CFPB- Getting Ready for NEW Real Estate Closing Procedures. Ruth Dillingham, Special Counsel First American Title Insurance Company April 17, 2014

Transcription

1 CFPB- Getting Ready for NEW Real Estate Closing Procedures Ruth Dillingham, Special Counsel First American Title Insurance Company April 17,

2 Supervision of Third Party Vendors CFPB Bulletin April 2012 While service providers are often appropriate Their use does not absolve entity from responsibility for compliance with consumer protection laws and regulations Legal responsibility lies with both 2

3 Think Vendor Management is a Low Priority? "Reliance on third-party relationships can significantly increase a bank's risk profile, notably strategic, reputation, compliance, and transaction risks. Increased risk most often arises from poor planning, oversight, and control on the part of the bank and inferior performance or service on the part of the third party, and may result in legal costs or loss of business. To control these risks, management and the board must exercise appropriate due diligence prior to entering the third-party relationship and effective oversight and controls afterward." Office of the Comptroller of the Currency OCC

4 Supervision or Vetting? CFPB enforcement action: Lender outsourced collections Created and approve collection script Transmitted to 3 rd party Collection agent went off script Lender held liable 4

5 Supervision or Vetting? If Supervision Lender oversees activity of the provider Lender verifies compliance with CFPB checklist If Vetting Outsource the analysis of the 3 rd party vendor/provider 5

6 CFPB Guidelines Verify provider understands and complies with consumer laws Review provider s policies/procedures for internal training/oversight Contractually obligate provider to be compliant Monitor provider Terminate provider where appropriate 6

7 ALTA Best Practices Real Estate Closings/Settlements/Title Agents: ALTA Best Practices 7 Basic best practices National applicability Voluntary for settlement/title agents Provides lender with neutral assessment tool 7

8 7 Best Practices Correct Licenses IOLTA account reconciliation Privacy/Information security plan Compliance with State and Federal Consumer Financial Laws Title Policy delivery Correct Insurance Complaint resolution policy 8

9 One Lender picks up Best Practices 9

10 Integrated Mortgage Disclosures Rule Effective August 1, 2015 New Loan Estimate Replaces current GFE and initial TIL Three pages long New Closing Disclosure Replaces current HUD-1 and final TIL Five pages long

11 Loan Estimate Required by 12 CFR (e) Contents in 12 CFR Provided by lender or mortgage broker Deliver or place in mail within 3 business days of application (incl. Saturday if Lender open)

12 Loan Estimate Page (a)-(c) (a) General Information (b) Loan Terms If answers to questions in this section were YES different information would be provided (c) Projected Payments Includes payment schedule & estimated taxes, insurance & assessments

13 Loan Estimate Page 1 (cont.) (d)-(e) (d) Costs at Closing (e) Website reference Statement about & link to CFPB website

14 Loan Estimate Page (f)-(j) (f) Loan Costs (g) Other Costs (h) Calculating Cash to Close (i) Adjustable Payment (AP)Table* (j) Adjustable Interest Rate (AIR) Table* *To reduce confusion, these tables are only included if applicable

15 Loan Estimate Page (k)-(n) (k) Contact Information (l) Comparisons (m) Other Considerations (n) Signature Statement Signatures not required Different statements required depending on whether signature line is or is not included.

16 Closing Disclosure Required by (f) Three business days before closing Provided by: Lender (f)(1)(i) Lender may rely on Settlement Agent, but Lender remains responsible for accuracy (f)(1)(v) Contents in

17 Closing Disclosure Page (a)-(d) (a) General Information (b) Loan Terms (c) Projected Payments (d) Costs at Closing

18 Closing Disclosure Page (f) (f) Loan Costs A. Origination Charges B. Services Borrower Did Not Shop For C. Services Borrower Did Shop For D. Total Loan Costs

19 Closing Disclosure Page 2 (cont.) (g)-(h) (g) Other Costs F. Prepaids: 01. Homeowner s Ins. Premium 02. Mortgage Ins. Premium 03. Prepaid Interest 04. Property Taxes H. Other: 01. HOA Capital Contribution **** 05. Real Estate Commission 06. Real Estate Commission 07. Title - Owners title (h) Total Closing Costs

20 Closing Disclosure Page (i)-(k) (i) Calculating Cash to Close Tolerance amounts shown here (j) Summary of borrower s transaction (k) Summary of seller s transaction Itemizations in I and J are like page 1 of today s HUD-1 Settlement Statement

21 Closing Disclosure Page (l)-(n) (l) Loan Disclosures (m) Adjustable Payment (AP) Table* (n) Adjustable Interest Rate (AIR) Table* * Tables are only included if applicable

22 Closing Disclosure Page (o)-(q) (o) Loan Calculations (p) Other Disclosures (q) Questions Notice

23 Closing Disclosure Page 5 (cont.) (r)-(s) (r) Contact Information (Sale) Contact information for: 1. Lender 2. Mortgage Broker 3. Real Estate Broker (B) 4. Real Estate Broker (S) 5. Settlement Agent (r) Contact information (Refinance) Contact information for: 1. Lender 2. Mortgage Broker 3. Settlement Agent (s) Signature Statement

24 Additional Model Forms & Variations Forms differ based on: Sale vs. loan only Split forms for: Borrower s transaction Seller s transaction Alternative Calculating Cash to Close table

25 Three Day Advance Disclosure Closing disclosure received 3 business days before consummation (closing) Business day includes Saturday whether lender is open or not 1 Changes requiring a new 3 business day waiting period 2 Annual percentage rate becomes inaccurate most loans 1/8%; certain loans 1/4% Loan product changed Prepayment penalty added 1 12 CFR (a)(6) 2 nd sentence 2 12 CFR (f)(2)(ii)

26 Three Day Advance Disclosure (con t) If not provided in person (i.e. mailed), add 3 business days for presumed receipt 1 Consumer may not waive the 3 day waiting period except in the event of a Bona Fide Personal Financial Emergency CFR (f)(1)(iii) 2 12 CFR (f)(1)(iv)

27 Question If the Closing Disclosure is mailed on Thursday, February 20 th, which is the earliest day you can close? Monday 24 th Tuesday 25 th Wednesday 26 th Thursday 27 th Friday 28 th

28 Sale Closing Mail Delivery: SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY Closing Disclosure MAILED 21 Mail Day 1 22 Mail Day 2 23 Sunday doesn t count 24 Mail Day 3= Receipt 25 Disclosure Day 1 26 Disclosure Day 2 27 Disclosure Day 3 = OKAY to Close Hand Delivery: SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY Hand Delivery = Receipt 25 Disclosure Day 1 26 Disclosure Day 2 27 Disclosure Day 3 OKAY to Close 28 29

29 Refinances Even with 3 days advance disclosure before closing (consummation) 3 day rescission period still applies in refinance of principal residence SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY Closing Disclosure MAILED 21 Mail Day 1 22 Mail Day 2 23 Sunday doesn t count 24 Mail Day 3 = Receipt 25 Disclosure Day 1 26 Disclosure Day 2 27 Disclosure Day 3 = OKAY to Close 28 Rescission Day 1 1 Rescission Day 2 2 Sunday doesn t count 3 Rescission Day 3 = Rescission expires at midnight 4 Okay to disburse

30 Changes & Guidance Amendments to the Final Rule could occur Before August 1, 2015 On or after August 1, 2015 Official Interpretations Found in: Supplement I to Part 1026 Detailed

31 QUESTIONS AND ANSWERS