Tag Archives: compliance

NMLS Smart Deadlines for 2014 License Renewal

(OnlineEd – Jeff Sorg) – The deadline to complete NMLS CE for MLO license renewal is December 31, 2014. However, NMLS Rules allow course providers seven days to report their course completions to NMLS. This means licensees will not want to wait until the last minute before completing their education requirement. If the licensee completes before the deadline, but the provider does not submit until after the deadline, the licensee is prevented from submitting for renewal on time.

In order to allow enough time for CE to be reported into the system and for the MLO to file for renewal, NMLS sets Smart Deadlines each year. These 2014 Smart Deadlines are:

SMART: Course(s) reported by your provider to NMLS by Friday, December 19
AT RISK TO MISS: Course(s) reported by your provider to NMLS by Friday, December 26
GUARANTEED TO MISS: Course(s) reported by your provider to NMLS on Wednesday, December 31

At OnlineEd®, we report your course completions just as fast as we possibly can! This means completions are usually reported to NMLS not later than the next business day from completion (weekends, holidays, and NMLS closures excluded). For completions during the At Risk to Miss and Guaranteed To Miss, we upload completions several times daily. While we do as much as we possibly can to upload in a timely manner, it remains the licensee’s responsibility to know the rules and complete in time for provider reporting to take place before the deadline.

 

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This article was published on July 31, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

For more information about OnlineEd and their education for real estate and mortgage brokers, visit www.OnlineEd.com. OnlineEd is NMLS Sponsor: 1400327

Consumer Financial Protection Bureau, Federal Partners, and State Attorneys General File Order Requiring Suntrust to Provide $540 Million in Relief to Homeowners for Servicing Wrongs

Company Also Ordered to Pay $10 Million for Servicing Misconduct and Fined $418 Million by the DOJ

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SunTrust to Provide $540 Million in Relief to Homeowners

(CFPB -WASHINGTON, D.C.) — Today the Consumer Financial Protection Bureau (CFPB), Department of Justice (DOJ), Department of Housing and Urban Development (HUD), and attorneys general in 49 states and the District of Columbia filed a proposed federal court order requiring SunTrust Mortgage, Inc. to provide $500 million in loss-mitigation relief to underwater borrowers. The order also requires SunTrust to pay $40 million to approximately 48,000 consumers who lost their homes to foreclosure and $10 million to the federal government. The order addresses systemic mortgage servicing misconduct, including robo-signing and illegal foreclosure practices. SunTrust must also pay a $418 million penalty, in a parallel mortgage lending filing announced by DOJ today.

 “Deceptive and illegal mortgage servicing practices have pushed families into foreclosure and devastated communities across the nation,” said CFPB Director Richard Cordray. “Today’s action will help homeowners and consumers harmed by SunTrust’s unlawful foreclosure practices. The Consumer Bureau will continue to investigate mortgage servicers that mistreat consumers, and we will not hesitate to take action against any company that violates our new servicing rules.”

SunTrust is a mortgage lender and servicer headquartered in Richmond, Va., and is a wholly-owned subsidiary of Atlanta-based SunTrust Banks, Inc. As a mortgage servicer, it is responsible for collecting payments from the mortgage borrower on behalf of the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures.

 The CFPB, DOJ, HUD, and state attorneys general uncovered substantial evidence that SunTrust was engaged in systemic mortgage servicing misconduct. According to the complaint filed in the federal district court in the District of Columbia, SunTrust’s illegal practices put thousands of people at risk of losing their homes. Specifically, the complaint alleges that SunTrust:

  •  Took advantage of homeowners with servicing shortcuts and unauthorized fees: SunTrust failed to promptly and accurately apply payments made by borrowers, and charged unauthorized fees for default-related services.
  •  Deceived homeowners about foreclosure alternatives and improperly denied loan modifications: SunTrust failed to provide accurate information about loan modification and other loss-mitigation services, failed to properly process borrowers’ applications and calculate their eligibility for loan modifications, and provided false or misleading reasons for denying loan modifications.
  • Engaged in illegal foreclosure practices: SunTrust provided false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by SunTrust. The company also robo-signed foreclosure documents, including preparing and filing affidavits whose signers had not actually reviewed any information to verify the claims.

Enforcement Action

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Today’s proposed court order, filed in federal district court in the District of Columbia, would require SunTrust to correct their practices and provide relief to harmed consumers. Under the terms of the order, SunTrust must:

  • Provide at least $500 million in relief to underwater borrowers: Over a three-year period, SunTrust must provide more than $500 million in loss mitigation relief to consumers, including reducing the principal on mortgages for borrowers who are at risk of default and reducing mortgage interest rates for homeowners who are current but underwater on their mortgages. If SunTrust fails to meet this requirement, it must pay a cash penalty equal to at least 125 percent of the shortfall.
  •  Provide $40 million in refunds to foreclosure victims: SunTrust must refund $40 million to consumers whose loans it serviced who lost their homes to foreclosure between Jan. 1, 2008 to Dec. 31, 2013. All consumers who submit valid claims will receive an equal share of the $40 million. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts. Eligible consumers can expect to hear from the settlement administrator about potential payments later this year.
  •  Pay $10 million to the federal government: SunTrust must pay $10 million to cover losses it caused to the Federal Housing Administration, Department of Veterans Affairs, and the Rural Housing Service.
  •  Homeowner protections: Today’s order will require SunTrust to establish additional homeowner protections, including protections for consumers in bankruptcy. Like other servicers, SunTrust is subject to the CFPB’s new mortgage servicing rules that took effect on January 10, 2014. The agreement only covers SunTrust’s violations before the new rules took effect, and does not prevent the CFPB from pursuing civil enforcement actions against SunTrust for violations of these rules.  

 A copy of the SunTrust complaint that was also filed in the federal court in the District of Columbia will be posted at: http://www.consumerfinance.gov/

The complaint is not a finding or ruling that the defendants have actually violated the law. The proposed federal court order will have the full force of law only when signed by the presiding judge.

The settlement administrator will be in touch with eligible consumers who lost their homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2013.  Consumers who are interested in loss mitigation should contact SunTrust at 1-800-634-7928 or by email through the SunTrust Mortgage, Inc. support page at www.SunTrustMortgage.com.

U.S. Supreme Court to hear mortgage loan officers’ pay case

(Reuters) – The U.S. Supreme Court on Monday agreed to weigh a dispute over whether mortgage loan officers are exempt from minimum wage and overtime pay regulations.

The two related cases concern a decision in 2010 by the U.S. Labor Department, which reversed a 2004 finding made during the administration of President George W. Bush that had concluded mortgage loan officers were exempt from the regulations.

The Mortgage Bankers Association challenged the more recent finding in court, leading to the current litigation over whether the government followed the correct process in changing course.

[Read the story]

Realty Firm to Pay $500,000 for Disclosure Violations Suggesting Buyers Use a Specific Title/Closing Company

(Jeff Sorg, OnlineEd)  The Consumer Financial Protection Bureau (CFPB) recently ordered RealtySouth, the largest real estate firm in Alabama, to pay $500,000 for inadequate disclosures that could leave consumers unaware of their rights to choose service providers during the home-buying process. The practices identified by the CFPB’s investigation illegally benefited TitleSouth LLC, an affiliated company owned by the same holding company that owns RealtySouth.

“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”

The Bureau charged that RealtySouth violated Section 8 of the Real Estate Settlement and Practices Act (RESPA), which protects consumers during the home-buying process by prohibiting kickbacks, payment of unearned fees and items of value for referrals of real estate settlement services.  RealtySouth’s preprinted form purchase contracts, which its agents provided to homebuyers preparing to make an offer on a home, either explicitly directed or otherwise suggested that title and closing services be conducted by a specific, affiliated title company.

While RESPA allows real estate companies to refer their customers to affiliated businesses, the law requires them to provide consumers an “Affiliated Business Arrangement” (ABA) disclosure that clearly states their right to shop around for a better price and that they are not required to use the affiliated company. The disclosure RealtySouth gave consumers did not comply with the law; it did not properly highlight consumers’ rights, and the required language was buried in a section of text that also made marketing claims about the company’s prices.

RealtySouth changed its disclosure forms immediately after being contacted by the CFPB, but under the terms of the consent order, RealtySouth will pay a civil penalty of $500,000, ensure that its disclosures comply with RESPA, and ensure that its training materials emphasize that its agents cannot require the use of affiliates.

A copy of the Bureau’s consent order is available here: http://files.consumerfinance.gov/f/201405_cfpb_consent-order_realty-south-and-title-south.pdf

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This article was upadted on September 19, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

For more information about OnlineEd and their education for real estate and mortgage brokers, visit www.OnlineEd.com.

CFPB Report Shows Complaints Rose 80 Percent in 2013

(WASHINGTON, D.C. – CFPB) — The Consumer Financial Protection Bureau (CFPB) recently announced that consumer complaint volume nearly doubled from 91,000 complaints received in 2012 to 163,700 complaints received in 2013. The CFPB’s Consumer Response Annual Report also highlighted the many issues the CFPB is helping consumers address – from foreclosure alternatives to simply receiving better customer service.

“Consumer complaints have become central to the work of this agency. They enable us to listen to, and amplify, the concerns of any American who wants to be heard,” said CFPB Director Richard Cordray. “They are also our compass. They make a difference by informing our work and helping us identify and prioritize problems for potential action.”

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Report reveals the most complained about product is mortgages

The 2013 Consumer Response Annual Report can be found at: http://www.consumerfinance.gov/reports/2013-consumer-response-annual-report/

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established the handling of consumer complaints as an integral part of the CFPB’s work. When the Bureau opened its doors on July 21, 2011, it began consumer response operations the same day, accepting consumer complaints about credit cards. Since then, the Bureau has expanded its complaint handling in 2012 to include complaints about mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, and credit reporting. In 2013, it began taking complaints on money transfers, debt collection, and payday loans.

Today’s report covers the 163,700 complaints received by the CFPB from Jan. 1, 2013 through Dec. 31, 2013. This is an 80 percent increase over the previous year’s 91,000 complaints. To date, including this year, the CFPB has received more than 310,000 complaints overall. According to the report, the top three complaints in 2013 by consumers were:

Mortgages: The number one most complained about consumer product was mortgages, accounting for 37 percent of overall complaints. For these approximately 60,000 complaints, consumers were most concerned with problems when they were unable to pay, such as issues relating to loan modifications, collections, or foreclosures.

Debt collection: Debt collection was the second most complained about category, accounting for 19 percent of overall complaints even though the Bureau did not begin accepting debt collection complaints until July 2013. For the approximately 31,000 debt collection complaints, consumers were most concerned with collectors attempting to collect debt not owed, communication tactics by the collectors, and collectors taking or threatening illegal action.

Credit reporting: The number three most complained about category was credit reporting, accounting for about 15 percent of overall complaints. For the approximately 24,000 complaints about credit reporting, nearly three out of four consumers were concerned with incorrect information on their credit report.

The Bureau expects companies to respond to complaints within 15 days and to describe the steps they have taken or plan to take. The CFPB expects companies to close all but the most complicated complaints within 60 days. Companies have responded to more than 93 percent of the complaints sent to them for response, and consumers have disputed only 21 percent of those company responses.

Sometimes, companies respond through non-monetary relief. About 11 percent of complaints fall into this category; for credit reporting complaints, companies respond to about one out of three complaints this way. Through the CFPB’s complaint process, consumers have received a range of non-monetary relief in response to their complaints, such as:

Foreclosure alternatives: Consumers have received mortgage foreclosure alternatives that help them keep their home;
Protection from debt collectors: After CFPB inquiries, debt collectors have stopped engaging in excessive collection communications with consumers;
Restored lines of credit: Consumers have had their credit lines restored when they wanted, or removed when that was their desired outcome;
Corrections to credit reports: Consumers have had their credit reports cleaned up either by having correct submissions given to credit bureaus or by having credit bureaus correct inaccurate information about their consumer accounts; and
Customer service: Many consumer problems are related to unanswered inquiries or incorrect information. After CFPB involvement, many customers had their formerly unmet customer service issues finally resolved.

The Bureau has also seen monetary relief for consumers in about 7 percent of complaints. This includes:

A median amount of $460 for mortgages;
A median amount of $126 for credit cards; and
A median amount of $111 for bank accounts or services.

Information about consumer complaints is available to the public through the CFPB’s public Consumer Complaint Database. A complaint is listed in the database after the company responds to the complaint or after the company has had the complaint for 15 calendar days, whichever comes first. If a company demonstrates within 15 days that it has been wrongly identified, no data for that complaint is posted. The database is updated nightly and includes anonymized complaint information. The database enables the public to see what is being complained about and why; and it enables consumer groups to identify troublesome trends.

Complaints inform the Bureau’s work and help to identify problems, which then feed into the Bureau’s supervision and enforcement prioritization process.

The Bureau will continue to work toward expanding its complaint handling capabilities to include other products and services under its authority, such as prepaid cards.

To submit a complaint, consumers can:

Go online at www.consumerfinance.gov/complaint
Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
Fax the CFPB at 1-855-237-2392
Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
Additionally, through “Ask CFPB,” consumers can get clear, unbiased answers to their questions at consumerfinance.gov/askcfpb or by calling 1-855-411-CFPB (2372).

CFPB Orders Connecticut Lender to Pay $83,000 Civil Penalty

Pay Fine

Connecticut Lender to Pay $83,000

(Consumer Financial Protection Bureau – Washington, D.C.) Today, the Consumer Financial Protection Bureau ordered a Connecticut mortgage lender, 1st Alliance Lending, LLC (First Alliance), to pay an $83,000 civil money penalty for violating federal law by illegally splitting real estate settlement fees. First Alliance self-reported these violations to the Bureau, admitted liability, and provided information related to the conduct of other actors that has facilitated other enforcement investigations.

“These types of illegal payments can harm consumers by driving up the costs of mortgage settlements,” said CFPB Director Richard Cordray. “The Bureau will use its enforcement authority to ensure that these types of practices are halted. We will, however, also continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.”

First Alliance is a mortgage lender in East Hartford, Conn. that focuses primarily on providing loss-mitigation financing to distressed borrowers. First Alliance obtains troubled mortgages from mortgage servicers, and reaches out to consumers to offer them new loans with reduced principal amounts under federally related mortgage programs.

First Alliance started using a hedge fund to finance its loans in 2010. Under this arrangement, First Alliance split revenues and fees with affiliates of the hedge fund. In 2011, First Alliance secured less costly financing and ended its arrangement with the hedge fund and its affiliates. Although the hedge fund and its affiliates no longer financed First Alliance’s mortgages, First Alliance continued to split origination and loss-mitigation fees with them. The hedge-fund affiliates received payments from 83 First Alliance loans made between August 2011 and April 2012.

In 2013, First Alliance reported to the Bureau that it believed it had violated the Real Estate Settlement Procedures Act (RESPA) by paying these unearned fees. RESPA bans a person from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement. First Alliance cooperated with the Bureau’s investigation, and the Bureau concluded that First Alliance’s payments to the hedge fund and its affiliates had violated RESPA. First Alliance’s self-reporting and cooperation, consistent with the Bureau’s Responsible Business Conduct bulletin published on June 25, 2013, were taken into account in resolving this matter.

Under the terms of today’s consent order, First Alliance is required to pay a civil money penalty of $83,000 to the Bureau and agrees not to violate RESPA in the future. The Bureau will continue to enforce RESPA’s provisions to protect consumers and to deter unlawful activity.

A copy of the Bureau’s consent order is available here: http://files.consumerfinance.gov/f/201402_cfpb_consent-order_first-alliance.pdf

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 For more information about OnlineEd and their pre-license and continuing education for real estate and mortgage brokers, please visit www.OnlineEd.com. For more information about mortgage-specific products for compliance training, tracking, and management, please visit  https://www.onlineed.com/inlineed.php or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on February 25, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author. Due to the fluid nature of the subject matter, regulations, requirements, laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

OnlineEd’s CFPB Preparedness Article Published in Scotsman Guide

December 5, 2013 – OnlineEd was recently published in the December Scotsman Guide’s Residential Edition. Click the link below to read or download the complete article.

Our article outlines the need for mortgage businesses, both large and small, to prepare for CFPB examinations. We break down the CFPB examination guide’s criteria for education and training, and outline some best practices for staying ahead of the curve and being proactive with compliance. The article stresses the importance of having a suitable training program in place in accordance with written policies.

For the online version of Scotsman Guide’s December Residential Magazine, visit their website by clicking here. Some of this month’s topics include helpful tips on qualified mortgages (QM) for independent mortgage brokers, paperless cloud-based loan management, and tips on how to remain profitable in the face of tumbling refinances.

Make sure that you are not operating under the impression that the CFPB isn’t going to be concerned with your small mortgage business. For more information on preparing a training program and policies for your mortgage business, call OnlineEd at (866) 519-9597.

CFPB Seeks Constent Order Against Castle & Cooke for $13 Million

(CFPB – WASHINGTON, D.C.)  The Consumer Financial Protection Bureau (CFPB) today announced a proposed consent order in its enforcement action against Castle & Cooke Mortgage, LLC, for allegedly steering consumers into costlier mortgages. The Bureau has asked a federal district court to approve a consent order that would provide more than $9 million in restitution for consumers and obtain $4 million in civil money penalties against Castle & Cooke and two of its officers for allegedly paying loan officers illegal bonuses.

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Mortgage Loan Originators were allegedly paid illegal bonuses for steering consumers into mortgages with higher interest rates.

“Our action has put an end to illegal steering of consumers and has put more than $9 million back in their pockets,” said CFPB Director Richard Cordray. “This outcome embodies our mission—to root out bad practices from the marketplace and ensure consumers are being treated fairly.”

Castle & Cooke is a  Utah-based mortgage company that originated about $1.3 billion in loans in 2012. The company maintains 45 branches and does business in 22 states, including Arizona, California, Colorado, Florida, Hawaii, Iowa, Idaho, Nebraska, New Mexico, Nevada, Texas, and Utah. On July 23, 2013, the CFPB filed a complaint in federal district court against the mortgage company and two of its officers for allegedly paying illegal bonuses to loan officers who steered consumers into mortgages with higher interest rates.

The complaint alleged that Castle & Cooke, through actions taken by its president, Matthew A. Pineda, and senior vice-president of capital markets, Buck L. Hawkins, violated the Federal Reserve Board’s Loan Originator Compensation Rule by paying loan officers quarterly bonuses that varied based on the interest rate of the loans they offered to borrowers. That rule banned compensation based on loan terms such as the interest rate of the loan. The rule had a mandatory compliance date of April 6, 2011, and authority over that rule transferred to the CFPB on July 21, 2011. The CFPB estimates that more than 1,100 quarterly bonuses were paid to over 215 Castle & Cooke loan officers.

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions for violations of federal consumer financial protection laws. To ensure that all impacted consumers are repaid and that consumers are no longer subject to these illegal practices, the defendants have agreed to:

  • End unlawful compensation practices: Castle & Cooke must end compensation practices, such as giving loan officers bonuses that vary based on the interest rate of the loans they offered to consumers, that violate the Loan Originator Compensation Rule.
  • Pay $9,232,896 toward consumer redress: The defendants will pay $9,232,896 to administer redress to consumers for their actions. Any borrower who has obtained a home loan from a Castle & Cooke loan officer since April 6, 2011, and whose loan officer received a quarterly bonus from Castle & Cooke for that loan, will receive a check as a result of today’s action. The Bureau estimates that more than 9,400 consumers will receive checks.
  • Pay a $4 million civil money penalty: The defendants – Castle & Cooke, Pineda, and Hawkins – will pay $4 million to the CFPB’s Civil Penalty Fund for their alleged violations.
  • Ensure that Castle & Cooke retain records of compensation: Castle & Cooke will abide by federal law that requires creditors to retain evidence of compliance, such as payroll records.

This case was originally referred to the CFPB by investigators with the Utah Department of Commerce, Division of Real Estate. The complaint was filed in the United States District Court for the District of Utah, where the company is located and where the individual defendants reside.

A copy of the proposed consent order, which will not be final until approved by the court, can be found at:http://files.consumerfinance.gov/f/201311_cfpb_proposed-final-order_castle-cooke.pdf

A copy of the complaint filed in July can be found at: http://www.consumerfinance.gov/f/201307_cfpb_complaint_Castle-and-Cooke-Complaint.pdf

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For more information about OnlineEd, their mortgage loan originator compliance training program and education compliance management system, please visit www.InlineEd.comwww.onlineed.com,  or contact Joseph Mikkelson at 1.866.519.9597.

This article was published on November 7, 2013. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and was obtained by third party sources. Due to the fluid nature of the subject matter, regulations, requirements, laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

CFPB to Drop Enforcement Attorneys in Mortgage Lender Examinations

(OnlineEd – Portland, OR) Good news from the CFPB – they’re still not quite speaking softly, but starting in November at least, they’re leaving the big stick at home.

The Consumer Financial Protection Bureau confirmed earlier this month that enforcement attorneys would no longer be accompanying examiners in on-site exams of mortgage lenders.

The CFPB began the practice of having an enforcement attorney present at exams starting in 2012. This practice led to uneasiness in lenders and often made the process more costly. Detractors also argued that this practice limited the effectiveness of the examination process and differs from the practices of other federal regulators.

Beginning November, however, the agency will no longer have enforcement attorneys present at exams. According to a Bureau spokeswoman:

“We found that it wasn’t efficient to have both examiners and enforcement attorneys physically present on exams,” said the CFPB spokeswoman.  “We think this approach will result in better overall oversight.”

However, just because enforcement attorneys are on the bench, doesn’t mean that they will be uninvolved.  The CFPB made sure to clarify that enforcement attorneys will still be working with examiners:

“Supervision Examiners and enforcement attorneys will continue to work closely to ensure that the financial institutions that we oversee are following the rules.”

Not all of the news coming out of the CFPB is good, with many mortgage lenders struggling to make changes to comply with several January final rule effective dates, but this news should encourage mortgage lenders and should help relieve some of the stress and burden on the industry.

 

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CFPB Releases Second Update Of Exam Procedures For Mortgage Rules

(CFPB – WASHINGTON, D.C.) On August 15, 2013 the Consumer Financial Protection Bureau (CFPB) released a second update to its exam procedures in connection with the new mortgage regulations issued in January 2013. The interim exam procedures offer valuable guidance to financial institutions and mortgage companies on what the CFPB will be looking for as the rules become effective.

“We are committed to transparency around our examination process,” said CFPB Director Richard Cordray. “So we have worked hard to provide industry with advance notice of what we will be expecting. That, in turn, will improve compliance and benefit consumers.”

The CFPB issued several new regulations reforming the mortgage market in January 2013. Many of the new rules were directed by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules cover the various stages of a consumer’s mortgage experience, from shopping for a loan to paying it off. Most of the CFPB’s new rules go into effect in January 2014.

Today’s updates cover the Ability-to-Repay/Qualified Mortgages, high-cost mortgages, and appraisals for higher-priced mortgage loans, as well as new amendments related to the escrows rule. The updates also cover recent changes to credit card rules. With today’s release, the exam procedures now cover the Bureau’s mortgage origination rules issued through May 29, 2013, and mortgage servicing rules issued through July 10, 2013.

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Are you prepared for your CFPB exam?

Today’s release of exam procedures will help financial institutions and mortgage companies understand and prepare for how they will be examined for CFPB rules that, among other things:

  • Require lenders to evaluate a borrower’s ability to pay back the loan: Under the Ability-to-Repay rule, lenders must look at a consumer’s financial information and verify its accuracy. Lenders then must evaluate the information and conclude that the borrower can repay the loan. Lenders may not base their evaluation of a consumer’s ability to repay on teaser rates. They must determine the consumer’s ability to repay both the principal and the interest over the long term − not just during an introductory period when the rate may be lower.
  • Ban or limit certain points, fees, and risky features: Both the rule on Ability-to-Repay and the rule on high-cost mortgages ban or limit certain points, fees, and risky features. Under the Ability-to-Repay rule, a Qualified Mortgage is subject to limitations on points and fees and cannot have loan features such as terms that exceed 30 years or interest-only payments. Under the high-cost mortgages rule, balloon payments and fees for modifying loans are generally banned.
  • Require servicers to provide monthly statements and disclosures: Mortgage servicers must provide regular statements which include: the amount and due date of the next payment; a breakdown of payments by principal, interest, fees, and escrow; and recent transaction activity. For most adjustable-rate mortgages, they must also provide disclosures before the first interest rate adjustment, and before interest rate adjustments alter the payment amount.
  • Restrict dual-tracking: Under the Bureau’s rule on mortgage servicing, dual-tracking – when the servicer moves forward with foreclosure while simultaneously working with the borrower to avoid foreclosure – is restricted. Servicers cannot start a foreclosure proceeding if a borrower has already submitted a complete application for a loan modification or other alternative to foreclosure and that application is still pending review.
  • Require access to servicing personnel and a fair review process: Mortgage servicers must have policies and procedures in place to provide delinquent borrowers with direct, easy, ongoing access to employees responsible for helping them. If a foreclosure seems likely, the servicer must consider all alternatives available from the mortgage owners or investors to help the borrower retain the home.
  • Require creditors use a licensed or certified appraiser: The interagency rule from January 2013 on appraisal requirements for higher-priced mortgage loans requires that creditors use a licensed or certified appraiser to prepare a written appraisal report based on a physical inspection of the interior of the property. The rule also requires creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

The CFPB is sharing with industry what it will be looking for in its examinations under the new rules by updating the applicable sections of the exam procedure manuals for the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). These documents are intended for use by CFPB examiners in examining the mortgage companies and other financial institutions subject to the new regulations.

The CFPB is committed to ensuring that the mortgage industry complies with the new consumer protections. Throughout 2013, the CFPB has been working for a smooth transition. It has published plain-language guides. It plans to educate the public about their protections under the new rules. The CFPB is also coordinating with other federal government regulators that also conduct examinations of mortgage companies and financial institutions to ensure all regulators have a shared understanding of the CFPB’s new rules.

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 The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

OnlineEd is a provider of mortgage and real estate continuing and pre-license education and developer of InlineEd a compliance and learning management tracking system for the mortgage industry.