National Association of Federal Credit Unions l www.nafcu.org
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
Mortgage Servicing - TILA
Coupon Book Exemption – 1026.41(e)(3)– Dodd-Frank included a specific exemption
– CFPB proposes to add new requirements before
credit unions can qualify for the exemption
– Only available for fixed-rate mortgages
Static and Dynamic Information
– CUs would need to provide static coupon books and
also provide “dynamic information” upon request
from a member – See Aug. 22 blog post.
Coupon book itself
– Disclosures on each coupon; on book itself
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - TILA
Small Servicer Exemption – 1026.41(e)(4)– Small servicers would be exempt if they (1) service
1000 or fewer mortgages; and (2) only service
mortgage loans in their portfolio or mortgage loans
they originated but sold (i.e., cannot service
mortgage loans originated by someone else)
– Only 1000? Yes – 1000 or fewer closed-end dwelling-
secured loans. HELOCs do not count.
– If exceed 1000? Six-month transition or next year
– CFPB assumes that mortgages are refinanced every
five years – so this allows 200 originations/year
– For more, see our August 21 blog post
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Regulation X Proposed Changes– Error resolution and information requests
– Force-placed insurance
– Information management policies and procedures*
– Early intervention with delinquent borrowers*
– Continuity of contact with delinquent borrowers*
– Loss mitigation procedures*
Some required by Dodd-Frank. CFPB adds more
requirements* (including from AG Settlement).
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Other Regulation X Proposed Changes– Expand RESPA coverage to subordinate liens
• Closed-end loans – of all liens – would be covered
– Closed-end home equities covered
• Open-end lines of credit (HELOCs) still exempt
• CFPB accepting comment on this issue (the CFPB’s
justification for expanding was “piggyback loans”)
– If escrow, servicers must advance funds for force-
placed insurance if escrow has insufficient funds
• If no escrow? CFPB seeking comment. 1024.17(k)(5).
– Escrow refunds when mortgage paid in full
• If refinance at same CU, can transfer to new escrow
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Error Resolution Procedures – 1024.35– Combined with information requests (1024.36),
replaces “qualified written request” issues
– Notice of error may be made orally or in writing
• For oral notices, CUs can designate a specific number
– Includes notices of errors made by “a person acting
on behalf of the borrower”
• This needs clarity from the CFPB. What about Regulation
P? How does CU determine if proper authority? Certify?
– Errors are limited to a finite list
• Nine covered errors
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Covered Errors – 1024.35(b)1) Failure to accept a conforming payment
2) Failure to apply an accepted payment properly
3) Failure to credit a payment as of date of receipt
4) Failure to make disbursements from escrow account
5) Improper charging of a fee
6) Failure to provide accurate payoff balance under Reg Z’s
payoff statement requirement – 1026.36(c)
7) Failure to provide accurate information about loss
mitigation options
8) Delayed transfer of information to new servicers
9) Failure to suspend scheduled foreclosure sale
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Separate telephone number and address for errors is
allowed. Trained personnel. 1024.35(c).
– Can also establish an online method for errors
Acknowledgment of Receipt – 1024.35(d)
– Written acknowledgment within five days
Response to Notice of Error – 1024.35(e)
– Generally, CUs will have 30 days to respond
• CUs can get 15 day extension if notify borrower
• CU can request additional information of borrower
– Notice required to borrower after investigation
– Borrower has right to request documents relied upon
– If multiple errors asserted, can respond separately
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Error Resolution Exclusions
– Same error that was previously asserted by the borrower
• Unless, the borrower provides new and material information
– Overbroad or Unduly Burdensome
• Overbroad if CU cannot determine the specific error asserted
• Unduly burdensome if CU could not respond without exceeding
maximum timeframe or incurring unreasonably costs
– Intended to relieve CUs of current issues with Qualified Written
Requests and consumers (and consumer advocates) using online forms
as a form of pre-litigation discovery.
• If CU determines notice is overbroad or unduly burdensome it
must notify the borrower of that fact
– Untimely notices: Notice received by CU more than one year
after loan was transferred or paid in full
CU must notify borrower of the exclusion within 5 days
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Requests for Information – 1024.36
– Information request could be oral or written
• For oral notices, CUs can designate a specific number
– Information could be requested by “a person acting
as an agent of the borrower”
• CFPB needs to provide clarity. Who is an agent?
– Can designate required telephone, address and
online for members to request information
Acknowledgment of Receipt – 1024.36(c)
– Written acknowledgment within five days
Respond within 30 days (oral or written)
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Force-placed insurance – 1024.37– Reasonable basis before obtaining insurance
– Restrictions on charging a borrower for force-
placed insurance. Must meet all three:
1. Written notice 45 days prior to fee (1024.37(c)(2);
2. Written notice following 1024.37(d)(1); and
3. During the 45-day period, credit union has not
received verification of hazard insurance
First Notice – 1024.37(c)(2)
– Sent 45 days prior to CU charging a fee
– Model Form MS-3(A)
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
MS-3(A) – Model Form for Force-Placed Insurance Notice Required Pursuant to §§§§ 1024.37(c)(2)
[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower’s Name]
[Borrower’s Mailing Address]
Subject: Please provide insurance information for [Property Address]
Dear [Borrower’s Name]:
Our records show that your [hazard] [Insurance Type] insurance [is expiring] [expired], and we do not have evidence that
you have obtained new coverage. Because [hazard] [Insurance Type] insurance is required on your property, [we bought insurance for your property] [we plan to buy insurance for your property]. You must pay us for any period during which the insurance we buy is in effect but you do not have insurance.
You should immediately provide us with your insurance policy number and the name, mailing address and phone number
of your insurance company or insurance agent. [Describe how the borrower may provide the insurance information]. [The
information must be provided in writing.]
The insurance we [bought] [buy]:
� [Costs $[premium charge]] [Will cost an estimated $[premium charge]] annually, which is probably more expensive
than insurance you can buy yourself.
� May not provide as much coverage as insurance policy you buy yourself.
If you have any questions, please contact us at [telephone number].
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Reminder Notices – 1024.37(d)(2)(i) or (ii)– Two separate notices depending on whether the
credit union has received insurance information
– Cannot send the reminder notices until 30 days
passes from the First Notice under 1024.37(c)(2)
• Receive no information – 1024.37(d)(2)(i)
– Reminder Notice following MS-3(B)
• Receives information but not verification that
borrower has continuous insurance – 1024.37(d)(2)(ii)
– Reminder Notice following MS-3(C)
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
MS-3(B) – Model Form for Force-Placed Insurance Notice Pursuant to §§§§ 1024.37(d)(2)(i))
[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower’s Name]
[Borrower’s Mailing Address]
Subject: Second and final notice – please provide insurance information for [Property Address]
Dear [Borrower’s Name]:
This is your second and final notice that our records show that your [hazard] [Insurance Type] insurance [is expiring] [expired], and
we do not have evidence that you have obtained new coverage. Because [hazard] [Insurance Type] insurance is required on your
property, [we bought insurance for your property] [we plan to buy insurance for your property]. You must pay us for any period
during which the insurance we buy is in effect but you do not have insurance.
You should immediately provide us with your insurance policy number and the name, mailing address and phone number of your
insurance company or insurance agent. [Describe how the borrower may provide the insurance information]. [The information must
be provided in writing.]
The insurance we [bought] [buy]:
• [Costs $[premium charge]] [Will cost an estimated $[premium charge]] annually, which is probably more expensive than
insurance you can buy yourself.
• May not provide as much coverage as insurance policy you buy yourself.
If you have any questions, please contact us at [telephone number].
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
MS-3(C) – Model Form for Force-Placed Insurance Notice Pursuant to §§§§ §§§§ 1024.37(d)(2)(ii)
[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower’s Name]
[Borrower’s Mailing Address]
Subject: Second and final notice – please provide insurance information for [Property Address]
Dear [Borrower’s Name]:
We received the insurance information you provided but we are unable to verify coverage from [Date Range].
Please provide us with insurance information for [Date Range] immediately.
We will charge you for insurance we [bought] [plan to buy] for [Date Range] unless we can verify that you have insurance coverage
for [Date Range].
If you have any questions, please contact us at [telephone number].
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Renewal Notices – 1024.37(e)– In order to charge a borrower for renewing or
replacing force-placed insurance, credit unions
must:
1. Provide the renewal notice in 1024.37(e)(1) at least 45
days prior to the fee; and
2. Not have received evidence during the 45-day period
that the borrower has obtained insurance.
• Content of Renewal Notice– Additional statements about prior force-placed insurance
– Model Form MS-3(D)
• Notice only required once every 12 months
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPAMS-3(D) – Model Form for Renewal or Replacement of Force-Placed Insurance Notice Pursuant to §§§§ 1024.37(e)(2)
[Name and Mailing Address of Servicer]
[Date of Notice]
[Borrower’s Name]
[Borrower’s Mailing Address]
Subject: Please update insurance information for [Property Address]
Dear [Borrower’s Name]:
Because we did not have evidence that you had [hazard] [Insurance Type] insurance on the property listed above, we bought
insurance on your property and added the cost to your mortgage loan account.
The policy that we bought [expired] [is scheduled to expire]. Because [hazard][Insurance Type] insurance] is required on your
property, we have the right to maintain insurance on your property by renewing or replacing the insurance we bought.
The insurance we buy:
• [Costs $[premium charge]] [Will cost an estimated $[premium charge]], which is probably more expensive than insurance you
can buy yourself.
• May not provide as much coverage as an insurance policy you buy yourself.
If you buy [hazard] [Insurance Type] insurance, you should immediately provide us with your insurance policy number and the name,
mailing address and phone number of your insurance company or insurance agent. [Describe how the borrower may provide the
insurance information]. [The information must be provided in writing.]
If you have any questions, please contact us at [telephone number].
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Cancellation of force-placed insurance – 1024.37(g)
– Within 15 days of receiving verification that a borrower has
insurance, a credit union must:
• Cancel force-placed insurance obtained for the
borrower’s property; and
• For any period which the borrower’s insurance was in
place, refund to the borrower all force-placed insurance
premium charges (as well as any charges that have been
assessed but not yet collected)
– In short, when a member obtains their own
insurance (or provides evidence of prior insurance)
the credit union must cancel the force-placed
insurance and refund any overlap of premiums
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Reasonable Information Management Policies &
Procedures – 1024.38
– Requires policies and procedures for maintaining
and managing information and documents related
to borrower mortgage loan accounts.
– Flexibility to design based on size, nature, and
scope of credit union’s operations.
– Safe harbor if credit union does not engage in
pattern or practice of failing to meet objectives
Credit unions being punished for the sins of large
mortgage servicers (National AG Settlement)
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Policies & Procedures Must Cover
• Access and provide accurate information
• Evaluating loss mitigation options
• Facilitate oversight of service providers
• Facilitate servicing transfers
Standard Requirements – 1024.38(c)
– Record retention (one year after transfer/paid)
– Servicing file upon request
• CFPB wants to establish a industry standard
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Servicing File Upon Request – 1024.38(c)(2)
Credit union would be required to provide upon request:
• Schedule of all payments credited or debited to the
mortgage (including escrow and suspense accounts);
• A copy of the borrower’s mortgage note;
• A copy of the borrower’s deed of trust;
• Any collection notes created by servicer personnel
reflecting communications with the borrowers;
• A report of any data fields relating to the borrower’s
mortgage by the credit union’s electronic system
(including any records of phone calls); and
• Copies of any information provided by the borrower in
accordance with 1024.35 or 1024.41.
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Early Intervention Requirements – 1024.39
– Two notices required – one oral; one written
– Oral Notice – 1024.39(a)
• Must contact borrowers within 30 days after the
payment due date.
• Must be live contact (telephone or in-person) not
recorded message.
• Good faith efforts – must try to contact on three
separate days.
• Must inform the borrower that they were late and that,
if applicable, loss mitigation options may be available.
• Notice required each time a borrow becomes delinquent
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Early Intervention Requirements – 1024.39
– Written Notice – 1024.39(b)
• Must be provided within 40 days of the payment due
date that resulted in the borrower’s delinquency
• Credit unions can provide the written notice anytime
between the missed due date and the end of the 40-day
time period (could even provide prior to oral notice)
• Written notice only required once every 180 days
– 180 days from the prior written notice; after that the
CU would need to provide written notice again
• Detailed content requirements
–Model Clauses – MS-4
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPAMS-4—Model Clauses for the Written Early Intervention Notice Pursuant to §§§§ 1024.39(b)(2)
MS-4(A)—Statement Encouraging the Borrower to Contact the Servicer (§ 1024.39(b)(2)(i) and (ii))
Please contact us. [We may be able to make your mortgage more affordable. The longer you wait, or the further you fall behind on your payments, the
harder it will be to find a solution.]
[Servicer Name]
[Servicer Address]
[Servicer Telephone Number]
[For more information, visit [Servicer Web Site or Email Address]].
MS-4(B)—Available Loss Mitigation Options (§ 1024.39(b)(2)(iii))
[You may have options that could help make your mortgage more affordable, including:]
[Forbearance. This is a temporary reduction or suspension of your mortgage payments. Forbearance might be available if recent events have made it
difficult for you to make your payments—for example, if you recently lost your job, suffered from a disaster, or had an illness or injury that increased
your health care costs. If this option is available, your lender could create a payment plan to make up any missed payments over a period of time.]
[Mortgage modification. Your lender may be able to change your loan terms, such as your interest rate, the amount of principal you owe, or the
number of years you have to repay the loan.]
[If you are not able to continue paying your mortgage, your best option may be to find more affordable housing. As an alternative to foreclosure, you
might be able to transfer ownership of your home without having to pay off the full amount of your mortgage, although you would be required to
leave your home. For example, you may be eligible for the following option[s]:]
• [Short-sale. With your lender’s permission, you might be able to sell your home and pay off your mortgage even if the sale price is less than your
remaining balance. You might also be eligible to receive money to help you move.]
• [Deed-in-lieu of foreclosure. Your lender may release you from your mortgage if you transfer ownership of your home to your lender. As with a
short sale, you might also be eligible to receive money to help you move.]
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
MS-4(C)—Additional Information About Loss Mitigation Options (§ 1024.39(b)(2)(iv))
[Call us today to learn more about your options and for instructions on how to apply.]
MS-4(D)—Foreclosure Statement (§ 1024.39(b)(2)(v))
Foreclosure is a legal process a lender can use to take ownership of a property from a borrower who is behind on his or her mortgage
payments. The foreclosure process usually begins approximately [_] days after you miss a mortgage payment, although it may begin earlier
or later. The foreclosure process depends on the laws of the state where your home is located, the terms of your loan, whether you are
covered by the Servicemembers Civil Relief Act, and other factors.
MS-4(E)—State Housing Finance Authorities and Housing Counselors (§ 1024.39(b)(2)(vi))
For help exploring your options, Federal government agencies provide contact information for housing counselors, which you can access
by contacting [the Consumer Financial Protection Bureau at [Bureau Housing Counselor List Telephone Number] or [Bureau Housing
Counselor List Web Site]] [the Department of Housing and Urban Development at [HUD Housing Counselor List Telephone Number] or
[HUD Housing Counselor List Web Site]].
Your State housing finance authority may also be able to help. You can reach them at [State Housing Finance Authority Telephone Number]
or [State Housing Finance Authority Web Site].
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Continuity of Contact – 1024.40– Within five days of the oral delinquency notice (1024.39(a)),
CU must assign personnel to the borrower
• CU personnel would also need to respond to the borrower’s
“agent” which could include housing counselor or attorney
– Credit union could assign a single person or a team
– Assigned personnel must be available by telephone
• Borrower must be able to leave a voicemail
• Personnel must respond within three days
– Assigned personnel must be able to perform an enumerated
list of functions and CUs need policies & procedures
– Personnel must remain assigned until:
• Refinance; Paid off; three on-time payments; transfer; foreclosure
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Loss Mitigation – 1024.41– CFPB proposing specific procedures for servicers to follow
related to loss mitigation options
• Does not require credit unions to offer loss mitigation options
– Loss Mitigation Application – 1024.41(b)
• A complete loss mitigation application includes all the
information the servicer regularly obtains and considers
• If incomplete application, servicer must attempt to
obtain additional information to complete application
• If incomplete application, must send notice to borrower
– Review of Loss Mitigation Application – 1024.41(c)
• Must evaluate borrower for all loss mitigation options
for which the borrower may qualify. Within 30 days.
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Denial of Loan Modification – 1024.41(d)
– If CU denies a loan modification, must provide
borrower with written notice which includes the
specific reasons for the determination.
– Notice must also inform the borrower of their right
to appeal the CU’s determination
Borrower Response – 1024.41(e)
– If CU does not hear back from borrower within 14
days of the offer of loss mitigation, it may deem the
offer rejected.
– But, if member pays new amount = accepted
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Deadline for Loss Mitigation App – 1024.41(f)
– CU can set a deadline for a borrower to submit a
complete loss mitigation application
• So long as the deadline is no earlier than 90 days prior to
a scheduled foreclosure sale
Prohibition on Foreclosure Sale – 1024.41(g)
– If borrower submits loss mitigation application by
the deadline, CU cannot foreclose unless:
1. CU denies application and no appeal;
2. CU denies borrower’s appeal of determination;
3. Borrower rejects the CU’s offer; OR
4. Borrower fails to perform terms of loss mitigation option
National Association of Federal Credit Unions l www.nafcu.org
Mortgage Servicing - RESPA
Appeal Process – 1024.41(h)– Borrower has right to appeal loan modification denial
– CU must give at least 14 days for borrower to appeal
– Appeal must be reviewed by different personnel than those
that made the initial determination
– CU must decide the appeal within 30 days
Other liens – 1024.41(j)– Within 5 business days, a CU that receives a complete loss
mitigation application must determine if other servicers
have liens
– If so, provide the application to those servicers
– If CU is the other servicer – MUST FOLLOW ALL THE
REQUIREMENTS as if application was sent to the CU directly
National Association of Federal Credit Unions l www.nafcu.org
HOEPA/Section 32
High-Cost Mortgages
Regulation Z
12 CFR 1026
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Proposal to amend Regulation Z to expand
HOEPA/High-Cost/Section 32 Mortgage Loans
• Comments are due September 7, 2012• Except “finance charge” proposal – November 6, 2012
• Currently, protection is limited to refinance
and closed-end home equity loans
Proposal would expand coverage to include:
• Purchase money mortgages
• Home equity lines of credit (HELOCs)
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
HOEPA Background
• Currently, very few credit unions make HOEPA loans
• HOEPA loans are small part of the mortgage market
– In 2005, 8.2 million originations; 36,000 HOEPA loans
– In 2010, 5.3 million originations; 3,400 HOEPA loans
So, why should credit unions be concerned?
• Expanded definition to purchases & HELOCs
• Proposal to change “finance charge” & APR
• Burden is in determining if you have a HOEPA loan
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
CFPB Doesn’t Get It
In the CFPB’s cost-benefit analysis:
“We do not discuss the costs and benefits of
determining whether a loan is a high-cost mortgage,
e.g., the cost of computer systems and software,
employee training, outside legal advice, and similar
costs potentially necessary to determine whether a
loan is defined as a high-cost mortgage.” Page 153.
Suggestion: CFPB should create an online calculator
where credit unions could input the loan information
and CFPB certifies if loan is high-cost or not
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
General Coverage
Transaction is considered a “high-cost” mortgage loan
if it is secured by a principal dwelling and one of the
following thresholds is triggered:
1. APR at consummation exceeds the “average prime
offer rate” (APOR) for a comparable transaction;
2. Points and Fees test; or
3. Prepayment Penalty* can be charged more than 36
months after consummation or is more than 2 % of the
amount prepaid
*Includes waived closing costs that could be recouped
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
APR Threshold – 1026.32(a)(1)(i)
• Currently tied to “Treasury securities”
• Dodd-Frank moves to APOR - same as “higher-priced”
• First lien mortgages $50,000 or greater: 6.5 percentage
points above APOR
• First lien mortgages on dwelling that is personal
property and less than $50,000: 8.5 percentage points
above APOR
• Subordinate liens: 8.5 percentage points above APOR
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Impact of “finance charge” and APR Change
CFPB is proposing to move to an “all-in” APR calculation
where almost all fees would be finance charges
How does this impact HOEPA loans?
The APR threshold is based off the APOR. The APOR is “generally
calculated using data that includes only contract interest rate and
points, but not other origination fees.” Page 43.
Thus, the APR – under an all-in approach – would rise significantly
but the APOR would not. More loans would be HOEPA loans.
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Impact of “finance charge” and APR Change
CFPB is proposing to create a new metric - the transaction
coverage rate (TCR) - that credit unions would need to
calculate to determine if a loan was a HOEPA loan.
If adopted, credit unions would need to calculate the APR
for disclosures and calculate the TCR for HOEPA purposes.
CFPB claims it would be easier for CUs under this two
metric approach.
Suggestion: CFPB should create an online calculator to
determine the TCR and HOEPA coverage.
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Impact of “finance charge” and APR Change
What about HELOCs?
The proposed change – to an all-in APR – would only
apply to closed-end mortgage loans. Not HELOCs.
So, how do you determine HOEPA status for a HELOC?
Use the APR. But what do you compare it against?
CFPB states that CUs should use the APOR for the most
closely comparable closed-end mortgage loan. Huh?
– Comment 3 to 1026.32(a)(1)(i) gives one example that
compares a HELOC initial fixed-term to an ARM
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Calculating APR for HELOCs
CFPB proposes a difference between variable-rate where
the index is “outside the creditor’s control” and one
where the index may vary at any time
– If outside of control, calculate the APR using the maximum
margin to the value of the index at the opening of the plan
– If may vary at any time (or if a floor rate?), calculate the APR
using the maximum interest rate that may be imposed during
the plan.
If a floor rate pushes HELOCs into the second
calculation, many HELOCs will be high-cost
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Points & Fees Threshold – 1026.32(a)(1)(ii)
• For transactions of $20,000 or more, points and
fees exceed 5 percent of the total transaction
amount
• For transactions of less than $20,000, points and
fees exceed the lesser of 8 percent of the total
transaction amount or $1000 (adjusted annually)
• Bona fide third party charges not retained by the credit
unions are excluded from “points and fees”
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Prepayment Penalty Threshold – 1026.32(a)(1)(iii)
• Remember, prepayment penalties prohibited for Federal
Credit Unions
• NCUA does allow FCUs to “recoup” waived closing costs
• Proposed definition of “prepayment penalty” for Reg Z
includes recouping waived costs
• Dodd-Frank further restricts prepayment penalties
• What about HELOCs? Calculate 2% of credit limit
– Comments 2-3 of 1026.32(a)(1)(iii)
See waived closing cost discussion on Pages 100-101
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
New HELOC Disclosures for HOEPA Loans
For HOEPA loans, credit unions are required to
disclose payment examples.
How do you show payment examples for a HELOC?
CFPB proposes to require credit unions to disclose
payment examples showing first minimum payment for
the draw period and repayment period.
CFPB requires assumptions to make the estimates and
then requires credit unions to tell borrowers the payment
examples are estimates
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Pre-Loan Counseling – 1026.34(a)(5)
Prior to making a high-cost mortgage loan, credit unions
need to receive a written certification that the borrower
has obtained homeownership counseling.
– Credit unions can process the application but cannot extend
the loan until it receives the certification
Timing: Required counseling must occur after the
member receives the GFE or HELOC disclosures
List of Counselors: Must be given but credit unions
can follow 1026.20 and receive a safe harbor
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
List of Homeownership Counselors – 1026.20
Proposal would require the list be give to all
applicants of federally-related mortgage loans
– Requirement extends to more than just HOEPA loans
Must provide written list of five homeownership
counselors or counseling organizations by using the
zip code of the applicant’s current address
– CFPB is planning on developing an online portal
Timing: No later than 3 business days after application
National Association of Federal Credit Unions l www.nafcu.org
HOEPA Changes
Fee Limits – 1026.34(a)(7) & 1026.34(a)(8)
Modification or deferral fees would be prohibited for
high-cost mortgages (skip-a-pay fees?)
– Proposal is very broad and would cover any type of fee to
“modify, renew, extend or amend a high-cost mortgage, or to
defer any payment due under the terms of the mortgage.”
Late fees are capped at 4 percent of the “amount of the
payment past due” for high-cost mortgages
Also, Dodd-Frank created a mandatory 15-day grace
period for high-cost mortgage loans
National Association of Federal Credit Unions l www.nafcu.org
Integrated Disclosures
TILA/RESPA
Regulation Z & Regulation X
12 CFR 1026 & 12 CFR 1024
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
TILA/RESPA Integrated Disclosure Proposal
Proposed on July 9, 2012
Comment Deadline of November 6, 2012
Dodd-Frank required a proposed rule by July 21, 2012
BUT - there is no statutory deadline for a finalized rule
Congress has been seeking a solution to the confusion
from the TILA/RESPA disclosures for over 16 years
– EGRPRA of 1996
– Dodd-Frank mandates combined disclosures
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Applicability of TILA/RESPA Integrated Disclosure
• Would apply to most closed-end consumer credit
transactions secured by real property
– Would not apply to dwelling secured by personal property
• Were previously exempt from RESPA. Still need to follow Reg Z.
– Would not apply to home equity lines of credit (HELOCs)
– Would not apply to reverse mortgages
• Proposal adds new categories of covered loans
– Construction-only loans
– Loans secured by vacant land or 25 or more acres
– Loans to trusts
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Proposed Change to Finance Charge Definition
CFPB proposes to move to an “all in” finance charge
(currently, there is a “some in, some out” approach)
– Proposal would apply to closed-end transactions secured
by real property or a dwelling
• Not limited to transactions covered by Integrated Disclosures
– Example: Mobile home or manufactured home – personal property
• Would not apply to HELOCs
• Would not apply to other closed-end loans (i.e., auto loans)
Comment Period Extended to November 6, 2012
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Proposed Change to Finance Charge Definition
New definition would impact the calculations for:
– Higher-priced mortgage loans – 1026.35
• Including mandatory escrow for first liens
– High-cost mortgage loans – 1026.32
• As discussed in HOEPA section, would impact the APR threshold
for determining which loans are high-cost (APR vs. APOR test)
– Higher-risk mortgage loans (new appraisal proposal)
– Qualified Mortgages (Ability to Repay proposal)
• Based off the points and fee calculation which uses the finance
charge as part of the calculation
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Proposed Change to Finance Charge Definition
Proposed “transaction coverage rate” - TCR
“Although adopting the TCR would mean that
lenders would have to calculate one metric for
disclosure and another for purposes of
regulatory coverage, both metrics would be
simpler to compute than APR today using the
current definition of finance charge.”
Page 110 of TILA/RESPA Disclosure Proposal
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Other Potential Definition Changes
• “Application”
– Proposal would remove the “any other information
deemed necessary by the loan originator” clause
– Currently, there are 7 elements for “application”
– Proposal would allow creditors to collect other
information prior to collecting the [now] 6 elements
– Once a CU has the 6 elements, the 3 business day
clock for the Loan Estimate disclosure begins
• “Business Day” - All Except Sunday/Holidays
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Pre-disclosure Issues
No fees can be charged prior to disclosure
– Exception: Credit report fee
– Taking a check or credit/debit card information would not be
allowed (even if not charged)
Borrower must provide “intent to proceed” prior to the
CU charging any fees (similar to RESPA)
Credit unions can provide “preliminary written estimates”
but must disclose that the information is not the “Loan
Estimate”
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Loan Estimate Disclosure
Combines the Early TIL and the GFE
Model Forms H-24
Timing: Within 3 business days of application
Waiting Period: Loan Estimate Disclosure must be
provided at least 7 business days prior to consummation
– Clock starts when disclosures placed in the mail
Delivery: In person disclosures are delivered at that time
– Mailed or electronically delivered disclosures are presumed to
be received 3 business days after sent
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Written List of Settlement Service Providers
Must be sent separately from Loan Estimate Disclosure
Timing: Within 3 business days of application
Model Form H-27
Special Information Booklet
Applicability: Consumer credit secured by real property
– Certain exclusions (refinance; subordinate lien; personal property)
Timing: Must be sent within 3 business days of application
CFPB currently reviewing and may make changes in future
HELOCs? Use the HELOC brochure under 1026.40
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Tolerance Levels
• Proposal would move any fees from an affiliate
(i.e., CUSO) to the zero tolerance level
• Any “no shop” services would be moved to the
zero tolerance level (because CU should know
costs based on repeated use)
• 10 percent tolerance level only for (1) services
from a non-affiliate the borrower can shop for
and (2) recording fees
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Changed Circumstances
New definition and new categories and examples
1. Information Inaccurate; New Information
2. Consumer’s Creditworthiness or Value of Collateral
3. Revisions Requested by Consumer
4. Interest Rate Dependent Charges
5. Expiration (no intent to proceed – 10 business days)
6. Delayed Settlement Date on Construction Loan
Revised disclosures must be delivered within 3
business days of determining changed circumstance
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Closing Disclosure
Combines the Final TIL and HUD-1 or HUD-1(A)
Timing: At least 3 business days before consummation
– Timing restarts when revised disclosures
Delivery: Presumed received 3 business days after
mailed (presumption can be rebutted by evidence)
Model Forms H-25
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Subsequent Changes
Where 3 business day waiting period is not applicable
1. Changes Due to Consumer/Seller Negotiations
2. De minimus Change (less than $100)
3. Events After Consummation (taxes, recording fees)
4. Changes Due to Clerical Errors (non-numerical)
– No later than 30 days after consummation
5. Refunds Related to Tolerance Levels
– No later than 30 days after consummation
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Record Retention
Proposal would require CUs to retain evidence of
compliance for three years
Must retain the Closing Disclosures for five years
Electronic Records
Proposal would require CUs to keep records in an
electronic, machine readable format
– Where record can be analyzed & processed by spreadsheet or
database program
– Image reproductions, PDFs or document text not ok
National Association of Federal Credit Unions l www.nafcu.org
TILA/RESPA
Lender Cost of Funds
Proposal would allow CUs to use either the most recent ten-
year Treasury or the CU’s actual cost of borrowing the funds
– Is this useful to consumers? Not in the slightest
– CFPB alternatively proposing to remove requirement
Total Interest Percentage
Total interest paid over the life of the loan shown as a
percentage of the loan’s principal
– CFPB alternatively proposing to remove requirement
– Contributes to consumer confusion and information overload
National Association of Federal Credit Unions l www.nafcu.org
Questions?
Contact Info:
Steve Van Beek, Esq., NCCO
Email: [email protected]
Direct Phone: 703.842.2266
www.nafcu.org/compliance
www.nafcucomplianceblog.com
National Association of Federal Credit Unions l www.nafcu.org