Closing

CFPB Finalizes Updates to “Know Before You Owe” Mortgage Disclosure

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

License Renewals for MN are Due by June 30th

Real estate agents, abstracters, closing agents and brokers are reminded that they must renew their licenses on or before June 30th. So please check your license for renewals.

Information from the Commerce Department on MN state licensing can be found here.

Pulseportal information can be found here.

OCC Adds Information for Third Party Vendors

On June 7th, the OCC added bulletin 29 to third-party relationships to clarify the way lenders should interact with third party vendors, to us, that means how lenders deal title and closing providers.

    Get the entire OCC bulletin here

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As a part of the lengthy bulletin, it stated the lender is responsible for ongoing monitoring.

Ongoing Monitoring
Ongoing monitoring for the duration of the third-party relationship is an essential component of the bank’s risk management process. More comprehensive monitoring is necessary when the third-party relationship involves critical activities. Senior management should periodically assess existing third-party relationships to determine whether the nature of the activity performed now constitutes a critical activity.
After entering into a contract with a third party, bank management should dedicate sufficient staff with the necessary expertise, authority, and accountability to oversee and monitor the third party commensurate with the level of risk and complexity of the relationship. Regular on site visits may be useful to understand fully the third party’s operations and ongoing ability to meet contract requirements. Management should ensure that bank employees that directly manage third-party relationships monitor the third party’s activities and performance. A bank should pay particular attention to the quality and sustainability of the third party’s controls, and its ability to meet service-level agreements, performance metrics and other contractual terms, and to comply with legal and regulatory requirements.
The OCC expects the bank’s ongoing monitoring of third-party relationships to cover the due diligence activities discussed earlier. Because both the level and types of risks may change over the lifetime of third-party relationships, a bank should ensure that its ongoing monitoring adapts accordingly. This monitoring may result in changes to the frequency and types of required reports from the third party, including service-level agreement performance reports, audit reports, and control testing results. In addition to ongoing review of third-party reports, some key areas of consideration for ongoing monitoring may include assessing changes to the third party’s
• business strategy (including acquisitions, divestitures, joint ventures) and reputation (including litigation) that may pose conflicting interests and impact its ability to meet contractual obligations and service-level agreements.
• compliance with legal and regulatory requirements.
• financial condition.
• insurance coverage.
• key personnel and ability to retain essential knowledge in support of the activities.
• ability to effectively manage risk by identifying and addressing issues before they are cited in audit reports.
• process for adjusting policies, procedures, and controls in response to changing threats and new vulnerabilities and material breaches or other serious incidents.
• information technology used or the management of information systems.
• ability to respond to and recover from service disruptions or degradations and meet business resilience expectations.
• reliance on, exposure to, or performance of subcontractors; location of subcontractors; and the ongoing monitoring and control testing of subcontractors.
• agreements with other entities that may pose a conflict of interest or introduce reputation, operational, or other risks to the bank.
• ability to maintain the confidentiality and integrity of the bank’s information and systems.
• volume, nature, and trends of consumer complaints, in particular those that indicate compliance or risk management problems.
• ability to appropriately remediate customer complaints.
Bank employees who directly manage third-party relationships should escalate to senior management significant issues or concerns arising from ongoing monitoring, such as an increase in risk, material weaknesses and repeat audit findings, deterioration in financial condition, security breaches, data loss, service or system interruptions, or compliance lapses. Additionally, management should ensure that the bank’s controls to manage risks from third-party relationships are tested regularly, particularly where critical activities are involved. Based on the results of the ongoing monitoring and internal control testing, management should respond to issues when identified including escalating significant issues to the board.

Title Agent Charged with Negligence and Compensatory Damages

A Connecticut title agent was held liable for $77,500 that was paid by a Title Underwriter to clear title to property it insured, as well as more than $20,000 in compensatory damages for fees and expenses incurred in negotiating the settlement. The case showcased liability by the agent for a negligent title search, and breach of duty to the underwriter.

Read the case here.

CFPB Gives Snapshot of Complaints from Older Consumers

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

Closing Agent License Renewal is Due Now

Check your closing agent license for your renewal date! Licenses are good for two years and must be renewed by June 30th of the second year after your license is issued. If you miss the cutoff, you will be required to retake the Closing Agent Prelicense course, pay new license fees, and once again complete the entire process through the State’s Pulseportal System.

Meanwhile, and this is totally random, don’t miss the Elvis Cockatoo on youtube. It will make your day. 🙂

 https://www.youtube.com/watch?v=CEQuDyuQFKE

CFPB Seeks Comments on Proposed Mortgage Servicing Rule

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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Join the conversation. Follow CFPB on Twitter  and Facebook .

 

SEC Addresses Important Cyber-Security Measures for Service Providers

I just completed my PCI Compliance ( Payment Card Industry Data Security Standards report that requires specific security and use of qualified vendors who accept credit card payments on our behalf.) So  data security has been on my plate and on my mind.  I was particularly concerned after hearing about the recent ransom-ware attack that affected business, governments, hospitals and other entities computers in 75 countries including the US…. Scary stuff.

So it seems important to pass on the new SEC information on cyber-security.

“The staff observed a wide range of information security practices, procedures and controls across registrants that may be tailored to the firms’ operations, lines of business, risk profile and size,” as well as “firm practices during this Initiative that the staff believes may be particularly relevant to smaller registrants in relation to the recent WannaCry ransomware incident.”

Key findings from the examination, as reported in the alert, are as follows:

  • Cyberrisk assessment: “5 percent of broker-dealers and 26 percent of advisers and funds (collectively, ‘investment management firms’) examined did not conduct periodic risk assessments of critical systems to identify cybersecurity threats, vulnerabilities, and the potential business consequences.”
  • Penetration tests: “5 percent of broker-dealers and 57 percent of the investment management firms examined did not conduct penetration tests and vulnerability scans on systems that the firms considered to be critical.”
  • System maintenance: “All broker-dealers and 96 percent of investment management firms examined have a process in place for ensuring regular system maintenance, including the installation of software patches to address security vulnerabilities. However, 10 percent of the broker-dealers and 4 percent of investment management firms examined had a significant number of critical and high-risk security patches that were missing important updates.”

The SEC also noted that the Financial Industry Regulatory Authority (FINRA) has created a webpage with links to resources related to cybersecurity. It includes a cybersecurity checklist for small firms and a report on cybersecurity practices, which highlights effective practices for strengthening cybersecurity programs.

It is estimated that the ransomware attack affected more than 200,000 computers in about 150 countries, beginning May 12. The malicious software is known as “WannaCry,” “WCry” and “Wanna Decryptor,” which works by encrypting files and demands payment from users to regain access to their data.

“Initial reports indicate that the hacker or hacking group behind the attack is gaining access to enterprise servers either through Microsoft Remote Desktop Protocol (RDP) compromise or the exploitation of a critical Windows Server Message Block version 1 vulnerability,” the alert states. “Some networks have also been affected through phishing emails and malicious websites.

“To protect against the WannaCry ransomware, broker-dealers and investment management firms are encouraged to:

(1) review the alert published by the United States Department of Homeland Security’s Computer Emergency Readiness Team and

(2) evaluate whether applicable Microsoft patches for Windows XP, Windows 8, and Windows Server 2003 operating systems are properly and timely installed.”

MN Dept Commerce New E-license Website

The Minnesota Department of Commerce  has a new e-license Website regarding Closing Agent Licenses, look here for info:  https://mn.gov/elicense/a-z/?id=1083231369#/list/appId//filterType//filterValue//page/1/sort//order/

For the Abstracter Licensing the new  e-license link is: https://mn.gov/elicense/a-z/#/list/appId/0/filterType/Subject/filterValue/Abstracters/page/1/sort//order/

CFPB Fines Mortgage Lender, Real Estate Brokers and Servicer

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

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:

  • Paid for referrals through agreements: Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.
  • Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify with Prospect: One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.
  • Split fees with a mortgage servicer to obtain consumer referrals: Prospect and Planet Home Lending had an agreement under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Prospect compensated Planet for the referrals by splitting the proceeds of the sale of such loans evenly with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet.

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

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

Planet Home Lending

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:

  • Accepted fees from Prospect for referring consumers seeking to refinance:Under their arrangement, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
  • Unlawfully used “trigger leads” to market to Prospect to consumers: Planet ordered “trigger leads” from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. This was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers.

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

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

 

Info On Home Closing

Home Closing 101: An Educational Initiative of the American Land Title Association