members with valuable, timely compliance information. We’d like to take this opportunity to say thank you for being dedicated readers of our blog. We aspire to provide you with materials that will assist you with your day-to-day needs.
NCUA December Board Meeting Results; HPML Appraisal Supplementary Rule Finalized; NAFCU Webcast – Managing Third Party Fair Lending Risk.
Final Rule, Parts 703 and 721, Charitable Donation Accounts.
All actions were approved. I won’t go into detail on each of these actions in this blog post, but you can find the details here in NCUA’s Board Action Bulletin.
HPML Appraisal Supplementary Rule Finalized. During NCUA’s December Board Meeting, the last of the lingering mortgage rule amendments finalized. More specifically, the Interagency Proposed Supplemental Rule on the HPML Appraisal Requirements finalized. This supplements the HPML Final Rule that was issued in January, 2013, and goes into effect at the same time as the original final rule on January 18, 2014.
As background, under the January 2013 final rule, credit unions extending higher-priced mortgage loans must obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals and give applicants a copy of the written appraisals used for certain mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage.
The supplemental final rule provides exemptions from the requirements to: (1) transactions secured by existing manufactured homes and not land; (2) certain streamlined refinancings; and (3) transactions of $25,000 or less.
Also, the rule requires credit unions to provide notice to the borrower within three business days after receiving application that states, generally, that the credit union may order an appraisal for which the borrower may be charged. The proposal defined “business day” to only exclude Sundays and legal holidays, but NCUA heeded the advice of NAFCU and finalized the supplemental rule to also exclude Saturdays from the “business day” definition for the purpose of providing the notice required after receiving an application. NAFCU is appreciative of this outcome as it will provide added flexibility to those credit unions whose back office operations are not open on Saturdays.
You can view the final HPML Appraisal Interagency Supplemental Rule here.
NAFCU Webcast – Managing Third Party Fair Lending Risk. You may be following the fair lending regulations “to the letter,” but what about your vendors? If you utilize vendors for indirect lending, mortgage services, marketing or other services, you won’t want to miss NAFCU’s webcast – Managing Third Party Fair Lending Risk: Don’t Let Your Vendors Let You Down. The webcast will take place on January 13, 2013 at 2:00pm Eastern time. Register by January 6, 2014 and receive $100 off. For details on this webcast, click here.
I don't know about you all, but I have a hunch that most of us are still trying to catch up with our reading from the holiday. We'll keep it light today . . .
Last week, the Consumer Financial Protection Bureau (CFPB) released updates to its exam procedures in connection with the new mortgage regulations issued in January 2013. The updates cover all final rules issued by the CFPB through October 15, 2013.
Although the CFPB only has examination authority over credit unions with more than $10 billion in assets, the exam procedures serve as guidance to all credit unions on how the CFPB will conduct examinations for compliance with the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).
The CFPB’s Supervision and Examination Manual can be located here.
Baby Kyse is on the move! Ava isn’t quite there yet, but she does enjoy standing on her feet so I know she’ll get there soon enough!
Not receiving money after you applied for a loan."
The CFPB uses this complaint data to identify business practices that may pose risks to consumers, which in turn will pave the way for new payday lending rules and regulations.
NCUA Webinars on Remittances and Mortgage Lending Rules. In a press release yesterday, the NCUA announced that it will host a free, two-part webinar, “New Dodd-Frank Remittances and Mortgage Lending Rules.” The first part, which will cover remittance transfers, higher-priced mortgage loan appraisals, mortgage servicing, and higher-priced mortgage loan escrows, will take place at 2:00pm Eastern on November 18, 2013. The second part, which will cover ability-to-repay and qualified mortgages, high-cost mortgage and home ownership counseling, loan originator compensation, and Equal Credit Opportunity Act appraisals and valuations, will take place at 2:00pm Eastern on December 18, 2013.
Credit unions should take advantage of these free high-level overviews. Click here to register for the November 18 session and here to register for the December 18 session.
If you are looking for additional compliance assistance on these new rules and regulations, the NCUA also issued regulatory alerts and YouTube videos summarizing the rules and highlighting issues of particular importance for credit unions.
Programming Note. NAFCU’s offices will close today at noon and remain closed until Tuesday for the long holiday weekend. We’ll be back to blogging next Wednesday! Have a great weekend!
We have all heard the phrase before. It is purported to be an old Chinese proverb, seemingly positive in nature. Dig deeper into its origins, however, and evidence advances the theory it was actually one of three ancient curses, each imparting increased severity upon the designated target.
As the newest member of the National Credit Union Administration Board, I am mindful that how we decide to interpret a message goes a long in way in determining the direction and the outcome of our actions. Like my friend, I choose to observe these “interesting times” as an opportunity, not a curse, and a chance to make a difference in advancing the vital role credit unions play in the lives of so many Americans.
The NCUA report also contains an overview of the CFPB’s mortgage rules which the article notes will be the first in a series of articles to help credit unions comply with the impending mortgage rules.
NAFCU Member Resource - Consolidated Regulatory Text and Commentary for the CFPB’s Mortgage Rules.
And speaking of helping credit unions to comply with the CFPB’s mortgage rules, NAFCU’s compliance division has put together a great member resource (login required) which will hopefully save you quite a few headaches.
The CFPB's mortgage rules amended several federal regulations (Regulation Z, Regulation X, Regulation B), and many of the individual regulatory sections were amended by different final rules. As a result, it is difficult to determine the complete picture of the requirements when the rules become effective.
To solve this problem, NAFCU has consolidated the regulatory text and commentary for each amended (and added) regulatory section from each of the CFPB's final mortgage rules. The consolidated regulatory text and commentary show how the regulatory sections will look when the final rule(s) are effective in January 2014.
Check out our new webpage where you can download the consolidated regulatory text of each individual amended section or you can download the entire consolidated final rule as amended! You can also link to the consolidated text from the NAFCU Mortgage Rules webpage. Hopefully you will never have to use this stress reduction kit again!
Last week, the CFPB released its second update to its exam procedures in connection with the new mortgage regulations that were issued in January 2013. Specifically, the second update covers the Ability-to-Repay/Qualified Mortgages, high-cost mortgages, appraisals for higher-priced mortgage loans, the new amendments related to the escrows rule, the recent changes to the credit card rules, the mortgage origination rules issued through May 29, 2013, and mortgage servicing rules issued through July 10, 2013.
The updated exam procedures will, according to the CFPB’s press release, help financial institutions understand and prepare for how they will be examined in a number of different areas. For a list of some of examination areas from the second update and how to prepare for them, click here to view the second press release.
Also, if you’re interested in what examination areas were covered in the first update, click here to view the first press release.
It’s a good thing that the CFPB is making these updates and providing them to the industry, especially since it’ll be January, 2014 before we know it. Speaking of time flying . . . one year ago (from yesterday), my sweet babies – Kyse and Ava – were born. I cannot believe how quickly the time has come and went. I’m not going to bog you down with pictures at this very moment, but I assure you there will be pictures to share after this weekend . . . since I plan on having a big birthday bash for them!
Earlier this week, several agencies (Agencies) – including the Consumer Financial Protection Bureau (CFPB) and the National Credit Union Administration (NCUA) – released a supplemental proposal on appraisals for higher-priced mortgage loans (Supplemental Proposal).
The proposal relates to the 2013 Interagency Appraisals final rule (Final Rule), which goes into effect on January 18, 2014. Among other requirements, the Final Rule requires creditors to obtain an appraisal or appraisals for certain mortgages that meet the definition of a higher-priced mortgage. In part, the Supplemental Proposal would amend the Final Rule to include exemptions from the appraisal rules in the following instances: transactions secured by existing manufactured homes and not land; certain “streamlined” refinancings; and transactions of $25,000 or less (indexed for inflation).
For more information on these exemptions and what other amendments are contained within the proposal, you can access the Supplemental Proposal here. Also, NAFCU’s Regulatory Affairs team will be releasing a Regulatory Alert (NAFCU Member log-in required) on the proposal very soon, so keep an eye out for that.
If the proposal is finalized, the intent of the Agencies is for these exemptions to become effective on January 18, 2014, the same date on which the Final Rule will become effective.
NCUA Board. Late Thursday, the Senate confirmed, in action taken by unanimous consent, Rick Metsger for the National Credit Union Administration Board. Metsger, a Democrat, succeeds Gigi Hyland who left the Board in October of 2012. Metsger's term will run until August 2, 2017.
Current Board Member Michael Fryzel, the lone Republican on the Board, recently announced his decision to remain on the NCUA Board until his successor is confirmed. Fryzel's term officially ended on Friday but NCUA Board Members have the ability to remain until a successor is confirmed.
ATM Fee Disclosures - New York. On December 20, 2012, President Obama signed the ATM Fee Disclosure Bill which removed the federal requirement for an "on the machine" fee notice for ATMs (the CFPB officially amended Reg E in March). However, there are still state laws that could require this "on the machine" notice. New York was one of those states until action Thursday by Governor Andrew Cuomo to remove the requirement from New York law.
NCUA Regulatory Alert. Last Tuesday, Bernadette blogged about NCUA's recent Regulatory Alerts on Remittances, Garnishments and Escrow Requirements for HPMLs. Well, NCUA hasn't slowed down and they recently issued a Regulatory Alert on the Regulation B Appraisal Disclosure & Delivery Requirements (effective January 18, 2014).
Programming Note: Just a quick reminder that we'll be blogging on Mondays, Wednesdays and Fridays in August.
Update - 7:45 a.m. - Yesterday evening, the Senate confirmed Richard Cordray for a full five-year term as the Director of the Consumer Financial Protection Bureau.
Recently, the Consumer Financial Protection Bureau (CFPB) posted a list of counties determined to be “rural” or “underserved” during 2013 for use in 2014. Don’t mistake this list with the list posted on May 16, 2013, which was for use in 2013.
If you aren’t familiar with the purpose of these lists, they exist because the CFPB has several rules with provisions related to mortgage loans made by creditors that during the preceding year operated predominantly in “rural” or “underserved” counties. For instance, the TILA Escrow Rule, which took effect on June 1, 2013, requires certain creditors to create escrow accounts for a minimum of 5 years for higher-priced mortgage loans. However, certain small creditors that operate predominantly in rural or underserved counties are exempt from this requirement. For other examples of provisions that have a “rural” or “underserved” component, see the CFPB’s blog from July 2, 2013.
For purposes of these provisions, both “rural” and “underserved” counties are defined on an annual basis, using the USDA Economic Research Service’s urban influence codes for rural counties and data collected under the Home Mortgage Disclosure Act (HMDA) for underserved counties. Because the counties are defined on an annual basis, some counties’ status as rural or underserved may have changed between the list for use in 2013 and the recently posted list for use in 2014. Although the CFPB has taken some steps to address this concern (also discussed in the CFPB’s blog from July 2, 2013), this may result in some small creditors losing eligibility for the exemptions they may have received the year prior.
You can find the final list of rural and underserved counties for use in 2014 here, and the final list for use in 2013 here.
On Monday, the Consumer Financial Protection Bureau (CFPB) released its first version of the 2013 Dodd-Frank Mortgage Rules Readiness Guide. The Guide is made for use by financial institutions of all sizes to evaluate their readiness and to help them come into and maintain compliance with the upcoming mortgage rule changes.
Focuses the industry and examiners on key elements of a compliance management system that may warrant review, modification, or other enhancement.
- Obtaining and verifying certain financial information related to the consumer(s)?
- Ensuring that borrowers have sufficient assets or income to pay back the mortgage?
- For adjustable-rate mortgages, that the monthly payment is calculated using either a fully indexed rate or an introductory rate, whichever is higher?
- Any exemptions that apply and a full description of when the exemptions apply and conditions for exemptions (e.g., for a customer trying to refinance certain risky loans only after specific conditions are met)?"
The Guide will be updated periodically as rule clarifications and amendments are finalized or available.
Yesterday, the Consumer Financial Protection Bureau (CFPB) released updated exam procedures for some of the recent mortgage rules issued by the CFPB. Specifically, the CFPB updated the exam procedures for the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). The updated TILA exam procedures incorporate the requirements of the recent mortgage rules on escrow accounts and loan originator compensation and qualification. The updated ECOA exam procedures incorporate the requirements of the Regulation B final rule on appraisals.
What about the ability-to-repay and mortgage servicing final rules? The CFPB issued a press release on the updated exam procedures, indicating that "within the next several months, the CFPB will publish its first round of exam procedures for the Ability-to-Repay and mortgage servicing rules."
The updated exam procedures will eventually be incorporated into the CFPB's Supervision and Examination Manual, but for the time being you can find the TILA and ECOA exam procedures on the CFPB's website here.
12 CFR 1005.30 Remittance transfer definitions.
12 CFR 1005.33 Procedures for resolving errors.
12 CFR 1005.34 Procedures for cancellation and refund of remittance transfers.
12 CFR 1005.35 Acts of agents.
12 CFR 1005.36 Transfers scheduled before the date of transfer.
Note that the official commentary associated with each individual section is listed directly below the regulatory text. Pretty neat. Keep in mind that these links are not to the Electronic Code of Federal Regulations, but still, hopefully this will help you avoid a couple compliance related headaches!
Last week, the CFPB posted seven video presentations on the new mortgage rules. The purpose of these videos is to provide a plain language overview of the rules. We thought it might be handy to have the links to these videos, along with links to the CFPB’s Small Entity Guides in one place.
NAFCU Mortgage Rules Compliance Resources. Remember that NAFCU has a webpage to help organize compliance resources related to the CFPB’s new mortgage rules. The webpage includes links to the individual rules, scope-and-applicability charts, webcasts, compliance blog posts and more.
Last week, the CFPB issued Small Entity Compliance Guides for the TILA Higher-Priced Mortgage Loans Appraisal Rule (HPML Appraisal Rule), Equal Credit Opportunity Act (ECOA) Valuations Rule, and 2013 Home Ownership and Equity Protection Act (HOEPA) Rule.
“III. How do the Appraisals for Higher-Price Mortgage Loans Rule and the Equal Opportunity Credit Act Valuations Rule overlap?
For first-lien HPMLs that are covered by the HPML Appraisal Rule, the disclosure requirements overlap with the ECOA Valuations Rule. The ECOA Valuations Rule implements Dodd-Frank Act amendments to ECOA, which require you to provide consumer disclosures and free copies of appraisals and other written valuations.
You can use the disclosure under the ECOA Valuations Rule to satisfy the requirements of this rule. The ECOA guide and the ECOA Valuations Rule are online at http://www.consumerfinance.gov/regulations/disclosure-and-delivery-requirements-for-copies-of-appraisals-and-other-written-valuations-under-the-equal-credit-opportunity-act-regulation-b/.
The ECOA Valuations Rule imposes a different deadline structure for providing copies of appraisals to consumers. Under the ECOA Valuations Rule, the copies of appraisals must be provided “promptly upon completion” or three business days before closing, whichever is earlier.
As a result, if the appraisal is completed early in the application process, then the “promptly upon completion” deadline will come first, since it will be earlier than the three-business-days-before-closing deadline under this rule.
In addition, the applicant can waive the deadline under the ECOA Valuations Rule and elect to receive the copies at closing, whereas the applicant cannot waive the three-business-days-before-closing deadline under the HPML Appraisal Rule.
If the transaction is subject to both rules, then comply with the earlier deadline. The HPML Appraisal Rule deadline will be earlier if the applicant provides a waiver under the ECOA Valuations Rule.
For example, if an applicant waives the deadline under the ECOA Valuations Rule, you will still need to comply with the three-business-day-before-closing requirement in this rule.
If the applicant does not waive the three-business-days-before-closing deadline, generally the ECOA Valuations Rule “promptly upon completion” deadline will be earlier.
IV. What text do I use in my disclosure to consumers?
NAFCU Members: Check out this month’s Compliance Monitor (available for download here) which features an in-depth discussion of these disclosure and timing requirements in the article entitled New Appraisal Disclosure Requirements: Regulation B and Higher-Priced Mortgage Loans (NAFCU login required).
Information Collection on Report for Credit Card Plans. Remember back on February 1 where I got all bent out of shape regarding the CFPB's expansion of their Credit Card Survey to certain credit unions with 10 days notice?
Yesterday, the CFPB issued an Information Collection Request which asks whether the 30 minutes it estimates for financial institutions - including approximately 20 of the largest credit unions - is accurate.
"Request for Comments: Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Bureau, including whether the information shall have practical utility; (b) The accuracy of the Bureau's estimate of the burden of the collection of information, including the validity of the methods and the assumptions used; (c) Ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget (OMB) approval. All comments will become a matter of public record." (Emphasis added).
The reporting form is FR 2572. And, you can also review the instructions and form (opens as an Excel document) for responding to the report. After reading the instructions, would you say that completing the task would take 30 minutes? Me neither.
For the 20 or so credit unions who were recently added to the Report - did it take your credit union 30 minutes? For those credit unions who weren't covered - how long did it take you to determine you weren't covered?
You can also download the full PDF here.
HELOC Webcast. Don't miss NAFCU's webcast tomorrow on Which New Requirements Apply to HELOCs? - where I'll be walking through the new mortgage requirements that apply to HELOCs.
Wow - you couldn't ask for a better game last night (a different outcome, sure!). Hats off to Louisville on a great season and an outstanding game. For Michigan - what a run and well done.
Oh, yeah - that was called a foul. One thing is for sure, the blog has definitely upped its basketball coverage since the days of Anthony's Penn State Nittany Lions. Fred also mentioned the coverage was a little too skewed to Michigan - so here is a link to Navy's season as well (does David Robinson have any eligibility left?).
Last week I was at a conference with other credit union attorneys and I noted the only parts of the CFPB's Implementation Plan for the new mortgage rules was the press release (sent on February 13th) and one blog post on the preliminary rural and underserved counties list.
"In the coming months, we’ll release plain language compliance guides, updates of the official interpretations, examination procedures, and other materials. We’re planning to release the first set of materials next week.
If you’re in the mortgage industry or just want to know what we’re doing to help them get ready, sign up for our regulations-specific email list. The signup form is in the upper-right section of the page.
A good implementation plan reduces confusion and costs for industry. That means less time figuring out what the rules mean and more time designing business practices that serve consumers and follow the rules. That’s a market that works better for everyone."
I'd encourage you to sign-up for the announcements and set aside time to review the materials the CFPB provides.
Back in early 2013 (just before the rules were finalized) the CFPB reached out to NAFCU for input on their Implementation Plan for the Mortgage Rules. While I was hopeful at the time, as the days passed by I became more convinced the CFPB missed a huge opportunity by waiting so long to begin communicating with compliance officers on the new rules.
"Applicability. It is very important to credit unions that the CFPB be specific regarding which new requirements apply to which types of mortgage products. Credit unions usually think in terms of the mortgage products they offer and not which regulation might apply. The more the CFPB can do to make distinctions in their communications (and in the actual regulation and commentary), the less burden credit unions will face. Some of the distinctions that would allow credit unions to know if the regulations apply to their product are included below.
Fact Sheet for Compliance Officers. In the CFPB’s prior releases, there have been Fact Sheets for consumers and Fact Sheets for the press. It would be very helpful if the CFPB released a Fact Sheet for compliance officers.
Ask CFPB & Prior Q&As. Compliance officers should have an avenue to ask questions about the applicability and requirements of the new regulations. The CFPB would then be able to post these questions and answers on their website to provide guidance to other compliance officers. Very similar to the process the CFPB already uses to provide information to consumers.
One-Page Document with Compliance Dates. It would be very helpful if the CFPB created and released a one (or two) page document that contains the compliance dates for all the new requirements.
Webinars and Small Entity Guides. These are very helpful to credit unions. However, in order to have the greatest impact – they need to be released in a timely manner and clearly explain the applicability of the new rules.
Citations. Whenever possible, the CFPB should use citations when discussing new requirements so that credit unions can conduct further research and analyze the underlying regulatory text, any staff commentary and the preamble to the new regulatory requirement.
Annotated Model Forms. The CFPB’s proposed model forms for the TILA-RESPA Integrated Disclosures included annotated model forms which allowed users to click on various sections of the model form and see the underlying citation and a link to the proposed rule. Including this feature with the final rules would be extremely beneficial to credit unions – especially as they work with third-party forms providers. The annotated model forms will allow credit unions to show their vendors the underlying regulatory requirement and why the particular language or formatting is required.
Break Up Topics/Changes Into Manageable Sections. One of the aspects that NAFCU has found most effective in explaining large changes to regulations (such as from the Credit CARD Act or prior RESPA reform) has been to break up the new requirements in manageable pieces. For example, the mortgage servicing sections could be clearly broken up in the following sections: (1) adjustable-rate notices; (2) periodic statements; (3) error resolution procedures; (4) information requests); etc. This allows credit unions, who have very limited compliance staffs, to focus on certain changes initially and move on after implementing those changes rather than trying to comprehend the entire regulation at once."
We'll have to wait and see how they do overall, but they certainly didn't make educating compliance officers a focus of their new rules. Instead, they worked the media angle and touted the past abuses by certain mortgage lenders and servicers while simply dumping the new rules and forcing everyone to wade through the 3507 pages.
And, I must include your Moment of Zen (or at least mine) for today. Go Blue!
Hire those who know more than you.
As you can see, there is a little bit for everyone - be sure to pass along to others at your credit union that might be interested.
Upcoming NAFCU Webcasts. We have a full slate coming up. Remember - NAFCU's conferences and webcasts are open to anyone and everyone (NAFCU members receive preferred pricing).
I'm biased - but that is a great slate of upcoming webcasts. If you're thinking - I want them all - we got you covered. You can still purchase NAFCU's Unlimited Webcast Subscription - including access to the six webcasts we've already held in 2013.
During last week's webcast we received numerous great questions from credit unions - including one on the model language of appraisal disclosure requirement under Regulation B. Below is the Q&A that we've drafted on the question. Note: Attendees of the webcast should receive the Q&As in the next day or two.
Question: The model language for the appraisal disclosures tells the member “You can pay for an additional appraisal for your own use at your own cost.” Isn’t this going to lead to member confusion because it implies a lender might consider the member’s own appraisal (which we cannot do)?
Of course, the comment in the staff commentary does nothing to prevent member confusion.
Thus, we have the potential for applicants to infer - from the required notice - that they can obtain their own appraisal and provide it to their lender for consideration.
Confused Members. So, here is one way this could play out.
Credit union provides the appraisal disclosure to the applicant.
Applicant reads "You can for an additional appraisal for your own use at your own cost" and reasons that "for your own use" obviously means to help them get a loan from the institution who provided the notice.
Applicant obtains an additional appraisal.
Applicant brings the appraisal to the credit union for use in connection with their application.
Credit union informs the applicant that it is not allowed to use borrower-provided appraisals.
Applicant is furious and waives the credit union's disclosure in front of the loan originator.
The credit union explains that the notice is required by the Consumer Financial Protection Bureau and the credit union cannot modify the language.
Applicant calls the Consumer Financial Protection Bureau to file a complaint.
Of course, this won't happen often - but it will happen. Hopefully, the CFPB's implementation plans include educating consumers on the appraisal process. And, credit unions and other commenters brought this up to the CFPB and they declined to address this in the model language.
If you are curious, the industry's concerns are located here in the Federal Register and the CFPB's decision is here.
NAFCU members have access directly via NAFCU's CFPB Mortgage Rules webpage.
Registrants for today's webcast on The CFPB's Final Mortgage Regulations (registration is still open) will be able to download the charts during the webcast.
Attendees at NAFCU's Regulatory Compliance School will hear a similar presentation to today's webcast and will receive access to the charts at School in March (of course, NAFCU members can access the charts here).
Purchasers of NAFCU's Credit Union Compliance GPS will receive access in mid-March when the 2013 GPS is available.
Non-NAFCU member registrants of NAFCU's Regulatory Compliance Seminar will receive access in the next week. If you sign-up for Seminar after today, we'll get the charts to you within a week of your registration.
A Note on Sharing of Charts. We put a ton of time and effort into researching and creating these charts. And, we've made the accessible - in one way or another - to any credit union or organization that is interested. Please do not share these outside of your credit union. Of course, if you have any questions - just shoot me an email.
Hope to see you on today's Mortgage Rules Webcast.
NAFCU Calls for Regulatory Relief. Yesterday morning, NAFCU sent a letter to Senate and House leaders calling for a five-point plan on providing regulatory relief for credit unions through administrative, capital, structural, operational and data security reforms. You can find the letter here. For additional details, check out the NAFCU Today.
"All-in APR" Decision Delayed; HELOCs Next?
One of the biggest issues from the CFPB's mortgage proposals was their completely voluntary proposal to amend the definition of "finance charge" under the Truth in Lending Act. Keep in mind that their proposal was not mandated by the Dodd-Frank Act. In fact, the plain language of the existing Truth in Lending Act provides a clear definition of "finance charge" (which was not changed by Dodd-Frank). This definition includes a clear description of which fees and charges are specifically excluded.
"The Bureau's 2012 TILA-RESPA Proposal sought comment on whether to finalize the more inclusive finance charge proposal in conjunction with the Title XIV Rulemakings or with the rest of the TILA-RESPA Proposal concerning the integration of mortgage disclosure forms. Upon additional consideration and review of comments received, the Bureau decided to defer a decision whether to adopt the more inclusive finance charge proposal and any related adjustments to regulatory thresholds until it later finalizes the TILA-RESPA Proposal."
Good news on the delay - but the CFPB didn't provide any hint of which way they were leaning (or where they obtain the authority to override the clear language Congress adopted over 20 years ago).
"One consumer group commenter urged the Bureau to make the APR coverage test more consistent between closed- and open-end credit by adopting a more inclusive APR calculation for HELOCs. The commenter argued that, under the Bureau's proposal, a creditor could impose astronomical closing costs on a HELOC without meeting the APR coverage test, because such charges are not included in the APR calculation for HELOCs. The commenter expressed concern that the difference in the APR for HELOCs versus closed-end transactions will unduly encourage creditors to steer consumers toward HELOCs, and particularly to HELOCs with excessively high closing costs.
The Bureau acknowledges that Regulation Z requires a different calculation of APR for closed-end transactions (interest rate plus other charges) than for HELOCs (interest rate only) for disclosure purposes. Using these existing APRs for HOEPA coverage necessarily means that non-interest charges will be reflected in the APR for closed-end, but not for open-end. The Bureau declines at this time, however, to adopt a different APR for HELOCs........Thus, the Bureau believes that comments concerning the disparity between the APR for closed- and open-end credit transactions are better considered as part of a broader reevaluation of the HELOC provisions of Regulation Z, rather than in the context of this rulemaking to implement section 1431 of the Dodd-Frank Act."

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