News

Construction Loan TRID Compliance – Culp QC

On December 18, 2019 the CFPB released guidance for disclosing construction and construction-permanent loans under TRID. They published two guides on their website. The first is focused on disclosing construction and construction-permanent loans with separate Loan Estimates and Closing Disclosures for each phase of the loan and the second is on how to disclose a combined Loan Estimate and combined Closing Disclosure for both phases of a construction-permanent transaction. You can access both of the construction disclosure guides at: https://www.consumerfinance.gov/policy-compliance/guidance/tila-respa-disclosure-rule/.

Fannie Mae New Approved Mortgage Insurance Forms

Fannie Mae has just announced a change in their mortgage insurance forms. Any loan with mortgage insurance that is sold or securitized by Fannie Mae must be insured using one of the new approved forms. This will take effect on any loan application that was taken on or after March 1, 2020. Fannie Mae has stated that if an application taken after that time with mortgage insurance is insured under any previously approved form, it will not be eligible for delivery and will be subject to repurchase. There is an exception to this change. Loans that are refinanced into a High LTV Refinance loan may continue to be insured under the previously approved form. However, if a new mortgage insurance certificate is issued, then this exception does not apply.

Special Appraisal Requirements

On October 31, 2019, the CFPB announced an increase for the special appraisal requirements for higher-priced loans from $26,700 to $27,000. This will take effect January 01, 2020 and it will be based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as of June 1, 2019.

The special appraisal requirements for higher-priced mortgage loans was added in 2010 to TILA. This requirement makes the creditor obtain a written appraisal based on a physical visit to the home’s interior before making a higher-priced loan.

The full announcement can be found at: https://www.federalregister.gov/documents/2019

HMDA Final Rule Update (10-19)

On October 10, 2019, the CFPB issued a final rule that could affect your HMDA reporting for 2020. The first part of the rule extends the 500 threshold for open-end lines of credit until January 1, 2022. This means that institutions that originate fewer than 500 open-end lines of credit in the two preceding calendar years will not be required to report these lines of credit on their 2020 and 2021 LARS.

This final rule also incorporates the partial exemptions that were laid out in EGRRCPA into Regulation C. It also incorporates clarifications that smaller institutions have encountered when collecting their data to comply with the partial exemptions. Such as, whether a partial exemption applies after a merger or acquisition.

A copy of the final HMDA rule can be found below.

https://files.consumerfinance.gov/f/documents/cfpb_hmda_final-rule-2019.pdf

At Regulatory Solutions, we have developed HMDA software in order to complete full HMDA scrubs, including for those who qualify for partial exemptions.

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

HMDA Scrub Sample Size

What percentage of loans or applications on the HMDA LAR should I scrub?

This is a question we get asked quite often and my response is that you should look to the percentage examiners scrub. The Federal Financial Institutions Examination Council’s (FFIEC) HMDA Examiner Transaction Testing Guidelines (Guidelines) describe the validation process which examiners use and the circumstances in which examiners may direct institutions to correct and resubmit HMDA data.  The examiners select a random sample of loans/applications to test using the following sample sizes and thresholds as indicated in the Guidelines at https://files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf:

 Total Sample Size (A) Initial Sample Size (B) Initial Sample Threshold (C) Resubmission Threshold (D)
# %
25-50  30* 15 2 3  10.0*
51-100 30 20 2 3 10.0
101-130 47 29 2 3 6.4
131-190 56 29 2 3 5.4
191-500 59 30 2 3 5.1
501-100,000 79 35 2 4 5.1
100,001+ 159 61 2 4 2.5

*If less than 30 LAR lines, the institution should use the full sample size and the resubmission threshold remains at 3.

Let us scrub your HMDA data against source documents and provide you with an exception-based report indicating the percentage of errors by data point. You select your sample size either using the Guidelines or a certain percentage of HMDA loans/applications.  Contact us today to discuss your HMDA scrub.

Construction Loans FAQ – RegulationZ

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.

CFPB Proposed Rule for HMDA Reporting Requirements

The CFPB issued a proposed rule on May 2, 2019 that would change the HMDA reporting requirements and could have a significant impact on smaller financial institutions. The proposed rule would increase the closed-end coverage threshold from 25 to 100 loans originated in the previous two years. Additionally, it proposes to extend the current open-end threshold of 500 lines of credit until January 1, 2022. The proposed rule would also incorporate new interpretations and procedures into Regulation C. If this were to become part of the HMDA regulation, it would not take effect until January 1, 2020.

https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development

 

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.

TRID Updates

On May 1, 2019 the Consumer Financial Protection Bureau posted a factsheet regarding whether Loan Estimates (LE) and Closing Disclosures (CD) were required for assumption transactions.  The factsheet consists of a flowchart and a narrative discussion to assist lenders in making the determination of whether a loan would require the TILA-RESPA Integrated Disclosures.  The factsheet can be found at https://files.consumerfinance.gov/f/documents/cfpb_tila-respa-factsheet.pdf.

Regulatory Solutions specializes in TRID loan reviews, please contact us to schedule your review today.