News

Found 11 entries

Displaying results 1 through 10

GSE Patch

On July 25, 2019, the CFPB issued an advance notice of proposed rulemaking looking for feedback on the expiration of the temporary GSE patch. This patch specifically grants Qualified Mortgage status to loans eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac. As it stands, the GSE patch will end in January 2021 and the CFPB has stated their intention to let it expire. Along with announcing the expiration of the GSE patch, the CFPB is asking for feedback as to whether the definition of a Qualified Mortgage should be revised.

The full text of the advance notice with instructions on submitting feedback can be found here: https://files.consumerfinance.gov/f/documents/cfpb_anpr_qualified-mortgage-definition-truth-in-lending-act-reg-z.pdf

Construction Loans FAQ

Construction loans and their compliance with Regulation Z can be a struggle. The CFPB has recently published their first set of Frequently Asked Questions specifically addressing common compliance issues for construction loans that are subject to TRID. The Frequently Asked Questions can be found at https://www.consumerfinance.gov/policy-compliance/guidance/tila-respa-disclosure-rule/tila-respa-integrated-disclosure-faqs/#construction-loans.

Regulatory Solutions provides comprehensive TRID reviews to ensure compliance with TILA-RESPA requirements. Contact us today to find out how we can assist you with your TRID and other lending compliance reviews.

Regulatory Solutions Top 5 TRID Exceptions Noted During Our Loan Reviews

Last year, Regulatory Solutions completed TRID reviews on traditional mortgage loans, lot loans, constructions loans and construction/perm loans as well as home equity loans for lenders. While the number of exceptions varied per loan review, there were common TRID exceptions that occurred. Here are the top 5 TRID exceptions that Regulatory Solutions noted during our loan reviews:

 

                1. Disclosure issues in Block H of the Closing Costs Details table on page 2 of the Closing Disclosure. For example, the Real Estate Commissions fees are not always disclosed in Block H. These fees are required to be disclosed in Block H per 1026.38(g)(4) comment 4.

                2. Disclosure issues in Block B of the Closing Costs Details table showing the services that the borrower did not shop for on page 2 of the Closing Disclosure. For example, sometimes one or more of the Title fees are being placed in Block B when the borrower did not choose a service provider from the Settlement Service Provider List. Only fees that the borrower did not shop for should be placed in Block B per 1026.38(f)(2).

                3. The Amount Financed section of the Loan Calculations table on page 5 of the Closing Disclosure was not calculated correctly. Non-prepaid finance charges are being included in the calculation.

                4. The contact information for the participants in the transaction was not correct in the Contact Information table on page 5 of the Closing Disclosure. Lenders are still leaving out email addresses and contact information.

                5. The breakdown and other disclosure issues of the amount for taxes and other government fees listed in Block E of the Closing Costs Details table on page 2 of the Closing Disclosure. For example, the Transfer Taxes listed in Block E do not list the name of the government entity that is assessing the tax, which is required by 1026.38(g)(1)(ii).

While the portfolio loans we reviewed have similar TRID exceptions, they will occasionally have different reporting problems than loans sold in the secondary market. One of the most common exceptions for portfolio loans is the incorrect loan purpose being listed on the Loan Estimate and the Closing Disclosure. Whether the loan should be listed as a refinance or as construction are the two most confused loan purposes for portfolio loans.

Regulatory Solutions provides comprehensive TRID reviews to ensure compliance with TILA-RESPA requirements. Contact us today to find out how we can assist you with your TRID and other lending compliance reviews.

Fannie Mae Quality Control Timing Requirements

Fannie Mae recently updated its Selling Guide with announcement SEL-2019-03 which includes the requirement that lenders notify Fannie Mae using the self-report functionality in Loan Quality Connect within 30 days if the lender’s post closing quality control cycle is in arrears more than one 30-day cycle.  Fannie Mae requires that mortgage loan post closing quality control reviews must be completed within 120 days from the month of the loan closing.  If you need assistance in meeting this timing requirement, please contact Regulatory Solutions for all your post-closing quality control needs. 

 

Denied/Non-Originated Quality Control Reviews

In the mortgage world when you say the words quality control, post closing quality control loan file reviews immediately come to mind. Did you know that non-originated loan reviews are also considered a part of quality control?  Freddie Mac’s Quality Control Best Practices states that as part of your quality control process you should include a random sample of your declined loan applications.  In addition, FHA requires that you review a random statistical sample of rejected applications within 90 days from the end of the month in which the decision was made.   Regulatory Solutions can assist you with these monthly non-originated reviews to ensure you ae in compliance with agency and regulatory requirements including the Equal Credit Opportunity Act (ECOA).

HMDA Scrubs

We are just over half way through the new year under the new Regulation C rules which changed the Home Mortgage Disclosure Act (“HMDA”) reporting requirements.  Have you scrubbed your HMDA data in accordance with the new rules?  If not, let Regulatory Solutions help!  We have developed proprietary HMDA software to assist in the data integrity review of your HMDA data.  Our software produces exception based reports so that you know exactly what corrections need to be made by loan number. The report also provides you with a total number of exceptions and percentages based on data points.  If you are interested in Regulatory Solutions scrubbing your HMDA data, please contact us at 855.734.7655.

Quality Control HMDA Requirements

Did you know that your HMDA data plays an important role when you are selling your loans to various agencies? Do you have the right procedures in place for the 2018 Quality Control HMDA requirements?

Most agencies require the lender to submit various HMDA data points as part of the purchasing process. With the new HMDA regulation that just took effect in January 2018, this means that the expanded GMI will play a key role in the purchasing process for most agencies.  Freddie Mac in particular specifically requires the lender report the GMI, Rate Spread, and HOEPA information for each loan that Freddie Mac purchases.

Fannie Mae, FHA, and Rural Housing require more than just the reporting of HMDA data points. Before these agencies will consider purchasing loans from your institution, you must show that you have procedures in place and are complying with the current HMDA regulation as part of your Quality Control Program. FHA has an additional requirement that the HMDA information that is being reported be accurate.

At Culp QC, a division of Regulatory Solutions we are here to help. We provide in-depth Quality Control reviews, HMDA scrubs and other regulatory services to help you with your compliance needs.

Pre-funding/Pre-closing Quality Control Loan Review – VA and USDA

VA

A pre-funding / pre-closing quality control loan review must include 10% of all VA-guaranteed mortgages each month. As with other quality control policies, there must be procedures in place to notify senior management of any deficiencies found in the course of the review. Also, the quality control plan must establish an effective method for senior management to address and correct these deficiencies. If a pattern emerges from the deficiencies found, then there should be corrective instructions provided to the applicable employee.

The pre-funding (pre-closing) quality control loan plan must also provide a procedure for promptly reporting any violation of a regulation or false statements to the VA. It must also contain procedures for the Lender to remain up to date with any future VA pre-funding (pre-closing) requirements. Like with FHA, the Lender must check that no one involved in the origination or underwriting process is debarred or suspended.

USDA/RHS

USDA/RHS has not established any specifics for a pre-funding quality control loan review process when dealing with RHS loans. Merely that a Lender must have an effective pre-funding review process.

Culp QC, a division of Regulatory Solutions, is available to assist you with your pre-funding/pre-closing quality control reviews. Culp QC, a division of Regulatory Solutions, will provide you with the independent solution you need to ensure your prefunding files are reviewed in accordance with agency guidelines.

Pre-funding/Pre-closing Quality Control Review – FHA

FHA requires that pre-funding (pre-closing) quality control loan reviews should occur each month and that the loans selected for review must have been approved by an FHA Direct Endorsement underwriter before the pre-funding (pre-closing) quality control loan review can take place. According to FHA, the review should be 10% or less of the sample size and the review staff should operate independently from the Lender’s loan production or administration process. If nine or fewer FHA loans were closed during the prior month, then at least one FHA loan must be selected for pre-funding (pre-closing) quality control loan review. FHA also requires that the Lender verify that none of the participants in the transaction are debarred or suspended under an LDP and FHA program.

The following documents must be a part of the pre-funding (pre-closing) quality control loan review: appraisal; mortgage application, eligibility, and all underwriting documents; disclosures and legal compliance; mortgage origination documents; handling of mortgage documents; credit reports (a new report does not have to be ordered); any outstanding debt obligations; verifications of employment and deposit; self-employment information; source of funds; underwriting completeness and accuracy; property flipping restrictions; prohibited restrictive covenants; QM; Loan Estimate; any discrepancies in the loan file; and verification of any condition clearance. The results of the reviews must be reported to senior management on a monthly basis. The feedback that is provided should be used to create Action Plans so as to prevent the same mistakes from happening in the future. Any conflicting information in these documents should be resolved with the underwriter and any discrepancies found have to be resolved before closing. FHA also requires that if any discoveries of fraud or material misrepresentations are found during the review, they should be reported immediately to HUD/FHA.

Culp QC, a division of Regulatory Solutions, is available to assist you with your pre-funding /pre-closing quality control reviews. Culp QC, a division of Regulatory Solutions, will provide you with the independent solution you need to ensure your pre-funding files are reviewed in accordance with agency guidelines.

Pre-funding/Pre-closing Quality Control Review – Freddie Mac

Freddie Mac requires that a Lender establish a pre-funding / pre-closing quality control loan review process that contains a sample selection and provides enough time for reviews to be completed before closing. There must be procedures established to report deficiencies to senior management and to take the appropriate corrective measures. The pre-funding (pre-closing) quality control loan review process must also document the resolution of any defects and should establish procedures for canceling/postponing a closing when the review reveals deficiencies or when the review cannot be completed before closing.

The pre-funding (pre-closing) quality control loan review should include loans that reflect the full scope of the Lender’s products. When selecting loans for review the Lender should make sure to target certain loan samples in order to review the work of new employees, confirm that a new product is being originated in accordance with policies, and to evaluate the work of a particular employee when fraud is suspected. The method in which the Lender chooses their samples should be examined regularly so as to ensure its effectiveness.

For the validation and re-verification process, Freddie Mac requires that the pre-funding (pre-closing) quality control loan review include validation or re-verification of: data entered into Loan Product Advisor; Social Security numbers (unless validated during the loan origination process); income documentation and its calculation; employment; assets required to close or meet reserve requirements; property valuation documentation; adequate mortgage insurance; and whether additional credit was granted and considered when the credit report reveals inquiries within the previous 120 days.

Regulatory Solutions is available to assist you with your pre-funding/pre-closing quality control reviews. Regulatory Solutions will provide you with the independent solution you need to ensure your pre-funding files are reviewed in accordance with agency guidelines.