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Bank Originators to Participate in National Registry

Recent mortgage compliance activity

June 5, 2009

By SAM GARCIA


Six federal regulators have laid the groundwork for requiring loan originators at federally regulated institutions to join the national license registry. Meantime, several new offerings aim to help lenders meet a growing number of mortgage compliance requirements. But some firms are looking for ways to exploit compliance errors by lenders.

The Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corporation were among six federal agencies to issue a joint statement Monday requesting public comment for proposed rules requiring mortgage originators at federally regulated entities to meet the registration requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. The other regulators were the Office of Thrift Supervision, the Farm Credit Administration and the National Credit Union Administration.

S.A.F.E. requires originators to be registered with a unique identifier from the Nationwide Mortgage Licensing System and Registry and furnish background information and fingerprints for a background check. The proposed rule provides for a delay in implementation of the registration requirements until 180 days after the Registry becomes operational and available.

The Office of the Comptroller of the Currency announced last month the results of 39 performance evaluations for the Community Reinvestment Act. Just 10 were outstanding, while 28 were satisfactory and one needs to improve. None of the ratings involved substantial noncompliance.

The Consumer Mortgage Coalition sent a May 28 letter to Federal Reserve Board of Governors Chairman Ben S. Bernanke indicating the threshold for Section 35 loans under Regulation Z is inappropriately high -- causing some prime jumbo mortgages to fall within the definition. The group asked for a more moderate threshold.

It also requested that mortgage insurance premiums for loans insured by the Federal Housing Administration be excluded from the Annual Percentage Rate.

In another letter to Bernanke, the coalition said that the recently finalized Reg Z amendments requiring waiting periods on consumer loans are too restrictive. While waivers are allowed, lenders will be unwilling to grant them because little benefit can be derived and the risk of litigation is "far too high." The amendments were part of Truth in Lending Act amendments.

The CMC also asked the fed to confirm that assignee investors who purchase loans after origination not be considered a "creditor." Such a situation would require notice of a loan transfer each time mortgage-backed securities change hands.

Financial institutions can comply with early Reg Z disclosure rules finalized by the fed last month by utilizing Wolters Kluwer Financial Services' Disclosure Manager, an announcement last week said. The new requirements, which become effective on July 30, are designed to provide borrowers with important loan details earlier in the loan process.

Wolters Kluwer said its document preparation platform interfaces directly with existing loan origination systems to capture required disclosure data. Borrowers receive disclosures "in minutes" and are given the option for an e-signature or automatically generated printed disclosures.

"Institutions have a verifiable audit trail that allows them to prove to regulators that disclosures were delivered to borrowers within the timeframes specified by Regulation Z and RESPA," the statement said.

Wolters Kluwer launched a RESPA Resource Center to help mortgage lenders meet changes to the Real Estate Settlement and Procedures Act effective on Jan. 1, 2010. Under the new RESPA rule, the U.S. Department of Housing and Urban Development will require lenders to begin using revised Good Faith Estimates, settlement statements and settlement cost booklets.

DocVelocity 2.0 includes tools for better compliance, a news release Monday said. The new version helps originators stay compliant by logging and recording all folder activity.

Forensic Mortgage Audit Software announced that the most common instances of noncompliance on loans originated during the past five years involve violations of TILA, RESPA, HOPEA and APR. The company exploits such violations to extract better modification terms from lenders for borrowers.


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com in 2000.

e-mail: [email protected]


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