Compliance News
In First American's Compliance News Archive you will find easy access to our library of GSE announcements, court findings, legislative changes, specific changes to state requirements, governmental guidance on issues that directly affect the mortgage document industry and more.August 2009
STATE ANNOUNCEMENTS |
The Secure and Fair Enforcement Mortgage Licensing Act of 2008 ("S.A.F.E. Act"), Title V. Sec.1501, was signed into
law on July 1, 2008. States are provided guidance and encouraged to establish a system
for the Nationwide Mortgage Licensing System and Registry ("NMLSR") by July 1, 2009. The NMSLR must be implemented
by July 1, 2010. S.A.F.E. Act elements to be incorporated by states include, but are not limited to: licensing requirements for mortgage loan originators, obtaining a unique identifier number, criminal fingerprint background checks, pre-license education, testing, and continuing education and testing requirements. If a state does not provide a licensing program, HUD is authorized to establish a program for them.
To date, the following states and the District of Columbia have enacted legislation (with the bold portions
indicating the states that recently adopted legislation) to comply with the S.A.F.E. Act: Alabama, Alaska,
Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada,
New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia,
Wisconsin, and Wyoming.
Connecticut
House Bill 5535 (effective October 1, 2009)
Per the Uniform Real Property Electronic Recording Act, an electronic document satisfies the recording requirement
that a document be an original, on paper or another tangible medium, or in writing. An electronic signature meets
the recording requirement that the document be signed.
Senate Bill 949 (effective October 1, 2009)
Residential mortgage fraud is committed when an individual knowingly:
- makes any material written misstatement, misrepresentation, or omission;
- uses or facilitates the use of any material written misstatement, misrepresentation, or omission;
- receives or attempts to receive funds in connection with a residential mortgage loan that were obtained through fraudulent acts; or
- conspires with or solicits another to engage in fraudulent acts.
Residential mortgage fraud is considered a Class C or D felony depending on how many fraudulent acts are committed.
Laws concerning nonprime home loans were revised. A new condition of a nonprime home loan is "the difference,
at the time of consummation, between the APR for the loan and the average prime offer rate for a comparable
transaction, as of the date the interest rate is set, which is greater than 1 ½ percentage points if the loan
is a first mortgage loan or 3 ½ percentage points if the loan is a secondary mortgage loan." The average prime
offer rate is the APR derived from average interest rates, points, and other loan pricing terms offered by a
representative group of creditors for mortgage transactions with low-risk pricing characteristics.
In addition to existing prohibitions, a nonprime home loan may not include following:
- If the loan term is less than 7 years, a payment schedule with regular periodic payments that when aggregated do not fully amortize the outstanding principal balance;
- A payment schedule with regular periodic payments that cause the principal balance to increase;
- A payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds;
- Default charges in excess of 5% of the amount in default; or
- A call provision that permits the lender to accelerate the indebtedness, unless a bona fide default occurs.
Maryland House Bill 79 (effective October 1, 2009)
The definition of mortgage fraud is expanded to include knowingly creating or producing a document that contains a deliberate misstatement, misrepresentation, or omission with the intent that the document will be relied on in the mortgage lending process.
New Hampshire House Bill 610 (effective July 31, 2009)
In addition to the enactment of S.A.F.E. Act provisions, House Bill 610 prohibits yield spread premiums in
reverse mortgage transactions subject to the Non-Depository First Mortgage Bankers and Brokers Act ("Act").
Persons or their affiliates, who broker or fund reverse mortgages, may not participate in, associate with, or
employ any party that participates or is associated with other financial or insurance activities. Mortgagors may
not be required to purchase a financial or insurance product in connection with obtaining a mortgage.
The Act requires licensees to complete every field on the Good Faith Estimate prior to the borrower's receipt.
Mortgage loans made pursuant to the Act may not be made unless there is a reasonable belief that the borrower
will be able to make scheduled payments.
North Carolina House Bill 794 (effective June 16, 2009)
If the name of the trustee is omitted from a deed of trust, the owner(s) executing the deed of trust and granting
an interest in the real property shall be considered the constructive trustee(s) of record. The constructive
trustee will not have the authority or power to take any of the following actions without the consent and joinder
of the majority of holders or owners of the obligations secured by the deed of trust:
- Effect a substitution of trustee;
- Effect the satisfaction of the deed of trust;
- Release any property or any interest therein from the lien of the deed of trust; or
- Modify or amend the terms of the deed of trust.
Ohio House Bill 1 (effective July 17, 2009)
In addition to the enactment of S.A.F.E. Act provisions, House Bill 1 provides that a licensee, in connection with
a non-brokered loan, must deliver to the borrower a written disclosure no earlier than three business days nor
later than twenty-four hours before closing. The disclosure must include:
- A statement indicating whether property taxes and any insurance will be escrowed; and
- A description of what is covered by the regular monthly payment (principal, interest, taxes, and insurance, as applicable).
If the loan applied for exceeds 90% of the value of the real property, the licensee must provide the following
statement to the borrower within three business days after taking the loan application: "You are applying for
a loan that is more than 90% of your home’s value. It will be hard for you to refinance this loan. If you sell
your home, you might owe more money on the loan than you get from the sale." The statement must appear in boldface
type and be a least 16 point font.
LPS has these disclosures available for client use.
A registrant or licensee must:
- Timely inform the borrower of any material change in the terms of the loan; and
- Timely inform the borrower if any fees payable to the registrant, licensee or lender increase by more than the greater of 10% or $100.00.
Oregon House Bill 2189 (effective July 30, 2009) and House Bill 2188 (effective January 1, 2010)
In addition to the enactment of S.A.F.E. Act provisions, House Bill 2189 incorporates provisions of House Bill
2188 concerning disclosures. Mortgage bankers, brokers, and loan originators shall provide the following
disclosures to the borrower in English and in the language other than English in which a substantial
portion of communication related to the transaction occurs:
- The Good Faith Estimate (in the format required as of January 1, 2010);
- Truth-in-Lending disclosures; and
- A statement notifying the borrower that loan documents associated with the transaction will be in English and advising the borrower to obtain appropriate assistance with any necessary translations.
The Director of the Department of Consumer and Business Services ("Department") will provide translated versions of the disclosures listed above in the three languages other than English that are most commonly spoken in Oregon.
LPS will have the English and the Department's promulgated version of the disclosures available for client use on January 1, 2010.
AGENCY ANNOUNCEMENTS |
Fannie Mae Form 1009 (effective January 1, 2010)
The Residential Loan Application for Reverse Mortgages has been amended to provide product, policy and legal changes. The revised application may be used immediately, and is required to be used for all Home Equity Conversion Mortgage (“HECM”) applications taken on or after January 1, 2010.
LPS will have the revised form available for client use.
Fannie Mae Announcement 09-24 (July 10, 2009)
The Announcement addresses provisions for "higher-priced mortgage loans" ("HPML"), which were adopted in the
2008 Regulation Z amendments. A HPML is secured by a borrower's principal residence, with the APR exceeding
the thresholds which trigger additional requirements and consumer protection. HPMLs will be purchased by
Fannie Mae if they meet the following requirements:
- Lenders must represent and warrant that the HPML complies with Regulation Z; and
- Lenders must verify the borrower’s ability to repay.
Qualifying rate requirements were revised for the following loan types:
- 5/1 ARMs;
- Mortgage loans subject to temporary interest rate buydowns; and
- Step-rate mortgage loans.
Regulation Z amendments prohibit late fees and delinquency charges when the only delinquency is attributed to late fees or delinquency charges assessed on a prior payment, as long as the payment is a full payment for the applicable period and paid on its due date or within any grace period. These provisions apply to all mortgage loans, regardless of occupancy.
Mortgage loans will not be purchased or securitized by Fannie Mae regardless of the loan amount when the total points and fees exceed the greater of 5% of the mortgage amount or $1,000.00 (points and fees limitation).
Fannie Mae Announcement 09-25 and Freddie Mac Bulletin 2009-19 (July 13, 2009)
Fannie and Freddie have revised the Home Affordable Modification Program requirements concerning:
- guidance on determining the Trial Period Plan Effective Date and the Trial Period Plan first payment due date; and
- the ability to include an interim month between the end of the Trial Period and the due date of the first modified payment in the event the final Trial Period payment is not paid timely.
HUD Mortgagee Letter 2009-23 (effective August 15, 2009)
FHA announced its new FHA-Home Affordable Modification Program (“FHA-HAMP”) loss mitigation option. The FHA-HAMP allows the use of a partial claim up to 30% of the unpaid principal balance as of the date of default combined with a loan modification. The borrower must successfully complete a three month trial payment plan. If a trial payment is not made on time, a borrower is no longer eligible for FHA-HAMP.
