Upcoming changes to the mortgage disclosure process have community bankers concerned and compliance auditing firms chomping at the bit. But several service providers are promoting solutions that will help mortgage lenders maintain compliance and avoid exploitation over errors.
In testimony this month before a House committee, U.S. Department of the Treasury Assistant Secretary for Financial Institutions Michael Barr suggested that the proposed Consumer Financial Protection Agency would enable an integrated mortgage disclosure in place of separate disclosures required under the Real Estate Settlement Procedures Act and the Truth In Lending Act.
He said the proposed agency would "continue the work of the Federal Reserve and the Department of Housing and Urban Development to create and maintain a single, federal mortgage disclosure."
But mortgage bankers warned that such a proposal is not etched in stone.
"While the proposal suggests that HUD and the Federal Reserve work together to achieve a single combined RESPA/TILA disclosure, or have it become the responsibility of Consumer Financial Protection Agency, the bill does not require such collaboration as this committee directed in the mortgage reform bill which passed the House in May," Mortgage Bankers Association President and Chief Executive Officer John Courson told the House Financial Services Committee on Regulatory Reform in testimony last week. "And, borrower protections offered in H.R. 3126 could stem competition and innovation."
Mortgage Spirit issued a July 14 statement indicating that loan originators will be required to define their revenue on the revised Good Faith Estimate in dollar amounts instead of percentages.
"More importantly, the new regulation requires 100 percent transparency on the part of the originator," Mortgage Spirit said. "Any discrepancy between revenue, closing costs and transfer tax figures listed on the GFE and those listed on HUD-1 at closing will require the lender to return the difference to the borrower within 30 days."
Maintaining TILA compliance is the top regulatory concern over the next 12 months for 60 percent of the 242 community banks surveyed by Wolters Kluwer Financial Services, a July 7 announcement said. RESPA compliance was the No. 2 compliance concern, with 58 percent listing it among their top three concerns.
Wolters Kluwer noted that 43 percent of the surveyed financial institutions said mortgage lending was one among three areas of their business they planned to grow the most during the next year.
The Consumer Mortgage Coalition sent a letter to federal bank regulators on July 7 recommending that mortgage servicers not be subject to originator registration requirements under the Safe and Fair Enforcement for Mortgage Licensing Act of 2008 -- which requires originators to be state-licensed and state-registered through the Nationwide Mortgage Licensing System and Registry. The group noted that processing loan modifications should not trigger S.A.F.E. Act requirements.
Ocwen Loan Servicing has refunded $0.7 million to more than 180 Maryland borrowers over alleged violations of a state law restricting prepayment penalties, the Baltimore Business Journal reported this month.
eConsent has been released by MRG Document Technologies to help maintain compliance with Regulation Z changes that take effect on July 30 as required by the Mortgage Disclosure Improvement Act of 2008, a statement today said. The new changes expand TILA disclosure requirements to refinances and loans secured by properties other than borrower's primary residence.
MRG said its offering gives lenders proof of re-disclosures when the annual percentage rate changes beyond the acceptable tolerance level.
The Consumer Mortgage Audit Center, which exploits lender compliance errors on behalf of its borrower-customers, claimed in a July 17 press release that 98 percent of all mortgages can be renegotiated because of TILA errors. The firm claims it reviewed "thousands of mortgage documents."
Among the most common compliance violations noted were missing paperwork, "bait-and-switch" good faith estimates and incorrect payment disclosures. In addition, yield spread premiums were often missing in the GFE while income was often not documented.
Veros Real Estate Solutions announced last week that its automated valuation model, VeroSELECT, is fully compliant with Freddie Mac's July 10 update to its seller-servicing guide. Veros said Freddie is making a strong push for lenders to utilize AVMs as part of the quality-control process to detect fraud and improve appraisal review.
"A key benefit of VeroSELECT relating to the recent Guide update is the ability to pull individual AVMs, or to build, run and audit proprietary or third-party AVM cascades and compare them to appraisals ordered through the valuation management system from any number of providers," Veros President and CEO Darius Bozorgi said in the statement.