ARE YOUR LOANS IN COMPLIANCE? MortgageCurrentcy.com Effective

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1 ARE YOUR LOANS IN COMPLIANCE? MortgageCurrentcy.com Effective For Loan Officers, Processors, Underwriters, Quality Control, and Management. To be used as a tool to ensure that specific loan files AN the manner in which you do business are in compliance with the federal mortgage-related laws and regulations.* Use of this checklist can help mitigate potential litigation and fines! To use this Compliance Guide: THIS IS A CHECK-OFF LIST. YOU MUST EITHER CHECK EACH INIVIUAL BOX AS TRUE, OR MARK IT AS NOT APPLICABLE (n/a). IF NOT YOU ARE NON-COMPLIANT AN SHOUL TAKE IMMEIATE ACTION AN MAKE APPROPRIATE CORRECTIONS. Start with the GENERAL section. This section is procedural and not loan specific. It is most effective if completed by management. It is not necessary to complete with each loan file, but is useful to review periodically. The PRE-APPLICATION area is next. This is an area that is highly litigated. It is useful for individual loan originators and management. Although some entire sections may seem not applicable, it is wise to review each box individually to determine whether or not they are applicable. From APPLICATION through CLOSING, the checklist is loan specific. It is the most beneficial if it is completed in full for each individual loan file. It can be used for quality control after the loan is closed, or as a tool for loan officers and loan processors to ensure compliance along the way. *This checklist is a tool only, and does not cover every situation or every law. The material contained herein is general in nature and not intended to be comprehensive. Additionally, it addresses federal laws only. It does not address individual state requirements, nor does it address lender, insurer, or investor requirements. Although great care was taken to ensure accuracy, there is no guaranty as to the interpretation or inclusion of information. None of the material should be construed or relied upon as legal advice. For questions or further guidance, refer directly to the statute and/or the implementing regulation itself. If you need additional direction, seek legal counsel. 1

2 GENERAL This section covers general compliance procedural issues, and is not loan specific. The GENERAL checklist is most effective for management, and typically does not apply to individual loan officers. WRITTEN PLANS ALWAYS REQUIRE: Your company has a written plan and a security program to safeguard non-public information per the Safeguard Rule (Gramm-Leach-Bliley Act) It is in writing There is a coordinator assigned person in charge Safeguards are implemented There is staff training For more information about the Safeguard Rule, visit ALWAYS REQUIRE: Your company has a written plan that incorporates the FCRA isposal Rule and includes procedures to verify identity for alerts and address discrepancies on credit reports. (This may be included as part of the written plan for the Safeguard Rule.) (Fair Credit Reporting Act) It covers procedures to verify identity when credit reports have fraud alerts, extended fraud alerts, military alerts, and major address discrepancies It incorporates the isposal Rule, which refers to the safe disposal of personal credit information For more information about the isposal Rule, visit ( If your company is involved in any telephone solicitations or telemarketing, whether done directly or contracted to a third party (Telemarketing Sales Rule of 2003 / o Not Call) The company has a written plan, available on demand, for maintaining a do-not-call list It is in writing There is staff training Compliance is monitored and enforced A list of company- specific o-not-calls is maintained There is documented access to the NC registry within 31 days of any calls Note: For additional requirements (other than a written plan), see the next page in the Pre-Application Section OTHER PRIVACY ISSUES If consumer, non-public information is given or is sold to a third party, non-affiliate (Gramm-Leach-Bliley Act) A short form privacy notice is sent to the consumer providing the means to opt out and a reasonable amount of time to opt out For more information, go to AFFILIATE BUSINESS ARRANGEMENTS All affiliated business arrangements and situations of common ownership of more than 1% (mortgage company and builder / real estate company / title company/ etc.) are in compliance with RESPA, with fees paid for services rendered only. When setting up such arrangements, legal counsel for compliance with RESPA is recommended. (Real Estate Settlement and Procedures Act) RECORS KEPT Proof of borrower s I is retained for five years. (Patriot Act) Whenever an action is taken, such as a Notice of Incomplete File, or Notice of Adverse Action, all loan documents are maintained for 25 months after the action. (Equal Credit Opportunity Act) (Note that many various states and other laws have different, often longer, recordkeeping requirements) POSTER IN LOBBY An Equal Housing Lender Poster, measuring a minimum of 11" by 14", is conspicuously on display in the lobby where home loans are made. (Fair Housing Act) 2

3 PRE-APPLICATION Generally, the following information in Pre-Application is not loan specific. It is beneficial for individual loan originators, management, and marketing representatives. It is recommended that all boxes be reviewed and marked as accurate or not applicable, whether or not the area seems applicable to you or your business. CREIT ECISIONS OVER THE PHONE The following applies when a consumer makes an inquiry into a loan (over the phone or in person), and is verbally told that he/she does not qualify for the loan (for instance, a consumer calls in response to an advertisement or just shopping for a loan). (Equal Credit Opportunity Act, Regulation B). A loan file is created and retained (as above for 25 months). A written application that includes the applicant s name, address, race or national origin, sex, marital status and age is in the file. (The lender/broker/loan officer must create and obtain this information.) A Notice of Adverse Action has been sent to the client within 30 days, as evidenced in the file. TELEMARKETING & TELEPHONE SOLICITATIONS Telephone Consumer Protection Act (1991); Telemarketing and Consumer Fraud and Abuse Prevention Act (1994) Telemarketing Sales Rule (2003) If you make phone calls to solicit business (including previous clients), or have someone telemarketing on your behalf, all of the following must be checked. This applies to all solicitation phone calls, and is advisable to review whether or not you are actually involved in telemarketing. If telemarketing, you have registered with and paid the fee for the o Not Call Registry for each state in which you make phone calls o Not Call (NC) list is accessed in most recent 31 days to any call Neither you nor your representative calls those numbers listed on the NCRegistry Calls are not made before 8 a.m. or after 9 p.m. (at the time zone of the person whom you re contacting) Callers/Telemarketers must identify their individual name, the company s name they are calling on behalf of, and a phone number or address where they may be contacted If an individual asks not to be called again, they are placed on an internal list An internal list of those asking to be removed from calling is maintained, and persons on the list are not called for 5 years You have a written plan (see GENERAL, Written Plans on the previous page) You (and all who are engaged in telemarketing) have been trained on NC procedures You do not call former clients who are on the NC Registry if 18 months has passed since the established business relationship ended (Example of the end of the relationship is when a loan has closed) NOTE: Exception allowed if you have express written permission to call NOTE: Exception is you have a continuing business relationship (i.e., your company is servicing the loan) You do not call someone who has called you with an inquiry or made application if they are on the NC registry, and if more than 3 months has passed from the date of the call or the application You NEVER call any person who has asked not to be called, whether or not they fit into an exemption. You place them on the internal NC registry as previously noted. (An example is if you have an ongoing relationship because your company is servicing the loan, or it is within 18 months of the date that you closed their loan, etc.) Q&A publication can be located at o Not Call Registry at Additional information at 3

4 AVERTISING If written advertising, the Equal Housing Logo is displayed (Fair Housing Act) If verbally advertising (for instance on the radio), there is a statement made that you are an equal opportunity lender (Fair Housing Act) EXISTING AVERTISING ISCLOSURE RULES (If your ad contains any financing info ) ollar amount or % of down payment Number of payments or number of years to repay the loan ollar amount of any payment An interest rate or a finance charge then you must disclose the following The terms of repayment over the entire life of the loan, including ARMs, Balloon payments or temporary buy downs ollar amount or % of down payment The Annual Percentage Rate Updated Rate & Payment Rules in Addition to Existing Rules (Effective , more disclosure must be included in addition to the existing rules above:) If fixed interest rate over the life of the loan, the rate and APR must be printed in the same size letters If advertising a payment, you must include: o Fact that the payment does not include taxes, mortgage or homeowners insurance If rate or payment is NOT fixed (Buy down, ARM or Balloon) o Each rate or payment & time period changes for entire term of the loan o If ARM, future rate must be disclosed by adding index plus margin Size of Lettering & Placement of isclosure Printed Ads APR Rate and loan term details must be printed in the same size letters (or larger) than the rate or payment being advertised Must be printed in close proximity to info being advertised (not buried way down at the bottom of the ad) Cannot be obscured in any way (i.e., shading, coloration, etc.) TV, Radio, Video & All Oral isclosures (Must include all the information above PLUS:) Must be clearly stated (no talking fast or low tone of voice); or Must provide a toll-free number that may be used to call for additional info For information only it s not comprehensive or intended as legal advice. Final Rule published in Federal Register Vol. 73, No. 147 and 12 CFR, Part 226. PRESCREENE LISTS Author s Note: Cole v. Capital is considered the new Rodash in the mortgage lending industry and has lenders very aware of compliance when using prescreened lists (Fair Credit Reporting Act) If you obtain lists of people from a credit-reporting agency (CRA) who meet certain pre-established criteria, this is considered Prescreening and must comply with certain requirements. If you use prescreened lists: You have established in writing the criteria that the consumer must meet to be eligible for the offer of credit (and it must be available for inspection) You have an actual firm offer of credit if the customer meets the established criteria (the solicitation cannot be merely an advertisement) The offer includes disclosure to the consumer that information in their credit report was used in connection with the transaction, and that they received the offer because they satisfied the criteria The offer includes a Clear and Conspicuous Notice of Opportunity to Opt-out of prescreened offers, and the means to do so 4

5 For more information about prescreened offers, go to and O NOT FAX (Telephone Consumer Protection Act of 1991, Junk Fax Prevention Act of 2005) Fax advertisements are not sent to any party without prior express invitation or permission unless a business relationship exists, or the fax number is easily accessible through public means (such as on an Internet website, unless the site notes that it does not accept unsolicited faxes) Faxes sent contain contact information to opt out of future faxes Note that Business relationship is very loosely defined, for more information go to the FCC Consumer Fact Sheet at REFERRALS There has been NO payment, gift, or anything of value given for the referral of a loan (RESPA, Section 8 of the Act) 5

6 Borrower Name: Loan Number: Property Address: LOAN APPLICATION ISCRIMINATION (Fair Housing Act) There has not been discrimination based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents of legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap or disability Terms or conditions on a loan, such as different interest rates, points, or fees, have not been imposed upon a select group of people, such as making a higher yield-spread premium on those of a certain ethnicity. (Equal Credit Opportunity Act) There has not been discrimination in the extension of credit on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The applicant was not discouraged on a prohibitive basis from making or pursuing an application There have been no inquiries about the applicant s sex, race, color, religion, or national origin, excepting inquiries on the loan application under Information for Government Monitoring Purposes There have been no inquiries about the applicant s marital status other than married, unmarried, or separated There have been no inquiries about an applicant s spouse or ex-spouse unless the spouse will be an obligor on the loan; or, the spouse, ex-spouse, or property is in a community property state; or the applicant is relying on money from the spouse or ex-spouse such as alimony, child support, etc., for the purposes of qualifying for the requested mortgage loan The borrower has not been required to disclose income from child support or alimony unless such income is to be used for qualifying purposes There have been no inquiries about child bearing or child rearing (Author s note: oes anybody remember The Pill Letter from years past?) APPLICANT IENTIFICATION (Patriot Act) There is evidence of client identification in the loan file such as a copy of a driver s license ISCLOSURES REQUIRE at APPLICATION NOTE: For purposes of TILA and RESPA, application disclosures are not triggered until the borrower has a property. For instance, TIL and GFE disclosures for a pre-qualification (no property) are not required until a purchase contract is signed. In this instance, the three-day count starts after the sales contract is signed Good Faith Estimate: (Real Estate Settlement Procedures Act RESPA) In the file and completed in full There is evidence it was mailed, delivered, or signed within 3 business days of application All borrower fees and costs disclosed & separately itemized whether paid by borrower, seller, or lender Must be available to borrower for 10 days for review of fees except for interest rate (may change) Subject to tolerances for changes to fees some third party fees may change up to 10% Changed Circumstances required in order to change or add related fees Initial Servicing isclosure: (Real Estate Settlement Procedures Act RESPA) In the file and completed in full There is evidence it was mailed, delivered, or signed within 3 business days of application or must be signed AT application if face-to-face application There is evidence it was (required) signed before closing 6

7 Borrower Name: Loan Number: ISCLOSURES REQUIRE at APPLICATION (continued) Initial TIL isclosure: (Truth in Lending Act, TILA) In the file Completed in full! isclosure is clearly marked as the initial disclosure Prepaid finance charges are itemized (or clearly identified on the GFE), and appear to be correct If mortgage is an ARM, disclosure was based assuming the value of the index at the time of application remained the same throughout the life of the loan (This may result in an APR lower than the initial interest rate) There is evidence in the file that the disclosure was mailed, delivered, or signed within 3 business days of application and 7 business days prior to closing/consummation ECOA Valuations Rule: (Equal Credit Opportunity Act ECOA) See Small Entity Compliance Guide for defined rules: And: There is evidence on file that the appraisal notice was provided at application (within 3 days of application and that every borrower (whether or not the loan closes) automatically receives a copy of his or her appraisal Privacy Notice: (Gramm-Leach-Bliley Act) Includes a reasonable means to opt out of future solicitations (should be broker specific) There is evidence that this was provided to the consumer within a reasonable time (most lenders look for it at application) If disclosure is made on the Internet, customer signature acknowledging receipt is in the file GFE Provider Relationship: (Real Estate Settlement Procedures Act RESPA) HU FAQ s: In the file and completed in full There is evidence it was mailed, delivered, or signed within 3 business days of application o Required use subject to 10% fee tolerance o Identified providers subject to 10% fee tolerance; borrower can shop for provider o Not identified provider may have fee change from GFE quote HU s Settlement Cost Booklet: (Real Estate Settlement Procedures Act RESPA/MIA) File contains evidence booklet was mailed or received within 3 business days of application Give to clients for the following loan transactions: o Purchase Primary & 2 nd Homes, Condos, Townhomes o No-cost loans o Construction/End Loans o Refinance of Primary & 2 nd Home o Closed End HELOCs o Time Shares o Manufactured Homes/Mobile Homes on Real Property o Mortgage Assumptions (if loan terms change from original mortgage) o Reverse Mortgage Not required for: o Rental Property that will be used for Business Purposes o Land o Land & Home with 25 acres or more o Seller-Financed Mortgage or Contract-for-eed o Loan Modifications o HELOCs open end o Loan application denied at application Or if borrower withdraws within 3 days of loan application 7

8 Can change the cover ONLY no alterations to the content o OK to change picture, add your company name & contact info to cover page o Can be translated to languages other than English Affiliated Business Arrangement (ABA) isclosure: (RESPA) If applicable if affiliate relationship exists with another settlement service provider There is evidence that disclosure was signed prior to referral (prior to application if referred by Real Estate Agent, Builder, etc.) Consumer Handbook on Adjustable Rate Mortgages (CHARMs Booklet): (Truth In Lending Act) If applicable Always required if loan is an Adjustable Rate Mortgage (ARM), which includes ARM loans with initial fixed rate periods, regardless of how long the initial rate is fixed There is evidence booklet was mailed or received when originally discussing ARM product, or before a non-refundable fee was paid (Typically at application) ARM isclosure: (Truth In Lending Act) If applicable Always required when the loan is an ARM products isclosure is specific to the product (obtain from the lender for each different product) There is evidence disclosure was provided at application or before a non-refundable fee was paidhome Equity Line of Credit Booklet: (TILA) If applicable only if the loan is a Home Equity Line of Credit. Note that the GFE and the HU-1 Settlement Statements are not required if HELOC booklet and HELOC disclosure (next) are provided There is evidence in the file that the booklet entitled When Your Home is On the Line was given to the borrower at the loan application or within 3 business days Home Equity Line of Credit Booklet: (TILA) If applicable only if the loan is a Home Equity Line of Credit There is evidence that a HELOC isclosure was given to the borrower (often provided by the lender) at the loan application or within 3 business days ISCLOSURES AT APPLICATION, OTHER The following are lender required, and not specific requirements of the law: Fair Housing isclosure: Obtained as per lender requirements ECOA Notice: Obtained as per lender requirements Application Identification isclosure: Personal identification must be obtained as noted previously for the Patriot Act, but any disclosure about obtaining identification is lender created and required. Obtained as per lender requirements Flood Insurance Notice Reg Z Amendments efinitions: Early TIL Initial TIL isclosure provided to borrower within 3 business days of loan application and 7 business days prior to closing/consummation Consummation ate that borrower(s) execute all loan closing documents including note, mortgage, and riders Business ay Same definition used for Rescission Monday through Saturday excluding Federal holidays Upfront Fees Those fees collected from the borrower at the time of application or prior to application. Other than credit report fee, no other fees may be collected until the borrower has received the Early isclosures. The disclosures are considered received three business days after they are mailed Waiting Periods Early TIL must be given to borrower(s) within 3 business days of loan application and 7 business days before consummation Upfront fees cannot be collected until borrower has received the Early isclosures, 3 days after they are mailed Correct Early TIL must be given to borrower if changes in the loan transaction trigger the APR to 8

9 increase or decrease by more than.125%. The borrower must receive the revised disclosure at least 3 business days prior to consummation Rescission period of 3 business days must run in addition to the 7 business days and/or the 3 business days (in case of revision) that apply to the Early isclosures 9

10 Borrower Name: Loan Number: URING THE PROCESS BEFORE ORERING A CREIT REPORT A credit report cannot be ordered without a permissible purpose ( 604(a) of Fair Credit Reporting Act) There is evidence in the loan file that a credit report was not ordered without a permissible purpose, which must be one of the following: ONLY CHECK ONE As instructed by consumer in writing (general authorization signed); or For the extension of credit as a result of an application from consumer (you have a signed loan application); or Legitimate business need in connection with transaction initiated by customer (you have evidence that the customer called YOU looking for a loan) For more information, go to AFTER ORERING A CREIT REPORT isclosure: Notice to Home Loan Applicant and Credit Score isclosure: (Fair Credit Reporting Act) Required any time a credit score is used in conjunction with a mortgage transaction, this is often provided by the credit-reporting agency; however, the lender/broker retains the responsibility to ensure the disclosure is correctly made The file contains evidence that the borrower received this disclosure within a reasonable time after the credit report was completed ( as soon as is reasonably practicable - 609(g) of FCRA) NOTIFICATION OF ENIAL OR OTHER ACTIONS REQUIRING ISCLOSURE as applicable: isclosures: (Equal Credit Opportunity Act) Notice of Action Taken Notice of Adverse Action Counteroffer: Incomplete loan application notification: There is evidence in the file that applicants have been provided with a Notice of Action Taken within 30 days of receiving an incomplete loan application Complete loan application notification: After receiving a completed loan application (with all typical documentation), there is evidence in the loan file that applicants have been provided with a Notice of Action Taken notifying approval*; or a written Counteroffer; or a Notice of Adverse Action notifying a denial of credit Notice was provided within 30 days of the completed application * (The approved loan notification requirement is met by closing the loan with 30 days) enied loan notification: When the loan is denied (refusing to grant credit under substantially the amount or under the terms requested, and a counteroffer is not sent in writing), there is evidence in the loan file of the following: A Notice of Adverse Action (which includes an ECOA Notice) is sent to the borrower(s) The notice is within 30 days of the Action Reasons for denial are specific and listed indicating the principal reason for the adverse action If denied for credit in whole or in part, the notice contains complete information regarding the source of the credit information including the name, address, and phone number of the credit reporting agency, if applicable. (Fair Credit Reporting Act) Counteroffer: If a written counteroffer has been sent and not accepted within 90 days, there is evidence that a Notice of Action Taken or Notice of Adverse Action has been sent. Note: It is not necessary to send a notice if the applicant expressly withdraws his application. 10

11 Borrower Name: Loan Number: FLOO ZONE (Flood isaster Protection Act) Reasonable efforts were made to determine whether or not the subject property dwelling was located in a special flood hazard area (SFHA), including Zone A and Zone V. This may be performed by a third party determination company or by checking flood maps (Appraisals must match the determination, but appraisers are not liable for the determination) If in a SFHA, applicants have received a Flood Hazard Notice notification within a reasonable time before completion of the transaction, typically identified by regulators to be 10 days before If in a SFHA, there is evidence before closing that applicants have obtained flood insurance HIGH COST LOANS (Home Ownership Equity and Protection Act, Section 32 of Truth in Lending Act): The Bureau has adjusted the loan amount threshold under HOEPA that determines whether a transaction is a high cost mortgage when the points and fees are either 5 percent or 8 percent of such amount from, respectively, $20,000 to $20,391, and $1,000 to $1,020 (lesser amounts are through 12/31/14 and higher amounts are for loans originated on or after 01/01/15). HIGHER PRICE LOANS (HPML) SECTION 35 MORTGAGES EFINITIONS: and 1. Higher-priced loans (HPML) Section 35 Mortgages: Applies to Consumer credit, Owner Occupied principal dwelling, purchase and refinances, closed-end loan (1-4 family, condo, co-op, mobile home, construction perm). The APR trigger: First lien exceeds 1.5% of the Average Prime Offer Rate (APOR) in a comparable transaction as of the rate lock date Second lien exceeds 3.5% of the APOR in a comparable transaction as of the rate lock date There are no points and fee triggers as required in the Section 32 mortgages Loans excluded from Section 35 compliance are: Construction Only Mortgages, HELOC, Bridge loans with term of 12 months or less. 2. Average Prime Offer Rate (APOR): Annual Percentage Rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transaction that have low risk pricing characteristics. A sample of this survey is Freddie Mac Primary Mortgage Market survey, which contains data on 1-year ARM; 5/1 ARM; 30-year fixed and 15-year fixed. The APOR tables are updated every Friday by the Federal Reserve Board. The new values are effective the following Monday. APOR tables are available on the FFIEC website: 3. Rate Lock ate: The effective rate lock date is the date that the interest rate is locked. esignate amortization type State lock in date State APR If fixed rate, the term is loan maturity; if ARM, the term is the initial fixed rate period (years in whole numbers). The rate spread will be given If the rate spread is greater than 1.5% for first mortgages and 3.5% for second mortgages, the loan is a higher priced loan and additional requirements apply 11

12 A HIGHER-PRICE MORTGAGE LOAN IS SUBJECT TO CERTAIN RESTRICTIONS: See information at: ABILITY TO REPAY See Appendix Q: The consumer s ability to pay must be assessed as of consummation (date of closing), including the consumer s current and reasonably expected income, employment, assets other than collateral, current obligations and mortgage-related obligations, which include property taxes, homeowner s insurance, and similar mortgage-related expenses (such as homeowner s association dues or cooperatives fees). ESCROWS ARE MANATORY FOR ALL FIRST LIEN HPML (see associated link with Appraisal Guidance earlier in this document) COERCION OF APPRAISER Appraiser Independence Requirements irectly or indirectly coercing, influencing, or otherwise encouraging an appraiser to misstate or misrepresent the value of the consumer s principal dwelling is prohibited. REGULATION C HMA REPORTING The rate-spread thresholds used to determine if a loan is subject to Regulation C (HMA) have been amended to align with the rate spread thresholds used to determine if a loan is higher-priced. Under the revised rule, price information must be reported on a loan subject to Regulation C, if it has an APR that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is locked by: 1.5% or more for first lien loans; or 3.5% or more for subordinate lien loans 12

13 Borrower Name: Loan Number: CLOSING ISCLOSURES AT CLOSING Final TIL isclosure (Truth in Lending Act) There is evidence that the TIL isclosure was disclosed before the Promissory Note and Trust eed were signed It is completed in full and accurately represents the transaction, and signed by all parties The APR is accurate within 1/8 of 1% The Prepaid Finance Charges are accurately accounted for and match Last GFE disclosed to borrower HU - 1 Settlement Statement or HU-1 A Settlement Statement: (RESPA) In the file and completed in full Signed by all parties to the transaction ALL fees involved in transaction are disclosed on HU-1 and match Last GFE within tolerances All fees are disclosed and marked POC (to the left of the line item) if paid outside of closing, such as appraisal fee, credit, etc. All fees are reasonably related to market value of service performed There has been no splitting of fees There has been no up-charging (charging more than the actual third party charge) All Borrower fees are disclosed to borrower whether paid by lender or seller (noted left of line items) All line item charges accurately identify the source to whom the funds are paid Aggregate accounting has been used to calculate the final reserve/impound account RESCINABLE TRANSACTIONS (Truth In Lending Act) Generally speaking, rescindable transactions include secondary liens or refinances of the borrower s primary residence. (Improper compliance with the below results in a three year rescission period) isclosures Notice of Right to Cancel: The file includes evidence that ALL parties to the transaction, including all title holders, were individually given two copies each of this Notice The Notice was provided before consummation of the transaction (before note and T signed) Material isclosures There is evidence that Material disclosures were provided before the rescission period started. Material disclosures include (a) the APR, (b) the Finance Charge, (c) the Amount Financed, (d) the Total of Payments, and (e) the Payment Schedule. A properly completed TIL isclosure will meet this requirement, if delivered to the borrower Waiting Period There is evidence in the file that the borrower was given a full three business days after receiving the Notice of Right to Cancel and other material disclosures. To count business days, include Saturday, but exclude federally related holidays. The count starts at midnight of the night after signing and receipt of appropriate documents, and is over at midnight three business days later. If a Customer Rescinded the Transaction The file contains evidence that the security interest has teen terminated, if applicable (typically the loan has not yet recorded) There is evidence that ALL funds were given back to the customer, including those already paid to a third party, such as appraisal fee, whether or not the customer paid the third party directly SPECIAL FLOO HAZAR AREA (Flood isaster Protection Act) Always, regardless of the flood zone, applicants are provided with and have signed a Flood Hazard etermination Notice (responsibility of lender) If in a special flood hazard area, zone A or zone V, there is evidence of flood insurance in the file. 13

14 REFERENCES RESPA Settlement Cost Booklet CHARM Booklet, HELOC Booklet Complying with the Telemarketing Sales Rule (o Not Call) FCRA / FACTA O NOT CALL for telemarketers and businesses Final Rule for prescreened disclosures FCC Consumer Fact Sheet for o Not Fax National Association of Mortgage Brokers TILA consumer compliance RESPA consumer compliance Consumer and Community Affairs Handbook Copies of actual regulations General RESPA information Free credit reports Copies of many various regulations and publications The Safeguards Rule isposal of credit information requirements Financial Privacy, Gramm-Leach-Bliley Act ual/ and mplaince-guide_loan-originator.pdf CFPB Examination Manual and Loan Originator Compensation Rule 14