Integrated Disclosures: Challenges and Business Decisions 5 Best - PowerPoint PPT Presentation

Integrated Disclosures: Challenges and Business Decisions

5 Best Aspects to Being an Ex-Regulator  My speech bio is a lot shorter  I haven’t been sued since I left the State  I am not avoided at conferences  Terry Jones can now buy me lunch  Rick Accomazzo can no longer depose me!

Integrated Disclosures: Applicable Quotes “ Reality is the leading cause of stress am ong those in touch w ith it.” Lily Tomlin

Lessons Learned – Past CFPB Rule Implementation  There is no such thing as enough time  Vendors delays  Delayed investor guidance  Unearthing the “unknowns”  Training is vital  Importance of industry engagement

Regulatory Fatigue 20 13 CFPB Rule 20 14 / 20 15 CFPB Rule Im plem entation Im plem entation  Escrow Requirements under TILA  High Cost Mortgage & Homeownership Counseling  ATR/ QM  Integrated Disclosures  LO Compensation  Mortgage Servicing Rules  Appraisals for Higher Priced Loans  Appraisal disclosure and delivery requirements

Integrated Disclosures: Important Dates  Adopted November 20, 2013  20 months to implement  In reality, only 16 months  Effective date is August 1, 2015  ONLY 9 months left to implement

How will you feel on August 1, 2015?

How will you feel on August 1, 2015?

Effective Date Challenges  The effective date for a majority of the rule applies to applications taken on or after August 1, 2015.  Prohibited from using disclosures prior – Similar to RESPA 2010  No transition period  Entire industry must go live this date. This includes:  Mortgage companies  Vendors  Investors  Title companies  Real estate brokers

Triggers for Effective Dates  Managing two (2) triggers for the effective date:  Majority of the rule is triggered by application  Three (3) areas are not triggered by the application:  New provisions regarding pre-disclosure activities – disclaimer on pre-disclosure estimates  Restriction on collection of upfront fees or payment information  Preemption of state laws

Definition of an Application  “Application” means the submission of the following 6 pieces of information:  Consumer’s name;  Consumer’s income;  SS#;  Property Address;  An estimate of the value of the property; and  Loan amount sought.  Definition no longer includes the previous 7 th catch all of “any information deemed necessary by the loan originator.”

Loan Estimate – Same Day Disclosure  Currently, if loan is locked after initial Loan Estimate (L.E.), a new L.E. must be provided on the same day:  CFPB has proposed to change this to within 1 business day  Still creates challenges. 3 day disclosures timelines can still be difficult.  Provides very little time from a monitoring perspective.  What controls are you going to put into place to ensure compliance?

Zero Tolerance Fee Bucket Current Future  Origination charge;  Fees paid to the  While the borrower’s creditor, mortgage broker or an affiliate interest rate is locked, of either; the credit or charge for  Fees paid to a third the interest rate chosen party service and any adjusted provider selected by origination charge; the creditor;  Transfer taxes.  Transfer taxes.

Managing Closings  Proof of receipt.  How will title companies impact your ability to complete disclosures?  How will title companies impact waiting periods?  Who will manage your closings moving forward?

Managing Waiting Periods  Waiting periods drive fee due diligence on the front end. If not accurate:  Delayed closings  Loan cures  Two (2) new triggers for new waiting periods:  Loan product is changed  A prepayment penalty is added  Managing expectations:  It isn’t enough to have your staff trained on this rule.  It is vital that referral sources are aware of the waiting periods.

Term Consummation  When the borrower(s) becomes legally obligated to the loan.  Determined at the state level = Inconsistency  Will have to manage waiting periods accordingly from state to state

Managing Brokered Loans  Creditor is ultimately liable  Ensuring accuracy of broker disclosures  Knowing all affiliate relationships  Making sure timelines are met: Application date trigger  Managing waiting periods:  Confirmation of receipt of disclosures  Avoiding delayed closings

Training  Who to train?  Identifying which employees?  Closers  LOs  Processors  Real estate partners?  Title companies?  Builder partners?  Ensuring enough time for implementation and training?  Need to make business decisions early to know how to implement and how to train.  Will your vendor provide a test environment?

Evolving Clarity/ Guidance  Last round, CFPB provided clarity and guidance in October and November leading up to January implementation date.  CFPB will continue to alter existing rules:  Same day disclosure  As vendors and the industry approach effective date, more unforeseen circumstances will arise.  Industry and vendors will need to be nimble in light of evolving regulations.

Regulatory Leverage  Regulator perspectives not supported by law:  A Marketing Service Agreement is a thing of value – Lighthouse Title consent order.  Prohibition on collecting payment information for upfront fees.  Disparate Impact.  Consent orders, as opposed to law, are driving today’s regulatory landscape.  Cost and risk of challenging regulators is too great.  Industry has to find a way to challenge important topics

Consumer Leverage  Complaint management is vital in today’s environment:  CFPB complaint portal:  Complaint data is open to the public  CFPB is considering publishing the actual complaint and responses.  Managing perceptions  Yelp, but without the positive reviews  Not about who is right or wrong. Resolution is most important.  Who would you rather your customers complain to?

Resources  CFPB’s Compliance Guide  CFPB’s Guide to Forms  Integrated loan disclosure forms and samples  Model forms – blank and completed as samples (English and Spanish)  All Can be found at: http:/ / www.consumerfinance.gov/ regulatory-implementation/ tila-respa/  eRegulations – CFPB: easier way to review regulations. Only has Reg. E & Z currently.  Sign up for CFPB webinars at: fedwebinar@sf.frb.org  Freddie Mac and Fannie Mae have released industry datasets: http:/ / www.freddiemac.com/ singlefamily/ sell/ ucd.html   https:/ / www.fanniemae.com/ singlefamily/ uniform-closing-dataset  Law firm webinars