Sonia Lee Director of Affiliate Financial Services HFH International

Transcription

1 Sonia Lee Director of Affiliate Financial Services HFH International

2 Topics for Today Anti-Discrimination Laws Other Laws Outreach and Marketing Application Intake Selection Criteria Procedural Issues in Acceptance or Denial De-selection 2

3 Basic Principles for Selection Know the laws that govern the processes Formally adopt policies and procedures Policies must be facially neutral, using objective criteria Apply policies and procedures consistently Define & ensure internal understanding of roles of Board, Homeowner Selection Committee, other staff Manage clear & realistic expectations: families must understand Affiliate s policies and program requirements Maintain clear & consistent communication; explain components of application initially and throughout process Mutual Respect 3

4 Homeowner Selection Process ECOA (phase 1) and RESPA (phase 2) ECOA phase RESPA phase Preliminary Considerations Loan Originator (SAFE Act/TILA) BSA/AML E-Sign GLBA UDAAP Initiating Partnership Marketing/ Outreach Homeowner Selection Lending and applicable laws Partnership Agreement Preparing for Sale Property Due Diligence Underwriting Initial Disclosures Closing Mortgage Fundamentals House Pricing House Financing Shared Equity Models Documentation Servicing Full Servicing Small Servicer Exemption Controlling Delinquencies Escrow management Foreclosures/ Bankruptcies Remember: MPAR University on My.Habitat! 4

5 Homeowner Selection Process Habitat Application ONE application with 2 phases ECOA (phase 1) Program qualifications Define completed application Home visit Initial underwriting Income verification Credit review Financial readiness Board concurrence Partnership Agreement RESPA (phase 2) Homebuyers Name Homebuyers SSN Homebuyers income Property address Appraisal Loan amount Final underwriting Re-verify income Re-verify credit Ability to Repay Initial Disclosures 5

6 Anti-Discrimination Laws Affiliates need to know the prohibited bases for housing and lending decisions Fair Housing Act (FH Act) prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status, and handicap (disability). Equal Credit Opportunity Act (ECOA) makes it unlawful for any creditor to discriminate in any credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, source of income, or exercise of rights under Consumer Credit Protection Act (e.g., TILA). HUD Regulations (e.g., Feb Final Rule: Equal Access to Housing) prohibits housing discrimination under HUD based on sexual orientation orgender identity. Executive Orders - also prohibit discrimination on a number of bases when federal funds are involved. State Laws and Local ordinances may prohibit discrimination in housing and residential lending practices on additional bases (e.g., ancestry, creed, genetic characteristics, sexual orientation, mental disability, etc.). 6

7 Fair Lending Laws Do these laws just apply to the sale of the house and origination of the mortgage? NO! FH Act and ECOA cover all aspects of housing and credit decisions, including: Marketing efforts to potential Habitat home buyers Steering or Red Lining Informational Meetings / Orientations Evaluation and approval of applicants (incl. exceptions, cure opportunities) Design of Habitat homes Notices for declined applications Document retention Servicing mortgages, including the payment collection process and loan modifications 7

8 Other Applicable Laws Real Estate Settlement Procedures Act (RESPA): Mandatory compliance for all affiliates, whether subject to TRID or not. The Act covers timely disclosure of fees in origination and servicing processes like escrow account administration ABA course Truth In Lending Act (TILA): Mortgage advertising must be accurate, and clear. Requires disclosure showing the cost of a loan also governs steering, and certain aspects of servicing. 3 ABA courses TILA/RESPA Integrated Disclosures (TRID): Mandatory compliance with initial and closing disclosures if Affiliate in the previous or currently calendar year originated more than 5 mortgages or more than 25 secured or unsecured loans. Fair Credit Reporting Act (FCRA) : Mandatory disclosure of adverse action if decision was based on a factor from a consumer report. ABA course Loan Originator Qualifications: LO qualifications fall either under state SAFE Act or federal TILA 8

9 Other Applicable Laws Bank Secrecy Act / Anti-Money Laundering (BSA/AML): Mandatory compliance with AML Program, and Suspicious Activity Reporting (SAR), both in the origination and servicing processes ABA course Gramm-Leach-Bliley Act (GLBA) Privacy: Mandatory compliance with initial and annual privacy disclosures ABA course Electronic Signatures In Global National Commerce (E- SIGN) Act: Applicant must be provided with a disclosure and they must affirmatively consent before Affiliate can communicate electronically ABA module in the Privacy course Unfair, Deceptive, or Abusive Acts or Practices (UDAAP): Practices and behaviors from outreach & advertising thru to origination and servicing should not be perceived as unfair, or deceptive, or abusive. ABA course 9

10 Federal vs. State Laws SAFE Act both Loan Originator and Servicing requirements Origination Advertising Disclosures Language in note or mortgage Real Estate contracts Residency status Community property property ownership; dowry rights Use of sex offender information 10

11 Outreach and Marketing Use inclusive, non-discriminatory words, illustrations and messages in all marketing materials. Ensure advertisements and promotional materials are accurate, and not misleading or deceptive. ( You can own a home with NO MONEY DOWN! ) Include Equal Housing Opportunity logo should be on all applications and advertisements. Explain components of application: ability to pay (credit report or similar information), need (home visit), willingness to partner (sweat equity) and how the applicant can be successful in qualifying for the Habitat program. 11

12 Application Intake Post FH Act Equal Housing Lender sign wherever you meet with families. Applications must be made available in multiple venues not just at an orientation meeting Application should include the Right to Receive Copy of Appraisal Disclosure Notice or provide within 3 days of an application being submitted Privacy Notice may need to be included in the application package if affiliate shares information with third parties (e.g. USDA, state housing agencies, etc.) 12

13 Inquiry vs. Application Application can be oral or written Inquiry vs. Application: avoid turning inquiries into applications, invoking notice requirements for credit decisions Affiliate personnel should not give opinion about likelihood of acceptance A good phrase if asked direct questions: There are many factors that contribute to being approved or denied. We invite you to submit an application. - Develop a script for personnel to use - Keep the conversation to the program specifics, not the potential applicant s specifics 13

14 Habitat Selection Criteria ECOA Habitat Homeownership program is a Special Purpose Credit Program; allows lender to establish qualification criteria: Need Financial & Physical Ability to Pay Willingness to Partner Permits the collection of alimony, child support, and maintenance payments to determine program qualifications (need) Consider Habitat Policy, Legal Requirements, Affiliate Policy, and Perception Avoid any appearance of impropriety. Affiliates must have policies and procedures and apply them consistently. 14

15 Local Residency Requirement Concern: Potential to perpetuate discriminatory housing patterns. Habitat Policy: An affiliate may require successful applicants to either live or work within its service area, but cannot have a policy that requires applicants to have lived or worked in affiliates service area for more than one year. Consider Affirmatively Furthering Fair Housing under Fair Housing Act and HUD Final Rule: Take significant actions to overcome historic patterns of segregation, achieve truly balanced and integrated living patterns, promote fair housing choice, and foster inclusive communities that are free from discrimination. 15

16 Income Guidelines Need Household Threshold eligibility for program: all reasonable efforts to serve < 60% of AMI Ask: does this household need the program to provide a safe, decent, affordable home? AMI shows how does this household s need compare to the need of others in the community Current housing cost-burden may be factor Special Purpose Credit Program Habitat can require an applicant to disclose alimony and child support income to evaluate need. See page 21 of HO Selection AOM. Ability to Pay Borrower Underwriting decision based on income, debts and credit history of the borrower Ask: Can this borrower repay this loan? AMI not relevant New loan should not result in housing cost-burden If considering child support or alimony, need to get permission from applicant 16

17 Ability to Pay Affiliate must have policy and procedures for determining, in good faith, applicant s ability to pay the mortgage loan. Consider: To be considered for ability to pay, income should be stable and likely to continue (at least 3 years). Info should be documented and verified by third party source (and re-verified in the final underwriting prior to closing). New Habitat Policy 23: Housing debt ratio (monthly mortgage payment compared to income) = no more than 30% of income. Overall debt to income ratio (total monthly debt compared to total monthly income) = no more than 43% Credit History is also key indicator must comply with notice requirements if decision is based at all on reported info. 17

18 Ability to Pay U.S. Immigration Status Use caution: Any inquiry and decision must be based on ability to pay, not national origin (or other prohibited basis). Three models: 1. No Inquiry Affiliate makes no inquiry into residency status 2. Inquiry regarding any legal status 3. Lawful Permanent Residents (i.e., green card) or U.S. Citizens Only Affiliate must adopt and administer its policy equally and consistently for all applicants. 18

19 Third-party financing options 1. Adopt a policy: clear criteria for eligibility for the different loan products; may include an explanation as to why different products will be offered to different applicants. Follow affiliate policy consistently. - For example, the additional product(s) may help affiliates access more capital to serve more families. 2. All outreach and marketing materials must be entirely accurate and communicate to applicants the basic eligibility requirements and loan terms for the different products. - For example, if offering USDA or ZEMs, affiliates cannot advertise only 0% loans because this would be inaccurate in the USDA setting. 3. Do not promise any particular loan product to the applicant. 4. Loan originator employee must not receive increased compensation for offering any certain loan product (steering). 5. Ensure borrower cannot claim that the loan product is not in the consumer s interest. 19

20 Homeowner Selection Process Required ECOA Notices ECOA - a Notice of Action Taken must be provided to applicants when triggered: Submission of Application Completed Application Denial, at any time Notice of Action Taken are: Notice of Incompleteness (NOI) Denial Approval 20

21 1. Within 30 days after (SUBMISSION) receipt of first piece of information to evaluate (orally or written) send one of these: Type of Notice Notice of Incompleteness (NOI) Adverse Action Notice Informational NOI Details Include: (1) info needed; (2) reasonable time for applicant to provide info; and (3) notice that failure to provide info in time constitutes denial without further action. Template Adverse Action Notice on My.Habitat. Template compliant with ECOA and FCRA. FCRA is triggered if denial is based in whole or in part on information contained in a consumer report including a credit score or criminal background check. Send NOI when the application is incomplete due to required affiliate action (e.g., home visit or board approval) Notice of Acceptance (unlikely at this point) States that partner family has been accepted into the Habitat Program and pre-approved for the loan up to a certain amount, subject to changed circumstances and conditions. 21

22 2. Within 30 days of completed ECOA application (COMPLETION) (HomeownerSelectionAOM.pdf pg 5 ) (if first Notice of Action was a Notice of Incompleteness), send either: f Incompleteness 3. Within 30 days of making a decision to deny credit (DENIAL), at any point in application or partnership process, send: Type of Notice Adverse Action Notice Details Template Adverse Action Notice on My.Habitat. Template compliant with ECOA and FCRA. FCRA is triggered if denial is based in whole or in part on information contained in a consumer report including a credit score or criminal background check. Withdrawal: If applicant withdraws, affiliate should request writing confirmation of withdrawal; place copy in folder. Notify all parties within the affiliate. 22

23 Required FCRA Notices Fair Credit Reporting Act Goal: Accuracy and Privacy of Reported Info Use Consumer Reports only for permissible purposes, e.g., decision to extend credit Consumer report includes credit report and background check (release required) If denial based on information from consumer report, additional information must be included in the Adverse Action Notice Within 30 days of denial of application May be triggered before application is complete Same notice can satisfy ECOA and FCRA requirements 23

24 Required FCRA Notices cont d If denial is based at all on information from consumer report, Adverse Action Notice must include the following: Contact info for Consumer Reporting Agency (CRA) that supplied consumer report (with disclaimer that CRA did not make decision and does not know why application denied) Right to obtain free credit report, and how (60 days) Right to dispute accuracy/completeness of info, with CRA If denial was based on Credit Score, provide the score, source, and (up to) four negative factors from consumer report that likely impacted Credit Score (see template) If denial based on info from third party (not CRA), 60 day right to request info; response within reasonable time Legal Advisory - Denial Requirements for FCRA Adverse Action Template (ECOA & FCRA compliant) Legal Advisory - Identity Theft Red Flag 24

25 Acceptance of Applicant Documents the requirements of the partnership between applicant and affiliate. Should include process basics and conditions to close, for example: Down Payment, if applicable Sweat Equity (non-reimbursable) Applicant Workshops (Financial Literacy, Homeownership) Grounds for de-selection Equity protection Right of repurchase Other essential terms of the partnership Not a sales contract or a loan application 25

26 Willingness to Partner Reasonable accommodations should be made for prospective homeowners with disability limitations (ADA) Policy must have objective criteria that measure willingness to partner Must be documented in the Partnership Agreement (PA) During ECOA Application Completing and returning app in a timely manner Provide requested documents in a timely manner Being on time for meetings Returning messages in timely manner After PA is Signed Being on time to work site Attend required homebuyer workshop Saving required down payment as specified Comply with conditions of partnership agreement 26

27 RESPA Phase Appraisal Ordered - signals that RESPA phase is approaching 1. Borrower s name; 2. Borrower s monthly income; 3. Borrower s SSN; 4. Property Address; 5. Estimate of value of property; and 6. Loan amount Unlike ECOA, a RESPA is defined by law Initial disclosures are triggered, even if underwriting is not completed Appraisal must be delivered to buyer promptly after completion 27

28 De-Selection What does de-selection mean? De-Selection is the termination of the partnership with a prospective homeowner, after approval but before closing on the home. Grounds for De-Selection (Exclusive): - Fraud or material misrepresentation on theapplication - Negative change in financial circumstances (which affects the ability to pay) - Appearance on the Sex Offender Registry (Affiliate policy) - Lack of willingness to partner These conditions to closing must be communicated to applicant and included in letter of acceptance/partnership agreement 28

29 De-Selection (cont d) Important issues: Develop a De-Selection Policy that contains grounds, timeframe, and procedure for de-selection (and follow it consistently). Expectations and obligations should be clearly outlined in Partnership Agreement. Make sure that expectations and obligations of partnership are clearly communicated and explained from the beginning of the relationship. Affiliate should try to give prospective homeowners every reasonable opportunity to meettheobligations. If the prospective homeowner continues to fail to meet obligations, the Affiliate can de-select. 29

30 Disclosures not subject to TRID Requirements RESPA - Initial disclosures To be delivered to applicants within 3 days of receiving : (1) borrower s name; (2) borrower s monthly income; (3) borrower s social security number; (4) property address; (5) estimated value of property; and(6) mortgage loan amount sought Disclosure Good Faith Estimate (GFE) CFPB Settlement Cost Booklet [formerly HUD Special Information Booklet] Mortgage Servicing Disclosure Statement Affiliated Business Arrangement Disclosure List of Homeownership Counseling Organizations TILA GLBA Written List of Providers (if applicants can shop for services) Initial TIL Statement Initial Privacy Notice* Closing disclosures HUD 1 (Settlement Statement) Final TIL Statement Initial Escrow Statement Ongoing Annual Escrow Analysis Notice of Transfer (servicing) Annual Privacy Notice 30

31 Disclosures Subject to TRID Requirements Disclosure RESPA Initial disclosures To be delivered to applicants within 3 days of receiving: (1) borrower s name; (2) borrower s monthly income; (3) borrower s social security number; (4) property address; (5) estimated value of property; and (6) mortgage loan amount sought. GLBA Loan Estimate (LE) Your Home Loan Toolkit Affiliated Business Arrangement Disclosure List of Homeownership Counseling Organizations Intent to Proceed Initial Privacy Notice* TILA LE Written List of Providers (if applicants can shop for services) Closing disclosures Closing Disclosure (CD) Initial Escrow Statement Ongoing Annual Escrow Analysis Notice of Transfer (servicing) Annual Privacy Notice 31

32 Closing Disclosure Delivery 32

33 Questions? Affiliate Support Center Monday to Friday 8:00am to 8:00pm or