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1. Regulatory Update – Loans Sam Teague Teague Consulting Group.

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Presentation on theme: "1. Regulatory Update – Loans Sam Teague Teague Consulting Group."— Presentation transcript:

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2 Regulatory Update – Loans Sam Teague Teague Consulting Group

3 Overview Dodd-Frank Act – Provisions To Be Implemented Regulation Z – Mortgage Servicing Regulation X – Mortgage Servicing IRS Issues

4 Dodd-Frank Act Provisions To Be Implemented

5 Dodd-Frank Act – Future Section 1032 – TILA/RESPA Disclosures 7/9/12 – Proposed Rule On CFPB Website 8/23/12 – Proposed Rule In Federal Register 11/6/12 – Comments Due 1/8/13 – CFPB Semi-Annual Agenda – Final rule expected in September 2013

6 Dodd-Frank Act – Future Section 1094 – HMDA Data Collection New Data Elements To Be Reported – Age of applicants – Total points and fees – Length of prepayment period – Value of property securing the loan – Length of introductory rate period – Others

7 Dodd-Frank Act – Future Section 1094 – HMDA Data Collection Effective Date – The first January 1 after the end of the 9-month period following the issuance of final regulations. – If final regs are published on 12/31/13, the effective date could be no earlier than 1/1/15 (12/31/ months = 9/30/14; the first January 1 after that would be 1/1/15). August 2013 – Further Action Expected

8 Regulation Z Mortgage Servicing

9 Reg. Z – Mortgage Servicing Significant Dates 8/10/12 – Proposed Rule On CFPB Website – 9/17/12 – Proposed Rule In Federal Register 10/9/12 – Comments Due 1/17/13 – Final Rule Posted On CFPB Website – 2/14/13 – Final Rule Published In Federal Register 1/10/14 – Effective Date

10 Reg. Z – Mortgage Servicing Initial Rate Adjustments [§ (d)] Scope – Applies to all ARMs – not just hybrid ARMs Closed-end loan secured by principal dwelling – Excludes ARMs with terms < 1 year Notice Requirement – Special notice with first rate change – Must be in writing – Must be separate document (but may be included in same envelope with other material)

11 Reg. Z – Mortgage Servicing Initial Rate Adjustments [§ (d)] Timing – days before the first payment at the adjusted level is due – At consummation if the first payment at the adjusted level is due within first 210 days Estimates – May disclose an estimate if new interest rate and payment are not known

12 Reg. Z – Mortgage Servicing Initial Rate Adjustments [§ (d)] Notice Content – Date – Statement (explanation, effective date, other changes) – Rate & Payment Information (rates, payments, date) – Rate Determination (index, margin) – Rate & Payment Change Limits – Payment Determination – Interest-Only Loans – Negatively Amortizing Loans

13 Reg. Z – Mortgage Servicing Initial Rate Adjustments [§ (d)] Notice Content (cont.) – Prepayment Penalty – Lender Contact Information – Alternatives – Other Contact Information Homeownership Counselors State Housing Finance Authority Model Forms H-4(D)(3) & H-4(D)(4)

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15 Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§ (c)] Scope – Applies to all ARMs Closed-end loan secured by principal dwelling – Excludes ARMs with terms < 1 year Notice Requirement – Notice with a rate change that results in a payment change – No notice if rate changes but payment does not

16 Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§ (c)] Timing – days before the first new payment is due – Old rule ( days) still applies to: ARMs with adjustments every 60 days or more often ARMs originated prior to 1/10/15 that require a look-back period of less than 45 days – Early 1 st Adjustment 1 st adjustment occurs within 60 days of consummation Initial notice was based on an estimate Provide not less than 25 days before first new payment is due

17 Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§ (c)] Notice Content – Statement (explanation, effective date, other changes) – Rate & Payment Information (rates, payments, date) – Rate Determination (index, margin) – Rate & Payment Change Limits – Payment Determination

18 Reg. Z – Mortgage Servicing Subsequent Rate Adjustments [§ (c)] Notice Content (cont.) – Interest Only Loans – Negatively Amortizing Loans – Alternatives – Prepayment Penalty Model Forms H-4(D)(1) & H-4(D)(2)

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20 Reg. Z – Mortgage Servicing Payment Processing [§ (c)(1)] Periodic Payments [§ (c)(1)(i)] – Old Rule: must credit a payment as of the date of receipt – New Rule: must credit a periodic payment (PP) as of the date of receipt – PP: an amount sufficient to cover principal, interest, and escrow for a given billing cycle (does not include late fees, other fees, or non-escrow payments a servicer advanced on the borrower’s behalf)

21 Reg. Z – Mortgage Servicing Payment Processing [§ (c)(1)] Partial Payments [§ (c)(1)(ii)] – Unapplied Funds: must disclose on periodic statement – Subsequent Application: must apply when sufficient funds accumulate to cover a “periodic payment”

22 Reg. Z – Mortgage Servicing Payoff Statements [§ (c)(3)] Old Rule: provide within a reasonable time after receiving a borrower’s request (Commentary said 5 business days) New Rule: provide within 7 business days after receiving a borrower’s written request May provide within a reasonable time in situations where 7 days is not feasible (bankruptcy, foreclosure, reverse mtg., natural disasters, etc.)

23 Reg. Z – Mortgage Servicing Periodic Statements [§ ] Scope – Closed-end loan secured by a dwelling – Provide a statement for each billing cycle May use “monthly” if billing cycle is shorter than 31 days (e.g., bi-weekly loans). Timing – Provide within a reasonably prompt time after payment due date or end of courtesy period for previous cycle (the Commentary says 4 days)

24 Reg. Z – Mortgage Servicing Periodic Statements [§ ] Form – Clear – Conspicuous – In writing – Form to keep – Sample forms – Appendix H-30

25 Reg. Z – Mortgage Servicing Periodic Statements [§ ] Content & Layout – Amount Due (due date, late fee, amount due) – Explanation Of Amount Due (pmt amt, fees, past due) – Past Payment Breakdown (current cycle, YTD) – Transaction Activity (date, description, amount) – Partial Payment Message (if applicable) – Contact Information (toll-free #, ) – Account Information (balance, rate, next rate chg date) – Delinquency Information

26 Reg. Z – Mortgage Servicing Periodic Statements [§ ] Exemptions – Reverse Mortgages – Timeshare Plans – Fixed-Rate Loans With A Coupon Book If certain requirements are met – Small Servicers 5,000 or fewer mortgages Only service loans they own or originated

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30 Regulation X Mortgage Servicing

31 Reg. X – Mortgage Servicing Significant Dates 8/10/12 – Proposed Rule On CFPB Website – 9/17/12 – Proposed Rule In Federal Register 10/9/12 – Comments Due 1/17/13 – Final Rule Posted On CFPB Website – 2/14/13 – Final Rule Published In Federal Register 1/10/14 – Effective Date

32 Reg. X – Mortgage Servicing Regulation X – Mortgage Servicing – Error Resolution Procedures – Information Requests – Force-Placed Insurance – General Servicing Policies, Procedures, & Requirements – Early Intervention Requirements – Continuity Of Contact – Loss Mitigation Procedures

33 IRS Issues

34 IRS Issues – Overview Information Reporting – Tax Year 2013 Form Changes – TIN Truncation Fiscal Cliff Legislation IRPAC Recommendations To IRS

35 Tax Year 2013 Form Changes (as of 4/21/13)

36 Changes Impacting All Forms Payer’s Name Box – Caption Expanded – 1099-INT caption now reads: PAYER’S name, street address, city or town, province or state, country, ZIP or foreign postal code, and telephone no. Recipient’s Name Box – Last Address Line Caption Expanded – 1099-INT last address line caption now reads: City or town, province or state, country, and ZIP or foreign postal code. Web Links – 1099-INT web link reads:

37 1099-C – Cancellation Of Debt No Changes To The Form Box 6 – Identifiable Event Code – 2012 If Code “A” (Bankruptcy) applied, it was required to be reported. If other codes applied, reporting was optional. – 2013 The code that applies must be reported. There is no more “optional” reporting.

38 1099-C – Cancellation Of Debt Box 6 – Identifiable Event Code – A—Bankruptcy – B—Other judicial debt relief – C—Statute of limitations or expiration of deficiency period – D—Foreclosure election – E—Debt relief from probate or similar proceeding – F—By agreement – G—Decision or policy to discontinue collection – H—Expiration of nonpayment testing period – I—Other actual discharge before identifiable event.

39 Forms With No Changes 1098…………….Mortgage Interest Statement 1098-E Student Loan Interest Statement 1098-T………...Tuition Statement 1099-A… Acquisition or Abandonment of Secured Property 1099-S… Proceeds From Real Estate Transactions

40 TIN Truncation (a/k/a TIN Masking)

41 TIN Truncation 10/16/08 – IRPAC Report To IRS – Recommends that filers be allowed to truncate (mask) taxpayer TINs on information returns. – Objective: To help prevent identity theft. 11/19/09 – IRS Notice – TIN truncation permitted on taxpayer copies (generally Copy “B”)

42 TIN Truncation Pilot Program – Tax years 2009 & Forms Covered – 1098 series (except 1098-C – Contributions of Motor Vehicles, Boats, & Airplanes) – 1099 series – 5498 series NOTE: Forms1042-S & Form W-2 are not included

43 TIN Truncation Media Covered – “Paper” payee statements (not “electronic” statements) TINs Covered – SSNs, ITINs, & ATINs (not EINs) Format – ***-**-6789OR – xxx-xx-6789

44 TIN Truncation 1/5/10 – IRS Clarifications – Scope – may truncate the TIN on all copies of the form that are furnished to the payee. – Disclosure – may include a note on the 2009 forms stating that the TIN has been truncated forms included this information already. 4/14/11 – IRS Notice – Pilot program extended for 2 more years (2011 & 2012)

45 TIN Truncation 1/7/13 – Proposed Rule Published In Federal Register – 2/21/13 – Comments Due – Pilot Program: would be made permanent. – Participation: would continue to be voluntary. – Scope: would be expanded to include forms that are delivered “electronically” – New Terminology: the truncated TIN would be referred to as a “TTIN” TTIN = Truncated Taxpayer Identification Number

46 Fiscal Cliff Legislation

47 American Taxpayer Relief Act of 2012 (H.R. 8) – 1/1/13 – Passed the House & Senate – 1/2/13 – Signed Into Law (P.L ) Signed by autopen while President on vacation in Hawaii – 1/3/13 – 1 st Day Of 113th Congress Tax Brackets – Added the 39.6% bracket for high-income individuals – Made permanent the other existing tax brackets (Bush-era tax cuts)

48 Tax Brackets Bracket #Old Tax BracketsNew Tax Brackets 110% 215% 325% 428% 533% 635% 739.6%

49 Backup Withholding Tax Rate Economic Growth & Tax Relief Reconciliation Act of 2001 – 6/7/01 – Signed Into Law (P.L ) – Changed The BWH Tax Rate – Old BWH Tax Rate: flat 31% – New BWH Tax Rate: tied to the 4 th lowest tax rate for single individuals Impact Of New Tax Bracket Added By “Fiscal Cliff” Legislation – BWH Tax Rate Remains At 28%

50 Backup Withholding Tax Rate Bracket #Old Tax BracketsNew Tax Brackets 110% 215% 325% 428% 533% 635% 739.6%

51 MIP Deduction Tax Relief & Health Care Act – 12/20/06 – Signed Into Law (P.L ) – New tax deduction for Mortgage Insurance Premiums (MIP) – 2007 only – Tax year 2007 only Mortgage Forgiveness Debt Relief Act – 12/20/07 – Signed Into Law (P.L ) – Extends the deduction for 3 years (2008, 2009, and 2010)

52 MIP Deduction Tax Relief, Unemployment Ins. Reauthorization & Job Creation Act – 12/17/10 – Signed Into Law (P.L ) – Extends the deduction for 1 year (2011) Fiscal Cliff Legislation – Extends the deduction for 2 years (2012 & 2013) – 2012 Form 1098 Reporting – last minute scramble

53 IRPAC Recommendations To IRS

54 IRPAC Recommendations To IRS Information Reporting Program Advisory Committee Form 1099 Corrections – IRS should adopt a $50 de minimis threshold – Net change less than +/- $50 would not require a corrected form – The theory is that this would have minimal to no impact on tax liability

55 THANK YOU Sam Teague Teague Consulting Group


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