Which New Requirements Apply to HELOCs? April 10, 2013 2:00 p.m. – 3:30 p.m. EST Presented by: Steve Van Beek, Esq., NCCO Director of Regulatory Compliance National Association of Federal Credit Unions National Association of Federal Credit Unions l www.nafcu.org
Webcast Goals • Which DON’T APPLY to HELOCs? • Which Requirements Apply to HELOCs? • What Action Steps Do You Need to Take? – Where to Find New Requirements – Details of New Requirements – Is your HELOC covered? • Effective Dates of New Requirements • Which Requirements Will Take the Most Resources? Headache Areas? National Association of Federal Credit Unions l www.nafcu.org
7 New Regulations 1. Escrow Requirements for HPMLs 2. Loan Originator Compensation & More 3. Mortgage Servicing (Reg Z & Reg X) 4. Qualified Mortgage/Ability-to-Repay 5. Requirements for High-Cost Mortgages 6. Appraisal Requirements for HPMLs 7. Appraisal Disclosure & Delivery National Association of Federal Credit Unions l www.nafcu.org
HELOCs EXCLUDED 1. Escrow Requirements for HPMLs 2. Appraisal Requirements for HPMLs 3. New Ability-to-Repay Requirements* and Qualified Mortgage Standards 4. 8 of 9 New Mortgage Servicing Requirements 5. MLO Compensation, Qualifications, Training & Disclosure Requirements National Association of Federal Credit Unions l www.nafcu.org
HELOCs COVERED 1. Prompt Payment Crediting 2. Payoff Statements 3. Prohibition on Mandatory Arbitration 4. Prohibition on Financing Single-Premium Credit Insurance 5. IF FIRST LIEN – Reg B Appraisal (and Written Valuation) Disclosure & Delivery 6. Homeownership Counseling Disclosure Requirement National Association of Federal Credit Unions l www.nafcu.org
HELOCs COVERED 7. High-Cost Mortgages • Calculation • Disclosures • Requirements • Prohibitions 8. Homeownership Pre-Loan Counseling Certification (for high-cost mortgages) National Association of Federal Credit Unions l www.nafcu.org
Definition of Dwelling “ Dwelling means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.” 12 CFR 1026.2(a)(19) National Association of Federal Credit Unions l www.nafcu.org
Definition of Dwelling 2(a)(19) Dwelling 1. Scope. A dwelling need not be the consumer’s principal dwelling to fit the definition, and thus a vacation or second home could be a dwelling. However, for purposes of the definition of residential mortgage transaction and the right to rescind, a dwelling must be the principal residence of the consumer. ( See the commentary to §§ 1026.2(a)(24), 1026.15, and 1026.23.) 2. Use as a residence. Mobile homes, boats, and trailers are dwellings if they are in fact used as residences, just as are condominium and cooperative units. Recreational vehicles, campers, and the like not used as residences are not dwellings. National Association of Federal Credit Unions l www.nafcu.org
“Home Equity Plans” 1026.40 Requirements for home equity plans. The requirements of this section apply to open-end credit plans secured by the consumer's dwelling. Home-secured open-end loan (HELOC) • Application Disclosures – 1026.40 • Account Opening Disclosures – 1026.6(a) • Periodic Statements – 1026.7(a) or (b) • Special Rules for HELOCs National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Compensation, Qualifications, Training, & Disclosures And, More Regulation Z 12 CFR 1026.36 National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More Effective Dates Vary by Section June 1, 2013 • Prohibition on Mandatory Arbitration – 12 CFR 1026.36(h) • Prohibition on Financing Single-Premium Credit Insurance – 12 CFR 1026.36(i) January 10, 2014 • All other requirements (for closed-end credit) National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More New Requirements for Loan Originators* • Loan Originator Compensation – .36(d) • Qualifications & Training – .36(f) • Disclosures on Loan Documents – .36(g) DO NOT APPLY TO HELOCs Differs from SAFE Act definition (which is inclusive of HELOCs). See CFPB’s Regulation G 12 CFR 1007.102 and Appendix A – NCUA’s SAFE Act Page – Opinion 08-0843 National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More Prohibition on Mandatory Arbitration 12 CFR 1026.36(h) Dodd-Frank prohibited mandatory arbitration clauses . Not common, but credit unions must review agreements. Scope: Applies to closed-end mortgages secured by a dwelling. Also applies to HELOCs secured by principal dwelling. National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More Prohibition on Financing Single- Premium Credit Insurance 12 CFR 1026.36(i) Dodd-Frank also prohibited the financing, directly or indirectly, of single-premium credit insurance. This is not common . Note : This does not prohibit credit insurance where the premium or fees are calculated and paid in full on a monthly basis. National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More Prohibition on Financing Single- Premium Credit Insurance 12 CFR 1026.36(i) Scope: Applies to closed-end mortgages secured by a dwelling. Also applies to HELOCs secured by principal dwelling. National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More Prohibition on Financing Single- Premium Credit Insurance Calculated and Paid in Full on a Monthly Basis What about “decreasing premium” credit insurance? – Premium decreases each month as balance decreases – Premiums are added to the loan balance but are paid in full each month even though some interest is charged Discussions with the CFPB to clean up the language and make it clear “decreasing premium” plans are still OK. • CFPB has agreed informally; hoping they put it in writing. National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing Regulation Z & Regulation X 12 CFR 1026 & 12 CFR 1024 Effective Date: January 10, 2014 National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg Z Prompt Payment Crediting – 1026.36(c)(1) Not Eligible for Small Servicer Exemption Scope: Applies to consumer transactions secured by a member’s principal dwelling. This includes home equity- lines of credit (HELOCs). Payoff Statements – 1026.36(c)(3) Not Eligible for Small Servicer Exemption Scope: Applies to consumer credit transactions secured by a member’s dwelling. Includes HELOCs. National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg Z Prompt Payment Crediting – 1026.36(c)(1) • Credit payment as of the date of receipt – Credit union can process the payment on a later day so long as posted as of the date of receipt • “Periodic payment” – principal, interest, and escrow (if any) • Can still collect late fees – not a ban • Pyramiding of late fees – still prohibited • Partial payments – CUs can reject, put in suspense account or credit immediately National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg Z Payoff Statements – 1026.36(c)(3) • Applies to any dwelling – including HELOCs • Applies to written requests for payoff amount • Credit unions must send payoff statement within seven business days (limited exceptions for natural disasters; bankruptcies) • State law may have timeline – but CFPB says that seven business days is maximum • HIGH-COST LOANS – Within FIVE business days National Association of Federal Credit Unions l www.nafcu.org
Homeownership Counselor Disclosure Included in the High-Cost Mortgage Regulation Regulation X 12 CFR 1024.20 Effective Date: January 10, 2014 National Association of Federal Credit Unions l www.nafcu.org
Counseling Disclosure Homeownership Counselor Disclosure New requirement from Dodd-Frank that was included in high-cost final rule, but applies much broader. Implemented in 12 CFR 1024.20. Scope: Applies broadly to “federally related mortgage loans” and open-end home equity lines of credit (HELOCs) . Excluded : Reverse mortgages; timeshares; construction loans; and loans secured by a dwelling that is considered personal property under State law. National Association of Federal Credit Unions l www.nafcu.org
Counseling Disclosure Disclosure Requirements – 1024.20 Timing : Must be sent no later than three business days after the credit union receives an application. – With Special Information Booklet for closed-end loans; or – With HELOC disclosures for home equity lines of credit . Content : A written list of homeownership counseling organizations in the loan applicant’s location. Credit unions must have obtained the list in the prior 30 days. Creating List : CFPB will be developing a website portal that credit unions (and vendors) can use to populate the listings. National Association of Federal Credit Unions l www.nafcu.org
High-Cost Mortgages Regulation Z 12 CFR 1026.32 Effective Date: January 10, 2014 National Association of Federal Credit Unions l www.nafcu.org
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