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.
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.
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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.
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.
Topics:
Join the conversation. Follow CFPB on Twitter and Facebook .
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
Minnesota Considers New Ag Tax Credit for Farmers
Author Comment: In spite of Green Acre taxes, Minnesota Farmers face heavy real estate taxes on farmland, causing them to vote against independent school district referendums. So look for a new tax search to follow along with deferred Green Acre and Open Space Taxes. Lt. Gov. Tina Smith is working to help resolve this.
Daily Globe | January 20, 2017
Smith called the current situation a perfect storm. Farmers are suffering from low commodity prices, high land values and, for many, crushing health care costs. The prospect of their property taxes increasing by hundreds or thousands of dollars sent many to the polls in November to vote down building bond referendums like the one for ISD 518.
“The farm economy has been struggling for the past few years. Rising property tax bills are not what’s needed across the state,” said Minnesota Agriculture Commissioner David Frederickson. Noting that property taxes have increased by 114 percent for Minnesota farmers in the past decade, Frederickson said a majority of levy referendums in rural Minnesota failed in 2016, while the majority of levy referendums posed to city dwellers passed.
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Mortgage Bankers Assoc. Cuts 2017 Forecast
MBA Cuts 2017 Q1 Origination Forecast
MBA Forecast
Following the Federal Reserve’s decision to raise rates a quarter point, the Mortgage Bankers Association (MBA) lowered its origination forecast for the first quarter of 2017.
“We have adjusted the path of interest rates upwards a bit more quickly in 2017 reflecting the fact that the recent rate increase following the election has been sustained,” the MBA reported.
The total volume of one- to four-family mortgage loan originations is expected to reach $352 billion in the first quarter, according to the MBA’s December Mortgage Finance Forecast. This is down from the $365 billion in first-quarter volume the MBA had predicted in November. The lower forecast remains higher than the $350 billion in origination volume recorded in the first quarter of 2016.
The biggest drop off will be experienced in the refinance channel as rates have moved higher, forcing a more rapid decrease in an already slow refinance market. The MBA reported that refinance volume is now expected to reach $140 billion in the first quarter, down from the November forecast of $145 billion. The MBA also projected that purchase origination volume will total $212 billion, down from its prediction of $220 billion last month.
“We still forecast $1.10 trillion in purchase mortgage originations during 2017, an 11 percent increase from 2016,” the MBA reported. “Strong household formation coupled with further job growth, rising wages, and continuing home price appreciation will drive growth in purchase originations in the coming years.”
California Man Gets Two Years in Title Theft Scheme
press release
11/20/2016
Daniel Deaibes was sentenced recently to 24 months for his role in a scheme to steal title to Southern California homes and then “sell” the properties to unsuspecting buyers – before the buyers realized who the true owners were.
From September 2012 through their arrest in November 2014, Deaibes and his co-conspirators, including co-defendants Mazen Alzoubi and Mohamed Daoud, fraudulently sold or attempted to sell at least 15 homes worth more than $3.6 million that actually never belonged to them. On at least 10 occasions, they were successful—earning illicit proceeds of nearly $2.2 million.
Deaibes pleaded guilty in March 2015 to participating in the fraud and was sentenced today by U.S. District Judge Cynthia Bashant. As part of this plea, Deaibes admitted that he used aliases to deceive escrow and title officers into believing that he was “John Moran,” and that he was the true owner of property that was being marketed for sale. In fact, “John Moran” did not exist, and Deaibes and his co-conspirators planned to fraudulently sell the properties, divert the proceeds to their own bank accounts, and then quickly disburse the money overseas. On at least three occasions, Deaibes, posing as “Moran” and presenting a fake driver’s license, appeared before notaries to sign title documents and property deeds.
To make it appear that they owned these properties, the co-conspirators generated forged deeds that made it appear the true property owner had sold his or her home to a sham real estate “investment” business the co-conspirators controlled. They forged the true owners’ signatures on the deeds, and used forged notary stamps to make them appear legitimate. In reality, though, the true owners were entirely unaware of the pretend sales. Once the fraudulent documents were recorded in the chain of title, Alzoubi (using aliases and stolen identities) listed the properties for sale, posing to buyers, escrow companies, and title officers as the new owner. In this way, the co-conspirators collected all the proceeds of the sale, and the true owners were left with nothing.
Alzoubi, the ringleader of the fraudulent scheme, assumed multiple fake identities to keep the scheme going. He also posed as real people, pretending on one occasion that he was an attorney for one of the true owners. (Unbeknownst to Alzoubi at the time, he was talking to an undercover federal agent.) As a result of his greater role in the scheme, Alzoubi was charged with, and in January 2016 pleaded guilty to, aggravated identity theft, which carries a mandatory sentence of two years in prison in addition to his sentence for the fraud and money laundering. His sentencing is scheduled for November 7, 2016, at 9:00 am, before Judge Bashant.
Mohamed Daoud also pleaded guilty, in July 2015, admitting that he helped Alzoubi launder the proceeds of the scheme. They used Daoud’s company, “Norway LLC,” to pretend to acquire title to some of the properties. Daoud received approximately $270,000 in proceeds. In December 2015, before he was sentenced, Daoud fled the country and is now a fugitive.
Most of the properties the co-conspirators “sold” were post-foreclosure properties owned by banks or institutions such as Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are governmentsponsored enterprises with a mission to provide liquidity, stability, and affordability to the United States housing and mortgage markets. As part of this mission, Fannie Mae and Freddie Mac purchase residential mortgages in the secondary market, enabling lenders to replenish their funds to finance additional single family loans. Fannie Mae and Freddie Mac can become the property owners if they own the mortgage loan at the time a home is foreclosed.
“Schemes like this one undermine the public’s confidence in their most personal and important investment, their homes,” said U.S. Attorney Laura Duffy. “I am committed to prosecuting people who continue to prey on the victims of the devastating mortgage meltdown, and sending those criminals to prison.”
“This scheme was designed to literally rip home ownership right out of the hands of innocent victims, and for those victims the costs were far greater than a title to a house,” said Leslie P. DeMarco, Special Agent in Charge, Western Region. “This scheme is callous and the perpetrators deserve the punishment set out for them. FHFA-OIG remains committed to our relentless pursuit of individuals who try to profit from the aftermath of the housing crisis.” “
Fraud targeting a family’s home, the heart of a family’s financial investment, has a ripple effect through our nation’s economy,” said FBI Special Agent in Charge Eric S. Birnbaum. “The FBI is committed to investigate and uncover schemes by those who defraud homeowners.”
In addition to his jail sentence, Deaibes was ordered to pay $1,819,591 in restitution to the victims of the fraud.
I’m Proud to Be An American
It’s been a tough election. Regardless of your political persuasion, half of the US population is now in turmoil over the election results. Remember, we are a strong nation and our peaceful transition with new leadership is a testament to who we are. Let us be open-minded and look for the good. Let us accept the outcome and work together for the public good to keep this “one nation, indivisible, with liberty and justice for all.” We owe it to ourselves, our founding fathers, our fellow Americans, our posterity, and our role in the world as a good leader. As a reminder of who we are here’s a great short video by Lee Greenwood.
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