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CFPB Looks to Finalize Several Rules

Loan originators, servicers impacted

Jan. 8, 2013

By Mortgage Daily staff

The Consumer Financial Protection Bureau's agenda calls for several proposed mortgage-related rules to soon become final. Loan originators and mortgage servicers are impacted by the new regulations.

The rulemaking activities are primarily requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which was signed into law by President Barack Obama in July 2010. The landmark law authorized the CFPB's creation and empowered the agency with broad regulatory authority.

Dodd-Frank transferred regulatory authority for more than a dozen consumer financial laws from several federal agencies to the CFPB in July 2011.

A Semiannual Regulatory Agenda filed Tuesday by the CFPB indicates that several mortgage-related rulemakings are expected to be finalized this month.

Among the new rules expected to be finalized during January is the Loan Originator Compensation Rule. The proposed rule, which is being implemented through amendments to the Truth-in-Lending Act's Regulation Z, includes a new restriction on the imposition of any up-front discount points, origination points or fees in certain circumstances. It also implements registration and licensing requirements for loan originators as well as restrictions on mandatory arbitration and the financing of some credit insurance premiums.

"Finally, the proposal provides additional guidance and clarification under the existing regulation's provisions restricting loan originator compensation practices, including guidance on the application of those provisions to certain profit-sharing plans and the appropriate analysis of payments to loan originators based on factors that are not terms but that may act as proxies for a transaction's terms," the report states.

While the Loan Originator Compensation Rule is expected to be finalized this month, proposed regulations on anti-steering provisions required by TILA will be issued later.

Another Reg Z amendment will expand the scope of the ability-to-repay requirement on higher priced loans to cover any home-secured transaction except home-equity lines of credit, reverse mortgages or temporary loans. The proposal includes the establishment of a "qualified mortgage" and limits prepayment penalties. Lenders would need to retain evidence of compliance with this rule for three years.

The integration of mortgage disclosures that are currently required by Reg Z and Regulation X, which implements the Real Estate Settlement Procedures Act of 1974, is the focus of another rule. In addition to combining the disclosures and implementing new requirements, the proposed rule provides extensive guidance on compliance.

Mortgage servicers are also impacted by upcoming final rules.

An amendment to Reg Z addresses initial rate adjustment notices on adjustable-rate mortgages, periodic loan statements and prompt credit reporting of mortgage payments. Swift responses to payoff requests are also among the proposed revisions.

The Reg Z amendments will also amend rules that govern the scope, timing, content and format of consumer disclosures prompted by ARM interest rate adjustments.

Another proposed amendment to Reg Z lengthens the amount of time that a mandatory escrow account on a higher-priced mortgage must be maintained. Loans exempted from Dodd-Frank escrow requirements include those that are made by lenders operating primarily in rural or underserved communities.

Other proposed amendments to Reg X seek feedback on six servicer obligations:
  1. Correct errors asserted, and provide information requested, by mortgage loan borrowers;
  2. Alert consumers to possible servicer imposition of force-placed insurance and ensure that a reasonable basis exists to charge for it;
  3. Establish reasonable information management policies and procedures;
  4. Provide information about mortgage loss mitigation options and foreclosure to delinquent borrowers;
  5. Provide delinquent borrowers access to servicer personnel with continuity of contact about the borrower's mortgage loan account; and
  6. Evaluate borrowers' complete applications for available loss mitigation options.

Other modifications and streamlinings proposed for Reg X include revisions to provisions tied to a servicer's obligation to provide disclosures when mortgage servicing is transferred. They also address a servicer's obligation to manage escrow accounts, advance funds needed to maintain insurance coverage and return funds held in escrow upon full repayment of a loan.

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