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2013 Federation Annual Conference Mortgage Compliance


Title: Meeting the Challenge of Regulatory Compliance -Mortgage Created Date: 5/10/2013 8:05:49 PM Document presentation format: On-screen Show Company – PowerPoint PPT presentation

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Title: 2013 Federation Annual Conference Mortgage Compliance

2013 Federation Annual Conference Mortgage
  • Presented by
  • Keith Rhodes-Director of Education and Training
  • West Virginia Credit Union League

In 2013 there have already been 3,500 pages of
mortgage regulations from the CFPB
How did this all start?
2008 Mortgage Crisis
2010 - Dodd-Frank Act
2011 - CFPB
Statutory objectives of CFPB
  • To ensure that consumers have timely and
    understandable information to make responsible
    decisions about financial transactions
  • To protect consumers from unfair, deceptive, or
    abusive acts or practices, and from
  • To reduce outdated, unnecessary, or overly
    burdensome regulations
  • To promote fair competition by enforcing the
    Federal consumer financial laws consistently and
  • To advance markets for consumer financial
    products and services that operate transparently
    and efficiently to facilitate access and

CFPBs Jurisdiction
  • Home Mortgage Disclosure Act
  • Home Ownership and Equity Protection Act of 1994
  • Real Estate Settlement and Procedures Act of 1974
  • S.A.F.E. Mortgage Licensing Act of 2008
  • Truth in Lending Act
  • Truth in Savings Act
  • Omnibus Appropriations Act
  • Interstate Land Sales Full Disclosure Act
  • Alternative Mortgage Transaction Parity Act of
  • Consumer Leasing Act of 1976
  • Electronic Fund Transfer Act
  • Equal Credit Opportunity Act
  • Fair Credit Billing Act
  • Fair Credit Reporting Act
  • Home Owners Protection Act of 1998
  • Fair Debt Collection Practices Act
  • Federal Deposit Insurance Act
  • Gramm-Leach-Bliley Act

CFPB Mortgage Rules
Ability to Repay (ATR) and Qualified Mortgage
(QM) Rule
  • Effective Jan. 10, 2014
  • The rule applies to closed-end loans secured by a
    dwelling except
  • HELOCs
  • Timeshares
  • Reverse mortgages
  • Temporary or bridge loan (term 12 months or less)
  • Construction phase of construction to permanent

Ability to Repay (ATR)
  • Must make a reasonable and good faith
    determination that the consumer has the ATR using
    the eight factors
  • The ATR will depend on the creditors standards
    and how they are applied to each individuals
    facts and circumstances

Ability to Repay (ATR) Factors
  1. Current income or assets
  2. Current employment status
  3. Credit history
  4. The monthly payment of the mortgage
  5. The monthly payment on any other loans associated
    with the property
  6. The monthly payment for other mortgage related
    obligations (such as property taxes)
  7. Other debt obligations and
  8. The monthly debt-to-income ratio or residual
    income the borrower would be taking on with the

Qualified Mortgage
  • Includes product and underwriting
  • Compliance standard differs if the QM is
  • Not higher-priced safe harbor
  • Higher-priced presumption

Higher-priced mortgage loan
  • Defined as a covered transaction with an APR that
    exceeds the average prime offer rate for a
    comparable transaction as of the date the
    interest rate is set by 1.5 or more percentage
    points for a first-lien covered transaction, or
    by 3.5 or more percentage points for a
    subordinate-lien transaction

Qualified Mortgage
  • A QM must generally provide for regular periodic
    payments that are substantially equal.
  • A QM may not have the following features
  • Negative amortization
  • Interest-only payments
  • Balloon payments
  • A term exceeding 30 years
  • Points and fees in excess of rule limits

QM Points and Fees
  • Different thresholds for points and fees
    depending on loan amount.
  • Maximum If loan amount is greater than or equal
    to 100,000, then points and fees cannot exceed
    3 of the total loan amount
  • Minimum If loan amount is less than 12,500,
    then points and fees cannot exceed 8 of the
    total loan amount

QM Underwriting
  • Periodic payment
  • Verification of current or reasonably expected
    income or assets
  • Verification of current debt obligations,
    alimony, and child support
  • Debt-to-income ratio not to exceed 43

Ok, this only one new mortgage regulation with
more to come
CFPB Upcoming Mortgage Regulations
  • Mortgage Servicing (Reg X Reg Z) - nine
  • High Cost Mortgages
  • Homeownership Counseling
  • Escrow
  • Reg B Appraisal
  • Reg Z Appraisal
  • Loan Originator Compensation

CFPB's Small Servicer Exemption
  • Small Servicer a creditor (and its affiliates)
    that originated 500 or fewer first lien covered
    transactions in the preceding calendar year AND
    had total assets of less than 2 Billion
  • So what is a Small Servicer and what are they
    exempted from? A credit union that services 500
    or fewer mortgage loans where it is the creditor
    or assignee will be exempt from certain (not all)
    of the requirements of CFPBs new mortgage
    servicing regulation.

CFPB's Small Servicer Exemption
  • 1. Even if a credit union qualifies for the small
    servicer exemption, it may retain liability for
    compliance with the rule if it is using a
    sub-servicer that does not qualify for the
  • If a credit union use a sub-servicer, NCUAs
    regulations require the institution to conduct
    sufficient due diligence to determine that the
    third-party servicer is compliant with the new
    servicing rules.

CFPB's Small Servicer Exemption
  • 2. The exemption applies only to some aspects of
    the servicing rule. Significant portions apply to
    all mortgage servicers.
  • All credit unions servicing mortgages must adopt
    new standards for error resolution and
    information requests, comply with new
    restrictions on forced-placed hazard insurance,
    credit payments promptly, comply with new
    restrictions on starting foreclosure procedures,
    and provide new interest-rate change notices with
    adjustable-rate mortgages.

CFPB's Small Servicer Exemption
  • 3. Beware the inevitable regulatory creep that
    may require small servicers to adopt the entire
    mortgage servicing rule despite the exemption.
    Credit union regulators at the state and federal
    level will still examine the servicing policies
    and procedures for all credit unions servicing
    mortgages regardless of whether they qualify as
    small servicers.
  • NCUA and state regulators may end up requiring de
    facto compliance with all of the servicing rule
    provisions as the means for small servicers to
    demonstrate the safety and soundness of their
    mortgage servicing portfolios.

Feeling Overwhelmed!!!
Compliance Best Practices
  • View CFPBs website for compliance information
  • Form an in-house credit union team that meets
    regularly regarding compliance
  • Involve credit union management
  • Hold your third party vendors accountable
  • Stay informed through CUNA and your State
    League/Association for compliance assistance
  • Review all policies and procedures regularly
  • Establish a timetable with achievable deadlines
    for upcoming compliance regulations and stick to
  • Share compliance resources with other credit
  • YouTube, yes I said YouTube!
  • http//www.youtube.com/watch?vwxsKnoFzSYI

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