National Association of Federal Credit Unions l www.nafcu.org - PowerPoint PPT Presentation

National Association of Federal Credit Unions l www.nafcu.org

Inside the CFPB’s Mortgage Proposals (a very scary place) September 5, 2012 2:00 p.m. – 5:00 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 Remember, these are proposals – Compliance requirements may change – Dodd-Frank mandated many of these changes – CFPB proposed additional requirements – CFPB has given very short notice for comments • Understand which areas will change • Think about how your credit union currently operates and how it will need to change • Numerous new notices, timeframes to track National Association of Federal Credit Unions l www.nafcu.org

Agenda Mortgage Servicing Proposals – TILA – 3 Main Proposed Changes – RESPA – 6 Main Proposed Changes HOEPA/Section 32/High-Cost Proposal – Potential change to finance charge definition – Expanded coverage to purchases and HELOCs TILA/RESPA Integrated Disclosures – Broad Overview – New Issues and Future Confusion National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing TILA/RESPA Regulation Z & Regulation X 12 CFR 1026 & 12 CFR 1024 National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Regulation Z Proposed Changes – Prompt Crediting of Payments/Payoff Statements – Adjustable-Rate Mortgage Adjustment Notices – Periodic Statement Requirement Proposed changes would apply to all mortgage servicers (including nonbanks) The Regulation Z proposed changes would apply to different types of mortgage loans – Need to review “applicability” of each requirement National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Prompt Crediting of Payments – 1026.36 – Applies to consumer credit transactions secured by a consumer’s principal dwelling – Defines a “ full contractual payment ” as one that covers principal, interest, and escrow (if applicable), but not late fees – Partial Payments – allows servicers to hold partial payments in “suspense accounts” but would require disclosure on the periodic statement and servicers need to apply payments when the amount reaches a “full contractual payment” National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Payoff Statements – 1026.36(c)(3) – Would apply to any consumer credit transaction secured by a dwelling (not just principal dwellings) • Includes both open-end and closed-end – Statement must be sent within seven business days of request (currently five days) – Applies when credit union has received a written request for a payoff statement National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Adjustable-Rate Mortgage Notices – CFPB proposes to remove the existing “annual notice” requirement – 12 CFR 1026.20(c) – Two separate notices, two timing requirements – Applies to closed-end consumer credit transactions secured by a principal dwelling where the interest rate may increase after consummation • Does not apply to open-end credit plans (HELOCs) • Only applies when secured by principal dwelling – Model Forms proposed for both notices – Can notice be combined with other information? National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Rate Adjustment Notice – 1026.20(c) – Required prior to each change in payment is due – Timing : 60 to 120 days before the new payment is due • Increased from the current 25 to 60 days • Will credit unions know the new interest rate and payment amount 60 to 120 days out? – CFPB proposing to “grandfather” existing mortgages with “look back” periods that prevent the notice from being sent 60 to 120 before • After the rule is effective, mortgage contracts must be structured to allow sufficient time for the notices – Can be combined with periodic statement National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Initial Rate Adjustment Notice – 1026.20(d) – Required prior to the first rate adjustment – Timing : 210 to 240 days prior to the first payment due at the adjusted level. Content – Dodd-Frank required specific information – CFPB proposes to add tons of additional information to the notice. Tons . Notice would need to in writing, separate and distinct from all other correspondence National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Periodic Statement Requirement – 1026.41 – Applies to closed-end consumer credit transactions secured by a dwelling. • Does not apply to HELOCs (12 CFR 1026.7(a)) • Any dwelling . Does not need to be principal . – Monthly periodic statement requirement – What if bi-weekly billing cycle? • Can send one statement covering entire month • How does this work in practice? Two due dates? – Combined statements? • CFPB says would be ok – but will timing work? National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Periodic Statement Requirement – 1026.41 – Timing : Statement must be sent within a reasonably prompt time (4 days) after the close of the grace period of the previous cycle – First Statement : Sent no later than 10 days before the first payment is due – E-SIGN Act Consent Requirement? • CFPB proposes that credit unions would be able to send notices electronically without following the E-SIGN Act • TILA states that statement “may be transmitted in writing or electronically ” which takes it outside of E-SIGN • CFPB seeking comment on this issue National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Content of Periodic Statement – Some Required by Dodd-Frank – CFPB adds tons more information on statement Tabular Format – Requires specific disclosures to be grouped together and presented in close proximity (boxes) Inapplicable Information can be excluded – Delinquency Notice – Prepayment Penalty Disclosure* Sample Forms provide best overview National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Required Information (if applicable) – Amount Due – 1026.41(d)(1) • Amount due; payment due date; late payment fee – Explanation of Amount Due – 1026.41(d)(2) • Provide monthly payment amount – including the allocation of that payment to principal, interest and escrow (if applicable). • Total fees or charges incurred since the last statement – Past Payment Breakdown – 1026.41(d)(3) • Total of payments since last statement and a breakdown of how payments were applied to principal, interest, escrow, and fees. • Total of all payments year-to-date and the YTD breakdown • Any partial payments that have not been applied to mortgage – If applicable, this also triggers a partial payment message under 1026.41(d)(5) National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Required Information (if applicable) – Transaction Activity – 1026.41(d)(4) • All activity since last statement that credits or debits account • Covers payments received and applied, partial payments sent to suspense account, and any fees or charges – Contact Information – 1026.41(d)(6) • Must list toll-free phone number. May include other information as well – such as website address • Must be the same as the contact information provided for asserting errors or requesting information (from RESPA) – Account Information – 1026.41(d)(7) • Amount of principal balance; interest rate; the date on which the interest rate may next adjust (if applicable); the amount of any prepayment penalty *; and housing counselor information National Association of Federal Credit Unions l www.nafcu.org

Mortgage Servicing - TILA Required Information (if applicable) – Delinquency Notice – 1026.41(d)(8) • Required if member is more than 45 days delinquent • Number of days delinquent and risks of delinquency • Recent account history which shows the amount due for each billing cycle, or the date on which a payment for a billing cycle was considered fully paid. – Would need to include the lesser of the past 6 months or the last time the account was current • Total amount to bring the loan current • Loan modification acceptance or referral to foreclosure • Housing counselor information National Association of Federal Credit Unions l www.nafcu.org