2013 federation annual conference mortgage compliance presented by: keith rhodes-director of...
TRANSCRIPT
2013 Federation Annual Conference
Mortgage Compliance
Presented by:
Keith Rhodes-Director of Education and Training
West Virginia Credit Union League
In 2013 there have already been 3,500 pages of mortgage regulations from the CFPB
How did this all start?
2008 – Mortgage Crisis
2010 - Dodd-Frank Act
2011 - CFPB
Statutory objectives of CFPB
To ensure that consumers have timely and understandable information to make responsible decisions about financial transactions;
To protect consumers from unfair, deceptive, or abusive acts or practices, and from discrimination;
To reduce outdated, unnecessary, or overly burdensome regulations;
To promote fair competition by enforcing the Federal consumer financial laws consistently; and
To advance markets for consumer financial products and services that operate transparently and efficiently to facilitate access and innovation.
CFPB’s JurisdictionAlternative Mortgage Transaction Parity Act of 1982
Consumer Leasing Act of 1976Electronic Fund Transfer ActEqual Credit Opportunity ActFair Credit Billing ActFair Credit Reporting ActHome Owners Protection Act of 1998Fair Debt Collection Practices ActFederal Deposit Insurance ActGramm-Leach-Bliley Act
Home Mortgage Disclosure ActHome Ownership and Equity Protection Act of 1994Real Estate Settlement and Procedures Act of 1974S.A.F.E. Mortgage Licensing Act of 2008Truth in Lending ActTruth in Savings ActOmnibus Appropriations ActInterstate Land Sales Full Disclosure Act
CFPB Mortgage Rules
Ability to Repay (ATR) and Qualified Mortgage (QM) Rule Effective Jan. 10, 2014 The rule applies to closed-end loans
secured by a dwelling except: HELOCs Timeshares Reverse mortgages Temporary or bridge loan (term 12 months or
less) Construction phase of construction to
permanent
Ability to Repay (ATR)
Must make a reasonable and good faith determination that the consumer has the ATR using the eight factors
The ATR will depend on the creditor’s standards and how they are applied to each individual’s facts and circumstances
Ability to Repay (ATR) Factors1. Current income or assets;2. Current employment status;3. Credit history;4. The monthly payment of the mortgage;5. The monthly payment on any other loans associated
with the property;6. The monthly payment for other mortgage related
obligations (such as property taxes);7. Other debt obligations; and8. The monthly debt-to-income ratio or residual income
the borrower would be taking on with the mortgage
Qualified Mortgage
Includes product and underwriting guidelines/restrictions
Compliance standard differs if the QM is higher-pricedNot higher-priced = safe harborHigher-priced = presumption
Higher-priced mortgage loan
Defined as a covered transaction with an APR that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1.5 or more percentage points for a first-lien covered transaction, or by 3.5 or more percentage points for a subordinate-lien transaction
Qualified Mortgage
A QM must generally provide for regular periodic payments that are substantially equal.
A QM may not have the following features:
Negative amortization Interest-only paymentsBalloon paymentsA term exceeding 30 yearsPoints and fees in excess of rule limits
QM Points and Fees
Different thresholds for points and fees depending on loan amount.
Maximum: If loan amount is greater than or equal to $100,000, then points and fees cannot exceed 3% of the total loan amount
Minimum: If loan amount is less than $12,500, then points and fees cannot exceed 8% of the total loan amount
QM Underwriting
Periodic payment Verification of current or reasonably
expected income or assets Verification of current debt obligations,
alimony, and child support Debt-to-income ratio not to exceed
43%
Ok, this only one new mortgage regulation with more to come…
CFPB: Upcoming Mortgage Regulations
Mortgage Servicing (Reg X & Reg Z) - nine provisions
High Cost Mortgages Homeownership Counseling Escrow Reg B Appraisal Reg Z Appraisal Loan Originator Compensation
CFPB's “Small Servicer” Exemption” Small Servicer = a creditor (and its affiliates) that
originated 500 or fewer first lien covered transactions in the preceding calendar year AND had total assets of less than $2 Billion
So what is a “Small Servicer” and what are they exempted from? A credit union that services 500 or fewer mortgage loans where it is the creditor or assignee will be exempt from certain (not all) of the requirements of CFPB’s new mortgage servicing regulation.
CFPB's “Small Servicer” Exemption”1. Even if a credit union qualifies for the
small servicer exemption, it may retain liability for compliance with the rule if it is using a sub-servicer that does not qualify for the exemption
If a credit union use a sub-servicer, NCUA’s regulations require the institution to conduct sufficient due diligence to determine that the third-party servicer is compliant with the new servicing rules.
CFPB's “Small Servicer” Exemption”2. The exemption applies only to some
aspects of the servicing rule. Significant portions apply to all mortgage servicers.
All credit unions servicing mortgages must adopt new standards for error resolution and information requests, comply with new restrictions on forced-placed hazard insurance, credit payments promptly, comply with new restrictions on starting foreclosure procedures, and provide new interest-rate change notices with adjustable-rate mortgages.
CFPB's “Small Servicer” Exemption”3. Beware the inevitable regulatory creep that may
require small servicers to adopt the entire mortgage servicing rule despite the exemption. Credit union regulators at the state and federal level will still examine the servicing policies and procedures for all credit unions servicing mortgages regardless of whether they qualify as small servicers.
NCUA and state regulators may end up requiring de facto compliance with all of the servicing rule provisions as the means for small servicers to demonstrate the safety and soundness of their mortgage servicing portfolios.
Feeling Overwhelmed!!!
Compliance Best Practices 1. View CFPB’s website for compliance information 2. Form an in-house credit union team that meets regularly
regarding compliance3. Involve credit union management 4. Hold your third party vendors accountable 5. Stay informed through CUNA and your State
League/Association for compliance assistance 6. Review all policies and procedures regularly7. Establish a timetable with achievable deadlines – for
upcoming compliance regulations and stick to it8. Share compliance resources with other credit unions9. YouTube, yes I said YouTube!http://www.youtube.com/watch?v=wxsKnoFzSYI
Thank-You!!
QUESTIONS