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.December 2008
FEDERAL ANNOUNCEMENTS |
Federal 24 CFR Part 3500.21 (effective January 16, 2009)
The Department of Housing and Urban Development (HUD) published the final Real Estate Settlement Procedures Act (RESPA) rule on November 17. The final rule adds protections for consumers and helps consumers shop for lower cost mortgages. On January 1, 2010, the Good Faith Estimate (GFE) and HUD-1/HUD-1A settlement statement form amendments take effect. The average charge and required use provisions, technical amendments and Servicing Disclosure Statement requirements take effect on January 16, 2009.
The Servicing Disclosure Statement (Statement) must:
- be provided by the lender, table funding mortgage broker, or dealer who anticipates using table funding, or dealer who anticipates a first lien dealer loan (entity). Each applicant shall receive the Statement at the time an application for a mortgage servicing loan is submitted, or within 3 business days after submission of the application. A model form is provided in Appendix MS-1, but this specific language does not have to be used. The model format may be annotated with additional information.
- indicate whether the servicing of the loan may be assigned, sold or transferred while the loan is outstanding. If the entity will engage in the servicing of the loan, the disclosure may consist of a statement that the entity will service the loan and does not intend to sell, transfer or assign the servicing of the loan. If the entity will not engage in the servicing of the loan, the disclosure may consist of a statement that such entity intends to assign, sell or transfer servicing of such mortgage loan before the first payment is due.
- be delivered within 3 business days from receipt of the application by hand delivery, by placing it in the mail, or by fax, email or other electronic means if the applicant agrees. If co-applicants indicate the same address on the application, only one copy must be provided to the address. If the co-applicants provide different addresses on the application, a copy must be delivered to each co-applicant.
First American Loan Production Solutions (FALPS) has the amended Servicing Disclosure Statement available for client use.
STATE ANNOUNCEMENTS |
Delaware: Senate Bill 246 (effective February 1, 2009)
The Delaware Code Title 29 relating to notaries was amended to add short form certificates of Notarial acts in Section 4328. The acknowledgment for an individual capacity was not amended. Section 4329 provides for the electronic certificate of authority.
Delaware: 5 DE Admin. Code § 2401 (effective December 11, 2008)
The State Bank Commissioner adopted regulations requiring Mortgage Loan Originators (MLO) to be licensed.
- MLOs employed by an originating entity (defined in 5 Del.C. Chapters 21 or 22) prior to January 1, 2009 may submit a license application by March 31, 2009 and continue engaging in mortgage loan originating until the license is approved or denied by the Commissioner.
- Beginning January 1, 2009, individuals who begin employment as MLOs may submit a license application and engage in mortgage loan originating until the license is approved or denied by the Commissioner.
The Nationwide Mortgage Licensing System will be accessed to license MLOs.
New Jersey Bulletin 08-25 (effective January 1, 2009)
The New Jersey Department of Banking and Insurance (Department) issued this bulletin in accordance with the New Jersey Home Ownership Security Act of 2002 (the Act). The Act addresses the annual review required in the definition of a “high cost home loan” (N.J.S.A. 46:10B-24). The Act requires an annual adjustment of the maximum principal amount that will, subject to the other triggering provisions, result in a loan being considered a “high cost home loan.” The maximum principal amount increased from $411,777.45 to the new maximum amount of $428,615.60.
New York: Senate Bill 7360 (effective December 3, 2008)
Senate Bill 7360 amends the Notice to Co-signer to include the following sentence in all caps: IF THIS DEBT IS EVER IN DEFAULT, THAT FACT MAY BECOME A PART OF YOUR CREDIT RECORD.
FALPS has the amended Notice to Co-signer available for client use.
Tennessee: Senate Bill 4208 (effective January 1, 2009)
The Tennessee Unfair Trade Practices and Unfair Claims Settlement Act of 2009 (Act) was enacted to define the practices that constitute unfair methods of competition or unfair or deceptive acts. Among other things, the Act addresses:
- Misrepresentations of False Advertising of Insurance Policies
- Unfair Discrimination
- Rebates
- Disclosures
A depository institution and any person (on behalf of a depository institution or on the premises of a depository institution) that solicits, sells, advertises or offers insurance shall disclose to the customer in writing prior to sale, that the insurance:
- is not a deposit;
- is not insured by the Federal Deposit Insurance Corporation or any other federal government agency;
- is not guaranteed by the depository institution, its affiliate (if applicable) or any person that is soliciting, selling, advertising or offering insurance (if applicable); and
- where appropriate, involves investment risk, including the possible loss of value.
FALPS has the disclosure available for client use.
Texas: Regulation 7 TAC §§ 153.11 – 153.14, 153.51, 153.95 (effective November 13, 2008)
The Finance Commission of Texas and the Texas Credit Union Commissioner adopted amendments to provide clarification to both borrowers and lenders regarding home equity lending transactions. The rules clarify that the calculation for the two month time period under the Texas Constitution begins on the date of closing. In addition, under the Texas Constitution, the 3% fee cap will apply to the original home equity loan and any subsequent modification as a single transaction.
The Finance Commissioner will provide a Spanish translation of the Notice Concerning Extension of Credit for lenders whose discussions with the borrower are conducted primarily in Spanish.
AGENCY ANNOUNCEMENT |
Fannie Mae Announcement 08-33 (December 12, 2008)
Fannie Mae has announced the new Streamlined Modification Program (SMP), a collaboration with the Department of Treasury, Freddie Mac, and other participants of the HOPE NOW Alliance. This program will help borrowers avoid foreclosure by providing affordable monthly payments. Borrowers will get a 3 month trial period with the new payments, which take effect if the borrower makes all the payments during the trial period. This program is available for borrowers that have missed at least 3 payments on their current loan owned or securitized by Fannie Mae.
Freddie Mac Bulletin (December 12, 2008)
Freddie Mac, a member of the HOPE NOW Alliance, has also announced the release of the New Streamlined Modification Program (SMP) that will help borrowers avoid foreclosure. This program has consistent eligibility requirements that allow Servicers the ability to execute a consistent loan workout plan and modification to borrowers that own and occupy their property as a primary residence and have missed three or more payments.
FDIC Loan Modification (November 20, 2008)
Attachment to FDIC Loan Modification (November 20, 2008)
The Federal Deposit Insurance Corporation (FDIC) unveiled a simplified loan modification program to help minimize foreclosures and stabilize the broader economy. The program is designed to assist delinquent borrowers who occupy their home by achieving affordable and sustainable mortgage payments and increase the value of distressed mortgages. The program terms use interest rate reduction, amortization term extension, and principal deferment (if applicable) to allow borrowers to receive a maximum 38% down to 31% housing-to-income ratio.
HUD Mortgagee Letter 2008-38 (December 5, 2008)
This Mortgagee Letter provides a policy clarification regarding the requirements for repayment of Home Equity Conversion Mortgages (HECMs) and for termination of a HECM mortgage. HUD Handbook 4235.1 REV-1, Home Equity Conversion Mortgages, Paragraph 1-3C states:
The HECM is a “non-recourse loan”. This means that the HECM borrower (or his or her estate) will never owe more than the loan balance or value of the property, whichever is less; and no assets other than the home must be used to repay the debt.
HUD clarifies that if the borrower (or estate) does not pay the balance when due, the mortgagee’s remedy is limited to foreclosure and the borrower will not be personally liable for any deficiency resulting from the foreclosure (24 CFR 206.27(b)(8)).
HUD Mortgagee Letter 2008-40 (December 15, 2008)
HUD announced that effective for case numbers assigned on or after January 1, 2009, the maximum LTV for most refinance transactions will be 97.75 percent. A summary of maximum LTVs is provided in the mortgagee letter.
HUD Mortgagee Letter 2008-41 (December 19, 2008)
HUD announced that FHA will retain its standard rate-and-term refinance program for borrowers who are current on their existing mortgage. Effective December 31, 2008, the FHASecure program will terminate as per FHA’s initial guidance. Any loans for which the lender has requested a case number and taken a loan application prior to December 31, 2008 may be processed and will be insured by FHA.