Appraisal Requirements for “Higher Priced Mortgage Loans” 78 Fed. Reg. 10368 (2/13/13) Issued by multiple regulators Effective Date: January 18, 2014 Closed-end loan secured by consumer’s principal dwelling that exceed the applicable “higher priced” threshold Exclusions: “qualified mortgage” (see 12 CFR 1026.43(e)); credit secured by new manufactured home; credit secured by mobile home, boat, or trailer; construction loan; bridge loan; reverse mortgage Must obtain, before consummation, a written appraisal performed by certified or licensed appraiser who conducts physical visit of the interior of property Some purchase money transactions require two appraisals (but can only charge borrower for cost of one appraisal) Specific disclosure must be provided to loan applicant at time of application (very similar to ECOA appraisal disclosure) Must provide copy of all appraisals performed no later than 3 business days before consummation or, if not consummated, within 30 days of determination that loan will not close Standard TILA liability, plus: if creditor willfully fails to obtain required appraisal, there will be liability to the applicant or borrower for $2,000 State A.G. may bring action under a 3 year statute of limitations Revisit if any “higher priced mortgage loans” will be made Begin to examine current appraisal practices to identify need for changes Appraisal Delivery and Disclosure under ECOA 78 Fed. Reg. 7216 (1/31/13) Effective Date: January 18, 2014 Loan secured by first lien on a dwelling Note: Applies to HELOCs Note: Applies to consumer and commercial purpose loans Requires creditor to provide copy of all appraisals to applicant promptly upon completion of appraisal but not later than 3 business days before consummation (closed-end) or account opening (open end) Applies regardless of whether loan closes Also requires notice within 3 business days of application of applicant’s right to receive copy of all appraisals Standard ECOA liability is actual damages and, if appropriate, punitive damages up to $10,000, plus and attorney fees to an aggrieved applicant in a successful action 5year statute of limitations Consider how to implement process for providing copies of all appraisals and written valuations routinely on all loans secured by a first lien on a dwelling
High-Cost (HOEPA) Mortgage Loans 78 Fed. Reg. 6857 (1/31/13) Effective Date: January 10, 2014 Transaction secured by consumer’s principal dwelling that meets either the APR “trigger” or points & fees “trigger” or new prepayment fee “trigger” Exclusions: reverse mortgage; construction loan Note: Applies to HELOCs High-cost (HOEPA) mortgage loans are subject to additional disclosure requirements and limits on loan terms Standard TILA liability, plus: an amount equal to the sum of all finance charges and fees paid by the consumer (unless creditor demonstrates that failure to comply is not material) 3year statute of limitations for private actions State A.G. may bring action under a 3year statute of limitations Significant assignee liability New definitions in Reg. Z §32 need careful consideration Consider effect of lowering the APR “triggers” Consider effect of lowering the points & fees “trigger” and expanding the scope of points & fees Ability to Repay/Qualified Mortgage 78 Fed. Reg. 6408 (1/30/13) Effective Date: January 10, 2014 Loan secured by a dwelling Exclusions: HELOC; reverse mortgage; bridge loan; construction loan; construction phase (12 months or less) of loan Prohibits making loan unless lender makes determination of borrower’s ability to repay (“ATR”) Creditor is deemed to have complied with ATR obligation if loan is not “higher priced” and complies with “qualified mortgage” requirements (called “safe harbor”) Creditor is presumed to have complied with ATR obligation if loan is “higher priced” and complies with “qualified mortgage” requirements Exceptions: No ATR obligation for certain refinancing of “non-standard” to “standard” mortgage loan; certain balloon-payment loans can be “qualified mortgages” but only if made by “small, rural lender” Standard TILA liability, plus: an amount equal to the sum of all finance charges and fees paid by the consumer (unless creditor demonstrates that failure to comply is not material) 3year statute of limitations for private actions A.G. may bring action under a 3year statute of limitations Consider if non-qualified mortgage will be made Underwriters need to begin understanding ATR obligations and “qualified mortgage” obligations
Loan Originator Compensation 78 Fed. Reg. (2/15/13) Effective Date: January 10, 2014 Closed-end loan secured by consumer’s dwelling Applies to (i) individuals who are employees of lenders or brokers and (ii) entities that act as brokers Makes some changes to loan originator compensation structures Imposes obligations on bank employers of loan originators to consider employee “credentials” Requires NMLS ID information on credit applications, note, and deed of trust Standard TILA liability TILA liability expressly applies to loan originators even though they are not “creditors”, however, there is a maximum liability for loan originators of 3 times the total amount of the originator’s compensation plus costs and attorney fees statute of limitations for private actions Identify who gets compensation for mortgage loans and what are current compensation structures Consider if compensation comes from any affiliates Get human resources involved with new “credentialing” and loan originator employee training “Stay tuned” for regulations restricting loan steering by mortgage loan originators Mortgage Servicing – RESPA General Servicing Policies, Early Intervention Requirements, Continuity of Contact, Loss Mitigation Procedures 78 Fed. Reg. 10696 (2/14/13) Effective Date: January 10, 2014 Applies to RESPA-defined “federally related mortgage loans” except not HELOCs Exclusions: reverse mortgage; servicing 5,000 or fewer loans all of which are owned by the servicer or were originally made by the servicer Must establish certain specific written policies and procedures Regarding delinquent borrower, must make live contact quickly, followed by written contact soon after, and establish continuity of contact Must have a specific loss mitigation process and cannot start any foreclosure activities unless borrower is at least 120 days delinquent (note: the 120 delay applies to “small servicers”) RESPA liability for servicing errors is actual damages, plus any additional damages the court allows not to exceed $2,000, plus costs and attorney fees for any successful action Consider if TILA servicer” exception applies (if not, get help immediately) Even if “small servicer” exception applies, cannot start any foreclosure activities – which I believe includes sending Maryland’s Notice of Intent to Foreclose – until borrower is at least 120 days delinquent
Mortgage Servicing – TILA Periodic Billing Statements 78 Fed. Reg. 10902 (2/14/13) Effective Date: January 10, 2014 Closed-end loan secured by a dwelling Exclusions: reverse mortgages; where borrowers get very specific information in coupon book; servicing 5,000 or fewer loans all of which are owned by the servicer or were originally made by the servicer Must provide periodic statement meeting specific requirements Standard TILA liability Consider if TILA “small servicer” exception applies (if not, get help immediately) Note: Periodic statement sent to delinquent borrower to include up to 6 months’ past payment history (will systems be in place by July 2013 to ensure compliance with this disclosure requirement beginning in January 2014) Mortgage Servicing - TILA ARM Disclosures 78 Fed. Reg. 10902 (2/14/13) Effective Date: January 10, 2014 Closed-end loan secured by consumer’s principal dwelling in which APR may increase after consummation Requires a new initial rate change disclosure and makes changes to periodic rate change disclosures Standard TILA liability Work with forms vendors to ensure disclosures are available by effective date Homeownership Counseling 78 Fed. Reg. 6857 (1/31/13) Effective Date: January 10, 2014 RESPA-covered (i.e., mortgage loans Exclusions: reverse mortgage Note: Applies to HELOCs Must provide list of homeownership counseling organizations No private cause of action Consider how to implement this disclosure requirement (will forms vendor provide?)