CFPB Update
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.
ABOUT THE CFPB
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)
WHAT DOES THE CFPB REGULATE?
• Credit Cards
• Mortgages
• Bank Accounts &
Services
• Credit Reporting
• Money Transfers
• Debt Collection
• And More
2014 MORTGAGE
RULES
THE 2014 MORTGAGE RULES
• Issued: January 2014 (thereafter amended)
• Effective: January 2014 (most provisions)
• Location:
– CFPB Website:
• http://www.consumerfinance.gov
– Published in Federal Register
– Amend Code of Federal Regulations
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
2Real
In LendingAct
Estate Settlement Procedures Act
THE 2014 MORTGAGE RULES
(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: § 1026.36(h) – 6/1/13; Remainder 1/10/14; Issued: 1/20/13
(Amended 5/29/13 & 9/13/13)
THE IMPACT
• Lender’s activities in 2014
– Review the regulations
– Upgrade systems
– Train employees
• Lender’s activities in 2014
– Implement the regulations
– Comply
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.
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)
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%.
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
INTEGRATED
MORTGAGE
DISCLOSURES RULE
IN GENERAL
• Dodd-Frank Mandate1:
– 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).
RULE FORMS
• New “Loan Estimate”
– Replaces current GFE and initial TIL
– Three pages long
• New “Closing Disclosure”
– Replaces current HUD-1 and final TIL
– Five pages long
LOAN ESTIMATE
• Required by 12 CFR § 1026.19(e)
• Contents in 12 CFR
§ 1026.37
• 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
Loan Estimate Page 1
§ 1026.37(a)-(c)
(a) General Information
(b) Loan Terms
• If answers to questions in
this section were “YES”
different information would
be provided
(c) Projected Payments
• Includes payment schedule
& estimated taxes,
insurance & assessments
Loan Estimate Page 1
§ 1026.37(d)-(e)
(d) Costs at Closing
(e) Website reference
•
Statement about & link to CFPB website
(cont.)
LOAN ESTIMATE
PAGE
2
1026.37(F)-(J)
§
(f)Loan Costs
(g)Other Costs
(h)Calculating Cash to
Close
(i)Adjustable Payment
(AP)Table*
(j)Adjustable Interest
Rate (AIR) Table*
*To reduce confusion, these tables
are only included if applicable
LOAN
ESTIMATE
§
PAGE 3 1026.37(K)(k)Contact
Information
(N)
(l)Comparisons
(m)Other Considerations
(n)Signature Statement
• Signatures not required
• Different statements required
depending on whether signature
line is or is not included.
CLOSING DISCLOSURE
• Required by § 1026.19(f)
• Three business days before closing
• Provided by:
– Lender - § 1026.19(f)(1)(i)
– Lender may rely on Settlement Agent, but Lender
remains responsible for accuracy - § 1026.19(f)(1)(v)
• Contents in § 1026.38
Closing Disclosure
Page 1 1026.38(a)-(d)
(b) Loan Terms
(c) Projected Payments
(d) Costs at Closing
Closing Disclosure Page 2
§ 1026.38(f)
(f) Loan Costs
A. Origination Charges
B. Services Borrower Did
Not Shop For
C. Services Borrower Did
Shop For
D. Total Loan Costs
Closing Disclosure Page 2
§ 1026.38(g)-(h)
(cont.)
(g) Other Costs
F. Prepaids:
1. Homeowner’s Ins. Premium
2. Mortgage Ins. Premium
3. Prepaid Interest
4. Property Taxes
H. Other:
1. HOA Capital Contribution
****
5. Real Estate Commission
6. Real Estate Commission
7. Title - Owners title
(h) Total Closing Costs
CLOSING
DISCLOSURE
(i)Calculating
to Close
PAGE 3 § Cash
1026.38(I)-(K)
•
Tolerance amounts shown
here
(j)Summary of borrower’s
transaction
(k)Summary of seller’s
transaction
•
Itemizations in I and J are
like page 1 of today’s HUD-1
Settlement Statement
CLOSING
DISCLOSURE
PAGE
4 § 1026.38(L)-(N)
(l)Loan Disclosures
(m)Adjustable Payment (AP)
Table*
(n)Adjustable Interest Rate
(AIR) Table*
* Tables are only included if
applicable
CLOSING DISCLOSURE PAGE 5
§ 1026.38(O)-(Q)
(o) Loan Calculations
(p) Other Disclosures
(q) Questions Notice
Closing Disclosure Page Five
§ 1026.38(r)-(s)
(r) Contact Information (Sale)
Contact information for:
1. Lender
2. Mortgage Broker
3. Real Estate Broker (B)
4. Real Estate Broker (S)
5. Settlement Agent
(cont.)
(r) Contact information (Refinance)
Contact information for:
1. Lender
2. Mortgage Broker
3. Settlement Agent
(s) Signature Statement
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.
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
CFR § 1026.2(a)(6) 2nd sentence
212 CFR § 1026.19(f)(2)(ii)
112
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
CFR § 1026.19(f)(1)(iii)
CFR § 1026.23 (not amended by this Final Rule)
312 CFR § 1026.19(f)(1)(iv)
112
212
CHANGES & GUIDANCE
• Amendments to the Final Rule could occur
– Before August 1, 2015
– On or after August 1, 2015
• Official Interpretations
– Found in: Supplement I to Part 1026
– Detailed
– Time consuming to issue
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 44130
Direct/Cell: 440-725-8973
Fax: 866-216-4381
mholden@natic.com
http://www.natic.com/MichaelHolden