An interim Truth-in-Lending Act rule applies to investors who acquire a mortgage after origination — including individuals who acquire just a handful of loans in a given year.
The Federal Reserve Board published an interim final rule in today’s Federal Register.
The rule provides additional guidance on how residential mortgage loan purchasers can comply with section 131(g) of the Truth in Lending Act. Section 131(g) was enacted as part of the Helping Families Save Their Homes Act, which became effective on May 20, 2009.
Although it was effective when announced by the Fed on Nov. 16, compliance with the interim final rule is optional for 60 days from the date of publication in the Federal Register.
The interim final rule, which will be codified as section 226.39 of Regulation Z, requires any person who acquires legal title to two or more loans secured by a borrower’s principal dwelling in any 12-month period to provide a notice to the borrower within 30 days of acquiring the loan.
Servicers are not considered acquirers if they hold legal title solely for the administrative convenience of the servicer in servicing the loan. For purposes of section 226.39, the acquisition date is defined as the date it is recognized in the books and records of the acquirer.
The mortgage transfer notice must include the following:
- Identity, address and telephone number of the acquirer;
- Date of the acquisition;
- Information the borrower may use to contact an agent or party who has authority to act on behalf of the acquirer (e.g., the servicer); and
- Location of the place where the transfer of ownership of the loan is recorded.
In apparent recognition of the regulatory burden upon short-term holders and the potential borrower confusion that could result from the receipt of numerous notices in a short amount of time, the interim final rule provides an exception from the notice requirement to the extent an acquirer will hold legal title for no more than 30 days. Accordingly, aggregators, securitization vehicles and other short term holders will not be required to comply with the notice requirement, provided they sell or otherwise transfer legal title to the loan on or before the 30th calendar day following the date of acquisition.
The Federal Reserve Board is also seeking comment on the interim final rule. The deadline for submission is 60 days from today.
