Press Release
July 7, 2017
The Consumer Financial Protection Bureau (CFPB) today finalized updates to its “Know Before You Owe” mortgage disclosure rule with amendments that are intended to formalize guidance in the rule, and provide greater clarity and certainty. The changes will facilitate implementation of the Know Before You Owe rule by the mortgage industry. The CFPB is also releasing a limited follow-up proposal to address an additional implementation issue.
“A mortgage is one of the largest financial decisions a consumer will ever make, and CFPB’s rules help ensure consumers have the easy-to-understand information they need before making a decision that will significantly impact their financial lives,” said CFPB Director Richard Cordray. “Our updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process for lenders and consumers.”
The Know Before You Owe mortgage disclosure rule took effect Oct. 3, 2015. The CFPB’s rule created new, streamlined forms that consumers receive when applying for and closing on a mortgage. In addition to clarifications and technical corrections, the amendments that the Bureau is finalizing today address a handful of other issues within the rule, including:
Tolerances for the total of payments: Before the Know Before You Owe mortgage disclosure rule, the total of payments disclosure was determined using the finance charge as part of the calculation. The Know Before You Owe mortgage disclosure rule changed the total of payments calculation so that it did not make specific use of the finance charge. The Bureau is now finalizing updates to include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge.
Housing assistance lending: The Know Before You Owe mortgage disclosure rule gave a partial exemption from disclosure requirements to certain housing assistance loans, which are originated primarily by housing finance agencies. The Bureau’s update, as finalized, promotes housing assistance lending by clarifying that recording fees and transfer taxes may be charged in connection with those transactions without losing eligibility for the partial exemption. The update also excludes recording fees and transfer taxes from the exemption’s limits on costs. Through the update, more housing assistance loans will qualify for the partial exemption, which should encourage these loans.
Cooperatives: The Bureau is finalizing updates to extend the rule’s coverage to include all cooperative units. Currently, the rule only covers transactions secured by real property, as defined under state law. Cooperatives are sometimes treated as personal property under state law and sometimes as real property. By including all cooperatives in the rule, the Bureau is simplifying compliance and ensuring that more consumers benefit from the rule.
Privacy and sharing of information: The Know Before You Owe mortgage disclosure rule requires creditors to provide certain mortgage disclosures to the consumer. The Bureau has received many questions about sharing the disclosures provided to consumers with third parties to the transaction, including the seller and real estate brokers. The Bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a Closing Disclosure to consumers, sellers, and their real estate brokers or other agents. The Bureau is finalizing additional commentary to clarify how a creditor may provide separate disclosure forms to the consumer and the seller.
The finalized amendments are available at:
http://files.consumerfinance.gov/f/documents/201707_cfpb_Final-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf
In addition to the final rule, the CFPB is issuing a proposal addressing when a creditor may use a Closing Disclosure, instead of a Loan Estimate, to determine if an estimated closing cost was disclosed in good faith and within tolerance. Comments are due 60 days after the proposal’s publication in the Federal Register and will be weighed carefully before a final regulation is issued.
The proposal is available at:
http://files.consumerfinance.gov/f/documents/201707_cfpb_Proposed-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf
The Consumer Financial Protection Bureau (CFPB) released a complaint report highlighting complaints submitted by older consumers.
The snapshot shows that older consumers frequently report servicing problems with reverse mortgages, difficulties recovering money after financial scams, confusion around deferred interest credit cards, and charges for unauthorized add-on products. The snapshot provides an overview and analysis of more than 103,100 complaints submitted to the Bureau by consumers voluntarily reporting their age as 62 or older.
“Older consumers who may be on a fixed income are at a greater risk for financial trouble if they encounter problems with financial products or services,” said CFPB Director Richard Cordray. “The complaints submitted by older consumers are important for the Bureau to ensure we are properly looking out for this segment of the population.”
The Monthly Complaint Report can be found at: CFPB Press release
CFPB Seeks Servicing Agent Comments on Proposed Mortgage Servicing Rules. This is an important discussion for Service Providers who work for Mortgage Lenders
| LINK TO CFPB POST |
By Erik Durbin and Paul Rothstein – MAY 04, 2017
Today, we’ve released our plan to assess the effectiveness of the Real Estate Settlement Procedures Act (RESPA) mortgage servicing rule. We are asking the public to comment on our plan, to suggest sources of data, and generally to provide other information that would help with the assessment.
Mortgage loan servicers are typically responsible for several activities relating to mortgage loans such as:
- Processing loan payments
- Responding to borrower inquiries
- Keeping track of principal and interest paid
- Managing escrow accounts
- Reporting to investors
- Pursuing collection and loss mitigation activities (including foreclosures and loan modifications) under certain circumstances
In January 2013, the CFPB issued the 2013 RESPA Servicing Final Rule. We amended the rule a few times before it took effect, and we refer to all of the requirements and related amendments that took effect on January 10, 2014, as the RESPA mortgage servicing rule. This rule gave borrowers new consumer protections related to mortgage loan servicing, many of which were aimed at helping consumers who were having trouble making their mortgage payments.
The RESPA mortgage servicing rule requires, among other things, that servicers provide disclosures to borrowers related to force-placed insurance, respond to errors asserted by borrowers in a timely manner, and follow certain procedures related to loss mitigation applications and communications with borrowers. For example, servicers generally must acknowledge written notices of error within five days and investigate and respond to the borrower in writing within 30 days. In general, the consumer protection purposes of RESPA include that servicers respond to borrower requests and complaints in a timely manner, maintain and provide accurate information, help borrowers avoid unwarranted or unnecessary costs and fees, and facilitate review for foreclosure avoidance options.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires us to review some of our rules within five years after they take effect. These formal reviews are called assessments. We are conducting an assessment of the RESPA mortgage servicing rule, and we will issue a report of the assessment by January 2019. As required by law, the assessment will address the rule’s effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act and the specific goals of the rule, using available evidence and data. We recently released our plan for the remittance rule assessment, as well.
We see conducting the assessment as an opportunity. Conducting the assessment will advance our knowledge of the benefits and costs of the key requirements of the RESPA mortgage servicing rule. The assessment will also provide the public with information on the mortgage servicing market, and help us to fulfill our commitment to be an evidence-based and effective agency.
We would like your help in improving the assessment.
We invite consumers, consumer advocates, housing counselors, mortgage loan servicers, industry representatives, and other interested parties to comment on our assessment plan. Comments can suggest sources of data, offer other recommendations, and generally provide information that would help us understand the rule’s effectiveness or improve this important work.
We are committed to well-tailored and effective regulations and have sought to carefully calibrate our efforts to ensure consistency with respect to consumer financial protections across the financial services marketplace.
Comments on the plan will be due 60 days after it is published in the Federal Register.
Learn more about your options and rights related to mortgage loans.
For more information on how to comply with the Bureau’s mortgage servicing rules, visit our implementation and guidance page.
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CFPB Orders Prospect Mortgage to Pay $3.5 Million Fine for Illegal Kickback Scheme
Real Estate Brokers and Mortgage Servicer also Ordered to Pay $495,000
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals. The CFPB also took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Under the terms of the action announced today, Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.
“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”
Prospect Mortgage, LLC, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the United States, with nearly 100 branches nationwide. RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements. Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.
The CFPB is responsible for enforcing the Real Estate Settlement Procedures Act, which was enacted in 1974 as a response to abuses in the real estate settlement process. A primary purpose of the law is to eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. The law covers any service provided in connection with a real estate settlement, such as title insurance, appraisals, inspections, and loan origination.
Prospect Mortgage offers a range of mortgages to consumers, including conventional, FHA, and VA loans. From at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. For example, Prospect established marketing services agreements with companies, which were framed as payments for advertising or promotional services, but in this case actually served to disguise payments for referrals. Specifically, the CFPB found that Prospect Mortgage:
Under the consent order issued today, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company is prohibited from future violations of the Real Estate Settlement Procedures Act, will not pay for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.
The consent order filed against Prospect Mortgage is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_ProspectMortgage-consent-order.pdf
ReMax Gold Coast and Keller Williams Mid-Willamette are real estate brokers that work with consumers seeking to buy or sell real estate. Brokers or agents often make recommendations to their clients for various services, such as mortgage lending, title insurance, or home inspectors. Among other things, the Real Estate Settlement Procedures Act prohibits brokers and agents from exploiting consumers’ reliance on these recommendations by accepting payments or kickbacks in return for referrals to particular service providers.
The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.
Under the consent orders filed today, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.
The consent order filed against ReMax Gold Coast is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_RGCServices-consent-order.pdf
The consent order filed against Keller Williams Mid-Willamette is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_Willamette-Legacy-consent-order.pdf
In 2012, Planet Home Lending signed a contract with Prospect Mortgage that facilitated the payment of illegal referral fees. The company’s practices violated the Real Estate Settlement Procedures Act and the Fair Credit Reporting Act. Specifically, the CFPB found that Planet Home Lending:
Under the consent order filed against Planet Home Lending, the company will directly pay harmed consumers a total of $265,000 in redress. The company is also prohibited from violating the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.
The consent order filed against Planet Home Lending is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_PlanetHomeLending-consent-order.pdf
The latest CFPB Complaint Report for Mortgages shows that, by far, the largest number of complaints filed with the CFPB were with the Credit Reporting Agencies – Equifax, TransUnion and Experian, having 3,897 complaints nationwide on credit reports in January. Mortgage complaint leaders were Wells Fargo, Bank of America and JP Morgan Chase. To read the latest full mortgage report: click here for CFPB Complaint Report.
The Consumer Financial Protection Bureau (CFPB) is the first federal agency solely focused on
consumer financial protection,1 and consumer complaints are an integral part of that work. The
CFPB helps connect consumers with financial companies to make their voices heard. When
consumers submit a complaint, they work with companies to get the consumer a response,
generally within 15 days. They also publish basic information about complaints in our public
Consumer Complaint Database to empower consumers, inform consumer advocates, and improve the functioning of the marketplace.
On October 31st, the CFPB issued updates to lenders on use of Service Providers. This appears to allow a bit more flexibility for the lender to handle day to day affairs with its Servie Providers and is good news for title companies, abstracting and closing companies. The update states:
“The Bureau is reissuing its guidance on service providers, formerly titled CFPB Bulletin 2012-03, Service Providers to clarify that the depth and formality of the risk management program for service providers may vary depending upon the service being performed—its size, scope, complexity, importance and potential for consumer harm—and the performance of the service provider in carrying out its activities in compliance with Federal consumer financial laws and regulations. This amendment is needed to clarify that supervised entities have flexibility and to allow appropriate risk management.”
Lenders continue to be advised to:
take steps to review Service Providers and should include, but are not limited to:
- Conducting thorough due diligence to verify that the service provider understands and is capable of complying with Federal consumer financial law;
- Requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents that have consumer contact or compliance responsibilities;
- Including in the contract with the service provider clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities, including engaging in unfair, deceptive, or abusive acts or practices;
- Establishing internal controls and on-going monitoring to determine whether the service provider is complying with Federal consumer financial law; and
- Taking prompt action to address fully any problems identified through the monitoring process, including terminating the relationship where appropriate.
For more information pertaining to the responsibilities of a supervised bank or nonbank that has business arrangements with service providers, please review the CFPB’s Supervision and Examination Manual: Compliance Management Review and Unfair, Deceptive, and Abusive Acts or Practices.[3]
Excellent Article in The Atlantic today on the CFPB
After a spate of recent activity which has included introducing long-awaited regulations for payday lenders and prepaid cards and a nearly $200 million fraud settlement from Wells Fargo, the Consumer Financial Protection Bureau must now face a new challenge—more oversight.
On Tuesday, a Washington, D.C. circuit court found the structure of the CFPB to be unconstitutional. More specifically, the court took issue with the inability for other arms of the government to review or rebuke the Bureau’s judgements or actions and the unilateral power imbued in the CFPB’s director—currently Richard Corday.
The judgement states:
The Director enjoys significantly more unilateral power than any single member of any other independent agency. By “unilateral power,” we mean power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.
The court then goes on to proclaim that the director of the CFPB is given more power and autonomy than the speaker of the house, senate majority leader, or even a Supreme Court justice.
Sounds like alphabet soup with all the acronyms, but Fannie Mae and Freddie Mac have published the new, redesigned Uniform Residential Loan Application forms. So the long-standing 1004 Loan Application that we all know (and often had signed at closing) will soon be history. The press release reads:
WASHINGTON, DC – Fannie Mae (FNMA/OTC) and Freddie Mac today announced the publication of the redesigned Uniform Residential Loan Application (URLA), the standardized form used by borrowers to apply for a mortgage loan. This is the first substantial revision made to the form in more than 20 years and the changes will allow lenders to deliver an easier, more consumer-friendly loan application experience. The redesigned URLA form includes a reorganized layout, simplified terminology, and new data fields that capture necessary information in an easy-to-read format. Additionally, the GSEs worked together to create a common corresponding dataset, called the Uniform Loan Application Dataset (ULAD) to ensure consistency of data delivery.
“The redesigned URLA is the result of extensive collaboration with industry stakeholders,” said Andrew Bon Salle, Executive Vice President, Single-Family Business, Fannie Mae. “We are proud to be a part of this effort that enables lenders to better serve their customers by providing ease and clarity to borrowers during the loan origination process.”
The documents are being published now, in an effort to provide the industry with ample time to become familiarized with the URLA and ULAD updates and plan necessary changes to their systems. Lenders may begin using the redesigned URLA on January 1, 2018. A timeline for required use of the redesigned URLA and ULAD will be established at a later date.
Revisions made to the URLA form and corresponding ULAD include:
The GSEs collaborated closely with lenders, technology solution providers, mortgage insurers, trade associations, housing advocates, borrower groups, and other government agencies (CFPB, FHA, VA, and USDA-RD), throughout the URLA project from the initial requirements gathering, reviews of the form revisions, and contributions to the data. For the first time, the GSEs conducted extensive consumer and lender usability testing across the U.S. to gather their feedback on the URLA designs. The designs were updated based on the responses gathered and were used in subsequent usability testing and industry outreach.
Today’s announcement is part of the Uniform Mortgage Data Program (UMDP), a larger joint initiative undertaken by the GSEs, under FHFA direction, to standardize single-family mortgage data in the U.S.
To learn more about the redesigned, consumer-friendly URLA and corresponding dataset – ULAD visit – https://fanniemae.com/singlefamily/uniform-residential-loan-application.
Real estate professionals experiencing trouble receiving copies of the closing disclosure under federal closing rules that took effect last year for residential real estate transactions should see relief under proposed changes and clarifications to the rules the federal government released today.
The Consumer Financial Protection Bureau, which revised longstanding closing procedures last year under an initiative it calls Know Before You Owe, said today it understands that it’s customary for real estate sales associates, brokers, and other third-party service providers to receive copies of the closing disclosure that goes to the customers during the transaction. The closing disclosure replaced the HUD-1 Settlement Form last year on Oct. 3 when the new procedures took effect. After the new procedures took effect, some lenders and settlement agents cited privacy concerns and refused to share the closing disclosure with real estate professionals, making it hard for them to advise their clients.
“The Bureau understands that it is usual, accepted, and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers, and their real estate brokers or other agents,” the CFPB said in its announcement of its proposed changes.
“REALTORS® have reported challenges gaining access to the Closing Disclosure ever since the new closing procedures went into effect, despite a long history of access to the substantively similar HUD-1,” NAR President Tom Salomone said in a statement released today. “The CFPB acknowledged that concern by making it clear that it is appropriate and accepted for creditors and settlement agents to share the closing disclosure with consumers, sellers, and their agents. That’s a significant victory that will help REALTORS® continue to provide the expert service their clients have come to expect.”
The proposed changes address three other areas of the closing procedures. They would allow housing finance agencies to charge recording fees and transfer taxes without losing their existing exemptions from disclosure requirements, extend the Know Before You Owe requirements to transactions involving cooperative units, and restore treatment of finance charges to the way they were treated prior to the Know Before You Owe changes.
The agency will be taking comments on the changes until October 18. Access the proposal.
The problem real estate professionals faced obtaining the closing disclosure from lenders is examined in the June 21 Voice for Real Estate news video from NAR.
Author Comment: Hallelujah! What a pain it has been losing the ability to double check items for our customers. Having to contact the buyers and sellers to get their permission, then contacting the attorneys and title companies has been a great deal of effort, but worth it. many times I have helped correct errors on closing statements for Buyers and Sellers (and closers, attorneys and title companies) because, we all know, closings are very complex, and there is much room for error, so I greatly appreciate the CFPB for seeing the value in allowing those of us who are closely involved in getting closing statements for review.
RedVision/Accenture have put out a study on the changing costs for Title Insurers due to what it aptly calls “Multiple Disruptive Forces” including such things as regulatory changes, digital operations, industry convergence, and a subdued economic outlook. The benchmark study focuses on the true costs of title insurance origination and finds that the true cost is about 30% higher than their study participants estimated.
From my perspective, it’s a thoughtful analysis. I think the ultimate thought would be to have all the information simply digitally dumped into an automated system that would spit out a title commitment. But, as we all know, as the chain of title is put together, there are many stops involved and many places to collect data, all with different systems:Treasurers, Auditors, Assessors, County Recorders, Cities, plats/surveys, etc.etc. And while I know there are inefficiencies in manually obtaining data, and I recognize that much of the information can be downloaded, I believe we are light-years away from a one-stop automated process.
In order to have a “good” title product, someone has to actually LOOK at the data as it will not simply download into the appropriate category. There are too many variables. A good search needs to verify the physical signatures on that deed, look for recitals in documents, review divorce decrees, etc. Yes, streamlining is very important, but so is the knowledge of those persons who examine the instruments. On the other hand, if the industry wishes to become completely automated, it could choose to do so and become like a casualty underwriter – don’t check past history, just prepare and reserve for much higher claims.
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