Acting Director Mulvaney Calls for Evidence and Public Comment on CFPB Functions
Seeks Public Input on Ways to Better Fulfill Statutory Obligations
JAN 17, 2018
WASHINGTON, D.C. — The Consumer Financial Protection Bureau today announced that it is issuing a call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers. In coming weeks, the Bureau will be publishing in the Federal Register a series of Requests for Information (RFIs) seeking comment on enforcement, supervision, rulemaking, market monitoring, and education activities. These RFIs will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.
“In this New Year, and under new leadership, it is natural for the Bureau to critically examine its policies and practices to ensure they align with the Bureau’s statutory mandate. Moving forward, the Bureau will consistently seek out constructive feedback and welcome ideas for improvement,” said Bureau Acting Director Mick Mulvaney. “Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process. I look forward to receiving public comments in response to this call for evidence and encourage all interested parties to participate.”
The first RFI issued by the Bureau will seek public comment on Civil Investigative Demands (CIDs), which are issued during an enforcement investigation. Comments received in response to this RFI will help the Bureau evaluate existing CID processes and procedures, and to determine whether any changes are warranted.
National Association of Realtors on the Tax Cuts and Jobs Act – What it means for Americans
Tax Reform Bill December 2017
The National Association of REALTORS® (NAR) worked throughout the tax reform process to preserve the existing tax benefits of homeownership and real estate investment, as well as to ensure real estate professionals would benefit from proposed tax cuts. Many of the changes reflected in the final bill were the result of the engagement of NAR and its members.
The report states that the results were mixed. The exclusion for capital gains on the sale of a home, and mortgage interest rate deductions on homes and second homes was saved, but incentives pertaining to real estate for individuals was overall altered negatively. Significant incentives for large investors were included, helping their tax situation.
The article includes these categories and can be viewed here NAR Tax Cuts and Jobs Act
Introduction
Major Provisions Affecting Current and Prospective Homeowners
Major Provisions Affecting Commercial Real Estate
Major Provisions Affecting Real Estate Professionals
Appendix 1 – Examples of How the Deduction for Qualified Business Income May Affect Various Real Estate Professionals
Appendix 2 – Examples of How The New Law Will Affect the Tax Incentives of Owning a Home
HUD REACHES SETTLEMENT AGREEMENTS COMPANIES RE: VIOLATING FAIR HOUSING ACT
HUD Press Release
Thursday January 26, 2017
WASHINGTON – The U.S. Department of Housing and Urban Development announced agreements with two insurance companies in Ohio and Florida settling allegations the companies violated the Fair Housing Act by denying insurance coverage to properties that contain “subsidized housing” and “low-income housing.”
- Read the conciliation agreement with McGowan and Company, based in Fairview Park, Ohio.
- Read the conciliation agreement with Mack, Mack & Waltz Insurance Group based in Deerfield Beach, Florida.
The Fair Housing Act makes it unlawful for providers of housing-related services or products, including insurance providers, to discriminate because of race, color, religion, sex, national origin, disability, and familial status.
The agreements stemmed from a Secretary-Initiated complaint HUD filed after receiving reports the insurance companies’ policies and practices had a discriminatory effect because of race and national origin. Specifically, HUD’s complaint alleged that the companies refused to provide umbrella coverage, which provides additional liability coverage when an insured’s other primary policy limits have been reached, to properties containing subsidized or low-income housing.
Under the agreements, McGowan and Company will remove “subsidized” and “low-income” from its list of prohibited properties, spend $100,000 to affirmatively market its services and products to the affordable and low-income housing markets and provide fair housing training for management and staff that review and/or approve applications for insurance. Mack & Waltz will spend $10,000 to affirmatively promote its services in affordable and low-income housing markets, and provide fair housing training for its management and staff.
People who believe they have experienced discrimination may file a complaint by contacting HUD’s Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY). Housing discrimination complaints may also be filed by going to www.hud.gov/fairhousing, or by downloading HUD’s free housing discrimination mobile application, which can be accessed through Apple and Android devices.
FEMA Flood Maps Can be Appealed to Lower Flood Insurance Costs
Harrisburg, PA – Insurance Commissioner Teresa Miller today issued a consumer alert telling homeowners about a process by which they can appeal their property’s placement in a flood zone by the federal government, which in many cases requires them to purchase flood insurance.
“The Federal Emergency Management Agency (FEMA) recently re-mapped most of the country using 100-year flood projections, resulting in many homes being designated in flood zones which were never there before, despite many of these homes never or rarely having experienced flooding,” Commissioner Miller said. “If the mortgage on a home is backed by the federal government, which many are, then the homeowner must buy flood insurance.”
To appeal a home’s placement in what is officially called a Special Flood Hazard Area, the homeowner must show the lowest adjacent grade, or the lowest ground touching the structure, is at or above what is called the Base Flood Elevation. The Base Flood Elevation is the computed elevation to which flood water is anticipated to rise during the base flood used in determining the land is in a Special Flood Hazard Area.
Commissioner Miller noted that it is the homeowner’s responsibility to provide this information in a letter to FEMA. For this type of appeal, called a Letter of Map Amendment, there is no charge to the consumer.
Homeowners can get more information on how to appeal a flood zone designation, get a flood map, and find answers to other questions, by going to https://www.fema.gov/information-homeowners. Homeowners can also call 1-877-FEMA-MAP (1-877-336-2627) to get information on appealing a flood zone designation.
As NFIP premiums have risen and more homes have been re-mapped into flood zones, more private insurers have started entering the flood insurance market. However, private companies may not cover higher risk properties, leaving the NFIP as the only option for some homeowners. Homeowners who now have NFIP insurance with a subsidy, and switch to a private policy, will likely not be eligible for any subsidy if they later go back to the NFIP. Currently, only those homes insured through the NFIP are eligible for federal grants to help cover the cost of flood mitigation work, such as raising a home to lessen the chances of flooding in the future.
“In many cases, we have found comparable private flood coverage is much less expensive than the NFIP product,” said Commissioner Miller. “I encourage consumers who need or want flood insurance to shop and find the best coverage for them at the best price.”
Get Your Closing Paperwork Right with the New TRID
Remember, all loan applications taken through July 31, 2015 fall under the existing HUD regulations using the existing HUD-1 and Truth in Lending Rules, regardless of the closing date.
Loan applications taken as of August 1st will require the TRID change. In the real world, that means we will be alternating between BOTH TRID and the OLD HUD-1/RESPA/TIL forms well into August, September and October.
Good article from Locke, Lord, LLP about the CFPB’s “Sensitivity” to issues faced with TRID – the new Truth in Lending and Respa form changes that start with loan applications taken August 1st.
Can You Prove the Dates Required Under TRID?
Excellent article for title companies, and especially smaller title agencies by Aaron Prenger of Spencer, Fane, Britt and Browne, called” Snail Mail: a Whale of a fail…” pointing out the importance of title copanies and lenders proving the dates documents were sent out and received.
” With the upcoming regulatory changes going into effect on August 1st, it is more important than ever for mortgage lenders and title companies to have an electronic disclosure system…”
” Practically speaking, this means lenders and title companies that do not use electronic disclosures will not be able to begin collecting required documentation until four days after taking an application by phone or online. Likewise, such lenders will need to have their closing packages prepared at least seven days prior to closing.
Read the whole article here: “Snail mail: a whale of a fail that will make your borrowers bail, your lenders flail, and leave you on the rail”
Legal Issues Affecting Real Estate and Mortgage Title Closings
Excellent article by Alston and Bird (AlstonFinance.com)
Non-Agency Residential Mortgage Loans in 2014: A Survey of Legal Issues Affecting the Market. (Read entire article)
It covers in a solid overview of :
- Qualified Mortgages
- QRM and Risk Retention
- Due Diligence Rule
- Developments in Mortgage Servicing and ECOA
- Mortgage Servicing Transfers
- Proposed Changes in Mortgage Servicing and Safe Harbor Protection
“Conclusion
As can be seen, 2014 was a watershed year in the history of residential mortgage finance. More regulations were passed than would be ordinarily expected in a full decade. A lot remains to be digested, and some areas of regulation are still unresolved, but overall the biggest surprise was that all of these regulations had a surprisingly small impact on the RMBS market. Origination standards had tightenedso much after the financial crisis that the changes from QMs had very little impact. QRMs did not have a loan-to-valueratio requirement and was virtually the same as QMs, so the impact on the market was negligible. Regulation AB IIhas resulted in no real change in the RMBS market, which was completely private anyway. There were a number ofchanges in mortgage servicing, and the mergers and acquisitions market was surprisingly active.”
CFPB Finalizes TIL-RESPA Changes
Good Blog article by Buckley Sandler LLP that briefly outlines TIL-RESPA Changes
On January 20, 2015, the CFPB finalized amendments to the TILA-RESPA Integrated Disclosure (“TRID”) rule that make a number of amendments, clarifications, and corrections, including:
- Relaxing the redisclosure requirements after a rate lock. The final rule permits creditors to provide a revised Loan Estimate within three business days after an interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked (and instead of the proposed rule that would have allowed only one business day)
- Creating room on the Loan Estimate for the disclosure that must be provided on the initial Loan Estimate as a condition of issuing a revised estimate for construction loans where the creditor reasonably expects settlement to occur more than 60 days after the initial estimate is provided
- Adding the Loan Estimate and Closing Disclosure to the list of loan documents that must disclose the name and NMLSR ID number of the loan originator organization and individual loan originator under 12 C.F.R. § 1026.36(g)
- Providing additional guidance related to the disclosure of escrow accounts, such as when an escrow account is established but escrow payments are not required with a particular periodic payment or range of payments
- Clarifying that, consistent with the requirement for the Loan Estimate, the addresses for all properties securing the loan must be provided on the Closing Disclosure, although an addendum may be used for this purpose
CFPB Lays Compliance on Banks for Service Providers
The CFPB has issued a statement that it expects supervised banks and others to oversee their relationship with service providers to assure compliance with Federal Consumer Financial Law.
For settlement agents, closers, abstractors and title insurers, this means there will be significantly more paperwork ahead for us. I would imagine that we will be required to sign affidavits that we comply with a host of federal laws including state and federal laws pertaining to legal requirements of RESPA, TIL, FHLMC requirements, FIRREA, FIRPTA, Federal Consumer financial laws and dozens of others. Additionally you may expect audits, education and new contracts and be sure your licensing is up to date.
To quote part of the statement:
The CFPB expects supervised banks and nonbanks to have an effective process for managing the risks of service provider relationships.
The report lists a minimum of five specific steps that a lender should take in overseeing its service providers:
- Conduct due diligence
- Review service provider policies, procedures and controls
- Contract with the service provider clear expectations on compliance and consequences for non-compliance
- Ongoing monitoring to assure compliance
- Addressing problems and terminating relationships where appropriate
While this may ultimately be good for consumers, it will make the daily work of small businesses more difficult. See the CFPB full statement here.
More Government Oversight for Third Party Mortgage Vendors – That’s Us, Folks
Bryan Cave has a great article on new regulations on the horizon for title and closing companies and those who handle mortgage funds. The oversight is starting to strangle. I’m not sure how a small “Mom and Pop” type title agency or closing company be expected to keep up with all the regulations and oversight? Soon every transaction will take a group of internal auditors (tough in a small company) to triple check the file and fill out performance standards and performance contracts.
The Consumer Financial Protection Bureau issued a Bulletin about third party vendors in April 2012 and many others Government Agencies have followed. In is becoming quite obvious that the bar has been raised on how banks are expected to relate to their third party processors, program managers and other service providers. And it is increasingly plain that we are seeing a significant change in how regulators approach the relationships between banks and their third party vendors. Examiners are digging deeper – – especially into the content of bank contracts – and the scope of review is extending to more and more vendors.
The CFPB Bulletin states that the CFPB
“expects supervised banks and nonbanks to oversee their business relationships with service providers in a manner that ensures compliance with Federal consumer financial law”(emphasis added).
While the CFPB focuses on consumer products and services and the OCC and FRB approach vendor risk management more broadly, the Bulletins issued by all three regulators show some similar regulatory expectations, including:
- Thorough due diligence of the service provider, which the OCC notes could call for on-site visits depending on the risks of the relationship;
- Clear contractual expectations for the service provider, including enforceable consequences for violating contractual requirements (see more below); and
- Establishment and maintenance of internal controls and on-going monitoring of the service provider.
So be prepared, in addition to a new HUD-1, new TIL and other forms, there are many more rules and regs on the horizon.
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