Copyright 2013 Carey Green - 1

Transcription

1 Copyright 2013 Carey Green - 1

2 Mortgage Law Study Charts These charts are intended for use as a study-aid, not as compliance documents or official policies of any kind. Copyright 2013 Carey Green Sections marked in BLUE are things I saw on my test in one form or another. You will likely have a different experience than mine, so I suggest you NOT rely too heavily on the sections I've marked... but I thought you'd like to know! Copyright 2013 Carey Green - 2

3 TRID (TILA / RESPA INTEGRATED DISCLOSURES) Effective October 3, 2015 SEE ADDITIONAL RESOURCE - TRID BASICS Copyright 2013 Carey Green - 3

4 S.A.F.E. ACT Secure and Fair Enforcement Mortgage Licensing Act The S.A.F.E. Act is a very primary part of the Housing and Economic Recovery Act (HERA) of 7/30/2008 Section 1502: 1. Increases uniformity of Mortgage Originator Licensing Nationwide. 2. Reduces the regulatory burden for multi-state lenders. 3. Raises standards to enhance consumer protections. 4. Enables tracking of Mortgage Loan Originators across state lines, which reduces fraud 1. Requires all Mortgage 1. S.A.F.E. Created the Loan Originators to be NMLS Nationwide registered with NMLS and to Mortgage Licensing System. obtain a permanent, unique (sometimes called the I.D. (called their unique NMLS&R). identifier ) 2. Defines procedures, 2. All Mortgage Loan requirements, education, Originators not working for a testing, and new standards depository institution must for MLO registration and also be licensed by their licensing. state. 3. States were required to pass laws containing elements of S.A.F.E. Currently: CFPB (Consumer Financial Protection Bureau Legacy Regulator: HUD (Housing and Urban Development) Copyright 2013 Carey Green - 4

5 NMLS Nationwide Mortgage Licensing System & Registry (also called NMLS&R) S.A.F.E. Act 1. Provides comprehensive licensing & supervisory database of MLOs. 1. Creates licensing standards 1. Processors must be Current: CFPB (Consumer supervised by a state Financial Protection Bureau) licensed MLO, or must be 2. Will not allow licensing of licensed as MLO themselves. Legacy Regulator: HUD 2. Streamlines the licensing anyone with a revoked (Housing and Urban process. license. 2. Education must be done in Development) a live classroom, live 3. Provides increased 3. No felonies allowed w/in classroom equivalent, or accountability and tracking past 7 years. instructor-led online (not of MLOs and provides for allowed in some states). consumers to have access to 4. Requires financial MLO history. responsibility & character. 3. Retesting is required after 5 years of MLO inactivity. 4. Enhances consumer 5. Pre-licensing education is protections & supports antirequired (20 hour min.) fraud measures. 6. Must pass written tests 5. Requires MLOs to act in with at least 75% score. the best interest of the consumer. 7. Must meet surety bond requirements. 6. Encourages responsible lending through education 8. Requires 8 hrs. of and exam requirements. continuing education annually. (3 hrs. Fed. Law, 2 hrs. ethics, 2 hrs. nontraditional products, 1 hr. elective) Copyright 2013 Carey Green - 5

6 RESPA Real Estate Settlement and Procedures Act (also known as Regulation X) YELLOW HIGHLIGHTS indicate items changed by new TRID law, effective 10/3/2015 See additional resource TRID BASICS included in the course downloads None 1. Encourages home 1. Covers 1st & 2nd mortgages ownership by lowering and and related transactions on controlling costs. principal residences of 1 to 4 family units. 2. Creates early disclosures so consumers can be better 2. Includes purchase, shoppers for mortgages. refinance, lender approved assumptions, home 3. Eliminates kickbacks improvements, HELOCs (Section 8A) and referral (Home Equity Line of fees (Section 8B). Credit), reverse mortgages, time shares involving a lien, 4. Limits escrow amounts to Manufactured Homes taxes and insurance. attached to property, construction loans used to 5. Limits Escrow cushions to purchase a lot. $50 above 1/6th of the annual cost of taxes and insurance. 3. Does not include cash Lenders can only collect sales, seller held mortgages, 1/12th of total cost of taxes rental or business property, and insurance each month. construction loans without permanent financing, or 6. Allows consumers to shop homes with greater than 25 for title services. acres attached. 7. Covers all Federally related real estate transactions. Disclosures required: Current: CFPB (Consumer Financial Protection Bureau) AT APPLICATION: 1. GFE (Good Faith Estimate) or w/in 3 business days, and no charges can be assessed at application other than the cost of a credit report. Legacy Regulator: HUD (Housing and Urban Development) 2. Servicing disclosure statement. 3. HUD special info booklet. 4. Affiliated Business Arrangement disclosure (ABA) when applicable. AT CLOSING: 5. HUD-1. Can be requested 1 business day before closing. AFTER CLOSING: 1. Initial escrow stmt. (at close or w'in 45 days). 2. Annual escrow stmt. 3. Transfer servicing disclosure (15 days before transfer) VIOLATIONS: 1. $10,000 or 1 yr. In prison. Copyright 2013 Carey Green - 6

7 TILA Truth In Lending Act (Also known as Regulation Z) YELLOW HIGHLIGHTS indicate items changed by new TRID law, effective 10/3/2015 See additional resource TRID BASICS included in the course downloads Is included in the Consumer 1. To promote the informed 1. Requires the Truth In 1. Covers all credit Current: CFPB (Consumer Credit Protection Act use of credit by requiring Lending disclosure (TIL) be transactions and requires a 3 Financial Protection Bureau) (CCPA) of early disclosure of the costs given w/in 3 business days business day right to of credit as defined by of applications and not less rescind on refinances of Legacy Regulator: Federal Regulation Z. than 7 business days before primary residences. Reserve Board closing. It must show: 2. Requires the APR to be a. The finance charge as a conspicuous on all dollar amount. advertising. b. The APR as a percentage of the net loan amount. 3. Requires clear and accurate information in all PROHIBITED ACTS: advertising, and no misuse of the term fixed rate. Must 1. Creditors cannot in any offer terms that are actually way influence appraisers. available. 2. Servicers cannot delay crediting consumer payments and cannot pyramid late fees. 4. Redisclosure is required when APR is off by 1/8. Copyright 2013 Carey Green - 7

8 The Mortgage Disclosure Improvement Act (MDIA TILA section 35) TILA (this act is section 35 Sets a new rate threshold that 1. Prohibits lenders relying OF TILA) defines a subprime loan and on the value of the property offers additional consumer without regard for the protections by restricting borrower's ability to repay. certain practices on higher priced mortgages (HPM). 2. Prohibits lenders relying on income and assets of the borrower without verification (full doc. Only) 1. The new threshold index Current: CFPB (Consumer is called the Average Prime Financial Protection Bureau) Offered Rate (APOR). Legacy Regulator: Federal Reserve Board 3. Prohibits prepayment penalties (PPP) on any loans longer than 24 months, or on loans where the payment changes in the first 4 years. 4. Prohibits first mortgages without escrow accounts. Copyright 2013 Carey Green - 8

9 The U.S. Patriot Act None 1. To require financial institutions to begin a customer identification program (CIP) to: The Office of Foreign Assets This legislation was Control (OFAC) maintains a introduced one week after Specially Designated the 9/11 attacks. It Nationals and Blocked introduced changes to the Entities list (SDN). Financial wire tap, money laundering, a. Collect identifying institutions are prohibited immigration and electronic information from applicants from dealing with SDNs and communication rules. are obligated to block and b. Verify customers are who freeze payments and report they say they are such blocking to the OFAC. Current: Office of Foreign Assets Control c. Maintain records of verification d. Determine if applicants appear of the terrorist watch list. Copyright 2013 Carey Green - 9

10 Telemarketing Sales Rule (TSR) None 1. To promote the privacy of 1. There are some exempt 1. Companies must scrub Current: CFPB (Consumer the home against unwanted entities: charities, political their databases no less than Financial Protection Bureau) solicitation by telemarketing organizations and surveyors, every 31 calendar days and and to restrict the practices as long as they are not establish internal company Legacy Regulator: Federal of direct telephone marketing selling goods or products. do-no-call lists. Trade Commission and businesses. Federal Communications 2. Violations of the TSR are 2. Allows companies to Commission. 2. Added the Do Not Call considered an unfair and recontact established registry, giving consumers deceptive act and carry customers up to 18 months the right to opt-out of monetary and civil penalties after their last business receiving telemarketing calls. up to $16,000. transaction. 3. Once on the Do Not Call list, the consumer remains on the list forever. This includes cell phones. 3. Allows companies to recontact consumers that respond to mail campaigns for up to 90 days after the initial contact.. Copyright 2013 Carey Green - 10

11 National Flood Insurance Act (NFIA) None 1. To require borrowers to 1. Requires lenders to purchase flood insurance determine if the property when a home is deemed improvements are in a (typically through appraisal) special flood hazard area. to be in a flood plain. This process is called flood certification, which checks 2. National flood insurance the property in question is available for any property against FEMA flood maps whose local government that show areas subject to participates in flood 100-year floods. management through NFIA. 1. Lenders MUST require borrowers in flood zones to purchase flood insurance. Current: FEMA. Copyright 2013 Carey Green - 11

12 Homeowner Protection Act (HPA) None 1. Provides for termination of PMI (Private Mortgage Insurance) and applies to conventional loans (not VA, FHA, or USDA). 1. Cancels PMI 3 Disclosure Requirements Current: CFPB (Consumer automatically when the Financial Protection Bureau) mortgage balance is paid 1. With initial escrow down to 78% of the original statement Legacy Regulator: Federal value. Reserve Board 2. With each annual escrow 2. Can be canceled by statement. request: the lender must consider canceling PMI for a 3. Upon cancellation, borrower whose balance is disclosing that PMI has been 80% of original value canceled.. (borrower must be current on their payments and have no other home loans). Copyright 2013 Carey Green - 12

13 Homeowner and Equity Protection Act (HOEPA) HOEPA is a 1994 amendment to Regulations Z (TILA), Section 32 (High Cost Loans) To establish lending prohibitions and require additional disclosures for certain high cost loans. Prohibitions: 1. Cannot make the loan without regard for ability to repay. 2. No negative amortization 3. No default interest rates. 4. No due on sale clause. 5. No balloons on loans less than 5 years in term. 8. No prepayment penalties on loans that adjust in the first 4 years or on any loans longer than 24 months. 9. No refinancing a HOEPA loan with another HOEPA loan within 12 months unless it is in the borrower's best interest. 1. Covers all closed-end On these high cost loans Current: CFPB (Consumer transactions (does not cover the lender must provide an Financial Protection Bureau) HELOCs, reverse mortgages) additional 3 business day cooling off period (right of 2. The APR exceeds the APOR by Legacy Regulator: Federal more than: rescission) and send a Reserve Board 6.5% for a first lien loan disclosure stating: 1. Loan need not be completed and that the borrower has 3 business days to terminate the transaction. 2. Warning that borrower could lose their home and any money put into it. 3. The APR, the regular payment (including balloon), and the loan amount 7. No documenting a closed-end including credit insurance high cost loan as an open-end loan. premiums. 6. No repayments that consolidate more than 2 payments. 8.5% for a first lien dwelling and the loan amount is less than $50, % for a subordinate lien loan Or total points and fees payable exceed: A transaction with a loan amount of $20,000 or more 5% of the total loan amount or A transaction with a loan amount of less than $20,000, the lesser of eight percent of the total loan amount or $ For variable rate loans, 3. Penalties: All statuary and actual damages, court costs, and attorney that the rate and monthly fees. If the rescission is not payment might increase and delivered in a timely manner, it state maximum monthly might allow the consumer to payment possible. rescind the loan for up to 3 years. Copyright 2013 Carey Green - 13

14 Fair Credit Reporting Act (FCRA) Fair and Accurate Credit Transactions Act (FACTA) of 2003 amends this act. To ensure that a consumer's credit records are: 1. As amended by FACTA it 1. If adverse action is taken Current: CFPB (Consumer requires the proper disposal because of credit Financial Protection Bureau) of consumer credit information, a notice of 1. Kept confidential. information. adverse action is required to Legacy Regulator: Federal 2. Provides free credit all applicants within 30 days. Trade Commission 2. Are accurate. reports if: a. A company takes adverse 2. Such notice is not required Establishes procedures for action. if the reason for adverse the correction of erroneous b. The person is unemployed action was NOT creditor inaccurate credit and plans to job hunt in 60 related. information within 30 days. calendar days of a consumer c. The person is on welfare.. requesting an investigation d. The report is inaccurate. of the accuracy of their personal credit file. 3. States that borrowers have a rite to: a. Dispute inaccuracies. b. Be notified what credit information is being used against them. c. Know what is in their credit file. d. Receive a free credit report when denied credit. e. Negative pay history and public records must be removed after 7 years. f. Bankruptcy info. Must be removed after 10 years. Copyright 2013 Carey Green - 14

15 Fair and Accurate Credit Transactions Act (FACTA) This act is a 2003 To update and amend FCRA amendment to the Fair Credit in order to: Reporting Act (FCRA). 1. Enhance the ability of consumers to combat identity theft. 2. Give consumers control regarding marketing solicitations they receive. 3. Increase the accuracy of consumer reports. 4. Allows consumers to apply a credit freeze when their security is breached. 1. Added the red-flags rule requiring financial institutions (lenders) to develop and implement a written ID theft prevention program to detect, prevent, and mitigate ID theft. Requirements are: a. To identify specific red flags relevant to operations b. Detect red flags as they occur. c. Respond appropriately w hen red flags are detected. Users of credit reports must: Current: CFPB (Consumer Financial Protection Bureau) 2. Implements rules regarding discrepancy in consumer's address. 1. Provide a disclosure ( Notice to the Home Loan Applicant ) to each borrower including the consumer's credit score, the reason codes and to make available to the consumer all information received from the Credit Reporting Agency. Legacy Regulator: Federal Trade Commission. 2. Establish reasonable measures to protect against unauthorized access to credit file information. 3. Properly dispose of consumer credit information by burning, pulverizing, or cross shredding documents. 4. Institute policies to verify a consumer's identity when encountering a fraud alert on a consumer report. 5. Expands the definition of adverse action to include denying credit, insurance, and employment promotion. Copyright 2013 Carey Green - 15

16 Home Mortgage Disclosure Act (HMDA) or Regulation C None 1. To help determine if lenders are serving community housing needs, assist in identifying patterns of lending discrimination and enforce antidiscrimination practices. Applies to home purchases, home improvement loans, and refinance loans. 2. Specifically, seeking to discover any discrimination on the basis of sex, ethnicity, or income. This is a data-collection Current: CFPB (Consumer statute requiring mortgage Financial Protection Bureau) lenders and depositories to collect and report loan Legacy Regulator: Federal application characteristics to Reserve Board. the Board if the number of purchase money loan applications is over 100 annually.. Copyright 2013 Carey Green - 16

17 Gramm Leach Bliley Act (GLBA) Part of the Financial Modernization Act. The primary purposes of GLBA are: GLBA requires: 1. Privacy rule governs the collection of NPI and the company's information sharing policy. Current: CFPB (Consumer Financial Protection Bureau) 1. To prevent ID theft. 2. To protect consumer's financial information held by financial institutions. This statute applies to all mortgage lenders, mortgage brokers, finance companies, and other settlement service providers that collect, handle, and store consumer's nonpublic personal information (NPI). 1. Employee training to ensure awareness of security policies. 2. Physical safeguards: locking of doors, cabinets, windows, files, etc. 3. The management of systems failures and consumer notification of a security breach. 2. Safeguard rule requires lenders and brokers to develop a written information security plan that includes: a. Designating a company security officer to coordinate safeguards. b. Identify information assets and assess risks. c. Design and implement the company policy. d. Select and contract with service providers to implement their own safeguard policies. e. Evaluate, maintain, and amend policies in light of charges. Legacy Regulator: Federal Trade Commission. 3. Pretexting rule prohibits salesmen or telemarketers from pretending to be someone other than whom they are or posturing themselves in a capacity other than the one in which they function in reality.. Copyright 2013 Carey Green - 17

18 Fair Housing Act (FHA) None To provide for fair housing: 1. Covers building, selling, and rental plus any real estate related transaction. 1. Makes it unlawful for any Examples of discrimination: lender to discriminate based on race, religion, color, 1. Redlining (refusing to national origin, handicap, or lend within a certain familial status. geographic region). Current: HUD Legacy Regulator: HUD 2. Forbids the imposition of 2. Excessively low different requirements or appraisals. more onerous terms that may have a disparate effect on 3. Racially exclusive images. different borrowers. 4. Racial steering. 3. Requires the Fair Lending Notice to be given to 5. Discrimination against borrowers. women. 4. The Equal Housing Opportunity Logo must be present on all statements or advertising. 5. Excessively burdensome standards or more onerous terms.. Copyright 2013 Carey Green - 18

19 Equal Credit Opportunity Act (ECOA) or Regulation B None 1. A lender cannot discourage To provide for the availability of credit to all an applicant from applying. credit worthy applicants 2. May not require a cowithout regard to any applicant to be a spouse. discriminatory factors on a prohibited basis (race, color, religion, national origin, sex, 3. Issues of sex, race, marital status, or child-bearing may marital status, age, or that not be considered. the consumer receives public assistance income.) 4. The consumer may withdraw an application. This applies to all credit transactions. (Next 3 points are referred to as the 30/60/30 rule) 5. A notice of adverse action must be supplied within 30 days of application. 1. Credit records and records Current: CFPB (Consumer of denial must be held for 25 Financial Protection Bureau) months. Legacy Regulator: Federal 2. Lenders must collect Trade Commission and information about race and Federal Communications other personal characteristics Commission. for reporting purposes only. 3. Borrowers have the opportunity to receive a copy of appraisal reports they paid for. 4. Inquiry into marital status can only be done using the following terms: married, unmarried, separated.. 6. The consumer has 60 days to request a reason for the adverse action. 7. Creditor must give a reason for denial of credit must be given within 30 days of a request. 8. The purpose of the ECOA disclosure must be given at application. Copyright 2013 Carey Green - 19