CFPB FINAL RULES – Implementation Plan for New Mortgage Rules
The Consumer Financial Protection Bureau (CFPB) announced on 2/13/2013 a plan that focuses on supporting the mortgage industry, and their ability to comply with new consumer protections that go into effect in January 2014. In an effort to support rule implementation and ensure industry is ready for the new borrower protections, the CFPB will:
- Coordinate with Other Agencies: The CFPB is coordinating with other federal government regulators that also conduct examinations of mortgage companies to ensure all regulators have a shared understanding of the CFPB’s new rules. This will help promote a consistent regulatory experience for industry.
- Publish Plain-language Guides: The CFPB will publish easy-to-understand summaries of the regulations in both written and video form. The guides, available in the spring, will be particularly helpful to smaller businesses with limited staff for compliance.
- Publish Updates to the Official Interpretations: Over the next year, the CFPB plans to issue updates of the “official interpretations,” which provide guidance on how to comply with the rules. These updates will allow the CFPB to address important questions raised by industry or consumer groups, or other agencies. Priority for these updates will be given to issues that are important to a large number of providers or consumers, those which critically affect mortgage companies’ implementation decisions. The Bureau expects to issue the first one in the spring and issue additional updates, as needed.
- Publish Readiness Guides: These guides, available this summer, will help mortgage originators and servicers prepare to comply with the new rules by giving them helpful check-lists, such as suggesting that implementation plans include items like revising policies and procedures and finalizing training plans for staff. More in-depth examination procedures are expected to be published later this year by the Federal Financial Institutions Examination Council. Industry members will be able to use these examination procedures to conduct self-assessments and internal reviews of their readiness and compliance.
- Educate Consumers: As the January 2014 date approaches, the CFPB will give consumers information about their new protections under these rules through a broad-reaching consumer education campaign.
President Obama Issues Executive Order on Cybersecurity
President Obama issued an Executive Order (EO) titled “Improving Critical Infrastructure Cybersecurity,” and a related Presidential Policy Directive (PPD) on 2/12/13. The EO creates a process to facilitate sharing of cybersecurity information among private firms in critical infrastructure sectors and the federal government, and tasks the National Institute of Standards and Technology (NIST) with developing standards, methodologies, procedures, and processes that will form a voluntary best practices framework to address cyber risks. The financial services sector has been identified as a critical sector, and the EO and PPD name the Treasury Department as the federal entity responsible for providing institutional knowledge and specialized expertise as well as leading, facilitating or supporting the security and resilience programs and associated activities for critical financial services firms. On February 13, NIST initiated the process to develop the best practices framework by announcing a request for information from critical infrastructure owners and operators, other
members of industry, consumers, solution providers and other stakeholders. NIST is required by the EO to prepare a preliminary framework by October 10, 2013, and a final framework by February 12, 2014.
FINAL RULE: HUD Releases Disparate Impact Rule
The Department of Housing and Urban Development (HUD) has released the long-anticipated final rule regarding disparate impact under the Fair Housing Act. Through this final rule, HUD memorializes its long-held recognition of discriminatory effects liability under the Act. For purposes of providing a uniform national standard, HUD formalizes the burden-shifting test for determining whether a particular practice has an unjustified discriminatory effect, ultimately leading to liability under the Act. This final rule also amends the current illustrations of discriminatory housing practices found in HUD’s Fair Housing Act regulations prior to this final rule. This final rule is in response to the proposed rule from November 16, 2011.This final rule will be effective 30 days following publication in the Federal Register.
PROPOSED RULE: Streamlining Inspection and Warranty Requirements for Federal Housing Administration (FHA) Single-Family Mortgage Insurance: Removal of the FHA Inspector Roster and of the Ten-Year Protection Plan Requirements for High Loan-to-Value Ratio Mortgages.
This proposed rule (Docket No. FR–5457–P–01) is intended to streamline the inspection and home warranty requirements for FHA single family mortgage insurance. First, HUD proposes to remove the regulations for the FHA Inspector Roster. Second, this proposed rule would also remove the regulations requiring 10-year protection plans in order to qualify for high loan-to-value (LTV), FHA-insured mortgages as a condition of closing for newly constructed single-family homes. The Housing and Economic Recovery Act of 2008 (HERA) removed the statutory requirement for a warranty plan and other special requirements for high LTV mortgages. HUD, however, is retaining the requirement that the Warranty of Completion of Construction (form HUD–92544) be executed by the builder and the buyer of a new construction home, as a condition for FHA mortgage insurance. The comment due date is April 8, 2013.
NCUA Names New Ombudsman, Elevates Position
On 2/12/13, the NCUA announced that Joy Lee assumed the duties of Ombudsman, effective immediately. The NCUA also detailed that the Ombudsman will now be supervised by the Executive Director’s office and report directly to the Board. Prior to this position, Ms. Lee served as Senior Federal Financial Institutions Examination Council Advisor to the NCUA Chairman, and before that served in several senior staff positions at NCUA since joining the agency as an examiner in 1987.
MORTGAGEE LETTER 2013-01 – HECM – Consolidation of Pricing Options and Principal Limit Factors for Fixed Interest Rate Mortgages
For all fixed interest rate case numbers assigned on or after April 1, 2013, the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) Saver (including the Saver principal limit factors) will be the only fixed rate product with an initial mortgage insurance premium (MIP) option available. The HECM Saver, initial MIP, which is collected at the time of closing, will remain at 0.01 percent (0.01% or 0.0001) of the maximum claim amount. The annual MIP will remain at an amount of 1.25 percent (1.25%) of the outstanding loan balance. PLEASE NOTE: Mortgagors may still use the HECM Standard initial MIP option, but only with adjustable interest rate mortgages.
Selling Guide Announcement SEL-2013-02: Lender Incentives for Borrowers and
Private Flood Insurance Policies
Pay Down of Existing Mortgage Balance for Eligible Refinance Transactions: Lenders may provide an incentive to the borrower in the form of a payment to pay off a portion of the mortgage loan being refinanced provided that
- the amount of the incentive does not exceed $2,000;
- no repayment is required, and;
- the payment is reflected on the HUD-1 Settlement Statement as a lender credit.
Cash or Cash-like Incentives for All Transaction Types: The lender may provide the borrower with a cash or cash-like (e.g., a gift card) incentive that is not reflected on the HUD-1 Settlement Statement provided that 1) the amount of the incentive does not exceed $500, and 2) no repayment is required. Effective Date: Lenders may implement these new policies immediately. Lenders that have their own similar incentive policies currently in place may deliver loans with lender incentives that exceed the limits in this Announcement if the applications are dated before May 1, 2013.
Private Flood Insurance Policies: The Biggert-Waters Flood Insurance Reform Act of 2012 not only extended the National Flood Insurance Program’s (NFIP) authority through September 30, 2017, but also requires that Fannie Mae accept flood insurance from private providers as an alternative to NFIP policies. The terms and amount of coverage provided under a private policy must be at least equal to that provided under an NFIP policy and the private insurer must meet Fannie Mae’s rating requirements for insurance underwriters (described in B7-3-01, Hazard Insurance Policy Requirements). Fannie Mae will accept deliveries of mortgage loans with acceptable private flood insurance coverage effective immediately.
Virginia BFI Adopts New Rules
The Virginia Bureau of Financial Institutions has adopted rules (amending 10 VAC 5-160), effective 1/28/13, clarifying the definition of Licensee, specifically providing an exemption of loan processor or underwriter as not being a mortgage broker subject to licensure. The rule also, among other changes, broadens the definition of refinancing to now include loan modifications.