CFPB Updates Dodd-Frank Mortgage Rules Readiness Guide

Recently, the CFPB published an updated mortgage rules Readiness Guide for financial institutions to assist them in complying with new mortgage lending requirements. The Guide contains: (i) a summary of the mortgage rules finalized by the CFPB as of August 1, 2014; (ii) a readiness questionnaire to help perform self-assessments; (iii) a section on frequently asked questions; and (iv) a section on further tools to assist with compliance with the new rules. The guide discusses, among other rules, the TILA-RESPA Integrated Disclosure rule that integrates the mortgage loan disclosures currently required under TILA and RESPA. That rule requires a new Loan Estimate form that combines two existing forms, the Good Faith Estimate and the initial Truth-in Lending disclosure. The Loan Estimate must be provided to consumers no later than the third business day after they submit an application. The rule also requires a Closing Disclosure form, which combines the current Settlement Statement (“HUD-1”) and final Truth-in Lending disclosures forms. The Closing Disclosure must be provided to consumers at least three business days before consummation of the loan. The new requirements are effective for loans where the lender receives an application on or after August 1, 2015.

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HUD Continues To Fight Housing Discrimination

On October 15, HUD announced the award of more than $38 million to fair housing and non-profit organizations in 43 states and the District of Columbia to address discrimination in the housing industry. Through HUD’s Fair Housing Initiatives Program, grants are funded with the intent that they will “help enforce the Fair Housing Act through investigations and testing of alleged discriminatory practices.” Additionally, the grants are meant to help provide education on rights and responsibilities under the Fair Housing Act to housing providers, local governments, and potential victims of housing discrimination. HUD’s most recent categories of grants included: (i) Private Enforcement Initiative Grants; (ii) Education and Outreach Initiative Grants; and (iii) Fair Housing Organizations Initiative.

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BuckleySandler & American Bankers Association Release CFPB Mortgage Origination Deskbook

BuckleySandler is pleased to announce the availability of “The New CFPB Mortgage Origination Rules Deskbook,” by partner Joseph Reilly. The CFPB Deskbook, published in partnership with the American Bankers Association, is an all-inclusive compilation of all the mortgage origination rules made by effective by the Consumer Financial Protection Bureau (CFPB) in January 2014, including:

  • Ability-to-Repay and Qualified Mortgage requirements
  • Points and Fees
  • Loan Originator Compensation
  • Appraisals
  • High-Cost Mortgages
  • Qualified Mortgage Provisions for Federal Housing Administration and Veterans Affairs loans
  • Summary of the TILA-RESPA disclosure integration taking effect in 2015

“Our goal was to consolidate the numerous sources of CFPB regulatory guidance into a clear, organized format,” said Reilly. “We wanted to provide comprehensive descriptions from not just the rule text and official commentary but also from CFPB webinars, compliance guides, preamble material from federal register releases and informal compliance discussions with CFPB staff.  We hope this will be a ‘one-stop shop’ for origination compliance.”

Benjamin K. Olson, BuckleySandler partner and former Deputy Assistant Director in the CFPB’s Office of Regulations who was involved in the development of many of the rules covered by the CFPB Deskbook, describes it as “an invaluable resource with the potential to change the way regulations are understood.”

The CFPB Deskbook is available in PDF and hard copy formats. Requests for copies should be sent to CFPBDeskbook@buckleysandler.com.

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Special Alert: Proposed Amendments to the TILA-RESPA Integrated Disclosure (“TRID”) Rule, Transcript of CFPB Webinar on the Loan Estimate Form, and Introducing BuckleySandler’s TRID Resource Center

BuckleySandler is pleased to announce our new TILA-RESPA Integrated Disclosure (“TRID”) Resource Center.  The TRID Resource Center is a one-stop shop for TRID issues, providing access to BuckleySandler’s analysis of the TRID rule and the CFPB’s amendments, transcripts of CFPB webinars providing guidance on the rule, and other CFPB publications that will facilitate implementation of the rule.  In particular, the TRID Resource Center will address the following recent developments:

  • Proposed amendments. On October 10, 2014, the CFPB proposed amendments to the TRID rule that, if adopted, would: (1) allow creditors to provide a revised Loan Estimate on the business day after the date the interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked; and (2) correct an oversight by creating room on the Loan Estimate form for the disclosure that must be provided on the initial Loan Estimate as a condition of issuing a revised estimate for construction loans where the creditor reasonably expects settlement to occur more than 60 days after the initial estimate is provided.  The proposal would also make a number of additional amendments, clarifications, and corrections, including:
    • Add the Loan Estimate and Closing Disclosure to the list of loan documents that must disclose the name and NMLSR ID number of the loan originator organization and individual loan originator under 12 C.F.R. § 1026.36(g);
    • Provide additional guidance related to the disclosure of escrow accounts, such as when an escrow account is established but escrow payments are not required with a particular periodic payment or range of payments; and
    • Clarify that, consistent with the requirement for the Loan Estimate, the addresses for all properties securing the loan must be provided on the Closing Disclosure, although an addendum may be used for this purpose.

    Comments on the proposal are due by November 10, 2014. For your convenience, we have updated our summary of the TRID rule to identify the most significant proposed changes.

Read more…

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GAO Publishes Report Regarding Proposed Changes To The Single-Family Housing Finance System

On October 7, the GAO published a report to help policymakers assess proposals for changing the single-family housing finance system and consider ways to make it more effective and efficient. To this end, the report first describes the market developments since 2000 that have led to changes in the federal government’s role in single-family housing finance. Most notably, the GAO found that as the market share of nonprime mortgages grew before the 2007-2009 financial crisis, the share of new mortgage originations insured by federal entities (including Fannie Mae and Freddie Mac) fell dramatically before rising sharply again during and after the crisis. Second, the report analyzed whether and how these market developments created challenges for the housing finance system. The GAO concluded that mortgage markets since 2000 have challenged the housing finance system, revealing the following weaknesses: (i) misaligned incentives between originators and securitizers on the one hand, and borrowers and investors on the other, as the former did not share the risks of the latter; (ii) a lack of reliable information and transparency for borrowers because originators were not required to share certain information; (iii) excessive risk taking due to a loosening of underwriting standards prior to the financial crisis; and (iv) a lack of federal oversight (since addressed by Congress through the FHFA and CFPB). Finally, the report presents a nine-pronged evaluation framework for assessing potential changes to the housing finance system designed to help policymakers understand the strengths and weaknesses of competing goals and policies, to craft new proposals, and to understand the risks of transitioning to a new housing finance system.

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GAO Recommends Better Data Analysis to Improve TARP Housing Programs

On October 6, the GAO released a report recommending that the Treasury Department improve its analysis of data it collects on HAMP. As of June, Treasury has disbursed only about one-third of the $38.5 billion in TARP funds allocated to housing programs and fewer borrowers have received first-lien modifications under HAMP than Treasury originally estimated. Treasury does collect data on HAMP denial and redefault rates, but its evaluation of data to help explain differences in these rates between servicers is limited. For example, some variations may be caused by differences in servicer practices that would not necessarily be caught by Treasury’s compliance reviews or analyses of reporting errors. The GAO report recommends more sophisticated analysis of the data in order to identify the reasons for variations in denial rates and redefaults among servicers. The GAO hopes more robust data analysis will help Treasury increase oversight and transparency, improve its policies and guidance, and ensure that HAMP reaches the greatest number of eligible borrowers.

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FHFA Extends Comment Period For Proposed FHLB Membership Rule

On October 6, the FHFA announced that it would extend the comment period for its proposed rule on Federal Home Loan Bank membership. The proposed rule is intended to revise the requirements for financial institutions to apply for and retain membership in the FHLB. Comments are now being accepted until January 12, 2015.

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CFPB Publishes White Paper On Manufactured-Housing

On September 30, the CFPB published a white paper claiming that manufactured-home owners typically pay higher interest rates for their loans than site-built borrowers. The white paper cites data in support showing that a greater share of manufactured-housing loans are classified as higher-priced mortgage loans or “high-cost” loans. The white paper further discusses the CFPB’s findings that: (i) manufactured homeowners are likely to be older, live in a rural area, and have a lower net worth than site-built borrowers; (ii) manufactured homes typically cost less than site-built homes; (iii) about three-fifths of manufactured-housing residents who own their home also own the land it is sited on; (iv) approximately 65 percent of borrowers who own their land and financed the purchase of their manufactured home between 2001 and 2010 did so using a chattel loan (rather than a manufactured-housing loan); and (v) manufactured-housing production contracted in the 2000s. The white paper does not propose any formal rule or guidance related to manufactured-housing. Rather, it indicates that the CFPB will continue to analyze facets of the manufactured-housing market to identify ways to fill in gaps in available data about that market. For example, the white paper states that the CFPB is considering adding a data field to the Home Mortgage Disclosure Act’s reporting requirements that would indicate whether a manufactured-housing loan is secured by real or personal property.

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FHA Updates its Single Family Housing Policy Handbook

On September 30, the FHA published updates to several sections of its Single Family Housing Policy Handbook. The updates only apply to loans originated on or after June 15, 2015 and are a result of FHA’s attempt to create a consolidated Handbook that is intended to be a single authoritative source of relevant FHA policy. The updates relate to a variety of policies including origination/processing of loan applications, underwriting, and mortgage closing requirements. They also relate to several specific programs and products including refinances, ARM loans, new construction, weatherization, and solar and wind technologies. Future updates are anticipated regarding (i) doing business with FHA; (ii) servicing and loss mitigation; (iii) claims and disposition; and (iv) quality control, oversight, and compliance issues.

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OIG Audit Determines FHFA Should Direct The GSEs To Require Independent Assurance Of Counterparties’ Compliance

Recently, the FHFA Office of the Inspector General (OIG) concluded that the FHFA can further mitigate the risks posed by Fannie Mae’s and Freddie Mac’s reliance on third-party mortgage loan sellers and servicers (counterparties). The OIG recommended that the FHFA direct the two GSEs to assess a risk-based approach as to whether the counterparties should obtain independent, third-party attestations of their compliance with origination and servicing requirements, which would complement but not replace Fannie Mae’s and Freddie Mac’s own onsite reviews and other performance monitoring controls. The purpose of the recommendation was to increase assurance that the $4.8 trillion in GSE-owned and -guaranteed mortgages are appropriately originated and serviced. The recommendation came at the heels of an OIG audit of FHFA’s oversight over how the GSEs ensure that third party loan sellers and servicers comply with the GSEs’ requirements. The OIG’s recommendation was based on the finding that the GSEs currently rely on the counterparties’ self-representations of their compliance, and only a portion of loans purchased are subject to detailed quality reviews. Per the OIG’s recommendation, the attestations can be implemented in a manner that considers cost versus benefit based on a given counterparty’s size, complexity, performance, and other risk factors. The FHFA did not agree with the OIG recommendation, and the OIG is requesting that FHFA reconsider its disagreement with the recommendation.

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U.S. Supreme Court Grants Cert. (again) in FHA Disparate Impact Case

On October 2, the U.S. Supreme Court granted certiorari in Texas Department of Housing and Community Affairs, et al. v. The Inclusive Communities Project, Inc., No. 13-1371, a case in which the Fifth Circuit became the first federal Circuit Court of Appeals to apply the Department of Housing and Urban Development’s (HUD) “effects test” rule (see The Inclusive Communities Project, Inc., v. Texas Department of Housing and Community Affairs, et al., Nos. 12-11211, 13-10306 (747 F.3d 275, March 24, 2014)), which authorizes so-called “disparate impact” or “effects test” claims under the Fair Housing Act (FHA). In granting cert., the Supreme Court accepted one of the two questions presented by the petitioners, which was, “Are disparate-impact claims cognizable under the [FHA]?” It did not accept the second question: “If disparate-impact claims are cognizable under the [FHA], what are the standards and burdens of proof that should apply?” The Supreme Court’s partial grant of the petition represents the third recent matter in which the Court has taken up the issue of whether disparate impact claims may be brought under the FHA. The first opportunity ended in February, 2012 when petitioners in Magner, et al. v Gallagher, et al., No. 10-1032, stipulated to dismissal due to concerns that “a victory could substantially undermine important civil rights enforcement throughout the nation.” The Court’s second opportunity, Township of Mount Holly, New Jersey, et al., v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507, was dismissed in November 2013, just prior to oral argument after a settlement was reached by the parties.

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Nevada Supreme Court Holds Foreclosure Of A Homeowners Association’s Assessment Lien Extinguishes A First Mortgage

On September 18, the Nevada Supreme Court decided that a homeowners association may foreclose its assessment lien non-judicially and that the foreclosure extinguishes a first mortgage. SFR Investments Pool v. US Bank (130 Nev. Adv. Opinion 75, September 18, 2014). The lender argued that, because the “superlien” law gives an HOA lien priority over a first mortgage to the extent of nine months of unpaid dues, only nine months of unpaid dues should have priority over a first mortgage, not the entire assessment lien. The Nevada Supreme Court acknowledged competing views of “payment priority” and “lien priority” proponents, but ultimately sided with the lien priority camp because of the language of the superlien statute and general principles of lien priority. The Court suggested that lenders may prevent losses associated with HOA superliens by paying off the liens or by establishing escrow accounts for HOA assessments to avoid using its own funds. The Nevada decision is consistent with an August 28 decision on the same issue by the D.C. Court of Appeals in Chase Plaza Condominium Association v. JP Morgan Chase Bank, No. 13-CV-623 & 13-CV-674 (D.C. Cir. 2014).

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CFPB Updates Reverse Mortgage Guide

On September 24, the CFPB published an updated reverse mortgage guide on its blog to account for HUD’s recent changes to reverse mortgage programs. The blog post highlights new limits to lump sum, first-year payouts under reverse mortgages, as well as HUD’s new protections for non-borrowing spouses. For example, non-borrowing eligible spouses no longer need to choose between paying off the reverse mortgage or moving out when their borrowing spouse dies; instead, depending on the circumstances, they may be able to stay in the home. Consistent with its first reverse mortgage guide, issued in July 2012, the Bureau’s new guide strongly encourages consumers to consider all options before obtaining a reverse mortgage and points to HUD-approved housing counselors as their best resource.

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FFIEC and CFPB Announce Updates To Web-Based HMDA Database And Tools

On September 22, the FFIEC announced an update to its online database for analyzing HMDA data and the CFPB announced updates to the agency’s corresponding HMDA tools. Originally launched in September 2013, the tool focuses on the number of mortgage applications and originations, in addition to loan purposes and loan types, and allows the public to see nationwide summaries or employ interactive features to isolate the information for metropolitan areas. The updated database includes 2013 data of approximately 17 million records from 7,190 financial institutions. In both Director Cordray’s 2013 remarks and blog post, the CFPB appeared to indicate that HMDA data may be used to identify institutions that may be discriminating against protected classes of borrowers. On Monday, the Bureau encouraged the public to view the introductory video, maps and charts, data, and share their ideas and findings through its Twitter account.

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Ginnie Mae Publishes Position Paper Describing Response To Changes In Mortgage Lending Market

This month, Ginnie Mae published a position paper titled “An Era of Transformation,” which describes changes in the mortgage lending market that stem from the 2007-08 financial crisis, and explains how Ginnie Mae intends to react to those changes. The key change in the mortgage lending market that the paper focuses on is the “rapid, substantial increase in the presence of non-depository institutions” in the face of the retreat of commercial banks from mortgage lending and servicing. In the face of this trend, Ginnie Mae intends to make a number of changes that issuers should take note of, including modifying its MBS program to accommodate the larger role of non-depository lenders; upgrading its abilities to assess the financial and operating capacity of its issuers; and taking steps to ensure liquidity in the market for MSRs. Ginnie Mae also intends to actively police that issuers are in compliance with program requirements, and when issuers fail, to move MSR portfolios to other approved issuers rather than seize and manage the assets itself.

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