NAFCU Compliance Blog

HVCC Clarifications Issued; HOEPA Trigger Updated

Posted by Anthony Demangone

As those of you who deal with Fannie Mae and/or Freddie Mac know, Fannie and Freddie now require that lenders follow the Home Valuation Code of Conduct (HVCC) in order to deliver conventional, single-family loans originated on or after May 1, 2009 to them.  Many of you have told us about the difficulties you've had with the HVCC.   NAFCU continues to seek relief from HVCC-related burdens.   We also sent a letter to the Hill on this issue.  Download H R 3044 Comment Letter.

The Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie and is in charge of their conservatorship, issued a statement to try to clear up common misunderstandings related to the HVCC.   Fannie and Freddie themselves have also updated their respective "frequently asked questions" on the HVCC.Combined, these documents address, among other things, what loans are specifically covered by the HVCC and communication with appraisers and lender removal of appraisers. You can find these documents by clicking FHFA Notice or Fannie’s FAQ or Freddie’s FAQ.  (And know how I love my FAQs.)

For example, here's a Fannie FAQ that attempts to clarify a major area of confusion: providing borrowers a copy of their appraisal.

Question: Can you clarify the requirements around Section II of the Code requiring the borrower’s receipt of the appraisal?

Answer: The Code requires that a borrower be provided a copy of the appraisal no less than three days prior to the closing of the loan. The Code allows that the borrower may waive this three-day requirement. Situations where a borrower is unaware of his or her right to a copy of the appraisal prior to the three days and is then provided a waiver of that right at the closing table, would not be compliant with the intent of the Code. The time period of rescission in a refinancing situation does not constitute a valid three-day waiver period.     

    The Code does not specify what form the waiver must take or whether it be oral or written. In addition, the Code does not prohibit that a waiver, given in a timely manner, be recorded at some later point when the parties are available. Each lender must develop its own policies, procedures, and documentation. For example, a lender may obtain a waiver from a borrower through an email, phone call, or some other means, prior to the three-day period, and then have that waiver recorded in writing at the settlement table or at some other time.

    The three-day period begins on the day of the receipt of the appraisal. For example, in a non-waiver situation, where a borrower received an appraisal on Monday, the closing could be held on Wednesday. Saturday is included for purposes of counting the three-day period. Sundays and legal holidays are not included for counting the three-day period.

I would forward this to whomever at your credit union is tracking the HVCC issue. 

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In other compliance happending, the Fed has updaded the dollar amount of its fee-based HOEPA trigger down to $579, effective January 1, 2010.  Read all about it here.

Independent Valuation Protection Institute; SAFE Act

The Home Valuation Code of Conduct required the creation of the IVPI (I wasn't going to spell that out twice).  This entity was to serve as a body that would accept referrals and complaints about noncompliance with the HVCC.  Fannie Mae issued a Lender Letter recently to note that the IVPI is not in place yet.  It is still being finalized.  A temporary process will be put in place until the IVPI starts rolling. Read all about it here.

Editor's Note: IVPI does look like a Roman Numeral, but it isn't.  The P won't work.  For anyone who wants to quickly convert Roman Numerals into normal numbers (and vice versa), go here.

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Fannie Mae also issued Announcement 09-11, which discusses the Nationwide Mortgage Licensing System, as required by the S.A.F.E. Act.   Read all about it here.  Of note:

Q4. When will the federal banking agencies, Federal Financial Institutions Examination Council, and Farm Credit Administration have a system for registering employees of federally insured depository institutions and their subsidiaries?

A specific date has not been set, but Fannie Mae will communicate updates to lenders as more information becomes available. Lenders are expected to comply with their regulators’ requirements as systems and processes are established.

Home Valuation Code of Conduct; Whoops!

You may have heard about the Home Valuation Code of Conduct (HVCC).  For credit unions that do mortgage lending, this is a big deal.  Well, here's some help.

• Fannie Mae has put together a very nice HVCC resource page.  Access it here.  It has an FAQ, the HVCC itself, and some Fannie-related guidance.  (OK, that last phrase sounds funny.)  Seriously, though - this is a very good source of HVCC information.
• NAFCU is also offering an HVCC/Appraisal webcast later this month.  Read all about it here.   We put together a nice line-up.  We have someone from NCUA's Examination and Insurance side, a person from NCUA's Office of General Counsel, an expert from Fannie Mae, and an expert from the appraisal industry.  I can't imagine a better panel to address the changes.

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Yesterday's post on preemption had a dead hyperlink.  Use this link to access NCUA's recent legal opinion letter, which indicates that NCUA's regulations preempt a New York State law that attempts to limit insurance-related activities at federal credit unions.  I apologize for any inconvenience.

FinCEN Annual Report; Valuation Code

I'm not sure if this is good or bad, but there just seems to be a bunch of different things to write about.  I hope you don't mind this mish-mash of information which has become the trend as of late...

• Yesterday, FinCEN issued its annual report for 2008.  Access it here.  If you need to do board or staff training, this document does a good job of giving you the history of FinCEN, basic information and definitions for the filings, and a broad overview of what happened this year at that Agency.
• Last week, Fannie Mae and Freddie Mac reached a new valuation agreement with New York Attorney General Andrew Cuomo.  Here's a NAFCU Today article that details the changes.  Effective date?  The new rules will be effective for single-family mortgage loans (except government-insured loans) that are originated on or after May 1, 2009.  Here's a link to the new code provided on Fannie Mae's website.  Look for more guidance in the next week or so.

Appraisals; Web 2.0 and your Reputation

FFIEC regulators, including NCUA, have issued proposed guidelines to address appraisals.  Read a NAFCU Today article about the proposal here.  (The article also contains a link to the actual proposal.)  If your credit union does real estate lending, make sure someone is aware of the proposal. 

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Earlier, I posted about "Web 2.0" and your reputation.  In short, many consumers have blogs, use Twitter and post videos about...well, whatever they want.  The earlier post showed how Bank of America was taking a beating over some overdraft protection fees.

Well, be sure to read this post by Tim McAlpine of Currency Marketing.  He does a great job of showing how Motrin managed to anger many, many mothers.  And how their anger is surging through the Internet. 

My thoughts are this: to properly manage your credit union's reputation, you have to understand today's environment.  If you do something to anger a member, that member has many ways of venting their frustration on the World Wide Web.  Does your credit union have a mechanism to monitor what is being said about you in blogs, on Twitter or in Pod-casts?

Frequently Asked Questions; delicious

Anthony has mentioned the value of Frequently-Asked-Questions documents in past blog postings here and here.  These documents can help compliance officers weave through convoluted regulations and find answers to common issues.  Here are a few that I've found useful in the past: 

Bank Secrecy Act

Anti-Money Laundering Compliance FAQs

FinCEN Answers to FAQs on BSA

FAQs on Final CIP Rule - February 2004

FAQs on Final CIP Rule - May 2005

FAQs Relating to BSA and Hurricane Katrina

OFAC

OFAC Q&As Prepared by Treasury

Privacy

FAQs on the Privacy Regulation

Share Insurance

FAQs from NCUA's October 7, 2008 Webinar on Share Insurance Changes

NCUA's FAQs on NCUSIF and Share Insurance

HMDA

FAQs on Regulation C (HMDA Reporting)

RESPA

FAQs on RESPA for Industry

Appraisals

FAQs on Appraisal Regulation and Interagency Statement*

*Note:  The Agencies recently announced a proposal to replace this interagency statement.

Third Party Due Diligence

FAQs from NCUA's January 29, 2008 Webinar on Third-Party Relationships

Flood Insurance

2008 Proposal on Interagency Q&As on Flood Insurance (would replace 1997 Q&As)

1997 Interagency Q&As on Flood Insurance

Servicemembers Civil Relief Act (SCRA)

HUD's Q&As for Lenders Regarding SCRA

Judge's Guide to SCRA - including Q&As

Health Savings Accounts

Q&As on Health Savings Accounts - IRS Notice 2004-50

Q&As on Health Savings Accounts - IRS Notice 2008-59

Check 21 Act

Consumers FAQs on Check 21

FAQs for Financial Institutions on Check 21

Check 21 FAQs on Financial Institutions Requirements - from ABA

Accounting for Loan and Lease Losses (ALLL)

Questions and Answers on Accounting for Loan and Lease Losses

Online Banking

FFIEC Guidance on Authentication in an Internet Banking Environment

Savings Bonds

FAQs on Savings Bonds

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You never know when these FAQ's will come in handy.  That is why I have mine bookmarked on my delicious page.

If you are wondering what delicious is, take a look at the user guide and slides I prepared for a talk on Organizing the Compliance Information Flow at NAFCU's 2008 Regulatory Seminar.

If you know of other valuable FAQ documents, please let us know by adding a comment to this post. 

Appraisals, and Such

You may have heard about a recent agreement involving Fannie Mae, the Office of Housing Enterprise and the New York Attorney General's Office that could change the way that credit unions do appraisals.  This snippet comes from NAFCU Regulatory Alert 08-EA-06 (NAFCU Members Only), which indicates:

(They agree) to adopt a Home Valuation Protection Code (Code)...Fannie Mae has requested comments from its customers and other market participants regarding the implementation and deployment of the Code.

The Code would apply to single-family mortgage loans (except government-insured loans) nationwide that are originated on or after January 1, 2009. Among other things, the Code would require credit unions to select appraisers and not use reports completed by appraisers selected by any other party, to establish a hotline and email address for appraisal related complaints and report improper conduct to the Institute, to report appraisers that the credit union reasonably believes is violating applicable laws to the Institute and certifying agency, and to the quality control test. It would also prohibit credit unions from influencing appraisers.

In short, this agreement would create a new appraisal system for anyone who wants to sell a mortgage to Fannie or Freddie.  Hmmm.  But don't we already have an appraisal reg? I wasn't the only one who thought so.  Here's a critical response to the agreement from OCC Comptroller John Dugan.  And here's NAFCU's response.  

Only time will tell what happens here.  The agreement would be one more thing for credit unions that do mortgage lending to monitor and follow.  But it has created a hail-storm of opposition from some pretty big players. 

Stay tuned.

NCUA Issues Appraisal Legal Opinion Letter

Yesterday, NCUA issued Legal Opinion Letter 08-0129 (February 8, 2008). You may access it here.  I find the letter interesting for a few reasons.

First, any legal opinion letter sheds light on an issue, and therefore should clarify some confusion.  This letter clarified that credit unions are not required to have a checklist or narrative to document its review of a real estate appraisal.   NCUA guidance issued in 2005 indicated that credit unions should do so.  NCUA's letter notes the practice of using a checklist or narrative "although not required,...is recommended in interagency guidance."

Second, this legal opinion letter sheds some light on agency recommendations.  The recommendation to use a checklist or narrative was issued via a Letter to Credit Unions in 2005.  NCUA's legal opinion letter clarifies that, if push comes to shove, credit unions do not have to follow that guidance.