The CFPB’s Final Mortgage Regulations (Or 3507 Pages in Two Hours ) February 13, 2013 2:00 p.m. – 4:00 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 • Overview of New Regulations • Overview of NAFCU Resources Available • Understand Scope & Applicability – Which Requirements apply to your CU? • Which Requirements have Exemptions? – What are the Exemption Thresholds? – Which Transactions Count? • Effective Dates of New Requirements • Which areas will take the most resources? 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
NAFCU Resources • Mortgage Reform Webcast Series • Mortgage Rules Webpage – www.nafcu.org/mortgagerules • Compliance Blog Categories • Regulatory Update Day at Reg School • Multiple Sessions at Regulatory Seminar • Articles in Compliance Monitor • Scope & Applicability Charts National Association of Federal Credit Unions l www.nafcu.org
Escrow Requirements For Higher-Priced Mortgage Loans Regulation Z 12 CFR 1026.35 Effective Date: June 1, 2013 National Association of Federal Credit Unions l www.nafcu.org
Escrow Requirements - HPMLs • Small Change to Escrow Requirement for Higher-Priced Mortgage Loans – 1026.35 • Existing Requirement Amended – Currently, member can cancel after one year – Under the new rule, members cannot cancel for the first five years. • And, only when the unpaid principal balance is less than 80 percent of the original value of the property and the member is not delinquent or in default. • Applies to applications received on or after 06/01/13 National Association of Federal Credit Unions l www.nafcu.org
Escrow Requirements - HPMLs Scope of Escrow Requirement The requirement applies to higher-priced mortgage loans that are closed-end consumer credit transactions secured by a first lien on a member’s principal dwelling. Note : Scope is unchanged by new rules. Higher-Priced Mortgage Loan (HPML) Determination The test for HPML status still looks at the loan’s APR versus the “average prime offer rate” (APOR) National Association of Federal Credit Unions l www.nafcu.org
Escrow Requirements - HPMLs Excluded from Escrow Requirement • Loans that are not higher-priced mortgages; • Subordinate lien higher-priced mortgages; • Home equity lines of credit (HELOCs); • Loans secured by shares in a co-op; • Loan to finance the initial construction of a dwelling; • Temporary or bridge loans with a term of 12 months or less; and • Reverse mortgages. 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 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(h) 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(h) 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 New Requirements for Loan Originators* • Loan Originator Compensation – .36(d) • Qualifications & Training – .36(f) • Disclosures on Loan Documents – .36(g) *Loan Originator has new definition – Differs from SAFE Act definition – which is located in CFPB’s 12 CFR 1007.102 and Appendix A National Association of Federal Credit Unions l www.nafcu.org
Loan Originator Rules & More New Requirements for Loan Originators Effective Date – January 10, 2014 Scope : Closed-end consumer credit transactions secured by a member’s dwelling. This includes manufactured homes, boats, trailers and other loans that may be secured by personal property used as a dwelling. Timeshare plans are excluded. Excluded : Home-equity lines of credit (HELOCs) 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 3 Reg Z Mortgage Servicing Requirements 1. Mortgage Periodic Statements • 12 CFR 1026.41 2. Interest Rate Adjustment Notices • 12 CFR 1026.20(c) & (d) 3. Prompt Payment Crediting and Payoff Statements • 12 CFR 1026.36(c) All three have different scopes . National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg Z Mortgage Periodic Statements – 1026.41 Eligible for Small Servicer Exemption Scope: Applies to closed-end consumer transactions secured by a member’s dwelling. This includes closed-end home equity loans as well as other closed-end subordinate lien loans. Also includes second homes, vacation homes and loans secured by personal property that is used as a dwelling (manufactured home, boat, etc.) Excludes: Open-end credit – such as HELOCs. Remember, HELOCs already have a periodic statement requirement. National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg Z Interest Rate Adjustment Notices - 1026.20 Not Eligible for Small Servicer Exemption Scope: Applies to closed-end consumer transactions secured by a member’s principal dwelling where the APR may change after consummation. Applies to adjustable-rate mortgages (ARMs). Does not apply to fixed-rate mortgages. Excludes: Open-end credit – such as HELOCs. Also, excluded are ARMs with terms of one year or less. 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 X 6 Reg X Mortgage Servicing Requirements 1. Force-placed Insurance; 2. Error Resolution & Information Requests; 3. General Servicing Policies, Procedures and Requirements; 4. Early Intervention with Delinquent Borrowers; 5. Continuity of Contact with Delinquent Borrowers; and 6. Loss Mitigation Procedures. National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg X Scope of First Three Reg X Requirements 1. Force-placed Insurance; 2. Error Resolution & Information Requests; and 3. General Servicing Policies, Procedures and Requirements. Scope: Closed- end “federally related mortgage loans.” Excludes HELOCs. Also, excludes loans on property of 25 acres or more, business-purpose loans, temporary financing and vacant land loans. Loans secured by dwellings considered personal property are also excluded. Includes both first and subordinate liens. Includes second homes and vacation homes. National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing – Reg X Scope of Next Three Reg X Requirements 4. Early Intervention with Delinquent Borrowers; 5. Continuity of Contact with Delinquent Borrowers; and 6. Loss Mitigation Procedures. Scope: Closed- end “federally related mortgage loans” secured by a member’s principal dwelling. HELOCs are excluded. Loans on property of 25 acres or more, business-purpose loans, reverse mortgages, temporary financing and vacant land loans are excluded. Loans secured by dwellings considered personal property are also excluded. Includes both first and subordinate liens. National Association of Federal Credit Unions l www.nafcu.org
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