The Consumer Financial Protection Bureau wants mortgage lenders to stop using marketing services agreements, and it’s using the stick rather than the rules process to do so. The industry says no fair, that’s regulation by enforcement. What do you think?
Stay on top of your game by familiarizing yourself with the general requirements that are going change in regards to the Good-Faith Estimate when the new TILA-RESPA Integrated Disclosure (TRID) rule goes into effect.
First of all, it is no longer going to be called a Good-Faith Estimate but will then be identified as a Loan Estimate.
The jargon isn’t the only thing that is changing! The new disclosure carries with it some timing deadlines as well as a new look and lay out to the forms used instead of the familiar GFE.
Mortgage brokers or creditors may provide the Loan Estimate to the consumer when the mortgage broker receives the consumer’s completed application and must be provided no later than 3 business days after the completed application has been turned in.
This new TILA-RESPA form integrates and replaces the current RESPA GFE and the initial TIL for these transaction types. Creditors must issue a revised Loan Estimate only in situations where changed circumstances resulted in increased charges.
These general requirement changes are meant to help better inform, protect and serve the consumer. The Florida Agency Network is ready to guide the industry through these changes and looks forward to partnering with you to streamline the process.
Schedule a Training Class
The TILA-RESPA rule (TRID) is proposed to go into effect this year on October 3. Buyer’s Agents will need to be aware of 3 main things: what type of loan product their client is using to purchase, the expected closing date and if their title partner is approved to do business with their client’s lender of choice. This is especially true when it comes down to writing the contract.
Most closed-end consumer credit transactions that are secured by real property are covered by the new rule.
Certain types of loans that are currently subject to TILA but not RESPA are subject to the TRID rule as well, such as construction-only loans, loans secured by vacant land or by 25 or more acres and credit extended to specific trusts for estate planning purposes.
TRID will not cover HELOC’s, Reverse Mortgages or Chattel-dwelling loans. Other exemptions include loans that are made by a person or entity that makes five or fewer mortgages in a calendar year. In addition to, housing assistance loan programs for low- and moderate- income consumers are partially exempt.
The typical timeline of the closing process is going to change not only in the form of new documents and disclosures but on the operational side of things as well. It will take some time for the industry to adjust to these changes. Just after the rule goes into effect, it is recommended to add on an extra 15 days to the closing date when writing the contract. Eventually, as the industry adjusts, the forecast predicts this will move us to a more paperless environment resulting in an even quicker closing timeline of less than the typical 30 days in Florida.
Security is the main issue in regards to compliance between Title Agencies and Lenders due to the obligation both parties must protect Non-Public Information (NPI) data that is exchanged during a transaction. Lenders cannot do business with agencies that do not have compliant software to protect NPI. Technology has a big role in securing data. In an effort to comply, Agencies in the Florida Agency Network use SoftPro to secure the communication of NPI. You can find SoftPro on the American Land and Title Association’s Elite List of 12 Providers that can assist with compliance.
It is best to work with a preferred title partner that is compliant to ensure the least amount of hicups at the closing table. FAN has multiple agencies in our network that are ready to take on these changes. To find an agency in the network near you visit www.paramounttitlefl.com or contact Max@FLagency.net.
The creditor must retain copies of the closing disclosure and all related documents for 5 years after consummation.
If the creditor sells, transfers or no longer has interest in the loan the creditor must provide a copy of the closing disclosure to the new servicer.
There is no specific requirement on how the copies must be retained leaving the opportunity to streamline our lives through technology.
You can take a closer look below or to view the CFPB’s Compliance guide here.
The Florida Agency Network is an industry leader in compliance. All agencies in the Florida Agency Network are prepped and ready to take on this industry game changer. It is important for your title partner to be compliant with the TRID rule once it goes into effect.
To find out more about partnering with a title agency in the network contact:
As it stands now, the CFPB has proposed the TILA-RESPA Integrated Disclosure (TRID) implementation date be postponed until October 3. The rule is open for public comment until July 7, 2015 leaving the industry grasping for some much needed clarity until a final rule gets locked down.
According to the Congressional Review Act (CRA), before any major new rule goes into effect Congress and the Government Accountability Office (GAO) must receive a rule report. It must contain a copy of the rule and be received at least 60 days prior to the rule taking effect. The CFPB’s failure to turn in this two-page report to Congress on time is the reason for this much appreciated delay.
Stay tuned as we keep you up to date and don’t forget, the best way to prepare yourself is to join the conversation. In an ever changing industry it is important to partner up with a title agency that has aligned and complied with the new regulations. Agencies powered by the Florida Agency Network (FAN) are prepped and ready to lead the way during this immense industry change.
Find out more about partnering with an agency in the network:
The TILA-RESPA rule goes into effect October 3 of this year. What transactions does it apply to? It applies to almost every closed-end consumer credit transaction secured by real property. Check out what the CFPB had to say below:
In an industry that is constantly modifying it is important to partner with those who stay abreast of the changes. Title agencies that are in the Florida Agency Network (FAN) have been a part of the conversation and are ready to lead the industry through these changes. To find out more about partnering with an agency in the network contact: Max@FLagency.net
Curious about compliance with the TILA-RESPA rule?
Check out the CFPB’s site.
What It Took to Get a Mortgage in 2012
By: The KCM Crew, KCM Blog
An outright dual-tracking ban and serious consideration of loan modification requests are just two provisions in a series of national servicing standards rolled out by the Consumer Financial Protection Bureau late Wednesday.
The CFPB’s official servicing rules, which take effect Jan. 2014, create a baseline set of standards for all U.S. servicers to follow.
The guidelines apply to all mortgage servicers, except for smaller servicing shops that deal with 5,000 or fewer loans.
THE CFPB SERVICING RULE IN A NUTSHELL
The CFPB’s official mortgage servicing guidelines released Wednesday forbid dual-tracking, or from starting a foreclosure if a borrower already submitted a completed application for a loan mod or foreclosure alternative.
To give borrowers time to submit loan-mod applications, the CFBP rule prevents servicers from making a first foreclosure notice or filing until a mortgage is at least 120 days delinquent.
Furthermore, servicers must inform a borrower of all loss mitigation options after the homeowner has missed two consecutive mortgage payments. This requirement forces servicers to provide a written notice with examples of options that could be available to troubled borrowers.
The CFPB servicing rule also mirrors guidelines outlined in the national foreclosure settlement and by prudential regulators last year. The new CFPB rule says servicers must deploy policies and procedures that provide delinquent borrowers with direct, easy and continuous access to servicing employees who can assist with loan issues.
In addition, these servicing employees are responsible for alerting borrowers who miss information on loan modification applications and for ensuring documents reach the right personnel for processing. The contacts also have to provide continuous updates to the borrower on loan modifications.
HANDLING LOAN MOD REQUESTS
Mortgage servicers must deploy a fair review process that considers all foreclosure alternatives available from either the investors or mortgage owners.
Servicing shops are no longer allowed to steer borrowers to options that are most financially favorable to the servicing shop.
Furthermore, if an application for a loan modification arrives at least 37 days before a scheduled foreclosure sale, servicers must consider and respond to the borrower’s request.
In addition, if the servicer offers a foreclosure alternative, the borrower must be given time to accept the offer before the servicer can move for foreclosure judgment or sale. The CFPB added that servicers cannot foreclose if a borrower reaches a loss mitigation agreement, unless the borrower fails to perform their part of the deal.
KEEPING THE BORROWER INFORMED
The servicing guidelines from CFPB require servicers to offer borrowers regular and clear monthly statements, showing the amount owed and due date of the next payment. These statements should also break down payments by principal, interest, fees, escrow and include recent transaction data.
If a mortgage rate is about to adjust for the first time on an adjustable-rate mortgage, servicers have to provide the borrower with a disclosure.
The CFPB says borrowers can no longer be surprised by forced-placed insurance policies attached to their accounts. If such a transaction is required, the servicer must provide advance notice and pricing information before charging consumers. In addition, a servicer has to have a reasonable basis for concluding a borrower lacks this type of insurance before acquiring a policy. When servicers do buy insurance and find out it was not needed, the policy must be terminated within 15 days with all premiums refunded.
The CFPB guidelines also require servicers to promptly credit a consumer’s account on the day that a payment is received. If partial payments are put in a suspense account, the account must be credited to the borrower’s account as soon as the suspense account includes an amount equal to a full payment.
When receiving a request for payoff balances on mortgages, servicers must provide a response within seven business days of receiving the written request.
Servicers must quickly respond to borrowers who point out account errors. Servicers have to acknowledge receipt of written notices and must do the following within 30 days: correct the error and provide the information requested; lead a reasonable investigation and inform the borrower of why the error did not occur; or inform the borrower that the information asked for is not available.
Servicers also are required to store borrower information in a manner that makes it easily accessible. This means having policies and procedures in place to ensure information is passed on to borrowers, investors and the courts in a timely fashion.
NEW BORROWER STANDING
Officials with the CFPB said Wednesday that loss mitigation issues are only enforceable through the bureau and enforcement agencies, not the borrower. However, a consumer not receiving the benefits of the CFPB’s outlined servicing processes – such as an end to dual tracking – can go to court to stop the rule violation.
CFPB director Richard Cordray sees the creation of national servicing standards as a direct result of the housing meltdown, which led to obscene foreclosure levels and a dramatic increase in processing issues.
“Servicers were unprepared to work with borrowers that needed help to deal with their individual problems,” he wrote. “People did not get the help or support they needed, such as timely and accurate information about their options for saving their homes. Servicers failed to answer phone calls, routinely lost paperwork, and mishandled accounts.”
The CFPB said half of the complaints reported to the bureau in the second half of 2012 related to loan modifications, collections and foreclosure issues on mortgages.
A summary of the rule can be accessed here. The final rule will be available on the CFPB’s website Thursday.
By: By Kerri Ann Panchuk, HousingWire
For over a year, we have been reporting on the impact that the new regulations being created for the Qualified Mortgage (QM) and the Qualified Residential Mortgage (QRM) would have on the housing market. Last week, the Consumer Finance Financial Protection Bureau (CFPB) announced its rules for a qualified mortgage. Let’s take a look at what it will mean to housing.
Let’s Begin with ‘Simplified’ Definitions
The idea of a QM is to assure the “ability to pay” — what standards a bank must follow to make sure a borrower has the ability to make the mortgage payments before offering a loan. An over-simplified explanation would be “the things a bank can’t do”.
The idea at the center of QRM is to determine the standards that a buyer must meet before getting a mortgage. An over-simplified explanation would be “the things a buyer must do”.
What Happened Last Week?
The CFPB issued their QM rules which will be effective January 10, 2014. The rules determine the limits on the loan types which can be offered by banks, the fee structures which can be charged by banks and other such issues. (For more details, you can download the 7 page summary or the 804 page full document issued by the CFPB).
The biggest news impacting a potential mortgage applicant is that the allowable back-end-debt ratio was set at 43% which is more lenient than the discussed 36% limit. The back-end-ratio is explained by Investopedia as:
“A ratio that indicates what portion of a person’s monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI), credit-card payments, child support and other loan payments. Lenders use this ratio in conjunction with the front-end ratio to approve mortgages.”
This will result in more buyers still being able to qualify for a mortgage.
What DID NOT Happen Last Week?
The QRM rules were NOT released. The QRM rules will be set by several different Federal agencies, such as the FDIC, Federal Reserve Board, FHFA, HUD, and OCC. These rules will be announced later this year and may include:
- A maximum “front-end” monthly debt-to-income ratio (which looks at only the consumer’s mortgage payment relative to income, but not at other debts) of 28 percent;
- A possible 20 percent down payment requirement in the case of a purchase transaction
- New minimum FICO scores established
These QRM rules will also have a big impact on future lending. We will try our best to keep you abreast of any updates.
By: The KCM Crew, KCM Blog
After many long months of waiting, the Consumer Financial Protection Bureau (CFPB) has finally issued its finalized qualified mortgage (QM) rule designed to protect both consumers and responsible lenders.
One of the biggest provisions of the QM rule is the newly set Ability-to-Repay rule, which demands that all new mortgages comply with basic requirements to protect consumers from taking on loans they can’t repay.
The rule does away with so-called “no doc” and “low doc” mortgages, requiring that all of a borrower’s pertinent financial information must be supplied and verified, including: employment status, income and assets, current debt obligations, credit history, and monthly payments on the mortgage, among other information. Based on that information, the lender must be able to make a fair judgment on whether or not the borrower can really take on more debt.
The Ability-to-Repay rule also stipulates that lenders base their evaluation of a consumer’s ability to pay on long-term views, discounting “teaser” or “starter” rates typically used in the introductory period.
CFPB director Richard Cordray explained the Ability-to-Repay rule is a common-sense answer to curb the borrowing and lending behavior that led to the financial crash.
“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” Cordray said. “Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.”
The rule will go into effect January 2014, according to theCFPB. Exceptions to the rule would apply for consumers trying to refinance from a risky mortgage to a more stable loan.
The CFPB also announced it is considering proposed amendments to the Ability-to-Repay rule. These amendments would, among other things, exempt certain nonprofit creditors that work with low- and moderate-income consumers. They would also provide QM status for certain loans made and held in portfolio by small creditors such as community banks and credit unions. If adopted, the proposed amendments would be finalized this spring and would go into effect at the same time as the Ability-to-Repay rule.
The bureau also announced other features of a QM beyond the Ability-to-Repay criteria. In order to meet QM requirements, a mortgage loan must limit points and fees (including those used to compensate originators) and have no toxic or risky loan features, such as interest-only payments or terms that exceed 30 years.
There is also a 43 percent cap on the acceptable debt-to-income ratio, though there will be a transitional period during which non-qualifying loans that meet other affordability standards will be considered QMs.
In addition, the CFPB explained there are two kinds of QMs that have different protective features for consumers and legal consequences for lenders.
The first kind, QMs with a rebuttable presumption, are higher-priced loans given to consumers with insufficient or weak credit history. Legally speaking, the lenders who give these are presumed to have determined that the borrower has the ability to repay. Consumers can challenge the presumption by proving that they did not actually have the income to repay the mortgage and other living expenses.
The second type of QMs are those that have a safe harbor status—generally lower-priced prime loans given to low-risk consumers. They offer lenders the greatest legal certainty that they are complying with the Ability-to-Repay rule, and consumers can only legally challenge their lender if they believe the loan does not fit the criteria of a QM.
While QM status does not grant a lender complete immunity from borrower challenges, Cordray said in prepared remarks he believes the CFPB has “limited the opportunities for unnecessary litigation” by setting up clear guidelines.
Mike Calhoun, president of the Center for Responsible Lending, said in a response that the new rules “strike a balanced, reasonable approach to mortgage lending—for the most part.”
“But the rules also leave a pivotal issue unresolved: How the fees that lenders pay to mortgage brokers will be counted when it comes to defining a qualified mortgage. The CFPB should not create a loophole that allows high-fee loans to count as a qualified mortgage under Dodd-Frank,” Calhoun said. “If the broker payment issue is appropriately resolved, the rules will be—all in all—good for consumers, investors and the economy.”
Debra Still, chairman of the Mortgage Bankers Association, expressed her own reservations, but said the organization applauds the approach and effort given.
“This is a very complex rule. We remain concerned that certain aspects of it could curb competition, increase costs and tighten credit availability for borrowers. In particular, the 3 percent cap on points and fees appears to be overly inclusive as it relates to compensation and affiliates,” Still said.
“Additionally, we will be looking carefully at whether the interest rate threshold for the safe harbor, which is set at 150 basis points above the benchmark rate, will adversely impact too many borrowers,” she continued. “Ultimately, the final verdict on this rule will be made by the market.”
By: Tory Barringer, DSNews