TIL/RESPA Final Rules on Integrated Mortgage Disclosures

Transcription

1 TIL/RESPA Final Rules on Integrated Mortgage Disclosures CLAconnect.com

2 Disclaimers The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the user. The user also is cautioned that this material may not be applicable to, or suitable for, the user s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The user should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the user of any changes in tax laws or other factors that could affect the information contained herein.

3 Housekeeping If you are experiencing technical difficulties, please dial: Contact your CLA compliance consultant with questions The PowerPoint presentation, as well as the webinar recording, will be sent to you within the next 10 business days Please complete our online survey

4 CPE Requirements Answer the polling questions If you are participating in a group, complete the CPE sign-in sheet and return within two business days Contact sada.kempf@claconnect.com Allow four weeks for receipt of your certificate; it will be sent to you via * This webinar, once recorded, has not been developed into a self study course. Therefore, watching the recording will not qualify for CPE credit.

5 About CliftonLarsonAllen A professional services firm with three distinct business lines Accounting and Consulting Outsourcing Wealth Advisory 3,600 employees Offices coast to coast Serve more than 1,100 financial institutions

6 Speaker Introduction John Zasada, JD John is a principal with CLA and leads the financial institution regulatory compliance practice. He assists financial institutions nationwide in establishing regulatory compliance programs, conducting compliance testing, training staff on regulations, and performing website compliance assessments.

7 Learning Objectives At the end of this session, you will be able to: Recognize TIL/RESPA applicability to mortgage transactions Identify the new disclosure forms and retention requirements Differentiate between requirements in the proposal and final regulations

8 Agenda 2014 compliance environment TIL/RESPA rule applicability Timing Estimate disclosure Tolerance Closing disclosure Revisions

9 2014 Compliance Changes Reg. Z - Mortgage Originator Standards Reg. Z Ability to Repay Reg. Z and Reg X - Mortgage Servicing Reg. Z - HOEPA High Cost Mortgage Loans Reg. B - Appraisal Rules Reg. Z - High Risk Mortgage Appraisal Rules

10 Upcoming Changes Reg. Z and RESPA integrated disclosures Revisions to the 2013 final rules HMDA changes Flood Insurance amendments Regulation CC amendments Courtesy pay Annual privacy notice Debt collection

11 2013 Enforcement Actions UDAAP up Fair lending up BSA up Flood up Safety and Soundness down

12 Top Compliance Violations Truth in Lending (TIL) Real Estate Settlement Procedures Act (RESPA) Truth in Savings (TIS) Flood Regulation B (Equal Credit Opportunity Act)

13 Consumer Complaints Mortgages dominate Credit cards significant FIs usually resolve with an explanation Relatively high % resolved with relief Concerning to regulators Review complaints before examiners

14 Outstanding Compliance Happens 1/3 of the time Improving compliance performance Will it continue into 2014?

15 CFPB Mindset Automatically penalized for poor compliance management system Self police Grandma

16 TIL RESPA Mortgage Disclosures 1,888 pages long Compliance not required until August 1, 2015 Disclosures fundamentally changed Significant implementation time and resources necessary

17 Process TIL and RESPA disclosures separate for 30 years Proposal and several prototypes Thousands of comments

18 Applicability Most closed-end loans HELOCs and reverse mortgages not covered No small creditor exception

19 Early Compliance New disclosures must be provided for apps received on or after August 15, 2015 Cannot use new disclosures before then No early compliance

20 New Loan Estimate Disclosure New form replaces GFE and early TIL Lender responsible for compliance regardless of who provides the disclosure Provide no later than 3 business days after application Can be provided by mortgage broker

21 Two Timeframes and Delivery 3 days 7 days Different business day definitions Multiple applicants

22 What is an Application? Six pieces of information: Consumer s name Consumer s income Consumer s social security # Property address Property value estimate Mortgage loan amount Cannot require more information before providing Loan Estimate

23 Application Issues Consumer does not specify the loan term or product type Online application contains six pieces of required information but does not submit it Online application contains 6 pieces of required information but not information the creditor deems necessary

24 Page 1 of Estimate

25 Page 2 of Estimate

26 Page 3 of Estimate

27 Estimates on the Estimate Label as such Good faith Pay more than estimate not in good faith Pay less than estimate in good faith

28 Charging More than Estimate Regardless of any tolerance limit, a creditor can charge consumers more than what was disclosed on the estimate: Prepaid interest; property insurance premiums; amounts placed into an escrow, impound, reserve or similar account. For services required by the creditor if the creditor permits the consumer to shop and the consumer selects a thirdparty service provider not on the creditor s written list of service providers. Charges paid to third-party service providers for services not required by the creditor

29 10% Tolerance Charges subject to a cumulative 10% tolerance: Recording fees Charges for third-party services where: The charge is not paid to the creditor or the creditor s affiliate; and The consumer is permitted by the creditor to shop for the thirdparty service, and the consumer selects a third-party service provider on the creditor s written list of service providers.

30 Zero Tolerance Fees paid to the creditor, mortgage broker, or an affiliate of either Fees paid to an unaffiliated third party if the creditor did not permit the consumer to shop for a third party service provider for a settlement service Transfer taxes

31 Exceeding Threshold Refund within 60 days For zero tolerance charges, refund the amount above the estimate For 10% cumulative tolerance refund the amount that exceeds 10%

32 Shopping If you allow shopping, creditor must provide consumer with a written list of services that they can shop for List separate from Loan Estimate Within 3 business days Must identify at least provider for each service and state that consumer can choose a different provider Option to list services for which consumer cannot shop for

33 Revised Loan Estimates Generally cannot issue revised Loan Estimates unless: Changed circumstances Change requested by consumer The interest rate was not locked when the Loan Estimate was provided, and locking the rate causes the points or lender credits disclosed on the Loan Estimate to change The consumer indicates an intent to proceed with the transaction more than 10 business days after the Loan Estimate was originally provided The loan is a new construction loan, and settlement is delayed by more than 60 calendar days

34 Changed Circumstance An extraordinary event Information specific to the consumer or transaction was inaccurate or changed New information

35 Timing of Revised Loan Estimate Within 3 business days of learning of the reason for the revision Revised Loan Estimate must be provided no later than 7 business days before consummation 7 day waiting period Business day definition for 7 day waiting period different than for loan estimate Cannot provide revised Loan Estimate after Closing Disclosure issued

36 Waiving 7 Day Waiting Period Must have bona-fide personal financial emergency Imminent sale of home at foreclosure Need dated signed written statement No pre-printed waiver form

37 Fee Limitations Prior To Disclosure or Application Cannot impose fees until the consumer receives the loan estimate and indicates intent to proceed A fee is imposed if consumer is required to provide payment method Fees restricted include appraisal, application, underwriting One exception bona fide and reasonable fee for obtaining credit report

38 Intent to Proceed Consumer communicates in any manner that he/she choose to proceed after the Loan Estimate is delivered Creditor can specify a particular manner of communication Silence does not equal intent to proceed Must document the intent to proceed

39 Estimates Before the Loan Estimate Can provide it if it clearly and conspicuously states at the top of the first page: Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing the loan. 12-point font Cannot look substantially similar to Loan Estimate or Closing Disclosure

40 New Loan Closing Disclosure Replaces HUD-1 (RESPA) and final TIL Provide at least 3 business days before closing Changes in certain terms must result in a new disclosure and an additional 3 business days to close

41 Waiving 3 day Waiting Period Can waive it if: Bona fide personal financial emergency Consumer received closing disclosure Dated written signed statement describing the emergency Pre-printed form prohibited

42 Page 1 of Closing Disclosure

43 Page 2 of Closing Disclosure

44 Page 3 of Closing Disclosure

45 Page 4 of Closing Disclosure

46 Page 5 of Closing Disclosure

47 Average Charges General rule is the amount imposed on the consumer for any settlement service must not exceed the amount the settlement service provider actually received for that service An average charge may be used if: The average charge is no more than the average amount paid for that service The creditor defines the class of transactions The creditor uses the same average charge and The creditor does not use an average charge for any type of insurance, any charge based on the loan amount or property value or if doing so is prohibited by law

48 Revising Closing Disclosure Three categories of changes requiring a revised Closing Disclosure: Changes that occur before consummation that require a new three-business-day waiting period Changes that occur before consummation and do not require a new three-business-day waiting period Changes that occur after consummation

49 Changes Before Consummation Requiring a New Waiting Period Inaccurate APR Loan product changes Adding prepayment penalty

50 Inspection Right to inspect Consumer is entitled to inspect the closing disclosure the day before consummation Can allow the settlement agent to permit the consumer to inspect

51 Corrected Closing Disclosure for Changes after Consummation Provide a corrected Closing Disclosure after consummation based on change causing the disclosure: To become inaccurate, and Results in a change to an amount paid by the consumer Corrected disclosure must be provided within 30 calendar days after receiving information about the change

52 Clerical Errors Does not affect a numerical disclosure or the timing or delivery of the disclosure Identifying the wrong settlement provider as the recipient of a payment Listing the wrong address would not be a clerical error Provide a revised Closing Disclosure within 60 days of consummation

53 Other Disclosures Escrow Closing Notice Mortgage Servicing Transfer Notice Partial Payment Notice

54 Differences Between Proposal and Final Rule Waiting period after changes APR redefinition Approximate cost of funds

55 Record Retention Closing disclosure and related docs for five years If applicable, escrow cancellation notice and partial payment policy disclosure for two years All others (loan estimate) for three years Electronic recordkeeping not required

56 Thank you! John Zasada Principal CLAconnect.com twitter.com/ CLAconnect facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen 56