Source: http://nafcucomplianceblog.typepad.com/nafcu_weblog/mortgage-origination/
Timestamp: 2018-01-19 07:20:16
Document Index: 142757497

Matched Legal Cases: ['art 1', '§ 1026', '§1026', '§1026', '§1026', '§1026', '§1026', '§1026', '§1026']

NAFCU Compliance Blog: Mortgage Origination
Posted by NAFCU on April 10, 2017 in Fair Lending, Mortgage Origination, Reg B | Permalink | Comments (0)
Happy Monday! Last week, CFPB published a list of counties determined to be rural and a list of counties determined to be rural or underserved for use in 2017.
CFPB has several rules that refer to its “rural or underserved” and “rural” counties lists. Each year, the Bureau publishes new lists for use the following year. As a refresher, the rules that refer to these lists are:
Last Thursday, the NCUA Board approved, as part of the agency’s 2017-2018 budget, ten recommendations from the agency’s Exam Flexibility Initiative working group, including an extended 18-month exam cycle for well-managed, low-risk federal credit unions with assets of less than $1 billion. Since NCUA moved to an annual exam cycle at the height of the financial crisis, credit unions have contended with more frequent exams of increased scope and complexity in the post-Dodd-Frank era. However, as the industry has recovered along with the overall U.S. economy, NAFCU and its member credit unions have called for relief in this area.
In response, in May 2016, NCUA Chairman Metsger established the Exam Flexibility Initiative to review NCUA’s examination and supervision program and to consider ways to modernize and improve the agency’s examination process. A working group formed under the initiative solicited input from credit union stakeholders and, as a result of that feedback, issued a report in October 2016 making ten recommendations for approval by the NCUA Board. Specifically, in addition to an 18-month exam cycle for certain well-run credit unions, the working group recommended the following:
While the NCUA Board’s approval of these recommendations is mostly welcome news for credit unions, NAFCU continues to call for an extended exam cycle for all well-run, healthy credit unions regardless of asset size, as well as an independent appeals process for disputing exam results.
Posted by NAFCU on November 21, 2016 in CFPB, Mortgage Origination, Mortgage Servicing, Reg Z | Permalink | Comments (0)
We Listened So You Don’t Have To: Know Before You Owe Mortgage Disclosure Rule – Construction Lending Webcast, Part 1 of 2
The CFPB’s TRID Construction Lending webcast ran long, did not cover Closing Disclosures at all and was, frankly, a bit of a slog.
So, let me start by saying: You’re welcome.
But even docking points for reading directly from the regulation, the webcast was very helpful in that it answered a couple burning questions about the construction loans and the Loan Estimate. So what did we learn?
Construction Holdbacks Can Be Disclosed As “Other” Costs In Box H!
NAFCU has received multiple member questions about construction holdbacks (i.e., a portion of the loan which will not be disbursed until a later time) and how they should appear on the Loan Estimate. There is no direct guidance in the rules or the commentary on this issue, but the CFPB offered their analysis of the question. In the webcast, they posed the below question:
“Q26: How may a creditor disclose a construction holdback on the Loan Estimate?”
To begin with, the CFPB stated that the Loan Estimate should reflect the terms of the legal obligations created by the loan agreements involved. The CFPB stated that, as an amount contracted to be paid to a person other than the creditor, this can be listed as a line item under “other” costs pursuant to 12 C.F.R. § 1026.37(g)(4):
“§1026.37 Content of disclosures for certain mortgage transactions (Loan Estimate).
(4) Other. Under the subheading “Other,” an itemization of any other amounts in connection with the transaction that the consumer is likely to pay or has contracted with a person other than the creditor or loan originator to pay at closing and of which the creditor is aware at the time of issuing the Loan Estimate, a descriptive label of each such amount, and the subtotal of all such amounts.” (Emphasis added.)
The amount can be listed in Box H of the Loan Estimate and labeled “Construction Holdback,” or by some other term which clearly and conspicuously reflects the purpose of the proceeds.
Surprise Twist: Alternatively, Construction Holdbacks Can Also Be Disclosed In Cash To Close!
The CFPB offered an alternative method of disclosing holdbacks in question 27: allowing the amount to be factored into the Calculating Cash to Close table. You have to walk through the rule a bit to see how this can be done; it isn’t intuitive. We begin with what is included as “closing costs to be financed” in section 1026.37(h)(1)(ii):
(h) Calculating cash to close—
(1) For all transactions. Under the master heading “Closing Cost Details,” under the heading “Calculating Cash to Close,” the total amount of cash or other funds that must be provided by the consumer at consummation, with an itemization of that amount into the following component amounts:
(ii) Closing costs to be financed. The amount of any closing costs to be paid out of loan proceeds, disclosed as a negative number, labeled “Closing Costs Financed (Paid from your Loan Amount)”;” (Emphasis added.)
Straightforward enough…but not quite on point. But let’s look at the commentary to 37(h)(1)(ii) which advises how to calculate “closing costs financed:”
“37(h)(1)(ii) Closing costs financed.
1. Calculating amount. The amount of closing costs financed disclosed under §1026.37(h)(1)(ii) is determined by subtracting the estimated total amount of payments to third parties not otherwise disclosed pursuant to §1026.37(f) and (g) from the total loan amount disclosed pursuant to §1026.37(b)(1). If the result of the calculation is a positive number, that amount is disclosed as a negative number under §1026.37(h)(1)(ii), but only to the extent that it does not exceed the total amount of closing costs disclosed under §1026.37(g)(6). If the result of the calculation is zero or negative, the amount of $0 is disclosed under §1026.37(h)(1)(ii).” (Emphasis added.)
The CFPB suggests by including the construction holdback as one of these “payments to third parties not otherwise disclosed,” there is a cascading effect on the remainder of the cash to close table, which will result in an accurate disclosure. The calculation of the closing costs to be financed in section 1026.37(h)(1)(ii) affects the calculation of the “funds to the borrower” in section 1026.37(h)(1)(v). The end result, according to the CFPB, is that the cash to close box will accurately reflect the amounts the parties are actually responsible for at closing as a result of the loan agreement and the parties’ legal obligations.
We will blog again about other lessons learned in the near future. The webcast will be posted here once it is available. If you wish to check out the webcast yourself, I strongly recommend reviewing the presentation slides for questions of particular interest, and then fast-forwarding to that slide for further explanation.
Posted by NAFCU on March 02, 2016 in CFPB, Mortgage Origination, TILA/RESPA Integrated Disclosures | Permalink | Comments (0)
Happy Friday everyone! My name is Elizabeth Young LaBerge and I have recently joined NAFCU as Regulatory Compliance Counsel. My background is in litigation, and I have previously practiced law in Kansas City, Missouri and Portland, Maine. Now, I am thrilled to have joined the Compliance Team here at NAFCU. I look forward to interacting with all of you in the near future.
On April 28, 2014, we blogged about the CFPB’s announcement of a pilot research program on eClosings. This Wednesday (August 5), the CFPB released its report on that eClosings pilot and held a forum summarizing the results, featuring a panel discussion that included some participating lenders.
The pilot research program was aimed at determining whether eClosings could simplify the closing process for consumers by allowing more time for consumers to review closing paperwork, reducing the amount of that paperwork, and offering more educational materials so consumers can understand the paperwork. Seven lenders participated in the pilot, including two credit unions.
While the pilot had some significant data and methodological limitations, the report suggested that consumers who participated in eClosings expressed more perceived empowerment and efficiency in the closing process, as well as a better understanding of the loan and their own rights and responsibilities. This effect was higher among consumers in purchasing transactions than it was for consumers in refinancing transactions. Consumers who received and reviewed documents before closing also reporting higher levels of empowerment, understanding, and efficiency than those who did not. Additionally, closing meetings for eClosings were reported to be much shorter than in traditional closings.
In Section 5.1 of the report, participating lenders noted several steps they took to facilitate successful implementation of eClosing processes for their consumers:
Clear expectations and consistent communication with all partners.
Commitment from company leadership and buy-in across the organization.
Sufficient time for preparation and rollout to avoid technology issues at closing.
Early and continuous training of all stakeholders.
At the forum, two participating credit unions emphasized the importance of the first two of these steps in implementing eClosing processes. When asked by the panel about the most critical aspects of implementing eClosing processes, Lorraine Stewart, Vice President of Mortgage Lending at Boeing Employees Credit Union emphasized the importance of having strong partners in technology and settlement services who are aligned with the credit union in their commitment to provide service to members through eClosings. Amy Moser, Vice President of Mortgage Services at Mountain America Credit Union highlighted the importance of ensuring that everyone within the organization has the same level of commitment and a top-down belief in the importance of the eClosing process in trying to help members to be successful in achieving financial dreams.
The report also contains descriptions of several operational challenges presented to lenders in implementing eClosings:
Limitations in technology platforms and concerns from compliance and legal departments lead to more lenders providing paper documents than anticipated.
Approval processes of eClosings by secondary market investors were sometimes reported as lengthy, extensive, or confusing.
Large-scale workflow and process changes were required to implement eClosings processes, especially for early document delivery.
External stakeholders, such as settlement agents, real estate agents and closing attorneys found it difficult to invest the time and resources necessary to implement and learn eClosing processes.
eNotarization capabilities were insufficient in number due to lack of confidence in the legality of the practice.
eClosing platforms may require significant IT changes before eClosing processes can be fully implemented.
Participants recommended that while technology and compliance concerns are being resolved, lenders interested in implementing eClosings should start with a hybrid process where only some documents are provided electronically and others provided on paper. Additionally, participants recommended proactively offering educational materials about eClosings to members and stakeholders at each step of the loan process. Ultimately the CFPB determined that lenders should continue to explore eClosings as a viable option for providing an excellent experience for consumers and cost savings benefits to lenders, and suggested that additional research by stakeholders is necessary and welcome.
Posted by NAFCU on August 07, 2015 in CFPB, Mortgage Origination | Permalink | Comments (0)
Posted by NAFCU on May 18, 2015 in CFPB, Fair Lending, Mortgage Origination, Private Student Loans, Student Loans, TILA/RESPA Integrated Disclosures | Permalink | Comments (0)
Written by Talia Rosenberg, Regulatory Intern
As part of the Consumer Financial Protection Bureau’s (CFPB’s) supervisory authority, it has recently released another issue of Supervisory Highlights, this time taking a look at supervisory actions found between July 2014 and December 2014. The CFPB’s Supervisory Highlights serve as a way for the bureau to communicate to the public and the financial services industry information about its examination process and the types of problems its examiners have discovered.
This report can be a useful tool for credit unions, as it points to items that the CFPB carefully scrutinized during its supervisory process. Credit unions are also able to see the seriousness of noncompliance for those particular problem areas as well as the remedies other financial institutions took to correct their deficiencies. In this issue, the CFPB focused on non-public supervisory actions involving debt collection, consumer reporting, deposit overdraft practices, mortgage origination, and fair lending. Let’s briefly look at these select deficiencies here:
Consumer Reporting (2.1): CFPB examiners found that some consumer reporting agencies fail to forward to furnishers relevant documents submitted by consumers, including cancelled checks, invoices, and correspondence. They also found deficiencies in the updating of public record information, leading to errors in the reporting of dispute results to consumers.
Debt Collection (2.2): CFPB examiners came across debt collectors employing false and misleading representation in collection communications, including misrepresenting collection calls, scripts and letters as well as practices involving ACH payments that created a serious risk of deception to consumers.
Deposits (2.3): CFPB examiners discovered that multiple financial institutions recently switched from a ledger-balance method to an available-balance method without properly disclosing this change, resulting in consumers being misled as to the circumstances under which overdraft fees were assessed.
Mortgage Origination (2.4): CFPB examiners identified multiple areas in which institutions demonstrate deficiencies in compliance with Title XIV on mortgage origination activities. These deficiencies include those in loan originator compensation, use of lender credits, responses to applications, advertisement and adverse action notices. See below for a more detailed examination of these deficiencies.
Fair Lending (2.5): CFPB examiners found multiple violations of both Regulation B and ECOA treatment of protected forms of income. They found that institutions, among other improper practices, sometimes automatically decline applications that rely on income from a non-employment source or discourage applicants who receive public assistance.
Supervision Program Developments (3.1, 3.2, 3.3): The CFPB highlights recent developments in the efficiency of its operations. These include examination procedures for credit card accounts, a guidance bulletin with information on social security disability income and compliance with the Equal Credit Opportunity Act and Regulation B, and the start of the Examiner Commission Program (ECP).
Now let’s dive into Section 2.4 on Mortgage Origination:
Mortgage Origination (2.4)
Improper Loan Originator Compensation (2.4.1): Despite the fact that Regulation Z strictly prohibits loan originators from receiving compensation based on the terms of a consumer credit transaction secured by a dwelling, CFPB examiners found that branch managers, acting as loan originators, have received compensation based on these terms. Examiners concluded that these improperly allocated expenses resulted in marketing services entities receiving income based on the profitability of retail loans, and that supervision subsequently directed this income to loan originators.
Improper Use of Lender Credit (2.4.2): CFPB examiners discovered that, because Regulation X requires a loan originator be bound to the settlement charges listed on Good Faith Estimates (GFEs), multiple institutions have employed the practice of reducing lender credits on an HUD-1 when the amounts that should have been disclosed on the HUD-1 were found to be in excess of those disclosed on the GFE. This consequence of inadequate training and compliance procedures, while aiming to prevent the borrower from receiving excess cash-back at closing, ultimately results in an impermissible increase in the final adjusted origination charge, a violation of Regulation X.
Improper Failure to Provide Estimates (2.4.3): Regulations X and Z both provide three-day time limits for responses to certain types of consumer applications (Regulation X pertaining to GFEs provided by lenders and Regulation Z pertaining to good faith estimates of the Truth in Lending disclosures provided by creditors respectively). However, CFPB examiners identified policies and procedures that led to unspecific reporting of when applications were received, resulting in delays past these three-day time limits and consequent violations of both Regulations X and Z.
Improper Use of Advertisements (2.4.4): CFPB examiners found that institutions have violated the Regulation Z rule against using triggering terms in advertisements without disclosures. These institutions advertise the length of payments, amount of payments, numbers of payments and finance charges, all without providing the requisite disclosures under Regulation Z.
Improper Action Notices (2.4.5): CFPB examiners discovered that entities have been failing to meet the requisite provisions set forth by Regulation B with regard to adverse action notices. Examiners found that these entities not only failed to consistently notify applicants of action taken within 30 days of receiving the completed application (as is required by Regulation B), but also failed to provide the necessary information within such notifications (including the name and address of the creditor, a statement describing the provision of the Equal Credit Opportunity Act, the name and address of the agency administering creditor compliance and information regarding the specific reasons for the action taken).
Improper Compliance Management Systems (2.4.6): CFPB examiners came across many institutions that lacked effective and proper compliance management systems. While an effective compliance management system should include board and management oversight, a compliance program, a consumer complaint program and a compliance audit program, examiners found deficiencies in the comprehensiveness and content of training, the scope of compliance audits and numerous other violations of Regulations B, X and Z.
These deficiencies have reportedly resulted in approximately $19.4 million in remedial costs for more than 92,000 consumers. Even though the CFPB only retains official supervisory authority over institutions and credit unions with total assets of more than $10 billion, a credit union with less than $10 billion in assets can still use this report to ensure that it is compliant with federal consumer financial laws.
NAFCU Webcast - The Currency Transaction Report: Avoiding The Many Danger Zones on Tuesday, April 14, 2-3:30 pm ET. The Financial Crimes Enforcement Network’s (FinCEN’s) Currency Transaction Report (CTR) contains more than a few intricacies that can easily cause confusion. Make it a nonissue and attend this comprehensive webcast. We’ll review the CTR line-by-line, ensuring your ability to work with all types of accounts and potential challenges that can arise. Attendees also receive a handbook with over 20 examples of how to complete the CTR for trusts, businesses, aggregated transactions, sole proprietors and more. Register by April 1 to save $100!
Posted by NAFCU on April 03, 2015 in CFPB, Mortgage Origination | Permalink | Comments (0)
Posted by NAFCU on May 14, 2014 in Dodd-Frank, FHA, Lending, Mortgage Origination, Mortgage Servicing | Permalink | Comments (0)
Free Kick. Before I jump into today’s World Cup group previews focusing on Groups D and E, I want to share Nike’s newest football ad titled Winner Stays.
Group D: The second of the three Groups of Death, Group D houses three traditional powers, plus Costa Rica. Between Italy (4), Uruguay (2), and England (1), there are a total of 7 World Cup titles. The three of them will duke it out for the top two spots in the group, but don’t be surprised if Costa Rica can steal a couple of points to make things interesting for one or two of the heavyweights in the group. While all Italy, Uruguay, and England are all traditionally players on the world stage, they all come into the tournament with question marks. Italy has a solid defense, but there are concerns up top, especially if Mario Balotelli is on the wrong side of his mercurial ways. For Uruguay, the concern lies in their defense. And, with England, there are just too many question marks to count with Roy Hodgson’s squad needing to gel quickly.
Posted by NAFCU on April 28, 2014 in CFPB, Mortgage Origination, Sports | Permalink | Comments (0)