CFPB Changes and Document Updates Effective January 10, 2014
In accordance with the new rules for Loan Originator Compensation (12 CFR 1026.36), effective January 10, 2014, Docu Prep is adding the NMLS ID to all security instruments, notes or loan contracts, and to the credit application. The NMLS ID will be added to the footer of each of these documents and will include the NMLS ID of the originating organization and the NMLS ID of the originating individual.
In conjunction with these additions, we are conducting a comprehensive review of our entire library of non-custom Notes and Security Instruments. We will be reviewing these documents for compliance and for formatting consistency. As part of this review we will be replacing the language in our second mortgage security instruments and notes, to refer to “junior lien” instead of “second mortgage.” This will allow for greater flexibility in the usage of these documents. The change will be most evident in the footer(s) of each document, but will occur anywhere the “second mortgage” language is present.
Due to the large number of documents to be included in these changes, the updates will occur continuously over the next several months. All required changes will be in place prior to the January 2014 deadline.
Social Security Administration update to SSA-89 form
Form SSA-89 has been modified to include a checkbox section where the request for verification must select all applicable reasons for the verification request. The federal Information Collection lists the changes under the title of “Consent-Based Social Security Number Verification Service (CBSV)” ICR Reference Number 201308-0960-001. The new form can be found at: http://www.reginfo.gov/public/do/DownloadDocument?documentID=397709&version=1
North Carolina High Cost Test Updates
North Carolina amends provisions of the anti-predatory lending law.
The North Carolina legislature enacted HB 692, which changes the high cost loan definitions under NC law. The points and fees threshold was increased from 4% to 5% of the total loan amount. Additionally, FHA, VA, and USDA fees are now excluded from the points and fees calculation, whereas previously a 1.25% exculsion cap was placed on these fees.
For full details see: http://www.ncleg.net/Sessions/2013/Bills/House/PDF/H692v7.pdf
CFPB Updates Small Entity Compliance Guide for the ATR/QM Rule
CFPB updates include a QM Rule Implementation Guide, and Quick reference charts for ATR/QM. and mortgage origination rules.
The new charts are available on the CFPB website at:
Maine Enacts Provisions Regarding State SAFE Act
Maine enacted provisions meant to encourage financing of manufactured housing for the workforce by altering the licensing requirements for mortgage loan originators.
The legislature of the state of Maine has enacted provisions amending the Maine Secure and Fair Enforcement for Mortgage Licensing Act to specify that a person who does not engage in the business of mortgage loan origination in a habitually or repeatedly does not need to be licensed as a mortgage loan originator in the state of Maine.
The effective date is 10/01/2013.
The full text of the bill can be found at: http://openstates.org/me/bills/126/HP847/documents/MED00005228/
CFPB – Proposed Rule to Delay Effective Date of Prohibition on Financing Single-premium Credit Insurance.
In the May 10, 2013 issue of the Federal Register (Vol. 78 No. 91), the Consumer Financial Protection Bureau (CFPB) published a proposed rule intending to temporarily delay the June 1, 2013, effective date of a prohibition on creditors financing credit insurance premiums in connection with certain consumer credit transactions secured by a dwelling. The prohibition was adopted in the Loan Originator Compensation Requirements under the Truth in Lending Act Final Rule, issued on February 15, 2013.
Temporary delay of the effective date would permit the CFPB to clarify, before it takes effect, its applicability to transactions other than those in which a lump-sum premium is added to the loan amount at closing.
Comments on the proposed rule must be received on or before May 25, 2013. You may submit comments, identified by Docket No. CFPB-V2013-V0013 or RIN 3170-VAA37, by any of the following methods:
- Electronic: http://www.regulations.gov. Follow the instructions for submitting comments.
- Mail/Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 20552.
All submissions must include the agency name and docket number or Regulatory Information Number (RIN).
CFPB Releases Three Small Entity Compliance Guides and HUD Releases Mortgagee Letter Explaining Enhancements to the Lender Insurance Program
On Thursday, May 2, 2013, the Consumer Financial Protection Bureau (CFPB) released its small entity compliance guides for the recently finalized Home Ownership and Equity Protection Act (HOEPA) rule; Equal Credit Opportunity Act (ECOA) valuations/appraisals rule; and Truth in Lending Act (TILA) Higher-Priced Mortgage Loan (HPML) appraisal rule. While these guides are designed to help small entities understand and comply with these rules, they also offer all industry participants a summary of the CFPB’s thinking on its rules, as well as practical implementation tips. MBA has also been carefully studying and analyzing the mortgage rules, and with the help of law firm experts has created Compliance Essentials, a broad, new program from MBA’s education department to help members position their company to comply with current and coming rules. .
HUD Releases Mortgagee Letter Explaining Enhancements to the Lender Insurance Program
On Wednesday, May 1, 2013, the Department of Housing and Urban Development (HUD) released mortgagee letter (ML) 2013-12, which slightly revises and supersedes ML 2013-10, released on April 10, 2013. This new ML and its accompanying Lender Insurance Guide explain enhancements to the Lender Insurance (LI) program based on a final rule published in the Federal Register on January 25, 2012. The ML provides information on initial and continuing eligibility for the LI program, the termination and reinstatement process for LI participants, and details the new indemnification process required for all loans endorsed through the LI program.
California Assembly Bill 278: “Homeowner Bill of Rights”
A new California law became effective on January 1, 2013. You could incur penalties up to $7,500 per mortgage if you don’t review documentation and have “competent and reliable evidence” to prove it.
The California Assembly Bill 278, commonly referred to as the “Homeowner Bill of Rights” calls for documents recorded by or on behalf of a mortgage servicer in connection with a foreclosure, including a declaration, notice of default or sale, assignment of a deed of trust or a substitution of trustee, must be accurate and complete and supported by competent and reliable evidence.
Before recording any such documents, mortgage servicers must ensure they have reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose.
You may read the bill in its entirety here.
Compliance Update- Effective Dates of Recently Issued Final Rules
To keep our clients informed, here are some important dates regarding recently issued final rules.
The following are important effective dates and the Final Rules to which they apply:
June 1, 2013- effective date for:
- Escrow Rule: Requires creditors to establish and maintain escrow accounts for at least 12 months after originating a higher-priced mortgage loan secured by a first lien on a principal residence among other requirements. Learn more.
January 10 2014– effective date for:
- High-Cost Mortgage: Modifies the definition of a high-cost mortgage, including the rate and fee thresholds, and expands the scope of loans to be held to the HOEPA requirements to include all purchase transactions and home equity lines of credit. Learn more.
- Ability to Repay/Qualified Mortgage: Establishes parameters for classifying loans as “qualified mortgages.” The rule sets for the documentation and underwriting requirements that must be met to provide lenders with additional legal protections in the event of a lawsuit. Learn more.
- CFPB Servicing: Establishes consistent standards for mortgage loan servicers, aimed at ensuring borrowers receive clear information about their mortgages. Learn more.
January 18, 2014– effective date for:
- Appraisal Delivery: Outlines the requirements for appraisal delivery to soncumers for QM. Learn more.
- Appraisal Standards for Higher Risk Mortgages: Outlines the requirements for appraisal delivery to soncumers for higher risk mortgages. Learn more.
Recent CFPB Updates- Mortgage Loan Disclosure Forms.
The Consumer Financial Protection Bureau has issued a notice and request for comments regarding its proposal titled "Quantitative Testing of Integrated Mortgage Loan Disclosure Forms." The comment period will end on March 7, 2013.
The Consumer Financial Protection Bureau has issued a notice and request for comments regarding its proposal titled “Quantitative Testing of Integrated Mortgage Loan Disclosure Forms.” The comment period will end on March 7, 2013. Learn more.