Dodd-Frank and Your Business
A snapshot of the
Consumer Financial Protection Bureau’s
proposed rules
Marianne Collins, Executive Director & Chief Operating Officer
Ohio Mortgage Bankers Association
Consumer Financial Protection Bureau
(CFPB)
Proposed Rules
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Qualified Mortgage
Qualified Residential
Mortgage
Integrated Good Faith
Estimate/Truth-inLending/Closing Statement
Home Owner’s Equity
Protection Act Changes
Servicing Rules
Loan Originator Compensation
Qualified Mortgage (QM)
Ability to Repay
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Proposal by the Federal Reserve Board,
Final rule by the CFPB
Two proposed alternatives
Coverage: Dwelling secured 1-4 family
(including 2nd homes) 1st & 2nd
mortgages, sold and portfolio
Exempt: HELOC, timeshare, reverse,
temporary
Includes sold and portfolio loans. No
exemptions for GSE’s or government loans
QM
Alternative 1
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Safe Harbor
No Negative-amortization, interest only,
balloon payments (w/narrow exception)
Maximum term of 30 years
Maximum of 3% in points & fees
Must be underwritten at maximum rate
permitted in the first 5 years
Income & assets must be verified
QM
Alternative 2
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Rebuttable Presumption
Loan must meet all of the requirement of
Alternative 1
Verify employment status
Consideration of DTI and credit history
QM
3% Points and Fee Limit
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Direct and indirect payments by a
consumer to a creditor and mortgage
broker as well as their originator
employees (double count)
Affiliate fees
Mortgage insurance premiums in excess of
the FHA premium
The prepayment penalty on the covered
transaction or on an existing loan if it is
refinanced by the same creditor.
QM
Fees Not Included in 3%
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3rd party fees
Bone fide discount points
QM
Failure to Comply
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Actual damages
All fees paid by the consumer and up to
three years of finance charges paid by the
consumer
Court costs and reasonable attorney’s fees
associated with the enforcement action
Defense against foreclosure
Qualified Residential Mortgage
(QRM)
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Sold loans only
Coverage: Principal Dwelling 1st lien, closed end
loan that does not finance initial construction,
not a bridge or timeshare, not a reverse
mortgage
Exemptions: 2nd liens, Fannie/Freddie (as long as
they are in conservatorship), Government Loans
Non QRM/Non Exempt=Risk Retention
QRM Credit Requirements
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Cannot be currently past due on any debt
No 60 day late payments in the past 24
months
No bankruptcy, foreclosure deed-in-lieu,
short sale or repossession of personal
property in last 36 months
QRM Loan Requirements
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No Balloons, Negative Amortization, or interest
only
ARM increases may not exceed 2/6 Caps,
underwritten at max rate in 1st 5 years
3% Maximum points and fees
Maximum ratios 28/36%
Max LTV: 80% purchase, 75% rate/term refi,
70% cash-out refinance
Closing costs and down payment paid cash from
borrower’s funds
Written appraisal
No loan assumptions
Penalty for Making a Non-QRM
Loan
Risk retention in the amount of 5%
of the loan
Integrated Good Faith Estimate (GFE)
Truth-in-Lending (TIL)
Closing Statement (HUD1)
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All-in APR (not a Dodd-Frank requirement)
0% tolerance for affiliate fees and 3rd
party services that borrower cannot shop
A 5-page closing disclosure would replace
the HUD1. Borrower must receive
completed form 3 days prior to closing.
Changes of more that $100 require
another 3 day period
Integrated GFE/TIL/HUD1
Concerns
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All-in APR would cause more loans to
become a HPML or HOEPA
0% tolerance on 3rd party fees will mean
more lender cures
3-day wanting period will cause purchase
contract and rate loan expirations
Home Owner’s Equity Protection Act
(HOEPA) (High Cost Loans)
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Adds purchases and Home Equity Lines of Credit
(HELOC), previously refinance only
Excludes reverse mortgages
Triggers when Annual Percentage Rate (APR)
exceeds prime offer rate by 6.5% (8.5% for 2nd
lien), points and fees exceed 5%, or a prepayment penalty applies for more than 36
months or exceeds 2% of the amount pre-paid.
Requirement to provide list of federally approved
homeownership counselors to ALL mortgage
applicants
Servicing Proposal
Monthly statements required, to include:
Explanation of amount due,
Past payment breakdown,
Transaction activity,
Message section,
Contact information,
Account information section,
Delinquency information,
Housing counselor information
 Coupon books acceptable for fixed rate loans, if all
information is somewhere in the book
 Exception for small servicers for loans they originated or
own, and reverse mortgages
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Servicing Proposal (cont.)
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60-120 day notice of rate/payment changes to
Adjustable Rate Mortgages (ARM)
Payments credited on the day of receipt
Payoffs must be sent within 7 days of receipt of
written request
Complaints: Acknowledged within 5 days,
respond/correct within 30 days (5 days for payoff resolutions)
Force-placed insurance: refund to borrower
within 15 days of confirmation that he had
insurance
Servicers must establish information
management policies and procedures
Servicing Proposal
Delinquent Borrowers
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At least 3 separate calls on 3 separate days must
be made before the 30th day of delinquency
Assign contact personnel within 5 days of oral
notice. Response within 3 days of customer
contact
Early loss mitigation intervention required with
1st 30 day late payment
Written notice by the 40th day of delinquency
Establish formal policies and procedures
Small servicers are not exempt
Loan Originator Compensation
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Loans with points and fees can only be
made if an option at no points and fees is
offered
No affiliate fees can be charged in a no
points and fees option
Reduction in loan officer’s commission
allowed if a fee exceeds tolerances and
the loan officer could not have known this
ahead of time
Record retention goes from 2 years to 3
THE
ROAD
AHEAD