Mortgage Banking Update - August 8, 2019
In this issue:
- Inside the Beltway — Implementing Regulatory Relief, S. 2155
- Proposed Changes to HUD Disparate Impact Rule Would Create New Burden-Shifting Framework to Reflect Inclusive Communities
- HUD Announces Suspension of Effective Date for New Down Payment Assistance Requirements
- Solicitor General Asks SCOTUS for Extension to File Response to Seila Law’s Cert Petition
- CFPB Seeks Comment on Replacing Temporary GSE Patch Under Ability-to-Repay Rule
- CFPB Reopens HMDA Proposed Rule Comment Period
- Ballard Spahr Creates Debt Collection Team
- This Week’s Podcast: What the CFPB’s Proposed Debt Collection Rules Mean for the Mortgage Industry
- CFPB Extends Comment Deadline for Proposed Debt Collection Rules
- HUD Reduces Maximum LTV for FHA Cash-Out Refinance Loans
- CFPB Updates TRID Rule FAQs to Address Providing a Loan Estimate to Consumers
- A Little More COFI
- Did You Know?
- Looking Ahead
Just before adjourning for the summer district work period, 13 Republicans from the Senate Banking Committee sent a letter pushing for expedited implementation of S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, as well as asking for modifications to several provisions. Congress passed and President Trump signed into law this bipartisan legislation on May 24, 2018, to provide regulatory relief for community banks, midsized banks, regional banks, and credit unions.
S. 2155 garnered strong support from many in the financial services community looking for relief from the stringent requirements passed under the Dodd-Frank Wall Street Reform and Consumer Protection Act that were hampering lending and growth, especially in rural parts of the country. While the bill passed with bipartisan support, there were outside stakeholders and Members of Congress opposing passage of this legislation believing it would allow large banks to resume adoption of “risky” practices that led to the 2008 financial crisis.
Initiated by Chairman Crapo, the Senators sent their letter to the Chairman of the Board of Governors of the Federal Reserve System, Jerome Powell, Comptroller of the Currency, Joseph Otting, and Chairman of the Federal Deposit Insurance Corporation, Jelena McWilliams. In addition to urging faster implementation, they encouraged changes such as reducing the Community Bank Leverage Ratio (CBLR) to 8 percent (versus the 9 percent proposed by the agencies) and expanding eligibility for short-form call reports to community banks with less than $5 billion in total assets.
In addition, the Senators asked that the Volcker Rule proposal be revised and simplified to reduce burdensome compliance requirements, and requested a full exemption from initial margin requirements for swaps transactions between affiliated entities. Lastly, the letter to these agencies requested that the “Federal Reserve’s stress testing regime be significantly simplified for institutions with total assets between $100 billion and $250 billion in accordance with Section 401 of S. 2155.”
The day after the Crapo letter was sent, Chairwoman of the House Financial Services Committee, Maxine Waters, and Ranking Member of the Senate Banking Committee, Sherrod Brown, sent their own letter urging the agencies to maintain “the current requirements to post initial margin for any swaps transaction with a prudentially regulated affiliate of a U.S. banking entity.” They and other Democrats on the Committees remain leery of the relief provided by S. 2155 and will remain a strong counterpoint to agency actions perceived as further loosening regulatory reins.
The Department of Housing and Urban Development is expected to soon release proposed revisions to its 2013 rule under which HUD or a private plaintiff can establish liability under the Fair Housing Act (FHA) for discriminatory practices based on disparate impact even if there is no discriminatory intent (Rule). The proposal has been submitted to Congress for review pursuant to the Congressional Review Act. Comments on the proposal will be due on or before 60 days after the date it is published in the Federal Register.
In 2018, HUD issued an advance notice of proposed rulemaking seeking comment on whether the Rule should be revised in light of the 2015 U.S. Supreme Court ruling in Texas Department of Housing and Community Affairs v Inclusive Communities Project, Inc. While the Supreme Court held in Inclusive Communities that disparate impact claims may be brought under the FHA, it also set forth limitations on such claims that “are necessary to protect potential defendants against abusive disparate impact claims.” In particular, the Supreme Court indicated that a disparate impact claim based upon a statistical disparity “must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity” and that a “robust causality requirement” ensures that a mere racial imbalance, standing alone, does not establish a prima facie case of disparate impact, thereby protecting defendants “from being held liable for racial disparities they did not create.”
HUD’s proposed revisions to the Rule include the following:
- To reflect language in Inclusive Communities warning against the use of racial quotas, a statement that nothing in the Rule or elsewhere in Part 100 of HUD’s regulations requires or encourages the collection of data with respect to protected characteristics and that the absence of such collection will not result in an adverse inference against any party.
- To conform with language in Inclusive Communities, a statement that the remedy in an administrative proceeding should concentrate on eliminating or reforming the discriminatory practice so as to eliminate disparities and may include equitable remedies and, where pecuniary damage is proved, compensatory damages or restitution but (consistent with the FHA) not punitive or exemplary damages (HUD asks for feedback on the question of whether, and under what circumstances, punitive or exemplary damages may be appropriate in disparate impact litigation in federal court).
- To reflect guidance in Inclusive Communities, revised language that makes clear that providing information which is inaccurate or different from that provided others because of protected characteristics does not violate the FHA if the information is not materially inaccurate or materially different from that provided others.
- Based on Inclusive Communities, a new framework that requires the plaintiff to allege each of the following five elements to establish a prima facie case based on a claim that a specific, identifiable policy or practice has a discriminatory effect:
- That the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective
- That there is a robust causal link between the challenged policy or practice and a disparate impact on members of a protected class which shows the specific policy or practice is the direct cause of the discriminatory effect
- That the alleged disparity caused by the policy or practice has an adverse effect on members of a protected class
- That the alleged disparity caused by the policy or practice is significant
- That there is a direct link between the disparate impact and the complaining party’s alleged injury
- In addition to alleging that a plaintiff has not alleged sufficient facts to support a prima facie case, a defendant can use one of the following two methods to establish that the plaintiff’s allegations do not support a prima facie case:
- The defendant can show that its discretion is materially limited by a third party, such as through a federal, state, or local law or binding court, arbitral or other order or administrative requirement
- Where the cause of a discriminatory effect is alleged to be a model used by the defendant such as a risk assessment algorithm, the defendant can:
- Identify the material factors used in the model and shows that these factors are not substitutes for protected characteristics and that the model is predictive of credit risk or another similar valid objective
- Show that a recognized third party that determines industry standards is responsible for producing, maintaining, or distributing the model, the inputs within the model are not determined by the defendant, and the defendant is using the model as directed by the third party
- Show that the model has been validated by a neutral third party that found it to be empirically derived, that its inputs are not substitutes for protected characteristics, and that it is demonstrably and statistically sound and accurately predicts risk or other valid objectives.
- If the plaintiff is able to successfully allege a prima facie case, the proposal then sets forth the following approach:
- The plaintiff must prove by a preponderance of evidence, through evidence that is not remote or speculative, each of the elements set forth in 4.II through 4.V above; and
- If the defendant successfully rebuts the plaintiff’s assertion that the policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective, by producing evidence showing that the challenged policy or practice advances a valid interest or interests, the plaintiff must prove by a preponderance of the evidence that a less discriminatory policy or practice exists that would serve the defendant’s identified interest in an equally effective manner without imposing materially greater costs on, or creating other material burdens for the defendant.
- Further, the defendant may, as a complete defense:
- Prove any element identified under 5.I or 5.II above;
- Demonstrate that the plaintiff has not proven by a preponderance of the evidence any element identified under 6.I above;
- Demonstrate that the alternative policy or practice identified by the plaintiff under 6.II above would not serve the valid interest identified by the defendant in an equally effective manner without imposing materially greater costs on, or creating other materials burdens for, the defendant.
The Rule has been the subject of a lawsuit filed in D.C. district court by two industry trade associations whose members sell homeowners insurance. Initially filed in 2013, the plaintiffs filed an amended complaint following Inclusive Communities to allege that the Rule was inconsistent with that opinion. The lawsuit has been stayed in light of HUD’s planned issuance of proposed revisions to the Rule. Apparently to address the lawsuit, the proposal also would add a section to the Rule that provides nothing in the Rule is intended to invalidate, impair, or supersede any law enacted by any state for the purpose of regulating the business of insurance. In the preamble, HUD notes that while this section would not be a safe harbor, the “proposed section and the complete defense where a defendant’s discretion is materially limited by compliance with federal, state, or local law, would have a similar effect to a safe harbor, only in appropriate circumstances, by ensuring that parties are never placed in a ‘double bind of liability’ where they could be subject to suit under disparate impact for actions required for good faith compliance with another law.”
In the preamble to its Fall 2018 rulemaking agenda, the CFPB indicated that the future activity being considered by the Bureau included “reexamining the requirements of the Equal Credit Opportunity Act (ECOA) in light of Inclusive Communities and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.” The bulletin set forth the CFPB’s disparate impact theory of assignee liability for so-called auto dealer “markup” disparities. In April 2019, the Bureau announced that it plans to hold a symposium on disparate impact and the ECOA.
As previously reported, recently a U.S. District Court granted a preliminary injunction preventing the U.S. Department of Housing and Urban Development (HUD) from implementing new requirements for government-provided down payment assistance in connection with FHA insured loans. The requirements were announced in Mortgagee Letter 2019-06 and originally were scheduled to go into effect for case numbers assigned on or after April 18, 2019. HUD later extended the effective date to July 23, 2019 as a result of the legal challenge.
HUD recently announced in Mortgagee Letter 2019-10 the suspension of the effective date of Mortgagee Letter 2019-06 until further notice. HUD also advises that mortgagees may continue to follow the guidance in HUD Handbook 4000.1 II.A.4.d.ii, which sets forth existing requirements regarding government-provided down payment assistance.
The Solicitor General has filed a motion with the U.S. Supreme Court asking for an extension of the date by which the government must file its response to Seila Law’s petition for a writ of certiorari. The petition seeks review of the Ninth Circuit’s ruling that the CFPB’s single-director-removable-only-for-cause structure is constitutional.
The government’s response was due July 29. The Solicitor General is asking the Supreme Court to extend the filing deadline until August 28. The motion states that preparation of the government’s response has been delayed “because of the heavy press of earlier assigned cases to the attorneys handling this matter.”
As we have previously discussed, Dodd-Frank Section 1054(e) requires the CFPB to make a written request to represent itself in its own name before the Supreme Court within a specified period. That period has expired and we are not aware of such a request having been made by the CFPB.
The CFPB recently issued an advance notice of proposed rulemaking (ANPR) requesting comments on how to revise the qualified mortgage (QM) provisions of the Regulation Z ability-to-repay rule in view of the impending expiration of the temporary QM for loans that meet the statutory QM criteria and are eligible for purchase or guaranty by Fannie Mae or Freddie Mac. The temporary QM, which is often referred to as the “temporary GSE patch,” will expire on January 10, 2021, or earlier if Fannie Mae and Freddie Mac exit conservatorship. The CFPB notes in the ANPR that it might provide for a short extension of the expiration date, but does not specifically seek comment on an extension.
QM and Non-QM Loans. The ability-to-repay rule provides for two basic types of loans: (1) loans that meet the general ability-to-repay standards, which provide for flexibility but also uncertainty as to when the standards are met, and (2) categories of QM loans that must meet the criteria applicable to the QM category and, depending on the annual percentage rate, qualify for either a safe harbor or rebuttable presumption of compliance. The general QM loan under the rule is based on a strict debt-to-income (DTI) ratio limit of 43%, and there is guidance in Appendix Q to Regulation Z regarding the calculation and verification of debt and income that is based on standards for Federal Housing Administration (FHA) loans.
Basis for Temporary GSE Patch. The CFPB advises in the ANPR that at the time the ability-to-repay rule was adopted in January 2013, it did not believe that a 43% DTI ratio represented the outer boundary of responsible lending, and that the mortgage market at the time was still fragile as a result of the prior decade’s mortgage crisis. The CFPB explains that the temporary GSE patch was intended to help ensure access to responsible, affordable credit for consumers with DTI ratios above 43%, as well as facilitate compliance with the rule by creditors by promoting the use of widely recognized underwriting standards.
CFPB Off-Base Prediction of Market Behavior. When adopting the ability-to-repay rule, the CFPB also believed that as the mortgage market recovered, the reliance on the temporary GSE patch would decrease, as the market would shift to general QM loans and to non-QM loans for consumers with DTI ratios above 43%. The CFPB actually believed that the private mortgage market would support the shift to non-QM loans. The industry knew at the time that a shift away from the temporary GSE patch, particularly to non-QM loans, was unlikely to occur. There simply is too much uncertainty about compliance when making a loan under the general ability-to-repay (i.e., non-QM loan) requirements and, in view of the significant liability for violating the ability-to-repay rule, many creditors are reluctant to make non-QM loans.
The CFPB’s assessment of the ability-to-repay rule, issued in January 2019, acknowledges that QM loans made in reliance on the temporary GSE patch represent a “large and persistent” share of the conforming segment of the mortgage market. One contributing factor noted by the CFPB is the need to follow Appendix Q for general QM loans, as industry members find Appendix Q to lack clarity and the Appendix has not been updated since January 2013.
The CFPB indicates in the ANPR its concern that “as long as the [temporary GSE patch] continues, the private market is less likely to rebound.” When the CFPB adopted the ability-to-repay rule, it did not correctly read how the private market would react to the rule. The CFPB should not repeat this mistake by assuming once again it knows how to read the private mortgage market. The private mortgage market, and not the CFPB, determines what is acceptable to the market. The CFPB should pay heed to comments submitted by industry members in response to the ANPR.
Possible Market Impact of Temporary GSE Patch Expiration. In the ANPR, the CFPB addresses the possible impact on the market of the temporary GSE patch expiration, although the focus is on consumers with higher DTI ratios. The CFPB notes that Fannie Mae and Freddie Mac purchased nearly 52% of all closed-end first-lien residential mortgage loans made in 2018. The CFPB estimates that 31% of the loans had DTI ratios that exceeded 43%, which means the loans would not be eligible for the general QM.
The CFPB identifies three possible results of the temporary GSE patch expiration for consumers with DTI ratios above 43%: (1) some will seek FHA loans, (2) some may be able to obtain loans in the private market and (3) some may not be able to obtain loans. While the expiration of the temporary GSE patch will likely adversely affect higher DTI ratio borrowers, especially if no changes are made to the ability-to-repay rule, including Appendix Q, the adverse consequences will likely reach more than higher DTI ratio consumers.
Topics on Which the CFPB Seeks Comment
The CFPB asks that parties commenting on the various topics raised in the ANPR provide data and analysis to support their views, although parties do not have to resubmit data provided to the CFPB in connection with its assessment of the ability-to-repay rule or in response to the various requests for information issued by the CFPB in 2018.
General QM Loan Definition.
Direct Measures of a Consumer’s Personal Finances. The CFPB notes that it is considering whether to propose revisions to the general QM loan definition and, in particular, whether the definition should retain a direct measure of the consumer’s personal finances, such as DTI or residual income. The CFPB requests comment on the following issues:
- If the CFPB retains as part of the general QM loan definition a criterion that directly measures a consumer’s personal finances, should the CFPB continue to include only a DTI limit, or should the CFPB replace or supplement the DTI limit with another method (e.g., residual income or another method)?
- If so, which method and why?
- If the CFPB retains a DTI limit as part of the general QM loan definition, should the limit remain 43%?
- Should the CFPB increase or decrease the DTI limit to some other percentage?
- Should the CFPB grant QM status to loans with DTI ratios above a prescribed limit if certain compensating factors are present?
- If the CFPB retains a criterion that directly measures a consumer’s personal finances—DTI ratio, residual income, or some other measure—should creditors be required to continue using Appendix Q to calculate and verify debt and income?
- Should the CFPB replace Appendix Q?
- If the CFPB retains Appendix Q, how should it be changed or supplemented?
- If the CFPB does not retain Appendix Q or permits use of an alternative, what standard should the CFPB require or permit creditors to use to calculate and verify debt and income?
- Should the CFPB specify in Regulation Z an existing version of a widely used method of calculating and verifying debt and income that creditors would be required to use?
- Or, to provide flexibility to creditors, should the CFPB combine a general requirement to use a “reasonable method” with the option to use, as a safe harbor, a specified, existing version of a widely used method for calculating and verifying debt and income?
- If the CFPB were to specify an existing version of a widely used method for calculating and verifying debt and income under either of the approaches described in this paragraph, which method (or methods) should be allowed?
- Should Appendix Q be one of them?
Alternatives to Direct Measures of a Consumer’s Personal Finances
The CFPB advises that parties have suggested that the general QM definition not be based on DTI or other direct measures of a consumer’s personal finances. Suggestions include basing the definition only on the statutory QM loan restrictions (i.e., prohibitions on certain loan features, requirements for underwriting and a limitation on points and fees), and using factors that do not directly measure a consumer’s personal finances and may be more predictive of default than DTI or other direct measurements. One particular suggestion is using the statutory QM criteria along with the loan pricing, which is based on credit risk.
The CFPB requests comment on the following:
- Whether standards that do not directly measure a consumer’s personal finances are consistent with, and further the Truth in Lending Act’s purpose of, ensuring that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability-to-repay the loans.
- The advantages and disadvantages of such standards relative to standards that directly measure a consumer’s personal finances, including DTI ratio and residual income.
- If the CFPB were to adopt standards that do not directly measure a consumer’s personal finances, whether the CFPB should retain the current line separating safe-harbor and rebuttable-presumption QMs or modify it and, if so, how.
- If the CFPB were to adopt standards that do not directly measure a consumer’s personal finances, whether the CFPB should further specify or clarify the grounds on which the presumption of compliance can be rebutted.
Other Temporary GSE Patch Issues
- To minimize disruption to the mortgage market when the temporary GSE patch expires, should the CFPB consider any other changes to Regulation Z’s ability-to-repay and qualified mortgage provisions (i.e., other than changes discussed in response to prior questions)?
- To conduct an orderly rulemaking process and to smooth the transition to any new general QM loan definition, how much time would the industry need to change its practices following the issuance of a final rule with such a new definition?
- If the answer depends on how the CFPB revises the definition, the CFPB requests answers based on alternative possible definitions.
The draft Federal Register notice indicates that comments on the ANPR will be due 45 days after publication in the Federal Register. That is a short comment period given the significant issues involved, but is likely based on the need for a compressed rulemaking timeframe in view of the impending January 10, 2021, expiration of the temporary GSE patch. The CFPB simply waited too long to focus on this important issue.
The CFPB recently announced that it is reopening the comment period for the May 2019 Home Mortgage Disclosure Act (HMDA) rule proposal. Comments on certain aspects of the proposal, addressed below, are due by October 15, 2019.
The CFPB notes that later this summer the national loan level dataset for 2018 and the CFPB’s annual overview of residential mortgage lending based on that data (collectively, the “2018 HMDA Data”) will be released, and that stakeholders have asked to submit comments on the May 2019 proposal based on the 2018 HMDA Data. The 2018 HMDA Data will be the first data reflecting the significant expansion of the HMDA data reporting categories. The CFPB decided to extend the comment period to permit stakeholders to submit comments based on the 2018 HMDA Data.
The CFPB requests comment on the proposals to (1) modify the loan volume threshold that triggers the reporting of closed-end mortgage loans, and (2) modify the permanent open-end line of credit threshold that triggers the reporting of open-end lines of credit. The CFPB also requests comment on the appropriate effective date for any change to the closed-end mortgage loan threshold.
With regard to closed-end mortgage loans, the CFPB proposal is to increase the loan volume threshold from at least 25 originated loans in each of the prior two calendar years to at least 50 originated loans in each of the prior two calendar years. The CPFB also solicits comments on an alternative threshold of 100 originated loans in each of the prior two calendar years. Before the main implementation of the HMDA rule amendments issued in October 2015, the threshold for reporting closed-end loans applicable to non-depository lenders was 100 originated loans in the prior calendar year.
With regard to open-end lines of credit, the CFPB proposal is to continue until January 1, 2022, the temporary volume threshold of at least 500 originated open-end lines of credit in each of the prior two calendar years that triggers reporting of lines of credit, and then implement a permanent threshold of 200 originated lines of credit in each of the prior two calendar years. As previously reported, while the HMDA rule amendments adopted in October 2015 established a threshold of 100 originated lines of credit in each of the prior two calendar years, in 2017 the CFPB temporarily increased the threshold until January 1, 2020, to the 500 originated lines of credit level. As noted above, the CFPB only requests comment on the proposed permanent threshold of 200 lines of credit in each of the prior two calendar years.
The CFPB states it “believes that it would be useful to have public comment on the 2018 HMDA Data in considering where to set the permanent coverage thresholds for closed-end mortgage loans and open-end lines of credit. For example, the new data may shed light on the number of institutions and percentage of market activity covered at different potential coverage thresholds and the value of the data that would not be reported if the thresholds were increased.”
The CFPB originally intended to implement any changes to the closed-end loan reporting threshold on January 1, 2020. The CFPB advises that based on the reopening of the comment period, if the CFPB decides to amend the closed-end loan threshold, it will not be able to finalize the change to take effect on January 1, 2020. The CFPB requests comment on the appropriate effective date of any change, should the CFPB decide to modify the reporting threshold. In particular, the CFPB requests comment on the costs and benefits of a mid-year effective date during 2020, such as May 2020, versus a January 1, 2021, effective date. The CFPB also requests comment on the costs and benefits of specific days of the week or times of the month, quarter, or year for a new closed-end coverage threshold to take effect, and whether there are any other considerations that the CFPB should address in a final rule if it were to adopt a mid-year effective date.
Advances in technology coupled with increasing regulatory scrutiny have created a challenging environment for the debt collection industry, a reality that we have been helping our clients navigate by providing comprehensive counsel—from assessing and designing debt collection-related compliance programs and evaluating potential collection partners to defending claims that may arise during examinations or enforcement investigations and assisting in ensuring proper state licensing.
Even more seismic changes are likely to occur in the coming years. To better assist our clients in preparing for and responding to those changes, Ballard Spahr has created a Debt Collection Team to address the issues specific to creditors, debt collection firms, and debt buyers. Our team includes regulatory lawyers with deep knowledge of the CFPB, the FTC, federal and state banking agencies, the Nationwide Multistate Licensing Systems (NMLS) and state licensing regulators, and state attorneys general. Litigators on the team have hands-on experience defending a wide variety of industry players.
We also have significant experience in areas of law that go hand-in-hand with debt collection and servicing, including Fintech, mobile commerce and emerging payments; credit reporting; Telephone Consumer Protection Act matters; and privacy and data security.
The leaders of our Debt Collection Team are among the most highly regarded in the industry. Stefanie Jackman has been named one of the 25 Most Influential Women in Collections and also one of the 25 Most Influential Attorneys in Collections by Collection Advisor. Chris Willis and John Culhane are recognized by Chambers USA as national leaders in financial services regulation, and John Socknat is a leading voice on collections licensing issues and has served as a NMLS board member. All are regular speakers at prominent collections industry conferences.
Click here to learn more about our new Debt Collection Team.
In this podcast, we focus on provisions of the proposed rules that are of particular interest to the mortgage industry. In addition to the special consumer definition, we look at the alternative content allowed in the validation notice and issues raised by the need to include the amount of the debt. We also highlight areas where additional CFPB guidance would be helpful.
Click here to listen to the podcast.
In a notice to be published in tomorrow’s Federal Register, the CFPB is extending the comment deadline for its proposed debt collection rules until September 18. The proposal’s initial 90-day comment period was set to expire on August 19.
The Bureau states in the notice that it received two written requests from consumer advocates and an industry trade group asking for either a 60- or 90-day extension of the comment period. (We blogged about the letter sent by seven consumer advocacy groups to Director Kraninger requesting a two-month extension of the comment deadline.) According to the Bureau, after balancing the desire of interested parties for additional time to prepare their comments with the Bureau’s interest in proceeding expeditiously with the rulemaking, it believes a 30-day extension is appropriate.
In Mortgagee Letter 2019-11, the U.S. Department of Housing and Urban Development (HUD) announced that it is reducing the maximum loan-to-value ratio and combined maximum loan-to-value ratio on cash-out refinance mortgages from 85% to 80%. The change is effective for case numbers assigned on or after September 1, 2019. The limitation will apply to the property’s adjusted value, as determined under HUD guidelines.
The change does not apply to mortgages insured under section 247 of the National Housing Act, which addresses single family mortgage insurance on Hawaiian Homelands.
HUD welcomes feedback from interested parties for a period 30 days from the August 1, 2019, date of the Mortgagee Letter. Interested parties should send feedback to the FHA Resource Center at firstname.lastname@example.org. HUD advises that it will consider the feedback in determining the need for future updates.
The CFPB recently updated the TRID rule FAQs to address questions about providing a Loan Estimate to consumers. The FAQs mostly confirm guidance previously provided by the CFPB in various forms.
The FAQs focus on the obligation of a creditor to issue a Loan Estimate once the consumer submits the six items of information specified in the definition of “application” applicable to the TRID rule. The six items are the consumer’s name, income and social security number (to obtain a credit report), the property’s address, an estimate of property’s value, and the loan amount sought. One FAQ reflects the CFPB’s view that even if the consumer does not intend to apply for a mortgage loan, the submission by the consumer of the six items of information triggers the obligation of a creditor to issue a Loan Estimate:
Is the requirement to provide a Loan Estimate triggered if the consumer submits the six pieces of information in order to receive a pre-approval or pre-qualification letter?
Yes. If a consumer submits the six pieces of information that constitute an application for purposes of the TRID Rule to obtain a pre-approval or pre-qualification letter for a mortgage loan subject to the TRID Rule, the creditor is responsible for ensuring that a Loan Estimate is provided to the consumer within three business days of receipt of the last of the six pieces of information. 12 CFR §1026.19(e)(1)(iii). See comment 2(a)(3)-1. The fact that a consumer submits the six pieces of information to obtain the pre-approval or the pre-qualification letter does not change the obligation to ensure a Loan Estimate is provided. The consumer has submitted the six pieces of information that constitute an application for purposes of the TRID Rule and, thus, the requirement to provide the Loan Estimate has been triggered.
Consumers can be surprised, or even annoyed, when they are not ready to submit an application to a creditor, and then receive a Loan Estimate from the creditor. Creditors should have policies and procedures in place to advise consumers that the creditor must issue a Loan Estimate if the consumer submits the six items of information.
As previously reported, late last year the Federal Home Loan Bank of San Francisco (FHLB of San Francisco) announced that it would discontinue publishing the 11th District Weighted Average Cost of Funds Index (COFI) after the publication of the December 2019 COFI on January 31, 2020. Certain mortgage lenders use COFI as the index for their adjustable rate mortgage loans.
The FHLB of San Francisco recently announced that it will continue to publish COFI through the December 2020 COFI in January 2021.
Spouses of Individual Delaware License Applicants May be Required to Provide Fingerprints
As part of recently enacted legislation (HB 199) authorizing the Delaware State Bank Commissioner to participate in a multi-state automated licensing system to administer licenses for mortgage loan brokers, licensed lenders, mortgage loan originators, money transmitters, check cashers, and motor vehicle sales finance companies, the Commissioner may, in certain instances, require spouses of individual license applicants to provide fingerprint cards.
GLBA Safeguard Rule - FTC Proposed Amendments
RESPRO 2019 Fall Seminar | Charleston, S.C. | September 11-12, 2019
MBA’s Regulatory Compliance Conference 2019
Washington, D.C. | September 22-24, 2019
Speaker: Richard J. Andreano, Jr.
Speaker: Kim Phan
Speaker: Stacey L. Valerio
Speaker: John D. Socknat
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