NAFCU Compliance Blog

CFPB Issues Guides on HPML Appraisals, ECOA Valuations, and HOEPA Rule

Written by Bernadette Clair, Regulatory Compliance Counsel

Last week, the CFPB issued Small Entity Compliance Guides for the TILA Higher-Priced Mortgage Loans Appraisal Rule (HPML Appraisal Rule), Equal Credit Opportunity Act (ECOA) Valuations Rule, and 2013 Home Ownership and Equity Protection Act (HOEPA) Rule.

Today I want to highlight an excerpt from Section 3 of the HPML Appraisal Rule Guide which discusses when the disclosure requirements of the HPML Appraisal Rule and ECOA Valuations Rule overlap and provides guidance on how to comply with the disclosure and timing requirements when both rules apply to a transaction.  From the guide:

“III. How do the Appraisals for Higher-Price Mortgage Loans Rule and the Equal Opportunity Credit Act Valuations Rule overlap?

For first-lien HPMLs that are covered by the HPML Appraisal Rule, the disclosure requirements overlap with the ECOA Valuations Rule. The ECOA Valuations Rule implements Dodd-Frank Act amendments to ECOA, which require you to provide consumer disclosures and free copies of appraisals and other written valuations.

You can use the disclosure under the ECOA Valuations Rule to satisfy the requirements of this rule. The ECOA guide and the ECOA Valuations Rule are online at http://www.consumerfinance.gov/regulations/disclosure-and-delivery-requirements-for-copies-of-appraisals-and-other-written-valuations-under-the-equal-credit-opportunity-act-regulation-b/.

The ECOA Valuations Rule imposes a different deadline structure for providing copies of appraisals to consumers. Under the ECOA Valuations Rule, the copies of appraisals must be provided “promptly upon completion” or three business days before closing, whichever is earlier.

As a result, if the appraisal is completed early in the application process, then the “promptly upon completion” deadline will come first, since it will be earlier than the three-business-days-before-closing deadline under this rule.

In addition, the applicant can waive the deadline under the ECOA Valuations Rule and elect to receive the copies at closing, whereas the applicant cannot waive the three-business-days-before-closing deadline under the HPML Appraisal Rule. 

If the transaction is subject to both rules, then comply with the earlier deadline. The HPML Appraisal Rule deadline will be earlier if the applicant provides a waiver under the ECOA Valuations Rule.

For example, if an applicant waives the deadline under the ECOA Valuations Rule, you will still need to comply with the three-business-day-before-closing requirement in this rule.

If the applicant does not waive the three-business-days-before-closing deadline, generally the ECOA Valuations Rule “promptly upon completion” deadline will be earlier.

 

IV. What text do I use in my disclosure to consumers?

Use this text in your disclosure to consumers:

“We may order an appraisal to determine the property’s value and charge you for this appraisal. We will give you a copy of any appraisal, even if your loan does not close. You can pay for an additional appraisal for your own use at your own cost.”

For a first-lien transaction, you can also add the word “promptly” to the disclosure, telling the consumers you will “promptly” give them the copy. Then you will have the same disclosure used to comply with the ECOA Valuation Rule. (Regulation B, 12 CFR 1002.14(a)(2))”

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NAFCU Members: Check out this month’s Compliance Monitor (available for download here) which features an in-depth discussion of these disclosure and timing requirements in the article entitled New Appraisal Disclosure Requirements: Regulation B and Higher-Priced Mortgage Loans (NAFCU login required).

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

***

And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

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CFPB Mortgage Rules in Federal Register; NAFCU Rule Summaries; Upcoming NAFCU Mortgage Webcasts

Written by Steve Van Beek

CFPB's Mortgage Regulations.  The CFPB's mortgage regulations are starting to be published in the Federal Register.  Below are the links to the rules that have been published so far as well as links to rules that are at the Public Inspection Desk (waiting to be published).

Published in Federal Register

• Escrow Requirements for Higher-Priced Mortgage Loans - Regulation Z

• Disclosure and Delivery Requirements for Copies of Appraisals and Other Valuations - Regulation B

• HOEPA/High-Cost Mortgages and Homeownership Counseling Amendments - Regulation Z & Regulation X

• Ability-to-Repay and Qualified Mortgage Standards - Regulation Z

• Concurrent Proposal - Ability-to-Repay and Qualified Mortgage Standards - Regulation Z

• Mortgage Servicing Rules (02/14) - Regulation Z (TILA)

• Mortgage Servicing Rules (02/14)- Regulation X (RESPA)

• Loan Originator Compensation Requirements (02/15) - Regulation Z

• Interagency Final Rule on Appraisals for Higher-Priced Mortgages.

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NAFCU Resources.  Yesterday, we mentioned our new mortgage rules webpage.  That page includes tons of resources to help credit unions comply and it will be growing each day.  Included are summaries of the new rules from NAFCU's Regulatory Affairs team, such as:

• Final Regulation:  Ability-to-Repay and Qualified Mortgages
• Regulatory Alert:  Concurrent Proposal for Ability-to-Repay and Qualified Mortgages
• Final Regulation:  Escrow Requirements for Higher-Priced Mortgages
• Compliance Monitor Article:  Escrow Requirements for Higher-Priced Mortgages
• Final Regulation:  HOEPA/High-Cost Mortgage Loans and Homeownership Counseling Amendments
• Final Regulation:  Mortgage Servicing Requirements (Both Reg Z and Reg X)

Note:  The resources linked above are for NAFCU members-only.  However, the new mortgage rules webpage has additional resources that are available to everyone - including webcasts, conference sessions and links to blog post categories.   

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Upcoming NAFCU Mortgage Webcasts.  The first two webcasts of NAFCU's Mortgage Reform Webcast Series are quickly approaching:

• The CFPB's Final Mortgage Regulations - February 13, 2013 - Special Two-Hour Webcast - 2:00 p.m. to 4:00 p.m.

I'll be providing an overview of the new regulations - including specifically the scope and applicability of each regulation.  I'll also be zeroing-in on the finalized exemptions and how credit unions determine if they qualify for the exemptions.  For a taste of the resources I'll be providing, check out this Scope & Applicability Chart for the Escrow Final Rule. 

• CFPB's Ability to Repay and Qualified Mortgage Requirements - March 6, 2013 - 2:00 p.m. to 3:30 p.m.

On March 6, Andy Keeney from Kaufman & Canoles will be examining the details of the CFPB's Ability-to-Repay and Qualified Mortgage Requirements.  Andy will walk through the new underwriting guidelines - including the debt-to-income requirements - and explain how these rules will impact credit union mortgage lending.  And, importantly, the steps your credit union needs to take to comply by January 10, 2014.  

                     

CFPB Field Hearing - Atlanta; Mortgage Servicing Final Rule; Appraisals for Higher-Risk Mortgages Final; NAFCU Final Regulation on Qualified Mortgages

Written by Steve Van Beek

CFPB Field Hearing.  Today, we should get a look at the CFPB's next final rules for the mortgage market.  We are expecting the final rules for mortgage servicing (both Reg Z and Reg X), mortgage loan originator compensation (and much more), and possibly the Reg B final rule for appraisal disclosures.  

***Updated at 8:00 a.m.***

Mortgage Servicing Final Rule.  As expected, the mortgage servicing rules will be the main focal point of the CFPB's field hearing today.  The rules should be online later today (when it is, it will be posted here).  

As of 8:15 a.m., there is a short summary and a fact sheet.  

***At 9:30 a.m., the CFPB posted their press release, Director Cordray's speech and a webpage with the final rules (the Reg X/REPSA rule is 753 pages and the Reg Z/TILA rule is 426 pages).*** 

Effective Date:  The summary indicates January 10, 2014 as the effective date (in other words, the CFPB is providing less than 12 months for this rule).  

Small Servicer Exemptions:  I also noticed this paragraph in the fact sheet:

"SMALL SERVICER EXEMPTIONS

Recognizing that small servicers approach servicing quite differently, the CFPB has made certain exemptions to today’s mortgage servicing rules. Servicers that service 5,000 mortgage loans or less and only service mortgage loans that they or an affiliate own or originated are exempt from some of the new rules. These exemptions include many of the procedural rules, including most of the requirements regarding the handling of loss mitigation applications."

We'll have additional details on exactly which mortgages are included in this 5000 in a future blog post.  For now, check how many mortgages you currently service and you'll get a good initial look at how onerous the mortgage servicing rules will be for your CU.  

***  

Appraisals for Higher-Risk Mortgages.  On Tuesday, the FDIC posted an approved version of the joint final rule on appraisals for higher-risk mortgages.  There are additional details in the NAFCU Today.  Both the CFPB and NCUA were joint on this rulemaking, so expect the CFPB to have additional details on this final rule in the near future (most likely a press release and short summary - and, hopefully, a Fact Sheet for compliance officers).  

***

NAFCU Final Regulation on Qualified Mortgages.  NAFCU's Regulatory Affairs team has finished their summary of the Qualified Mortgage/Ability-to-Repay final rule.  NAFCU members can find it here (13-EF-01).  

They are also working on summaries of the escrow final rule, HOEPA/high-cost final rule and the concurrent proposal for the qualified mortgage rule.  When they are available, NAFCU members can find the Final Regulations here and the Regulatory Alert here.  

Reminder: You can find information on the first three final rules in this blog post.  NAFCU also has a Mortgage Reform Webcast Series planned for 2013 and we'll also have a special Regulatory Update day - including sessions on the new moretgage regulations - on the Thursday of Regulatory Compliance School.  P.S. Register for School by January 31st using the promo code NEWYEAR to save $100.  

CFPB Finalizes First Three Mortgage Regulations: Qualified Mortgages; Escrows; & HOEPA

Written by Steve Van Beek

Did you hear that?  No worries, it was just the sound of thousands of dying trees after the CFPB's first three mortgage regulations were finalized.  If you heard a second noise, it was probably your printer dying. 

***

Now, on to the good stuff.  Initially, it is good idea to overview which rules were finalized and which are coming next.

Which Three Regulations?  Yesterday, the CFPB finalized the qualified mortgage rule (AKA the ability-to-repay rule), the escrow rule for higher-priced mortgages, and the HOEPA/High-Cost/Section 32 mortgage rule.  

What is Left?  It is expected that the CFPB will finalize the remaining regulations on January 17th at their field hearing in Atlanta.  Which ones?  Mortgage servicing (both Reg Z and Reg X), mortgage loan originator compensation (and much more - including SAFE Act angles), appraisals for higher-risk mortgages, and Regulation B appraisal disclosure requirements.  Yikes! 

Of course, it is always possible the CFPB waits on one or two of these - especially given that neither the higher-risk appraisals or Reg B appraisals are listed on the CFPB's latest Regulatory Agenda.  But, be prepared for all of these to be coming out soon.  

What about TILA/RESPA Integrated Disclosures?  The new disclosure forms will be finalized later in 2013.  Dodd-Frank mandated that the CFPB propose new regulations by July 21, 2012 but it did not mandate a timeframe for the final regulation.  

***

Qualified Mortgages - Ability-to-Repay.  This is the one that got all the press yesterday.  There was the field hearing, the press release, Cordray's prepared remarks, the blog post, the Fact Sheet, the Summary and.........finally, the final rule (804 pages).  

The CFPB created a special page for each new final rule and you can find the Qualified Mortgage/Ability-to-Repay page here.

This page includes the full final rule and it also takes a page out of this blog's playbook and breaks the new rule down by preamble, regulatory text and official interpretations.  

Effective Date:  The final rule contains an effective date of January 10, 2014.

Concurrent Proposal:  The CFPB also proposed changes to the just finalized regulation.  The proposal can be found here.  Including the preamble, regulatory text and the official interpretations.   

Of course, we'll have more on this final rule and the proposed rule in the future.

***

Escrow Final Rule - Higher-Priced Mortgages.  To much less fanfare, the CFPB also finalized a rule on escrow requirements for higher-priced mortgages (the original proposal was from the Federal Reserve way back in March 2011).  The CFPB released a consumer guide on this rule (where is the compliance officer guide?)  There is also a one-page summary here.

The CFPB's special page for the escrow final rule is here.

The full final rule is here (116 pages).  There are also separate documents with the preamble, regulatory text and the official interpretations.

Effective Date:  This final rule is effective June 1, 2013.     

***

HOEPA/High-Cost Mortgage - Final Rule.  The CFPB also finalized a rule implementing changes to high-cost mortgages.  A consumer guide for this rule is also available.  A three-page summary is here.     

The CFPB's special page for the HOEPA/High-Cost final rule is here.

The full final rule is here (431 pages).  There are also separate documents with the preamble, regulatory text and the official interpretations.

Effective Date:  This final rule is effective January 10, 2014.

Importantly, this final rule did not include a decision on whether to expand the definition of finance charge.  That decision will be made as part of the TILA/RESPA Integrated Disclosure final rules.   

***

Adding It Up.  So, that is 804 + 116 + 431 = 1351 new pages.  And, more to come next week.

And, silly me, I thought I'd be able to finalize the third Game of Thrones book prior to the show starting back up.  

Bonus:  While there are many resources above, I wanted to share my personal favorite.  Have a great weekend!  

Updates to Adverse Action Notices and Risk Based Pricing Notices Required by January 1, 2013

Written by Michael Coleman, Regulatory Compliance Counsel

Regulation B - Adverse Action Notices

When the CFPB republished Regulation B into 12 CFR 1002, they updated Appendix A to Part 1002 to reflect the address for NCUA’s new Office of Consumer Protection (OCP), which is required to be listed on adverse action notices for credit unions under $10 billion in assets starting January 1, 2013.

The underlying requirement for including the agency address on adverse action notices comes from 12 CFR 1002.9(a)(2) and (b)(1).   

Appendix A to Part 1002  now includes this information for FCUs under $10 billion on assets:

"d. Federal Credit Unions: National Credit Union Administration, Office of Consumer Protection (OCP), Division of Consumer Compliance and Outreach (DCCO), 1775 Duke Street, Alexandria, VA 22314." 

Credit unions over $10 billion in assets need to include the CFPB's name and address:

“1. Banks, savings associations, and credit unions with total assets of over $10 billion and their affiliates: Bureau of Consumer Financial Protection, 1700 G Street NW., Washington DC 20006. Such affiliates that are not banks, savings associations, or credit unions also should list, in addition to the Bureau: FTC Regional Office for region in which the creditor operates or Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.”

State-chartered credit unions should check the address on their notices and determine if it matches the FTC address in #9 from Appendix A. 

For additional details, check out this January 13, 2012 blog post

Regulation V - Risk-Based Pricing Notices

Regulation V was also updated when the CFPB republished Regulation V in 12 CFR 1022 and will require the CFPB's website address on risk-based pricing notices after January 1, 2013.  

The requirement comes from 12 CFR 1022.73(a)(1)(viii) which mandates that credit unions provide this on their risk-based pricing notices:

"(viii) A statement directing consumers to the Web site of the Bureau to obtain more information about consumer reports;"

After January 1, 2013 - credit unions need to make sure they have the updated language referencing the CFPB.  Appendix H to Part 1022 has the model forms where you can see the risk-based pricing notice requirements.  

For additional details, check out this June 7, 2012 blog post.

***

Redskins – I am a huge Skins fan, and as anyone who is familiar with the trials and tribulations of being a sports fan in DC knows, it’s not easy being green (or burgundy and gold in this case). But I am one of those optimistic Redskins fans. The Skins have a shot at the playoffs this year, and have two huge games to close out the season (against the Eagles and then the Cowboys, fingers crossed). It’s not certain if Robert Griffin III will start this weekend, but even if he doesn’t, I’m optimistic that Captain Kirk will continue to perform. I also like to focus on the good things from the season. Like the fact that even when RG3 fumbles, we score touchdowns (sorry New York readers). Go Skins! 

NAFCU’s Mortgage Comment Letters; November 7 Webcast on CFPB’s Latest Mortgage Proposals

Written by Shari R. Pogach, Regulatory Paralegal

The CFPB rolled out its various mortgage proposals at such a fast and furious clip that many of the comment deadlines for its proposals were on the same day.  So how is this making life easier for folks?  I feel like we all have an answer for this but are too polite to say it out loud.  Today we thought we’d highlight NAFCU’s comment letters in response to some of the proposals:

September 7, 2012:  High-Cost/HOEPA Proposal;

September 21, 2012:  Definition of Finance Charge;

October 9, 2012:  Mortgage Servicing Proposals;

October 15, 2012:  Higher-Risk Appraisal Proposal;

October 15, 2012:  Regulation B Appraisal Proposal; and

October 16, 2012:  Mortgage Loan Originator Proposal.

These comment letters can be a great way to get a summary of the proposed changes and help identify future headaches for your credit union if the rules are adopted as proposed.  

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NAFCU Webcast. Join NAFCU’s Regulatory Compliance team by watching the November 7, 2012, webcast on the CFPB’s latest mortgage proposals.  Part II: The CFPB's Latest Mortgage Proposals and the Impact on Your Credit Union.  The compliance team will highlight and discuss the mortgage loan originator proposal, the higher-risk appraisal proposal and the Regulation B appraisal proposal.  Save $100 if you sign up by October 31.   Note, NAFCU’s webcasts are open to all credit unions, regardless of membership or charter type!

Remittances Webinar; Fair Lending Webinar; Archived Nonaccrual/TDR Webinar

Written by Steve Van Beek

Remittances.  The CFPB recently opened their Remittances Webinar to everyone - without the need to register (the webinar is free).  The webinar will be available on this page beginning at 2:30 p.m. Eastern.  The webinar will last 90 minutes.

That is TODAY at 2:30 p.m. Eastern.  Be sure to tune in.    

NOTE - The CFPB issued their small entity compliance guide yesterday.  

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Fair Lending.  The Philadelphia Federal Reserve's Consumer Compliance Outlook will be hosting a Fair Lending Webinar tomorrow - October 17th from 2:00 - 3:30 p.m. Eastern.  You can register here.   

The presentation slides are already available here.  Topics to be discussed are:

• Recent Fair Lending Enforcement Actions
• Risk Assessments
• Fair Lending Compliance Management
• Data Reporting and Analysis
• FHA LGBT Rule, Disability Discrimination, Maternity Leave Discrimination
• Loss Mitigation and Loan Modification
• Redlining

Remember - TOMORROW at 2:00 p.m. Eastern.  Register here.   

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Nonaccrual and TDR Webinar.  NCUA's webinar on Workouts, Nonaccrual and TDRs is now archived and available.  The webinar can be watched here.  A transcript is also available inside the webinar (or at this link).       

Tracking the CFPB's Mortgage Proposals - Federal Register

Written by Steve Van Beek

With the various mortgage proposals from the CFPB, I thought a good Friday blog post would be one that linked to the various proposals in the Federal Register so that credit unions had the proposed rules in one place.

Initially, here is a link to the CFPB's section of the Federal Register.  Below are links to the CFPB's mortgage proposals.

• High-Cost Mortgages and Housing Counseling Amendments Note: The comment period for the finance charge portion has been extended until November 6th.  
• Equal Credit Opportunity Act (Regulation B) - Appraisals
• Integrated Mortgage Disclosures under TILA/RESPA Note:  The comment period for the finance charge portion was also extended until November 6th.
• Appraisals for Higher-Priced Mortgage Loans
• Loan Originator Compensation (Regulation Z)

Update (10/01): The Mortgage Servicing proposals can be found here (Reg Z) and here (Reg X).  It doesn't appear that the Mortgage Servicing proposed rules have been published in the Federal Register yet (the comment period ends October 7th for those proposals).  Those proposals can be found here:  Reg Z and Reg X.  Our August 23rd blog post also has a recap of our mortgage servicing blog posts to date.

***

NAFCU Seminar.  We'll be discussing both of the Mortgage Servicing proposals as well as the TILA/RESPA Integrated Mortgage Disclosures in breakout sessions in Seattle (October 23-26th).  We'll also be discussing the other proposals in our CFPB Update sessions.  

On-Demand Webcast.  If you missed the 3-hour marathon webcast on Wednesday, you can still purchase the on-demand version in order to get a detailed update of the CFPB's proposals on mortgage servicing and high-cost mortgages (including the impact on HELOCs).  I also provided an overview of the proposed Integrated Disclosures.

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Football Season.  I'll admit we've been a little slow on the football talk lately.  With that being said:  Go Blue!

Have a great weekend!

CFPB Issues Regulation B Appraisal Proposal

Written By JiJi Bahhur, Regulatory Compliance Counsel

Last Wednesday, the Consumer Financial Protection Bureau (CFPB) released a proposed rule that would amend the Equal Credit Opportunity Act (ECOA)’s Regulation B by requiring mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.

Under the proposal, consumers would receive disclosures of their right to receive a free copy of appraisal reports and home value estimates within three days of applying for a loan. Creditors would then be required to provide the reports to consumers as promptly as possible, but in no case later than three days before closing, regardless of whether credit is extended, denied, incomplete or withdrawn.

Also under the proposal, creditors could still charge reasonable fees associated with conducting appraisals and home value estimates.  However, the rule prohibits creditors from charging consumer fees for obtaining the reports.  This is a change from current practices where consumers must request an appraisal report from the creditor and may be charged a fee to obtain the report.   

The CFPB plans to finalize this rule in January 2013.  For more details on the proposal, you can view the proposal here and a summary of the CFPB’s proposal here. 

***

Importantly, the CFPB's proposal would remove the long-standing exemption from the appraisal requirements in Regulation B - 12 CFR 1002.14:

"(b) Credit unions. A creditor that is subject to the regulations of the National Credit Union Administration on making copies of appraisal reports available is not subject to this section."

Federal credit unions have historically been able to follow 12 CFR 701.31(c)(5) of NCUA's regulations but the CFPB's proposal would force CUs to comply with Regulation B for appraisals - including the new requirements.