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CFPB Update.

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Presentation on theme: "CFPB Update."— Presentation transcript:

1 CFPB Update

2 CFPB Update Looking Ahead
This presentation is for informational purposes only and is not and may not be construed as legal advice. North American is not a law firm and does not offer legal services of any kind. No third-party entity may rely upon anything contained herein when making legal and/or other determinations regarding title practices. You should consult with an attorney prior to embarking upon any specific course of action.

3 ABOUT THE CFPB

4 What Is the CFPB? Consumer Financial Protection Bureau
Independent bureau within Federal Reserve System Regulates offering and provision of consumer financial products or services under Federal consumer financial laws Created by Dodd-Frank Wall Street Reform and Consumer Protection Act1 1Dodd-Frank § 1011(a), 12 United States Code § 5491(a)

5 What Does the CFPB Regulate?
Credit Cards Mortgages Bank Accounts & Services Credit Reporting Money Transfers Debt Collection And More

6 2014 MORTGAGE RULES

7 The 2014 Mortgage Rules Issued: January 2014 (thereafter amended)
Effective: January 2014 (most provisions) Location: CFPB Website: Published in Federal Register Amend Code of Federal Regulations

8 The 2014 Mortgage Rules (cont.)
Ability to Repay and Qualified Mortgage Standards Under the TILA1 (Reg. Z) – Effective: 1/10/14; Issued: 1/10/13 (Amended: 5/29/13 & 7/10/13) High-Cost Mortgage and Homeownership Counseling Amendments to the TILA (Reg. Z) and Homeownership Counseling Amendments to the RESPA2 (Reg. X) – Effective: 1/10/14; Issued: 1/10/13 (Amended: 9/13/13 &10/15/13; Interpretive Rule & Summary: 11/8/13) Escrow Requirements under the TILA (Reg. Z) – Effective: 6/1/2014; Issued: 1/10/13 (Amended: 5/16/13, 7/10/13 & 9/13/13) 1Truth In Lending Act 2Real Estate Settlement Procedures Act

9 The 2014 Mortgage Rules 2014 RESPA (Reg. X) & TILA (Reg. Z) Mortgage
(cont.) 2014 RESPA (Reg. X) & TILA (Reg. Z) Mortgage Servicing Final Rules – Effective: 1/10/2014; Issued: 1/17/13 (Amended: 7/10/13, 9/13/13 & 10/15/13) Appraisals for Higher-Priced Mortgage Loans – Effective: 1/18/2014; Issued: 1/18/13 Disclosure and Delivery Requirement for Copies of Appraisals and Other Written Valuations Under Equal Credit Opportunity Act (Reg. B) – Effective: 1/18/14; Issued: 1/18/13 (Amended: 9/13/13) Loan Originator Compensation Requirements under TILA (Reg. Z) – Effective: § (h) – 6/1/13; Remainder 1/10/14; Issued: 1/20/13 (Amended 5/29/13 & 9/13/13)

10 The Impact Lender’s activities in 2014 Review the regulations
Upgrade systems Train employees Implement the regulations Comply

11 QM and QRM Rules The Dodd-Frank Act mandated that, for a residential mortgage, a creditor must make a reasonable and good faith determination based on verified and documented information that a consumer has a reasonable ability to repay an owner-occupied, residential mortgage loan according to its terms. The Ability To Repay Rule provided a series of factors to be considered when making a determination about a borrower’s ability to repay. It also provided a conclusive presumption, or safe harbor against litigation, for QM loans that are not higher-priced loans, and a rebuttable presumption of a borrower’s ability to repay QM loans that are higher-priced loans.

12 QM and QRM Rules Broadly defined, a QM loan has the following requirements: • no negative amortization • no interest-only payments • no balloon payments • no terms in excess of thirty years • verification and documentation of the borrower’s financial resources • points and fees must be less than three percent of the principal amount of the loan (but certain bona fide discount points excluded from this calculation in certain cases) • monthly payments, for purposes of calculations used in determining QM status, based on the highest payment in first five years • total debt to income ratio cannot exceed 43%, except in the case of loans meeting certain government affordability or other standards (e.g., loans meeting Fannie Mae or Freddie Mac requirements, or loans that are eligible for government insurance or guarantees)

13 QM and QRM Rules Under Dodd-Frank, securitizers of asset-backed securities are required to retain an economic risk (no less than 5%) in the assets collateralizing the asset-backed securities. However, among the exceptions in the proposed rule is that the risk retention requirements do not apply if all of the assets collateralizing the securities are QRMs. Dodd-Frank requires that the definition of QRM be “no broader” than the definition of QM adopted by CFPB. In the proposed rule, issued on April 29, 2011, the QRM Agencies defined QRM as “a closed-end credit transaction to purchase or refinance one-to-four family property at least one unit of which is the principal dwelling of a borrower” and that meets certain criteria. While the criteria for a QRM in the proposed rule are similar to the criteria for a QM set forth in the Ability-to-Repay Rule, there are some significant differences. In particular, the proposed rule defining QRM: (a) capped the interest rate increases for adjustable rate mortgages whereas the QM definition merely clarified how the adjustment should be factored into an Ability-to- Repay determination, (b) contains a maximum loan-to-value ratio of 80% for a purchase money mortgage whereas the QM definition does not establish loan-to-value limits, (c) required a 20% down payment for a purchase money mortgage whereas the QM definition does not require a specific down payment amount, and (d) required a debt-to-income ratio of 36% in contrast to the QM limit of 43%.

14 THE IMPACT – SELLER FINANCING
Seller Financers Have legal obligations Should seek legal counsel May receive notices and disclaimers from settlement service providers May be asked to sign acknowledgments of notice and disclaimers or releases of liability

15 INTEGRATED MORTGAGE DISCLOSURES RULE

16 In General Dodd-Frank Mandate1: Proposed Rule - Issued: 7/9/12
– Replace existing RESPA and TILA disclosures with single disclosure to include information previously contained in two separate ones Proposed Rule - Issued: 7/9/12 Final Rule - Issued: 11/20/13 Implementation Date: 8/1/15 1Dodd-Frank § 1032(f), 12 United States Code § 5532(f).

17 Rule Forms New “Loan Estimate” New “Closing Disclosure”
Replaces current GFE and initial TIL Three pages long New “Closing Disclosure” Replaces current HUD-1 and final TIL Five pages long

18 Loan Estimate Required by 12 CFR § 1026.19(e)
Contents in 12 CFR § Provided by lender or mortgage broker Deliver or place in mail within 3 “business days” of application (incl. Saturday if Lender open) With estimated settlement & transaction Charges Estimates subject to tolerances

19 Loan Estimate Page 1 § 1026.37(a)-(c) General Information Loan Terms
If answers to questions in this section were “YES” different information would be provided Projected Payments Includes payment schedule & estimated taxes, insurance & assessments

20 Loan Estimate Page 1 § 1026.37(d)-(e) Costs at Closing
(cont.) Costs at Closing Website reference Statement about & link to CFPB website

21 LOAN ESTIMATE PAGE 2 1026.37(F)-(J)
Loan Costs Other Costs Calculating Cash to Close Adjustable Payment (AP)Table* Adjustable Interest Rate (AIR) Table* *To reduce confusion, these tables are only included if applicable

22 LOAN ESTIMATE PAGE 3 1026.37(K)-(N)
Contact Information Comparisons Other Considerations Signature Statement Signatures not required Different statements required depending on whether signature line is or is not included.

23 Closing Disclosure Required by § 1026.19(f)
Three business days before closing Provided by: – Lender - § (f)(1)(i) – Lender may rely on Settlement Agent, but Lender remains responsible for accuracy - § (f)(1)(v) Contents in §

24 Closing Disclosure Page 1 1026.38(a)-(d)
(b) Loan Terms (c) Projected Payments (d) Costs at Closing

25 Closing Disclosure Page 2
§ (f) Loan Costs Origination Charges Services Borrower Did Not Shop For Services Borrower Did Shop For Total Loan Costs

26 Closing Disclosure Page 2
§ (g)-(h) (cont.) (g) Other Costs Prepaids: Homeowner’s Ins. Premium Mortgage Ins. Premium Prepaid Interest Property Taxes Other: HOA Capital Contribution **** Real Estate Commission Title - Owners title (h) Total Closing Costs

27 CLOSING DISCLOSURE PAGE 3 § 1026.38(I)-(K)
Calculating Cash to Close Tolerance amounts shown here Summary of borrower’s transaction Summary of seller’s transaction Itemizations in I and J are like page 1 of today’s HUD-1 Settlement Statement

28 CLOSING DISCLOSURE PAGE 4 § 1026.38(L)-(N)
Loan Disclosures Adjustable Payment (AP) Table* Adjustable Interest Rate (AIR) Table* * Tables are only included if applicable

29 CLOSING DISCLOSURE PAGE 5 § 1026.38(O)-(Q)
Loan Calculations Other Disclosures Questions Notice

30 Closing Disclosure Page Five
§ (r)-(s) (cont.) (r) Contact Information (Sale) Contact information for: (r) Contact information (Refinance) Contact information for: Lender Mortgage Broker Real Estate Broker (B) Real Estate Broker (S) Settlement Agent Lender Mortgage Broker Settlement Agent (s) Signature Statement

31 Additional Model Forms & Variations
Forms differ based on: Sale vs. loan only Split forms for: Borrower’s transaction Seller’s transaction Alternative “Calculating Cash to Close” table Etc.

32 Three Day Advance Disclosure
Closing disclosure received 3 business days before “consummation” (closing) Business day includes Saturday whether lender is open or not1 Changes requiring a new 3 business day waiting period2 Annual percentage rate becomes inaccurate – most loans 1/8%; certain loans 1/4% Loan product changed Prepayment penalty added 112 CFR § (a)(6) 2nd sentence 212 CFR § (f)(2)(ii)

33 Three Day Advance Disclosure
(cont) If not provided in person (i.e. mailed), add 3 business days for presumed receipt1 Still have 3 day rescission for refinances2 Consumer may not waive the 3 day waiting period except in the event of a “Bona Fide Personal Financial Emergency”3 112 CFR § (f)(1)(iii) 212 CFR § (not amended by this Final Rule) 312 CFR § (f)(1)(iv)

34 Changes & Guidance Amendments to the Final Rule could occur
Before August 1, 2015 On or after August 1, 2015 Official Interpretations Found in: Detailed Supplement I to Part 1026 – Time consuming to issue

35 Thank you Michael Holden Vice President Field Operations
and Agency Manager, Great Lakes Region North American Title Insurance Company 7550 Lucerne Street, Suite 401 Middleburg Heights, Ohio Direct/Cell: Fax:


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