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.September 2009
FEDERAL ANNOUNCEMENTS |
12 CFR Part 226 Regulation Z (effective October 1, 2009)
As previously reported in our July 18, 2008 legislation update, the Board of Governors of the Federal Reserve System ("Board")
adopted a final rule implementing certain changes to the Truth in Lending Act. Pursuant to the authority under the Home
Ownership and Equity Protection Act ("HOEPA"), the Board adopted a new category of loans subject to HOEPA provisions.
The new category, higher-priced mortgage loans ("Higher-Priced Loans"), includes loans that are lower priced than HOEPA
loans but higher priced than prime loans, excluding reverse mortgages, home equity lines of credit, purchase money loans,
and temporary/bridge loans with terms of twelve months or less.
Higher-Priced Loans are defined as first lien loans secured by a consumer’s principal dwelling that are 1.5 percentage points
above the average prime offer rate and second lien loans that are 3.5 percentage points higher than such rate. The average
prime offer rate is a rate that is derived from average interest rates, points, and other loan pricing terms currently
offered to consumers by a representative sample of creditors for mortgage transactions that have low risk pricing
characteristics. Prohibitions under Higher-Priced Loans include:
- Failure to verify the borrower’s ability to repay.
- Failure to verify the income and assets reported by the borrower.
- Charging a prepayment penalty when payments change during the four year period following consummation. In the event payments do not change during the four year period following consummation, a penalty may not be charged two years after consummation nor may the penalty be charged when a refinancing is with the same creditor or its affiliate.
- Failure to establish an escrow account for property taxes and homeowners insurance for first lien loans, except for liens secured by cooperative apartments and certain condominiums. This provision is effective April 1, 2010. If the lien is secured by a manufactured home, the effective date for establishing an escrow account is October 1, 2010.
The Board also prohibited the practice of coercing or encouraging appraisers to misstate or misrepresent the value of a
consumer’s principal dwelling.
24 CFR Part 3500 (effective January 1, 2010)
We previously reported on RESPA changes in our December 28, 2008 legislation update. As a reminder, effective January 1,
2010, the revised Good Faith Estimate ("GFE") and HUD-1/HUD-1A Settlement Statement ("HUD-1/1A") must be used. Use of these
revised forms is intended to create a more transparent and clearer transaction for the borrower.
New features of the GFE include the required use of a promulgated form, providing a third informational page, and disclosing
certain loan terms. The third page of the GFE sets forth the charges that may and may not increase, as well as charges
that may increase up to 10%. A comparison chart is included, which compares the borrower’s loan (1) to a loan with lower
settlement charges and a higher interest rate and (2) to a loan with higher settlement charges and a lower interest rate.
Finally, a section called the "shopping chart" is set forth, allowing a borrower to compare the terms of the loan to other
loan offers.
New features of the HUD-1/1A include the addition of cross references to the GFE, new fields ("Agent’s portion of the total
title insurance premium" and "Underwriter’s portion of the total title insurance premium"), and the "rewording" of
certain terminology ("Our origination charge," "Your credit or charge (points) for the specific interest rate chosen,"
and "Your adjusted origination charges").
The HUD-1/1A contains an additional page that serves as a comparison to the GFE. The page includes the loan terms that
were disclosed on the GFE. Also, the additional page compares the charges that may and may not increase, as well as
charges that may not increase more than 10%. In the event charges are not in tolerance, the lender has thirty calendar
days to cure after the date of settlement. Tolerance violations are considered cured by reimbursing the borrower the
amount by which the tolerance level was exceeded. If the HUD-1/1A contains an inadvertent or technical error, then the
lender also has thirty calendar days after the date of settlement to provide a revised HUD-1/1A.
LPS will have the revised GFE and HUD-1/1A available for client use on January 1, 2010.
12 CFR Part 226 Regulation Z (effective January 1, 2010)
The Federal Reserve Board amended its annual dollar adjustment that triggers additional disclosure requirements under the
Truth in Lending Act. A loan is covered if the total points and fees payable by the consumer at or before loan consummation
exceed the greater of $579 or 8% of the total loan amount.
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, 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.
North Carolina House Bill 1222 (effective October 1, 2009)
The restrictions for rate spread home loans are amended to state that a rate spread loan is not 1) an equity line of credit,
2) a construction loan, 3) a reverse mortgage transaction, or 4) a bridge loan with a term of 12 months or less.
AGENCY ANNOUNCEMENTS |
Fannie Mae Form Revisions (August 17, 2009)
Fannie Mae revised the Home Affordable Modification Trial Period Plan (Form 3156) and Home Affordable Modification
Agreement (Form 3157). In addition, the HAMP Hardship Affidavit (Form 1021) was also updated. The forms may be
used immediately; however, the forms must be used by September 30, 2009.
