Mortgage Quality and Compliance Webinar September 24, 2015

Transcription

1 Mortgage Quality and Compliance Webinar September 24, 2015 You have entered the call on mute. If you have a question for Susan or California MBA, please direct a question to her only by typing it into the panel to the left of the screen. The operator will open the lines for audience participation for Introduction of New Members, Alerts and also Q & A at the conclusion of the presentation. To join the audio portion, dial (800) and use passcode 4378

2 California MBA Mortgage Quality & Compliance Webinar Annemaria Allen, Committee Chair Susan Milazzo, Executive Director DIAL IN #: (800) Passcode: 4378 AGENDA I. Preliminary Remarks and welcome to the committee II. Introduction of New Members/Member Alerts / Recent Developments / Upcoming Event III. CA Legislative Update Pat Zenzola, KP Public Affairs, California MBA Legislative Advocate IV. Litigation Update Michael Pfeifer, Pfeifer & DelaMora, LLP, California MBA General Counsel V. Presentation New HMDA Rule Decision Speaker: Ari Karen, Strategic Compliance Partners

3 California State Mortgage Legislative Update AB 268 (Dababneh - D) Consumer loans: charges. Last Amend: 4/15/2015 Status: 5/1/2015-Failed Deadline pursuant to Rule 61(a)(2). (Last location was B. & F. on 4/16/2015) Location: 5/1/2015-A. 2 YEAR Summary: Existing law, the California Finance Lenders Law, provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight and makes a willful violation of its provisions a crime. Under existing law, a finance lender includes any person who is engaged in the business of making consumer loans. With respect to consumer loans of less than a bona fide principal amount of $2,500, existing law authorizes every licensee under that law who lends money to contract for and receive charges at a rate not exceeding the sum of certain percentages on specified parts of the unpaid principal balance, or at a charge determined by an alternative method. This bill would repeal those consumer loan provisions and would instead require the commissioner to establish an installment loan rate review process for licensees that intend to offer unsecured full amortizing installment loans of a minimum principal upon origination of at least $300 and a maximum principal amount of $2,500. The bill would require a licensee applying to make loans under this process to provide to the commissioner specified information in order for its loan product to be considered for approval, including information about the proposed loan fees and other charges associated with the loan and the length of the loan. This bill contains other related provisions and other existing laws.

4 California State Mortgage Legislative Update SB 602 (Monning - D) Seismic safety: California Earthquake Authority. Last Amend: 8/18/2015 Status: 8/28/2015-Failed Deadline pursuant to Rule 61(a)(11). (Last location was APPR. on 8/18/2015) Location: 8/28/2015-A. 2 YEAR Summary: Existing law establishes the California Earthquake Authority, which is authorized to transact insurance in the state as necessary to sell policies of basic residential earthquake insurance, as provided. Existing law provides that a public purpose will be served by a voluntary contractual assessment program that provides the legislative body of a public agency with the authority to finance the installation of seismic strengthening improvements that are permanently fixed to residential, commercial, industrial, agricultural, or other real property. For purposes of financing the installation of seismic strengthening improvements, "public agency" means a city, county, or city and county. This bill would include the California Earthquake Authority as part of the definition of "public agency" for this purpose. This bill contains other related provisions and other existing laws.

5 Litigation Update September 2015: In Re PHH Corporation, et al. By Michael R. Pfeifer, Esq. Copyright 2015 Pfeifer & De La Mora, LLP. CMBA MQAC Sept., 2015

6 Litigation Update Sept. 2015: In Re PHH Corporation et al. In re PHH Corporation, etc. et al. CFPB Admin Proc CFPB-0002 (Dec n. of the Director ) ---Richard Cordray decision in 1 st Appeal of CFPB Administrative Enforcement proceeding (now on appeal to DC Circuit Ct. of Appeals) ---Concludes that mortgage company PHH illegally referred consumers to mortgage insurers in exchange for kickbacks in the form of reinsurance premiums that the insurers paid to a subsidiary of PHH --- Reversed in part and upheld in part recommended decision of Admin Law Judge Cameron Elliott s in Nov holding that PHH violated RESPA 8 in accepting kickbacks ---Cordray s decision held that PHH violated 8 every time PHH accepted a reinsurance payment on or after July 21, 2008, going beyond Elliott s ruling that had limited PHH s violations to payments that were connected with loans that closed on or after July 21, 2008 Copyright 2015 Pfeifer & De La Mora, LLP. 6

7 Litigation Update Sept. 2015: In Re PHH Corporation et al. ---Cordray s order requires PHH to disgorge over $109 million, whereas Judge Elliot s decision had recommended only $6.44 million ---Key part of 38 page decision is construction of RESPA 8(c)(2) that provides in pertinent part: [n]othing in this section shall be construed as prohibiting the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed. ---Holds that PHH violated RESPA 8(a) and, rejecting a 1997 HUD letter and the interpretation of Judge Elliott to the contrary (as well as widespread industry belief), holds that RESPA 8(c)(2) merely clarifies 8(a) and does not provide a substantive exemption to it. ---Orders disgorgement, not civil money penalties, of all premiums accepted on or after July 21, 2008, not just those associated with loans that closed on or after July 21, Briefs on the Appeal to the DC Circuit are due by end of September Copyright 2015 Pfeifer & De La Mora, LLP. 7

8 Litigation Update Sept. 2015: In Re PHH Corporation, et al. The information and views in this presentation are for general information and discussion purposes only and should not be considered to be, nor relied upon as, legal advice generally or in connection with any specific transaction or matter. For legal advice, please consult your attorney. Copyright 2015 Pfeifer & De La Mora, LLP. 8

9 Litigation Update Sept. 2015: In Re PHH Corporation, et al. PFEIFER & DE LA MORA, LLP Pfeifer & De La Mora, LLP is an AV rated law firm dedicated to providing litigation and compliance representation to members of the financial services industry, including mortgage lenders, servicers, investors, brokers, and related service providers. Michael R. Pfeifer, Esq. Pfeifer & De La Mora, LLP 765 The City Drive South, Suite 380 Orange, California (714) Copyright 2015 Pfeifer & De La Mora, LLP. 9

10 HMDA Rule Changes Ari Karen Principal, Offit Kurman Offit Kurman, P.A. All rights reserved. 10

11 HMDA Proposed Changes CFPB amends Regulation C with new proposed HMDA rules Comment period closed October 29, 2014 Changed reporting thresholds Originate 25 or more closed-end loans or reverses in the preceding calendar year (excluding open-end credit); and Home or branch office in MSA Impact on mini-correspondents 2013 Offit Kurman, P.A. All rights reserved. 11

12 HMDA Reporting Requirements Additional reporting requirements Applications for dwelling secured loans (regardless of the purpose of the loan, whether for home purchase, home improvements, refinance, HELOC, or reverse) Construction to perm loans are included, not considered temporary financing Repurchased loans should not be reported as sold/purchased Brokered loans Only one entity (the one making the credit decision) reports 2013 Offit Kurman, P.A. All rights reserved. 12

13 Additional HMDA Changes Identify application channel Identify responsible loan officer Large institutions (in excess of loans/year) must submit quarterly. Potentially there will be a direct upload Data could be publicly available and searchable 2013 Offit Kurman, P.A. All rights reserved. 13

14 Additional HMDA Data Universal loan ID Originator NMLS ID Property identifier Reasons for denial AUS results Application channel Borrower age Credit score DTI Ratio Loan purpose and category (reverse, cash-out refi, HELOC) QM High-Cost Mortgages Balloon Interest Only Negative amortization Introductory period for ARMs Prepayment penalty months LTV Total Points and Fees Total origination charges Total discount points Pre-discounted rate Interest rate Financed unit count Affordable housing programs Construction method type Financing type Property estate type Census track reporting on all loans 2013 Offit Kurman, P.A. All rights reserved. 14

15 HMDA Will allow CFPB to sort based on area and borrower type amongst similarly situated loans, the amount of overage Will be able to compare borrowers in same and different areas A great enforcement tool for fair lending because you can make stronger case on fewer data points by looking at overage by originator and organization 2013 Offit Kurman, P.A. All rights reserved. 15

16 HMDA CFPB borrower education tool release in January 2015 Discusses rates and costs without proper TILA disclosures Cost estimates may greatly differ from those listed Educational exemption 2013 Offit Kurman, P.A. All rights reserved. 16

17 Fair Lending HMDA increases ability to provide discriminatory intent by showing different profit margins/overages Disparate Impact if rejected reduces ability to bring discrimination claims Disparate Treatment theory allows for more disparity in pricing and compensation 2013 Offit Kurman, P.A. All rights reserved. 17

18 Practical Implications More flexibility in business when it comes to fair lending. Consistency in terms of pricing and compensation is less important. However, it is easier to show disparity between different protected groups and only need to raise inference of discriminatory intent 2013 Offit Kurman, P.A. All rights reserved. 18

19 Practical Implications Agencies don t need to wait until fair lending exam to pursue a fair lending case Increased scrutiny based not only on pricing but comparative margins and pricing based on credit overlays Increased public transparency on pricing based upon the information available Increased public transparency for underwriting exceptions Offit Kurman, P.A. All rights reserved. 19

20 Practical Implications Also additional concern for publicity for lenders with more flexible loan standards. Being called subprime because of certain loans. Pricing will flatten out because of transparency and potential fair lending violations Discretion will become more limited 2013 Offit Kurman, P.A. All rights reserved. 20

21 Long Terms Implications Smaller lenders that pay attention and implement fair lending protections will have greater flexibility in compensation and pricing There will be more fair lending cases brought because of HMDA data To some extent products like rate checker and HMDA data will cause some overall compression of price making service paramount to success 2013 Offit Kurman, P.A. All rights reserved. 21

22 Target Pricing Federal Reserve Board on October 22 Webinar raised concerns about target pricing to the extent it varied by LO s who concentrated on minority areas Did not per se indicate it was discriminatory but rather that it could have discriminatory effects/practices depending on implementation Must have regression analysis, monitoring across LO s to avoid reverse red-lining 2013 Offit Kurman, P.A. All rights reserved. 22

23 More Standardization Pricing Products Margins Compensation Credit Overlays Compression will result from concern over enforcement and transparency to public and to regulators 2013 Offit Kurman, P.A. All rights reserved. 23

24 Competition Will become more about technology, expediency, education, service Lenders may use data to advertise or compare themselves to competitors Smaller lenders will succeed through community trust, service, and relationships as well as flexibility both in product and pricing as long as compliance controls in place 2013 Offit Kurman, P.A. All rights reserved. 24

25 Thank You Ari Karen Principal, Offit Kurman Offit Kurman, P.A. All rights reserved. 25

26 Mortgage Quality and Compliance Webinar September 24, 2015 We will now take questions for the presenter. If you would like to ask a question, please press the * key followed by the 1 key (*1) on your touch-tone phone now. Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, press *2.

27 Mortgage Quality and Compliance Webinar September 24, 2015 Thank you for joining us today. Please mark your calendar for our next call which will be held as follows: October 22, 2015 Time: 11:00 a.m. Pacific Topic: Fraud in the Age of TRID Presented by: Ann Fulmer, Paladin Consults and Tani Lawrence, VidVerify