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| Iowa Mortgage Association - Prime Times Oct 16, 2009 In this issue: President's Message IMA Reg. Z Changes for Lenders Seminar IMA RESPA Seminar Industry Groups Send Letter Identifying RESPA Compliance Burdens and Insisting on Delay MBA Offers New Brochures as Part of New Loan Modification Communication Intiative USDA Rural Development Update FDIC Issues Financial Institution Letter Regarding "Protecting Tenants at Foreclosure Act" HMDA Rate Spread Reporting Changes Effective October 1st Updates to Reg. Z Exam Procedures RESPA Revisions 101 President's Message President's Message  2009-10 IMA President Kathy Klahn Dear IMA Member: I hope you are all having an enjoyable fall. It seems many first-time homebuyers are scrambling at the last minute trying to purchase a home so they can still receive the $8,000 stimulus money. Wouldn't be nice if they continue some type of incentive for first time homebuyers until the economy and real estate market turns around completely? I'm sure many of you read articles from MBA talking about the monthly changes in sales, the HAMP Program, FDIC issues, etc. They do a great job of keep us up-to-date on the real estate world. If you don't receive their news articles, you should contact them at www.mortgagebankers.org. At least there are many positives to compare to all the negative comments in the news media today regarding residential real estate.I hope that next year when I write this column for the IMA newsletter, I will have positive news. I am tired of listening to the news and all the blame games going on. We could all go there with the real estate issues as to whose fault it really is as to why these programs with no down payments, lower credit scores and high-qualifying ratios ever came about. I've been real estate lending 35 years and I know the bottom-line is our job as lenders/originators is to not only make loans to potential homeowners, but counsel those that need to do some hard work to prepare to become a homeowner. Bad things happen to good people, and many can be assisted to turn their credit issues around. A quote I read was this: "Good judgment comes from experience, and a lot of that comes from bad judgment". Most of us have now had some bad experiences based on some of the programs that were offered and because of some of the hard times people are experiencing. There may not be as many loan products we can offer, but we as IMA members can guide people in the right direction. Attitude is everything in life. We have always had a laminated statement on our refrigerator when our boys were growing up. Today, it is still there. Whether they were playing in sports, taking a test, applying for a job or resolving an issue, we would share it with them. Here it is:
Have a great month everyone! Kathy Klahn IMA Reg. Z Changes for Lenders Seminar IMA Reg. Z Changes for Lenders Seminar November 4 -- 9:00 a.m. to Noon Iowa Bankers Association, Johnston This seminar is designed to help residential real estate lenders and compliance officers understand the new disclosures and timing requirements imposed by recent amendments to Reg. Z. With mandatory compliance dates effective as early as July 30, 2009, don't miss this opportunity to learn key components of these amendments, including:
Iowa Bankers Association 8800 NW 62nd Ave., Johnston IA 515-286-4300 Registration: See www.iowama.org to register.IMA RESPA Seminar IMA RESPA SeminarNovember 18 - Johnston November 19 - Bettendorf (Sponsored by Midwest Community Title) This new full-day seminar from the Iowa Mortgage Association will provide you with the updates you on the latest RESPA changes and updates. Highlights
IMA Members $130 Nonmembers $200 See the IMA Calendar of Events for complete details and registration.Industry Groups Send Letter Identifying RESPA Compliance Burdens and Insisting on Delay Industry Groups Send Letter Identifying RESPA Compliance Burdens and Insisting on DelayOn October 13th, a group of industry organizations--including the Mortgage Bankers Association and American Bankers Association-- sent a very detailed letter to insist that HUD delay the implementation date of the recent amendments to Regulation X . The letter contains well-developed arguments explaining why RESPA implementation by the January 2010 deadline is becoming virtually impossible. Among the many difficulties identified in the letter are growing levels of confusion brought about by the issuance of HUD's informal FAQs, the confusing new requirements to issue written lists of settlement service providers that leave banks exposed to anti-referral-fee provisions, and a slew of other compliance questions that have not been properly answered by HUD. In the letter, the industry organizations wrote: "...we are headed for a mortgage market train wreck on the tracks of RESPA compliance. Unfortunately, the gap between the rule, which was unclear, and practical implementation is not being successfully bridged by the FAQs. In many instances, the FAQs, which HUD just began publishing in mid-August 2009, are further complicating the process of developing systems that will enable lenders and other mortgage service providers to deliver RESPA-compliant loans. Some of the FAQs are inconsistent with the rule while others clearly have unintended consequences to consumers, so further changes will be needed." The letter said that it is "essential" that HUD delay the final implementation date, resolve the issues discussed in the letter, and properly clarify all requirements before defining an extension of time for implement the final requirements. Click here to read the letter in full.MBA Offers New Brochures as Part of New Loan Modification Communication Intiative MBA Offers New Brochures as Part of New Loan Modification Communication Intiative The Mortgage Bankers Association (MBA) has launched a new Loan Modification Communication Initiative designed to explain the realities of loan modifications given the current economic climate. Going forward, MBA will continue to reach out to media, lawmakers, consumer groups and borrowers to educate on the loan modification process and to emphasize industry efforts to help keep people in their homes. The MBA has developed several informational brochures for use by mortgage lenders:
USDA Rural Development Update USDA Rural Development in Iowa Approves Record $227 Million in Guaranteed Home Loans During Fiscal Year 2009 Ending Sept. 30The federal government's fiscal year wrapped up on September 30 and it was a record-setting year for USDA Rural Development's guaranteed home loan program in Iowa. During the past year the agency approved $227 million in guaranteed loans to assist 2,512 families in Iowa secure new mortgages. This is more than double last year's levels thanks to special funding made available through the American Recovery and Reinvestment Act (ARRA) and special disaster assistance to help Iowans recover from floods and severe weather in 2008. "This record level of activity would not have been possible without the support of so many outstanding lenders throughout Iowa," said Bill Menner, USDA Rural Development State Director in Iowa. "We very much appreciate these valuable partnerships as our agency works to improve the quality of life for all rural Iowans." USDA Rural Development hopes to have another productive year in 2010. The agency has already received funding for the new year and is accepting loan packages. Please contact your local USDA Rural Development area office for more information about any of the agency's programs. Feel free to call the state office at (515) 284-4666 or visit www.rurdev.usda.gov/ia if you are unsure of the area office serving your community.FDIC Issues Financial Institution Letter Regarding "Protecting Tenants at Foreclosure Act" FDIC Issues Financial Institution Letter Regarding "Protecting Tenants at Foreclosure Act"On September 28, the Federal Deposit Insurance Corporation (FDIC) issued a Financial Institution Letter regarding the Protecting Tenants at Foreclosure Act. The Act provides protections for tenants living in homes subject to foreclosure and requires creditors to provide tenants with 90-days notice before evicting those tenants as the result of a foreclosure. Additionally, in the event a foreclosure takes place, the Act obliges creditors to honor existing leases with renters until the end of their terms, subject to certain exceptions. These provisions will not preempt the requirements of any state or local law that provides longer time periods or other additional protections for tenants in homes subject to foreclosure. The letter clarifies these new requirements and verifies that protections under the Act became effective May 20, 2009. Click here to view the Financial Institution Letter.HMDA Rate Spread Reporting Changes Effective October 1st HMDA Rate Spread Reporting Changes Effective October 1stHMDA reporters are reminded of the October 1, 2009 mandatory compliance date for amendments to Regulation C (Home Mortgage Disclosure) to revise the rules for reporting price information on higher-priced loans. The rules were revised to conform the definition of ‘‘higher priced mortgage loan’’ adopted under Regulation Z revisions issued in July of 2008. Since 2004, Regulation C has required lenders to collect and report the spread between the annual percentage rate (APR) on a loan and the yield on Treasury securities of comparable maturity if the spread is equal to or greater than 3.0 percentage points for a first-lien loan (or 5.0 percentage points for a subordinate lien loan). Under the revised rule, a lender will report the spread between the loan’s APR and the Average Prime Offer Rate (APOR); a survey-based estimate of APRs currently offered on prime mortgage loans of a comparable type if the spread is equal to or greater than 1.5 percentage points for a first-lien loan (or 3.5 percentage points for a subordinate lien loan). The change in index used for HMDA rate spread reporting purposes is effective October 1, 2009. Compliance is mandatory for loan applications taken on and after that date and for loans that close on and after January 1, 2010 (regardless of their application dates). To assist creditors in correctly calculating and reporting rate spreads, the FFIEC has updated its Rate Spread Calculator. The new Rate Spread Calculator generates the spread between the Annual Percentage Rate (APR) and the APOR. The new Rate Spread Calculator should be used if the loan application date is on or after October 1, 2009 or the loan is closed on or after January 1, 2010. The new Rate Spread Calculator can be found at http://www.ffiec.gov/ratespread/newcalc.aspx.The final rule detailing the HMDA rate spread reporting changes can be found in the October 24, 2008 Federal Register at http://edocket.access.gpo.gov/2008/pdf/E8-25320.pdf.Updates to Reg. Z Exam Procedures Updates to Reg. Z Exam ProceduresThe Reg. Z examination procedures have been updated to address two recent regulatory changes in mortgage disclosure requirements. First, the Mortgage Disclosure Improvement Act of 2008 (MDIA) expanded the early TIL requirement to include refinance transactions, home equity loans and loans secured with dwellings other than a consumer’s principal residence. In addition, the MDIA requires waiting periods between the time the early TIL is delivered and loan closing and requires redisclosure in some instances. Second, the Truth in Lending Act (TILA) was amended in May 2009 to require that within 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the new creditor must notify the borrower in writing of such sale or transfer and include information on how to contact the new creditor. All of these requirements are now in effect. Under the updated procedures, examiners will consider whether:
RESPA Revisions 101 RESPA Revisions 101By Ronette Schlatter, CRCM Senior Compliance Coordinator, Iowa Bankers Association The January 1, 2010 revisions rewrite RESPA in such a way even the seasoned compliance officer feels like he/she is starting over—learning the regulation for first time. In light of the sweeping changes, the best approach to understanding the revisions may be to start at the beginning of the regulation and build on the basics. Much like college course-work, start at level “101” and then work your way through the more advanced courses (or aspects of the regulation, in this case.) During the course of the next three months, a series of articles will walk through the regulatory changes to Regulation X, which implements RESPA. Applications “The submission of a borrower’s financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include: (1) the borrower’s name, (2) the borrower’s monthly income, (3) the borrower’s social security number to obtain a credit report, (4) the property address, (5) an estimate of the value of the property, (6) the mortgage loan amount sought, and (7) any other information deemed necessary by the loan originator.” The definition of application is fairly “bare bones” requiring minimal information before triggering the GFE. The goal of the RESPA revisions is to get an accurate GFE in the hands of the applicant early in the application process. Loan originators will likely not have all the information they need to render a credit decision from the seven items identified in the definition. This is hard for many loan originators to comprehend. Unfortunately, the definition of an “application” is not consistent from RESPA to Reg. B which requires creditors to notify applicants of their credit decision within 30 days of receiving a “completed application.” It is important to note the applicant must identify a property address in order to trigger a GFE. Prequalifications, in which a property address is not identified, do not trigger a GFE. The new definition includes “an estimate of the value of the property” but does not provide specific information as to what value should be used. The estimated value provided on the application may be the tax value of the property, a recent appraised value, the sales price or even the applicant’s best guess. The inclusion of the estimated value in the elements constituting an application does not mean the loan originator has to obtain an appraisal for the purpose of issuing a GFE. As noted in the definition, the loan originator may at any time collect from the loan applicant any information that it requires in addition to the required first six pieces of application information. The loan originator is NOT permitted, however, to require, as a condition for providing a GFE, that an applicant submit supplemental documentation to verify the information provided on the application. For example, the loan originator cannot require proof of income such as a paystub or W-2 statement as a condition for issuing a GFE. This supplemental information will be needed to make a credit decision, but it should not impede the process of providing a GFE. Fee Restriction Binding GFE There is one important exception to this general rule. If the interest rate has not been locked in at the time the GFE is issued, the following charges do NOT have to be made available for 10 days:
Change in Circumstance “Changed circumstance” is defined in § 3500.2 as: (1) Acts of God, war, disaster, or other emergency; (2) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (4) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems. None of the information collected by the loan originator prior to issuing the GFE may later become the basis for a changed circumstance upon which a loan originator may offer a revised GFE, unless the loan originator can demonstrate that there was a change in the particular information or that it was inaccurate, or that the loan originator did not rely on that particular information in issuing the GFE. For example, if a loan originator simply forgot to disclose the appraisal fee, it cannot be added to the GFE later. HUD has been sporadically issuing questions and answers (Q&A) to its new rules and a number of the Q&A address the issue of what constitutes a changed circumstance. Examples provided in the Q&A include:
The next article in this series will address the topic of the new GFE. In the meantime, lenders may find it helpful to review HUD’s RESPA Revisions Q&A posted on the IBA website at http://www.iowabankers.com/aspx/iba/faq.aspx.This article was originally published in the October issue of "The Disclosure," the Iowa Bankers Association's monthly Compliance magazine. To remove yourself from this mailing list, click here. |
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