mortgage lending tsunami - texas land title association · – defense to foreclosure by recoupment...

Mortgage Lending

Tsunami Dodd-Frank, CFPB and Beyond

2013 Texas Land Title Institute

Robert R. Wisner Crain, Caton & James

Houston, TX

ROBERT R. WISNER CRAIN, CATON & JAMES, P.C.

1700 Five Houston Center 1401 McKinney Street

Houston, Texas 77010-1079 Direct Dial Number (713) 752-8607

Email [email protected] www.craincaton.com/attorneys/robert-wisner

BIOGRAPHICAL INFORMATION Robert R. Wisner is a graduate of the University of Michigan, Ross School of Business Administration, with distinction, and Law School and practices law in Houston, Texas, with Crain, Caton & James, where he serves as President. Rob is the author of Usury and Texas Credit Laws, the “go-to” guide for lending in Texas for over 20 years, and frequently publishes articles, presents seminars and conducts in-house training on consumer and commercial lending. Rob represents banks and other financial services providers ranging from community banks to large multi-state holding companies and finance companies. His advice and unique expertise on consumer and commercial lending forms and procedures are sought not only by financial institutions, but also by forms companies, attorneys and regulators. Rob is certified by the Texas Board of Legal Specialization in both residential and commercial real estate law, a fellow of the State Bar College, a member of the Texas College of Real Estate Attorneys, the Texas Association of Bank Counsel, the Conference on Consumer Finance Law, and numerous committees and subcommittees of the American Bar Association, Business Law and Real Property, Probate and Trust Law Sections.

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Mortgage Lending Tsunami Dodd-Frank, CFPB and Beyond

Robert R. Wisner

Crain Caton & James

Houston, Texas

Robert R. Wisner

Crain, Caton & James1401 McKinney Street, 17th Floor

Houston, Texas 77010(713) 752‐8607

[email protected]/attorneys/robert‐wisner

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EARLY TIL DISCLOSURESJuly 30, 2009

• Expanded Coverage:• Any loan secured by a “dwelling,” not only principal dwelling

• Additional Disclosure:• “You are not required to complete this agreement merely because

you have received these disclosures or signed a loan application.”

• No Fees Until Receipt of Early Disclosure

• Early Disclosure:• Delivered within 3 days of application• At least 7 business days before consummation• If the APR in the early disclosure is not “accurate” within tolerance, then a

corrected disclosure must be provided within 3 business days of consummation

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HIGHER‐PRICED MORTGAGE LOANOctober 1, 2009

• Defined: A consumer credit transaction secured by the consumer’s principal dwelling in which the APR for the loan exceeds

• For a first lien, 1.5% above the average prime offer rate (“APOR”) for a comparable transaction; or

• For a subordinate lien, 3.5% above the APOR.

• Requirements:1. Verification of Repayment Ability;2. Escrows required for a first lien loan for at least 1 year;

and3. Prepayment penalties are prohibited.

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TRANSFER NOTICEJanuary 19, 2010

• A required notice under TIL (in addition to and different from RESPA) of a transfer of legal title to a mortgage loan, including the following information:

• The name, address and telephone number of the new owner;

• The date of transfer;• Contact information for an authorized representative of the new owner; and

• The location where the transfer of ownership is recorded.

• At its option, a covered person may “provide any other information regarding the transaction.”

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LOAN ORIGINATOR COMPENSATIONAugust 16, 2010

• Prohibit compensation based on a loan term (e.g., interest rate or other terms). Loan amount is not a loan term.

• Prohibits a loan originator from receiving compensation from the consumer and anyone else

• Prohibits “steering”

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NEW MORTGAGE DISCLOSURESJanuary 30, 2011

Rate and Monthly Payment

Interest Rate ____%

Principal + Interest Payment $_____________

Est. Taxes + Insurance (Escrow)• [Includes (Private) Mortgage Insurance]

$_____________

Total Est. Monthly Payment $_____________

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Interest Rate and Payment Summary [Appendix H‐4(E)]

Balloon Payment Notice:Final Balloon Payment due (date): _____

No Guarantee‐to‐Refinance Statement:There is no guarantee that you will be able to refinance to lower your rate and payments.

FULL DEPOSIT INSURANCE ONNONINTEREST BEARING TRANSACTION ACCOUNTS

Expired December 31, 2012

• IOLTAs and other noninterest bearing transaction accounts are now subject to standard aggregation and deposit insurance limits ($250,000.00)

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Dodd‐Frank and CFPB

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Dodd‐Frank and CFPB

• Dodd/Frank Wall Street Reform and Consumer Protection Act Effective July 21, 2010 (2,315 pages)

• Title XIV of Dodd‐Frank established the Consumer Financial Protection Bureau (“CFPB”) consolidating 18 consumer financial laws

• Dodd‐Frank required final regulations within 18 months (January 10, 2012) to take effect not later than 12 months thereafter (January 10, 2013)

• January 10‐20, 2013 CFPB promulgated:– 8 sets of regulations– Regulations Z, X and B– 3,507 pages– Generally effective January 10‐18, 2014, but some June 1, 2013

• www.consumerfinance.gov/regulations/

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Small Entity Compliance Guides

• Ability‐to‐Repay and Qualified Mortgage Rule (October 17, 2013)• 2013 Loan Originator Rule (November 8, 2013)• 2013 RESPA and TILA Mortgage Servicing Final Rules (June 7, 2013) • TILA Escrow Rule (April 18, 2013)• 2013 Home Ownership and Equity Protection Act Rule (May 2,

2013)• TILA Higher‐Priced Mortgage Loans Appraisal Rule (May 2, 2013)• ECOA Valuations Rule (May 2, 2013) • 2013 CFPB Dodd‐Frank Mortgage Rules Readiness Guide (July 2013)• and• Examination Procedures, along with First Update (June 4) and

Second Update (August 15).

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ABILITY‐TO‐REPAY (ATR)and

QUALIFIED MORTGAGE (QM)

Effective January 10, 2014

Amends Truth in Lending Regulation Z

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ATR & QM CITATIONS

• Final Rule January 30, 2013 78 Fed. Reg. 6407

• Amendment June 12, 2013 78 Fed. Reg. 35429

• Amendment July 24, 2013 78 Fed. Reg. 44685

• Correction July 30, 2013 78 Fed. Reg. 45842

• Amendment October 1, 2013 78 Fed. Reg. 60381

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Ability to Repay (ATR)

• Covers a “residential mortgage loan,” which is a consumer credit transaction secured by a dwelling

• Exemptions:– HELOC or timeshare

– Reverse mortgage, except for prepayment penalty restrictions

– Bridge or initial construction loan with a term of 1 year or less, except for prepayment penalty restrictions (Home improvement loan? Interpretation from CFPB)

– Certain nonprofit creditors (Final rule published June 12)

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Ability to Repay (ATR):

• A lender may not make a covered mortgage loan unless the lender makes a reasonable and good faith determination, based on verified and documented information, at or before consummation of the loan, that the borrower will have a reasonable ability to repay the loan according to its terms

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Ability to Repay (ATR)Only six ways to comply:

• Verify repayment ability considering 8 factors

• Qualified Mortgage (QM)

• Small Creditor Balloon Payment QM

• Rural Balloon Payment QM

• Temporary (GSE) QM

• Refinance a “non‐standard” mortgage into a standard mortgage

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Ability to Repay (ATR):

• Liability:– Actual Damages– Statutory damages equal to the sum of all finance charges and fees– Court costs and reasonable attorney’s fees– Defense to foreclosure by recoupment or set off– Statute of limitations for suit increased to 3 years from date of occurrence or

violation– No statute of limitations for defense to foreclosure by recoupment or set off– Claim may be made against any lender, assignee, or other holder

• Safe Harbor:– A QM that is not “higher‐priced” receives a safe harbor, conclusive

presumption of compliance (Small creditors get 3.5%, rather than 1.5% above APOR, for first lien loans)

– A QM that is “higher‐priced” receives a rebuttable presumption of compliance

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Ability to Repay (ATR)

• Lender must verify information relied upon in determining ATR using reasonably reliable third party records considering 8 factors:

• Current or reasonably expected income or assets, excluding the value of the dwelling;

• Current employment status;

• Monthly payment on the loan (Special rules for balloon payments, interest only or negative amortization);

• Monthly payment on any simultaneous loan the lender knows or has reason to know will be made;

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Ability to Repay (ATR) ‐ Continued

• Monthly payment for mortgage‐related obligations;

• Current debt obligations, alimony and child support;

• Monthly Debt to Income (DTI) or residual income; and

• Credit history.

• See Appendix Q for standards for determining Monthly Debt and Income (See July 24 rule for amendments

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QUALIFIED MORTGAGE (QM)

• To be a QM, a loan must have:• Substantially equal regular periodic payments, including ARMs that adjust without balloon payments or negative amortization;

• A term of 30 years or less (except a balloon payment QM)

• Borrower’s debt‐to‐income ratio of 43% or less; and

• Total points and fees of 3% or less of the loan amount (or greater for loans under $100,000.00)

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QM – Points and Fees

• The following fees are included:

• All Finance Charges, except interest

• Loan originator compensation (Clarified June 24 –Might not be double counted with Finance Charges)

• Real estate related fees, if they are unreasonable or paid to the creditor or an affiliate

• Credit insurance premiums

• Prepayment penalties

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QM – Points and Fees(Real Estate Related Fees Excluded)

• Title search, policy and survey

• Loan document preparation

• Notary and credit report

• Appraisal and flood determination

• Tax and insurance escrows

• Either 1 or 2 bona fide discount points

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Temporary Small Creditor Balloon Payment QM

• Lender must• Originate no more than 500 first lien mortgages per year;

• Have less than $2 billion in assets;• Keep the loan in its own portfolio for at least 3 years (or not transfer legal title to any person who is not a small creditor); and

• Consummate the transaction on or before January 10, 2016.

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A qualified small creditor maymake a Balloon Payment QM if:

• The loan meets all of the other QM requirements, except those for a balloon payment

• The lender determines the borrower’s ability to repay the loan

• The interest rate is fixed

• The payments are substantially equal calculated on a 30 year or less amortization, with a balloon payment due in not less than 5 years

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Rural Balloon Payment QM

• Lender must

• Originate no more than 500 first lien mortgages per year;

• Have less than $2 billion in assets;

• Operate and originate at least 50% of its first lien mortgages in a predominately rural or underserved area designated by CFPB; and

• Comply with same balloon payment requirements as a small creditor.

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Temporary (GSE) QM

• If a loan satisfies the regular periodic payment, 30 year maximum term, and maximum points and fees test, it may be a QM until January 10, 2021 (or earlier expiration if agencies adopt their own rules sooner) if the loan is eligible for:

• Purchase or guarantee by FNMA or FHLMC• Insurance by HUD/FHA or the Rural Housing Service; or

• Guarantee by VA or Department of Agriculture• (See July 24 Federal Register Amendments for clarification)

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Refinancing a “non‐standard mortgage”into a “standard mortgage”

• Non‐Standard Mortgage

• ARM with introductory fixed rate for a period of 1 year or longer;

• Interest‐only loan; or

• Negative amortization loan.

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Standard Mortgage

• Regular periodic payments, no negative amortization or balloon payment

• QM points and fees limit (generally 3% for loans of $100,000 or more)

• Term is 40 years or less

• Fixed rate for first 5 years

• Proceeds used only to payoff non‐standard mortgage and closing costs

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Refinancing a “non‐standard mortgage”

• The lender must be the holder or servicer of the non‐standard mortgage

• Monthly payments must be “materially lower”• The borrower’s application must be received within 2 months of a recast

• The borrower must not have been more than 30 days late on one payment more than once in the last 12 months or at all in the last 6 months

• The lender is not required to verify ATR if the lender “has considered whether the standard mortgage likely will prevent a default by the consumer on the non‐standard mortgage once the loan is recast”

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LOAN ORIGINATOR COMPENSATION

Effective: January 10, 2014

(June 1, 2013 for Arbitration)


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Loan Originator Compensation Citations

• Final Rule February 15, 2013 78 Fed. Reg. 11279

• Delay Effective Date May 31, 2013 78 Fed. Reg. 32547(Insurance)


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Loan Originator Defined

• Covers closed‐end consumer transactions that are secured by a “dwelling”

• Loan Originator is a person who in expectation of or for direct or indirect compensation or other monetary gain does any of the following:– Takes an application;– Offers, arranges, or assists consumer in obtaining or applying to obtain, negotiates or makes an extension of consumer credit; or

– Through advertising or other means of communication represents that such person can or will perform such activities.

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Loan Originator does not include:

– A person who does not take an application and performs only purely administrative or clerical tasks;

– Employees of a manufactured home retailer who does not take a consumer credit application, offer or negotiate credit terms, or advise consumer on credit terms;

– Only real estate brokerage activities (unless compensated by creditor or loan originator);

– Servicer’s employee who modifies delinquent or reasonable likelihood of defaulting loans

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Loan Originator Prohibitions

• A loan originator may not receive any compensation based on a term of a transaction or a proxy for a term of a transaction (e.g. interest rate or points)

• The loan amount is not a term of a transaction

• A loan originator is prohibited from steering a consumer to a transaction that results in more compensation for the loan originator unless in the consumer’s best interest

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Dual Compensation Prohibited

• Dual compensation is prohibited. If a consumer pays a loan originator, then the loan originator may not receive any compensation from anyone else.

• A loan originator may pay its own employees, as long as the compensation is not based on a loan term.

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Consumer Payment ofUpfront Points and Fees

• Section 1403 of Dodd‐Frank prohibits a consumer from paying any upfront points or fees if anyone other than the consumer pays any compensation to a loan originator

• CFPB chose not to adopt this provision, so that a consumer may pay a loan originator and discount fees, origination fees and bona fide third party charges not retained by the lender

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Bonuses, Profit Sharing andPooled Compensation

• No compensation may be based on mortgage‐related profits

• Exception: Contributions to either: (1) a non‐deferred profits based compensation plan; or (2) a designated tax‐advantage defined benefit plan (e.g., 401(k)), as long as– No compensation based on the originator’s own transactions; and

– The contribution is 10% or less of the originator’s total compensation for the period or the originator was the originator of 10 or fewer transactions in the preceding 12 months

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Single Premium Credit Insurance Prohibited

• Effective January 10, 2014, a lender may not finance credit insurance premiums

• (Amended May 31, 2013 to delay the effective date from June 1, 2013 to January 10, 2014)

• Monthly premiums are still permissible

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Mandatory Arbitration Prohibited

• Effective June 1, 2013, mandatory arbitration or any other non‐judicial procedure to resolve or settle any claims arising out of the transaction is prohibited

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Record Retention

• Records of compensation paid and LO compensation agreement must be retained 3 years after payments

• Records should demonstrate:

– Nature and amount of compensation;

– Compensation was paid and by whom;

– Compensation was received and by whom; and

– When payment and receipt occurred.

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MORTGAGE SERVICING

Effective: January 10, 2014Amends RESPA, Regulation X, andTruth in Lending Regulation Z

(Applies to loans closed prior to effective date)

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Mortgage Servicing Citations

• Final TIL Rule February 14, 2013 78 Fed. Reg. 10901

• Final RESPA Rule February 14, 2013 78 Fed. Reg. 10695



• Interim Final Rule October 23, 2013 78 Fed. Reg. 62993

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General Servicing Requirements(All Servicers):

• Payments credited on the date of receipt

• Payoff statements within 7 days of written request

• ARMs– First interest rate adjustment notice sent 210‐240 days before first rate adjustment (Not required if the first payment due after the first interest rate adjustment is due on or before August 7, 2014)

– Subsequent notices: 25 or 60 ‐ 120 days

– New model form disclosures for interest rate and payment adjustments. Forms H‐4(D)(1), (2), (3) and (4)

– Do not apply to an ARM with term of one (1) year or less

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• Payments from escrow accounts must be made timely to avoid a penalty

• Force placed insurance

– First notice, 45 days before purchasing

– Second notice, 15 days before purchase, if not purchased by the borrower

– If escrow for insurance, then the lender must continue the policy, rather than force place insurance

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• Requests for information and Error resolution procedures

– 5 days to acknowledge receipt

– 10 days for contact information for owner or assignee

– 30 days for other information, 15 day extension may be available

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No foreclosure notices or actions until 120 days delinquent

• RESPA Regulation X, §1024.41(j) now provides:– “A small servicer shall be subject to the prohibition on foreclosure referral in paragraph (f)(1) of this section.”

• In turn, §1024.41(f)(1) states:– (1) Pre‐foreclosure review period. A servicer shall not make the first notice or filing required by applicable law for any judicial or non‐judicial foreclosure process unless:

– a borrower’s mortgage loan obligation is more than 120 days delinquent;

– the foreclosure is based on a borrower’s violation of a due‐on‐sale clause; or

– the servicer is joining the foreclosure action of a subordinate lienholder.”

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Small Servicers

• A “small servicer” services 5,000 or fewer mortgage loans, for all of which the servicer or an affiliate is the creditor or assignee.

• The determination is based on the number of mortgage loans serviced as of January 1 for the remainder of the calendar year. If a servicer crosses the threshold, it will remain a small servicer for the longer of 6 months or until the next January 1.

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Requirements for servicers that are not Small Servicers:

• Periodic statements each billing cycle (coupon books for fixed rate loans) – Sample forms: Appendix H‐30(A), (B) and (C)

• Adoption and implementation of servicing policies, procedures and requirements

• Early intervention requirements

• Continuity of contact

• Loss mitigation procedures

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CFPB Bulletin 2013‐01 February 11, 2013

• Warns of increased regulatory scrutiny and areas of focus relating to servicing transfers

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CFPB Bulletin 2013‐12 October 15, 2013

1. Policies and procedures regarding identification and communication with successors in interest of a deceased borrower

2. Communication under the Early Intervention Rule3. Servicer obligation to provide notices to borrowers who exercise

their rights under FDCPA barring debt collector communications

HIGH‐COST MORTGAGES



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High Cost Mortgage Citations


• Proposed Rule May 2, 2013 78 Fed. Reg. 25638

• Amendment June 12, 2013 78 Fed. Reg. 35429



• Amendment November Interpretative Rule (Homeownership Counseling Organizations List)

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Definition of High‐Cost Mortgage

• Expands the coverage of a high‐cost mortgage to include:

– Open‐end credit plan (HELOC)

– Residential mortgage transaction (i.e., purchase money loan), except to finance initial construction

• Lowers the thresholds for a high‐cost mortgage

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Definition of High‐Cost Mortgage

• Any consumer credit transaction that is secured by the consumer’s principal dwelling and in which:– The annual percentage rate will exceed the APOR by more than:

• 6.5 percentage points for a first lien transaction

• 8.5 percentage points for a first lien transaction if:– Dwelling is personal property; and

– The loan amount is less than $50,000.00

• 8.5 percentage points for a subordinate lien transaction.

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Definition of High-Cost Mortgage – Continued

– The total points and fees will exceed:• 5% of total loan amount for a loan of $20,000.00 or more

• For a loan less than $20,000.00, the lesser of:– 8% of the total loan amount; or

– $1,000.00.

– The loan has a prepayment penalty:• More than 36 months after consummation; or

• That can exceed in total more than 2% of the amount prepaid.

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High Cost MortgageProhibited Acts and Practices

• Financing of points and fees

• Recommending default to consumer in order to refinance the loan

• Prepayment penalty

• Demand feature

• Balloon payments, except for 12 month “bridge” loan or Balloon Payment QM

• Late fees in excess of 4% before 15 days delinquent

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High Cost MortgageProhibited Acts and Practices (Continued)

• Pyramiding of late fees or charges

• Restricts fees that may be charged in connection with payoff statements

• Charging of modification or deferral fees

• Refinancing within one (1) year

• Paying a contractor directly (not jointly) in a home improvement loan

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High‐Cost MortgageHomeownership Counseling is Required

• Creditor must receive written certification that the consumer has obtained counseling on the advisability of the mortgage from a counselor approved by HUD or if permitted by HUD, by a state housing finance authority

• Counseling must occur after receipt of good faith estimate under Reg X or disclosures required under Section 1026.40, but prior to closing

• Affiliation between creditor and counselor is prohibited• Creditor may not steer a consumer to a particular counselor or

counseling organization• See CFPB Bulletin 2013‐13 and Homeownership Counseling

Organizations List Interpretative Rule, both issued November 8, 2013

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High‐Cost Mortgages

• Open‐end credit (HELOC) is subject to ability‐to‐pay (ATR) requirements under §1026.34 (Closed‐end still subject to §1026.43)

• New cure provision allows cure of a Section 32 violation that is unintentional and bona fide, within 30 days of account opening or within 60 days of discovery

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HOMEOWNERSHIP COUNSELING NOTICE


Amends RESPA Regulation X

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Homeownership Counseling Notice

• Requires a written list of organizations that provide homeownership counseling in the applicant’s location

• List must not be older than 30 days and obtained from the CFPB website or other data provided by CFPB or HUD

• HUD website: http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm• CFPB website:

http://www.consumerfinance.gov/find‐a‐housing‐counselor• Provided not later than three (3) days after receipt of an application• May be combined with other mortgage disclosures under

Regulation X or Z

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Homeownership Counseling Notice

• November 8, 2013, CFPB published instructions for lenders to provide a homeownership counseling list using data made available by HUD or the CFPB

• Alternatively, for the interim, CFPB Bulletin 2013‐13, November 8, 2013, allows the following alternative disclosure:

• “Housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost.

• If you are interested in contacting a HUD‐approved housing counseling agency in your area, you can visit the Consumer Financial Protection Bureau’s (CFPB) website, www.consumerfinance.gov/find‐a‐housing‐counselor, and enter your zip code.

• You can also access HUD’s housing counseling agency website via www.consumerfinance.gov/mortgagehelp.

• For additional assistance with locating a housing counseling agency, call the CFPB at 1‐855‐411‐CFPB (2372).”

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HIGHER‐PRICED MORTGAGE ESCROW REQUIREMENTS

Effective: June 1, 2013


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HPML Escrow Citations


• Amendment May 23, 2013 78 Fed. Reg. 30739



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Escrows (Higher‐Priced Mortgages)

• Applies only to applications received on or after June 1, 2013, not retroactive to existing loans

• Requires escrow accounts be maintained for at least 5 years, rather than 1 year after closing, provided LTV is 80% or less

• Expands the exemption for condominiums and other associations covered by a master policy

• Exemption for small rural banks, but only if the lender:– Makes loans in certain “underserved” rural areas (May 23, 2013 clarification of

method to determine “rural” or “underserved”);– Makes 500 or fewer mortgages a year;– Has less than $2 billion in assets; and– Generally does not hold escrow accounts

• More notices and rules are required by Dodd‐Frank, but CFPB delayed rules until TILA or RESPA integration

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HIGHER‐PRICED MORTGAGE APPRAISAL REQUIREMENTS



(February 13, 2023 78 Fed. Reg. 10367)

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Appraisals (Higher‐Priced Mortgages)

• New appraisal disclosure required to be given within three (3) business days of receipt of application (Reg B notice will satisfy this requirement)

• Must obtain a written appraisal prepared by a certified or licensed appraiser who conducts a physical visit of the interior or the property

• A copy of the appraisal must be delivered to the borrower at least 3 business days prior to closing

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• Two appraisals are required unless the lender verifies from reliable third‐party documents that– If the seller obtained the property 90 or fewer days prior to the date the buyer agreed to buy the property, then the sale price does not exceed the seller’s acquisition price by more than 10%

– If the seller obtained the property 91‐180 days prior to the date the buyer agreed to buy the property, then the sale price does not exceed the seller’s acquisition price by more than 20%

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• If two appraisals are required, then– The second appraisal must be performed by a different certified or licensed appraiser

– One of the appraisals must address the difference between the seller’s acquisition price and the sales price, market conditions and any improvements

– The lender, not the borrower, must pay for the second appraisal

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• A second appraisal is not required if the seller obtained title through– Foreclosure of the seller’s lien– Inheritance or divorce– Employee or relocation agency– Certain non‐profit entities– A servicemember who has been deployed after the property was purchased

• Exemptions:– Qualified Mortgage– New manufactured home, mobile home, boat or trailer– Initial construction of a dwelling– Bridge loan with a term of 12 months or less (must be connected to the

acquisition of a new principal dwelling)– Reverse mortgage

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• July 10, 2013 Proposal to exempt:

• Loans of $25,000.00 or less;

• Certain “streamlined” refinancings– (E.g. Same borrower, only payoff principal and closing costs, not interest only, no negative amortization, no balloon payment)

• A loan secured by a manufactured home and not any land

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REGULATION B APPRAISAL REQUIREMENTS


Amends ECOA, Regulation B

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REG B Appraisal Citations



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Appraisals (Regulation B)

• Applies only to a first lien on a dwelling• Appraisal notice mailed or delivered within 3 days of application

• Same notice can be used for compliance with RegB and Reg Z

• Applicant must receive a copy of any appraisals at least 3 business days prior to closing

• Lender may charge for the appraisal, but may not charge or upcharge for the appraisal, copies or mailing

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Appraisals (Regulation B)

• Differs from Reg Z, Higher‐Priced Mortgage Loan requirements:– Only first liens

– Any dwelling, not just principal dwelling

– Includes manufactured and mobile homes

– Delivery of appraisal 3 business days prior to closing may be waived, but only if (1) the waiver is received by the lender at least 3 business days prior to closing and (2) the appraisal is delivered before closing

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COMBINEDTRUTH IN LENDING AND RESPA

DISCLOSURES

Effective: August 1, 2015

Amends Truth in Lending and RESPA

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Citation

• November 20, 2013, the CFPB promulgated a 1,888 page rule requiring the new disclosures required by Sections 1098 and 1100A of Dodd‐Frank

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Loan Estimate

• 3 Pages: Replaces early TIL and RESPA Good Faith Estimate of Settlement Costs

• Must be delivered within 3 business days of receipt of application

• Application redefined to mean consumer’s name, income, social security number to obtain a credit report, the property address, an estimate of the value of the property and the mortgage loan amount sought

• No fees may be charged until after the Loan Estimate is given

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Closing Disclosure

• 5 Pages: Replaces final TIL and RESPA HUD‐1 or HUD‐1A Settlement Statement

• Must be delivered at least 3 business days before closing

• If any material change (0.125% increase in APR; change in loan product, or add a prepayment penalty), then new disclosures and 3 business day waiting period to close

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Exemptions

• HELOCs

• Reverse Mortgages

• Mobile Home loan

• Dwelling that is not attached to real property

• A creditor who makes 5 or fewer mortgages in a year

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Limits on Closing Cost Increases

• Unless an exception applies, the amounts for a service in the Loan Estimate may not increase for

• Creditor’s or Mortgage Broker’s charges for its own services

• Charges for services provided by an affiliate of the creditor or broker

• Charges for services for which the consumer cannot shop

• Other services can increase, but generally not by more than 10%, unless an exception applies. If an exception applies, an updated Loan Estimate must be given within 3 business days.

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