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
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 “TRID Rule” is short for the TILA-RESPA Integrated Disclosure where the Consumer Financial Protection Bureau (CFPB) consolidated the number of required disclosure forms from four to two. Under the original Truth in Lending Act (TIL) and Real Estate Procedure Act (RESPA), consumers received four different disclosure forms that were federally required and had overlapping information. The multiple forms led to more confusion for consumers and missed the mark of making the information more understandable. These two new mandatory disclosure forms – the Loan Estimate and Closing Disclosure – are required on most residential mortgages. Their goal is to reduce paperwork and eliminate confusion for the consumer
The LE The Loan Estimate form replaces the Good Faith Estimate and initial Truth-in Lending form and is intended to guide consumers by highlighting important information. The first page of the form shows the interest rate, monthly payment, and total closing costs, allowing for an easy comparison of mortgage loans, so consumers can select the best loan for their situation.
The CD The Closing Disclosure form replaces the HUD 1 Settlement Statement and the final Truth-in Lending form on many loans. It does not apply to loans such as HELOCS or CASH sales. The CD outlines the costs of taxes and insurance, information about changes that can occur to the interest rate and payments, and includes warnings to consumers about prepayment penalties and other important items. This information can effectively be used to assist potential home buyers in deciding how much they can afford to spend on a new home and what loan fits them best.
Thoughts – What do you think, are your customers saying they have used it successfully, or are they still relying on “professionals” to help them get the right loan? Certainly, the intent is good, but until we can get the hundred plus pages of loan documentation to a manageable level, I’m not convinced that it will be used by most borrowers. The typical loan process is still too complicated for the typical consumer to wrap their heads around.
Clarifying comments from Richard Cordray of the CFPB on Closing Liability where Closing Agents have agreed to share in responsibility for TRID.
RESPA NEWS:
“The Know Before You Owe mortgage disclosure rule (TRID) places responsibility for the accuracy and delivery of the integrated disclosures on the creditor,” Cordray wrote. “But, as discussed in the preamble … creditors and settlement agents are free, as they have always been, to decide how to divide responsibility and risk most efficiently and to implement those mutual decisions via contract.
“While creditors may enter into indemnification agreements and other risk-sharing arrangements with third parties, creditors cannot unilaterally shift their liability to third parties and, under the Truth in Lending Act, alone remain liable for errors on the Know Before You Owe mortgage disclosures,” Cordray continued.
ALTA released the following statement in response to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray’s announcement of a proposed amendment to delay the effective date of the TILA-RESPA Integrated Disclosure (TRID) regulation to October:
http://www.alta.org/news/news.cfm?newsID=28275
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”
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press release 3/8/2015 |
The American Land Title Association (ALTA), the national trade association of the land title insurance industry, released the following statement in response to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray’s testimony before the House of Representatives Financial Services Committee:
“In 150 days, new disclosure forms for real estate transactions will completely change the homebuying process as it’s known today,” said Michelle Korsmo, ALTA’s chief executive officer. “As our member companies work to implement these new forms on Aug. 1, we strongly urge Director Cordray to announce a five-month restrained enforcement period so that new business processes can be adjusted to comply with these regulations. As with previous regulatory reform, only when the new forms are in practice will many issues and defects be discovered. A restrained enforcement period helps our members, and the broader real estate industry, make the changes needed to their business processes and collaborate with industry and regulators to ensure the consumer has a positive experience at the closing table.”
“Unfortunately, we’re already aware of one major problem with the new CFPB forms,” Korsmo stated. “The Bureau’s Closing Disclosure, which replaces the current HUD-1 Settlement Statement, inaccurately discloses the fees associated with title insurance premiums for consumers. State law and regulation in half of the United States dictates that consumers must pay title insurance rates that are different than how the CFPB requires industry to inaccurately disclose these fees to the consumer.”
“Every homebuyer should be well-informed about the accurate costs of homeownership—including what they pay for each service during the real estate closing process. For many consumers, buying a home is the single largest investment they will make in their lifetime. It’s critical that Director Cordray and the CFPB staff adjust the disclosure forms prior to Aug. 1 to ensure consumers receive accurate information about their mortgage costs. ALTA and our member companies stand ready to help the Bureau ensure consumers are neither confused nor misled at the closing table.”
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About ALTA
The American Land Title Association, founded in 1907, is the national trade association representing more than 5,400 title insurance companies, title and settlement agents, independent abstracters, title searchers and real estate attorneys. With offices throughout the United States, ALTA members conduct title searches, examinations, closings, and issue title insurance that protects real property owners and mortgage lenders against losses from defects in titles.
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.”
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
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