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.February 2009
FEDERAL ANNOUNCEMENTS |
American Recovery and Reinvestment Act of 2009
President Barack Obama made history yesterday when he signed the largest
stimulus bill in
United States history ($787 billion),
the American Recovery and Reinvestment Act of 2009, which is posed to impact
virtually every aspect of the U.S.
- Maintaining the 2008 government-sponsored enterprises and Federal Housing Administration loan limits for the 2009 calendar year
- Increases the Home Equity Conversion Mortgage limit from $417,000 to $625,500
- Increases the First Time Home Buyer Credit enacted under the Housing and Economic Recovery Act from $7,500 to $8,000 and extends the credit to December 1, 2009 with no repayment requirement.
STATE ANNOUNCEMENTS |
Illinois: 815 ILCS 137/10 (effective January 1, 2009)
The points and fees trigger under the Illinois High Risk Home Loan Act was
increased from $907 to $908 for 2009.
The Acts also increase the penalties for a direct or indirect violation of the Act from a civil fine of not more that $1,000 to not more than $3,000 for each violation, but not more than $30,000 for a transaction resulting in more than one violation, plus the cost of investigation.
Michigan: Senate Bills 343 (effective January 13, 2009)
Michigan: Senate Bills 356 (effective January 13, 2009)
The Mortgage Brokers, Lenders, and Servicers Licensing Act and the Secondary Mortgage Loan Act (collectively, the “Acts”) were amended to prohibit a person from willfully or intentionally coercing or inducing of a real estate appraiser to inflate the value of real property used as collateral, including, but not limited to, representing or implying that the real estate appraiser will not be selected for current or future appraisal work or will not be paid unless the appraiser agrees to a value, range of values, or minimum value for the property. If found guilty of such acts, a person is subject to a fine of not more than $15,000, imprisonment for not more than one year, or both.The Acts also increase the penalties for a direct or indirect violation of the Act from a civil fine of not more that $1,000 to not more than $3,000 for each violation, but not more than $30,000 for a transaction resulting in more than one violation, plus the cost of investigation.
Mississippi: House Bill 475 (effective July 1, 2009)
Documents and instruments (other than a plat or survey or a drawing related to a plat or survey) filed with the Clerk of the Chancery Court on or after July 1, 2009 must meet the following requirements:- The document must be printed on one side only and on white paper of at least twenty-pound weight.
- The document shall not be permanently bound although the individual pages may be stapled together.
- The print size must be at least eight point font.
- Each document must be sufficiently legible to produce a clear reproduction.
- All signatures must be in black or blue ink, with the signatory’s name typed, printed or stamped beneath the original signature.
- The first page shall have a top margin of at least three inches of vertical space from left to right reserved for the recorder’s use. All other margins shall be a minimum of three-fourths of one inch.
- The following information shall be on the first page below the three-inch margin:
- the name, address and telephone number of the individual who prepared the document;
- a return address;
- the title of the document;
- all grantors’ and grantees’ names;
- any required address and telephone number; and
- The property’s legal description.
LPS is in the process of revising the documents to meet the new formatting standards and will have them ready by the July 1, 2009 effective date.
Ohio: House Bill 525 (effective July 1, 2009)
Documents and instruments presented for recording to the county recorder must meet the following requirements.
LPS is in the process of revising the documents to meet the new formatting requirements and will have them ready by the July 1, 2009 effective date.
- The print size must be at least a ten-point font.
- The minimum paper size is 8 ½” x 11” (letter).
- The maximum paper size is 8 ½” x 14” (legal).
- Black or blue ink only.
- The side and bottom margins must be one-inch.
- A blank three inch top margin must be across the first page.
- A one and one-half inch margin is required across the top of each remaining page of the document.
LPS is in the process of revising the documents to meet the new formatting requirements and will have them ready by the July 1, 2009 effective date.
Ohio Advisory Opinion UPL 2008-02 (December 12, 2008)
The Board on the Unauthorized Practice of Law of the Supreme Court of Ohio (“Board”) issued the opinion advising that a nonattorney employee of a lending institution or bank may complete a standardized form without the supervision of an attorney. The Board noted that mortgages are standard forms widely used for the sale of various mortgage products and are drafted to comply with federal law. The only terms changed with each use of the forms are the names of the parties and the legal description or address of the property. No legal knowledge, discretion or special skills are involved to complete the documents since this is chiefly clerical in nature and therefore completing such standardized documents is not the practice of law in Ohio.
The Department of Financial Institutions amended the rules for the Mortgage Broker Practices Act to provide clarity and consistency. Highlights include the following:
In addition, Fannie Mae has updated its policy to require six months’ reserves for all one-to four-unit investment property transactions rather than the two month reserve that was previously required.
Pennsylvania: 10 PA. Code Ch. 46 (effective December 20, 2008)
As discussed in LPS' January 23, 2009 Compliance Update, the Pennsylvania Department of Banking (“Department of Banking”) adopted new regulations relating to the proper conduct of lenders and brokers in the mortgage business, which included a new Consumer Mortgage Disclosure that must be provided to the borrower. The disclosure has been published on the Department of Banking’s website along with instructions on completing the form and a required used date of March 20, 2009.
LPS will have the disclosure available for client use by the March 20, 2009 required use date.
LPS will have the disclosure available for client use by the March 20, 2009 required use date.
Washington: Regulations (effective January 23, 2009)
WAC 208-620-010, 230, 235, 320, 330, 511, 560, 565, 611, 612, 613, and 630
The Washington Department of Financial Institutions ("Department of Financial Institutions") amended the rules under the Consumer Loan Act for clarity and consistency. Highlights include the following:
- A mortgage broker cannot receive compensation as both a consumer loan licensee making the loan and as a mortgage broker in the same transaction
- A Consumer Loan Act licensee may not charge discount points on a junior lien loan unless the interest rate is actually reduced. In addition, a licensee is restricted from collecting a prepayment penalty on an adjustable rate loan except as allowed by RCW 19.144.040.
- A mortgage broker is allowed to charge the following fees:
- broker's fee
- yield spread premium, which must be disclosed as a dollar amount or dollar amount range on the good faith estimate, and as a dollar amount on the settlement statement.
- processing fee
- A mortgage broker may not charge the following fees:
- discount points;
- loan origination fee in addition to a broker’s fee; or
- an underwriting fee.
Washington: Regulations (effective January 23, 2009)
WAC 208-660-006, 008, 155, 163, 195, 250, 260, 300, 350, 360, 370, 400, 420, 430, 440, 500, and 600
The Department of Financial Institutions amended the rules for the Mortgage Broker Practices Act to provide clarity and consistency. Highlights include the following:
- The definition of a mortgage broker was revised to include any person who for compensation or gain:
- assists a person in obtaining a loan by, among other things, counseling on loan terms (rates, fees, other costs), preparing loan packages or collecting information to anticipate a credit decision under Regulation X, 24 CFR Part 3500, Section 3500)(2)(b); or
- holds himself out as being able to assist a person in obtaining a loan by advertising or otherwise informing the public that they engage in the activities of a mortgage broker or loan originator.
- A mortgage broker has a fiduciary relationship with the borrower.
- The one page disclosure summary required by RCW 19.144.020 must be dated when provided to the borrower.
AGENCY ANNOUNCEMENT |
Fannie Mae Announcement 09-02 (February 6, 2009)
Fannie Mae is updating the current policy regarding four financed properties per borrower limit to allow five to ten financed properties per borrower provided that certain eligibility and underwriting requirements are met. The eligibility requirements for five to ten financed properties include a 70-75% maximum LTV/CLTV/HCLTV (depending on transaction and property type) as well as a 720 minimum credit score. All loans delivered to Fannie Mae must meet these requirements even when Fannie Mae is not the investor on the borrower’s other mortgages. These properties will be accepted for whole loan purchase or delivery into MBS with issue dates on or after March 1, 2009.In addition, Fannie Mae has updated its policy to require six months’ reserves for all one-to four-unit investment property transactions rather than the two month reserve that was previously required.
Freddie Mac Bulletin (January 30, 2009)
Freddie Mac announced an increase in the post settlement delivery fees to address the additional risk associated with some mortgages such as cash-out refinance mortgages, interest-only adjustable-rate mortgages, and condominium unit mortgages. Home values have declined as much as 33% (annual price) in some areas based on the S&P/Case-Shiller 20-City Composite Index. Freddie Mac is increasing and/or introducing delivery fees associated with:- Condominium Unit Mortgages
- Initial InterestSM Adjustable-rate Mortgages (ARMs)
- Mortgages with certain Indicator Score/loan-to-value (LTV) ratio combinations
- Cash-out Refinance Mortgages with certain Indicator Score/LTV ratio combinations
Freddie Mac Industry Letter (February 12, 2009)
This Industry Letter is a reminder about anti-predatory lending (“APL”) requirements set forth in the Freddie Mac Guide, and also provides additional guidance. The APL requirements discussed are as follows:- excessive points and fees
- pass-through of Freddie Mac delivery fees
- claims of preemption or exemption
- claims of post-purchase cure
- expiration of applicable rescission periods
- policies and procedures to prevent sale of high-cost home