CFPB Updates TRID Rule Guide to Forms

The Consumer Financial Protection Bureau recently issued an updated version of the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure forms. The revised Guide incorporates the changes to the TRID rule that were issued in July 2017 and published in the August 11, 2017 Federal Register.

- Richard J. Andreano, Jr.

Federal Reserve Announces Consent Order Related to Bank’s Use of Discount Points

On November 28, 2017, the Federal Reserve Board announced a Consent Order with Peoples Bank (Peoples) in Lawrence, Kansas. The Order charges Peoples with violating Section 5 of the Federal Trade Commission Act (FTCA) by engaging in deceptive mortgage origination practices between January 2011 and March 2015. According to the Order, Peoples “often” gave prospective borrowers the option of paying discount points (an amount calculated as a percentage of the loan amount) at the time of closing, in order to obtain a lower interest rate. According to the Fed, this “regularly” led borrowers to pay thousands of dollars for discount points, but did not always result in a lower interest rate. Peoples denies the charges, but has agreed to pay $2.8 million to a settlement fund for the purpose of making restitution to the affected borrowers. Also, while not a part of the Order, Peoples has ceased taking new mortgage applications and is in the process of winding down its mortgage lending operation.

Section 5 of the FTCA proscribes “unfair or deceptive acts or practices in or affecting commerce.” Here, the Federal Reserve found that Peoples’ misrepresentations were deceptive because they were likely to mislead borrowers into thinking that they obtained a lower interest rate through the payment of discount points, when in fact, many did not receive a reduced interest rate, or received a rate that was not reduced commensurate with the price they paid for the discount points. This was found to be material because it “relate[s] to the cost of the loan paid by the borrowers.

The Consent Order notes that Peoples’ loan disclosures “gave an accurate quantitative picture of the loans’ costs.” But according to the Fed, Peoples (which had no written policy regarding discount points) misrepresented and/or omitted the nature of the discount points, which led many reasonable consumers to incorrectly assume they were receiving a rate based on the discount points they paid, when they actually received no benefit (or not the full benefit) from their payment. This matter illustrates the need for mortgage lenders to ensure they are painting an accurate picture of their mortgage products at all stages of the origination process – including advertising, loan disclosures, and communications with prospective borrowers.

- Daniel C. Fanaselle


New State Agencies Receiving ESB through NMLS

On January 1, 2018, certain state agencies will start receiving Electronic Surety Bonds (ESB) through NMLS for the following licenses:

  • California Department of Business Oversight: Student Loan Servicer License;

  • Ohio Division of Financial Institutions: Money Transmitters;

  • Michigan Department of Insurance and Financial Services: 1st Mortgage Broker License, 1st Mortgage Broker/Lender License, 1st Mortgage Broker/Lender/Servicer License, 2nd Mortgage Broker License, 2nd Mortgage Broker Registrant, 2nd Mortgage Broker/Lender License, 2nd Mortgage Broker/Lender Registrant, 2nd Mortgage Broker/Lender/Servicer License, 2nd Mortgage Broker/Lender/Servicer Registrant, Consumer Financial Services Class I License, Consumer Financial Services Class II License, and Money Transmitter License; and

  • Utah Department of Financial Institutions: Money Transmitter License.

As we have previously reported, please note that the California Student Loan Servicer License and Ohio Money Transmitters License are new license types in NMLS and will be available on NMLS starting on January 1, 2018.

More information about the state adoption of ESB can be found here.

- Wendy T. Novotne

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