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.October 2009
FEDERAL ANNOUNCEMENTS |
Federal Reserve Board (September 29, 2009)
The Federal Reserve Board ("FRB") issued a letter to the Secretary of the U.S. Department of Housing,
which stated that lenders who use the FHA interest accrual method are not required to treat the interest
charged from the prepayment date until the next installment due date as a prepayment penalty for Regulation Z
purposes.
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, California, Colorado,
Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah,
Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Alabama Senate Bill 90 (effective January 1, 2010)
The Alabama Uniform Real Property Electronic Recording Act was adopted to provide standards for electronic filing of real
property documents and electronic signatures. If the law requires that an original document be recorded, this requirement
is satisfied by recording an electronic document. If the law requires that a document be signed as a condition for recording,
the requirement is satisfied by use of an electronic signature.
California
Assembly Bill 329 (effective January 1, 2010)
The Reverse Mortgage Elder Protection Act of 2009 seeks to insure that borrowers make informed decisions before applying for a
Home Equity Conversion Mortgage ("HECM") and that lenders act in the borrower’s best interest. The Important Notice to
Reverse Mortgage Loan Applicant disclosure has been amended and must be provided to the borrower before the lender takes a
reverse mortgage loan application.
A list including at least ten (10) Department of Housing and Urban Development approved counseling agencies must be provided
to the borrower prior to the lender accepting an application. Additionally, a written checklist must be provided prior
to the borrower meeting with a counseling agency. If the borrower obtains counseling prior to applying for a reverse mortgage
loan, the counseling agency must provide the written checklist.
LPS will have these disclosures available for client use by the effective date.
Assembly Bill 1160 (effective the earlier of July 1, 2010 or 90 days after the Department of Corporations and the Department of Financial Institutions creates a form)
Existing law requires that a contract negotiated in Spanish, Chinese, Tagalog, Vietnamese, or Korean must be provided to
the borrower in the applicable foreign language prior to the execution of the contract. However, a supervised financial
organization may provide the borrower with a summary of the terms of the contract in the applicable language no later than 3
business days after receiving the written application. If the supervised financial organization provides either the summary or
the contract in the translated language, they will be deemed in compliance with the law. The Department of Corporations and
the Department of Financial Institutions will create contract summaries in each of the five languages listed above.
Note that these provisions become operative beginning on July 1, 2010 or 90 days after issuance of the summaries, whichever
occurs later.
LPS will have these summaries available for client use by the effective date.
Senate Bill 94 (effective October 11, 2009)
Any licensee who negotiates, arranges, or offers residential mortgage loan modifications or other loan forbearance services for
a fee or other compensation paid by a borrower is prohibited from (i) demanding or receiving any pre-performance compensation;
(ii) requiring any security as collateral for final compensation; and/or (iii) taking a power of attorney from a borrower.
These provisions do not apply to a licensee who offers loan modifications or other loan forbearance services for a loan owned
or serviced by them.
Licensees are required to provide the borrower with a 14-point bold type statement before entering into a fee agreement for
any loan modification or forbearance services. If the loan modification or loan forbearance is negotiated in Spanish, Chinese,
Tagalog, Vietnamese or Korean, the statement must be provided in that language.
LPS will have the English version of this disclosure available for client use.
Nevada Division of Mortgage Lending Guidance (effective October 1, 2009)
Nevada Assembly Bill 151 was signed by the Governor and became effective on May 29, 2009. The law requires that the
mortgage broker include his or her license number on the loan documents for each loan secured by a lien on real property
in the event a mortgage broker is involved. Between May 29 and October 1, 2009, a mortgage broker was given, without penalty,
30 days to cure a failure to provide the license number.
The Division of Mortgage Lending ("Division") issued guidance on the placement of the license number on the loan application,
note, deed of trust, and the final HUD settlement statement when the mortgage broker prepares any of these documents.
If the mortgage broker does not prepare the final documents, the Division recommends that the lender insert the information
on the mortgage broker’s behalf.
LPS has the revised forms available for client use.
South Carolina Senate Bill 673 (effective January 1, 2010)
In addition to the S.A.F.E. Act provisions, Senate Bill 673 provides amended definitions for mortgage lending and brokering as
well as high-cost and consumer home loans. Certain adjustable rate mortgages ("ARM") are defined as high-cost home loans
and require a disclosure which lists the schedule as to when the interest rate may change and a list of the monthly payment
that is owed at each change. If the insurance and taxes are escrowed with each monthly payment, the escrowed amount must be
reflected in the payment.
The mortgage broker fee agreement ("Agreement") requirements have been amended to include the current name, address and telephone
number of the mortgage broker’s branch office, the account number (if applicable), the date of the Agreement, the name of
the borrower, the signature of the borrower and mortgage broker, the amount of any fees, and the services provided to the
borrower. The borrower must be given a copy of the completed Agreement. When a mortgage broker co-brokers a loan, the
Agreement must contain a statement advising the applicant that the loan is co-brokered. The broker also must provide the
applicant a notice within three days of making a decision to co-broker the loan, which includes the name and street/ mailing
address of the co-broker, as well as which mortgage broker to contact regarding progress of the mortgage broker’s services to
the applicant.
Licensees must display their unique identifier on all mortgage loan forms and any other documents furnished in connection
with a mortgage loan transaction. The unique identifier is assigned by the Nationwide Mortgage Licensing System and Registry.
LPS will add the unique identifier to the loan documents as well as provide revised disclosures by the effective date.
AGENCY ANNOUNCEMENTS |
Fannie Mae Announcement 09-29 (September 22, 2009)
Fannie Mae will retire the biweekly payment mortgage product due to increased operational costs and lack of demand.
The effective date for this change will be the weekend of December 12, 2009. LPS will no longer provide these documents
after December 12, 2009.
HUD Mortgagee Letter 2009-28 (September 18, 2009)
New appraisal requirements for FHA loans have been added and become effective for all case numbers assigned on or after
January 1, 2010. The new requirements include but are not limited to prohibiting
FHA approved lenders from accepting appraisals prepared by FHA Roster appraisers if the appraiser was selected, retained,
or compensated by a mortgage broker or any member of the lender’s staff who is compensated on a commission basis for the
successful completion of a loan.
HUD Mortgagee Letter 2009-29 (September 18, 2009)
Appraisal portability is addressed regarding the purpose of facilitating the loan process when a borrower switches from
the first FHA approved lender to a second lender. At the borrower’s request, the first lender must transfer the appraisal
to the second lender. Appraiser shopping is prohibited by FHA when lenders order additional appraisals in an effort to
obtain the highest possible value for the property, the least amount of deficiencies, and/or required repairs.
These requirements are effective for all case numbers assigned on or after January 1, 2010.
HUD Mortgagee Letter 2009-30 (September 18, 2009)
A 120 day validity period will exist for all appraisals on existing, proposed, and under construction properties.
This provision is effective for all case numbers assigned on or after January 1, 2010.
HUD Mortgagee Letter 2009-32 (September 18, 2009)
On or after November 17, 2009, revised procedures must be followed for Streamline Refinance transactions.
These revised procedures include but are not limited to:
- The borrower, at the time of loan application, having made at least six payments on the FHA-insured mortgage;
- The borrower, at the time of loan application, exhibiting an acceptable payment history; and
- The lender determining that, with or without an appraisal, a net tangible benefit exists. A net tangible benefit is (1) a reduction in the total mortgage payment; (2) a refinance of an adjustable rate mortgage to a fixed rate mortgage; or (3) a reduction in the mortgage term.
HUD Mortgagee Letter 2009-34 (September 23, 2009)
A new set of principal limit factors for the FHA Home Equity Conversion Mortgage ("HECM") program must be used for all HECMs
for which the FHA case number is assigned on or after October 1, 2009.
HUD Mortgagee Letter 2009-36 (September 23, 2009)
As of October 1, 2009, appraisers listed on the FHA Appraiser Roster ("Roster") who are not state certified will be removed
from the Roster.
HUD Mortgagee Letter 2009-37 (October 1, 2009)
The originating lender is responsible for determining if a property is located in a Special Flood Hazard Area ("SFHA").
A qualified third party may be used to determine whether a property is located in a SFHA. The National Flood Insurance Act
requires that third party information may be used only to the extent that the third party guarantees the information’s accuracy.
If an escrow account is required for other insurance and taxes, Lenders must inform borrowers of the requirement to obtain
adequate flood insurance for properties when any portion of the property is located in a SFHA. Adequate flood insurance
must be maintained throughout the life of the loan and lenders are required to force place flood insurance in the event the
policy is inadequate or the borrower allows the policy to lapse.
