2015 Integrated RESPA/TILA Disclosures

2015 New Integrated RESPA/TILA Disclosures

Implementation and Transition November of 2013 was a busy time for Federal regulators as they approved final rules combining some of the RESPA rules with other rules still required under The TILA. Congress’s intent is to create an entirely new set of disclosures that when in place, will provide consumers with information (both new & old) formatted in such a way that provides the utmost clarity and consumer understanding. Let’s discuss the New Integrated RESPA/TILA Disclosures.

The new integrated disclosures will fall into two categories (e.g. “Loan Estimate” and “Closing Disclosure”). The “Who, What, When, Where & Why” The new integrated disclosures will need to be provided by creditors or mortgage brokers that receive an application [Emphasis Added] from a consumer for a closed-end credit transaction secured by real property on or after August 1st, 2015. Creditors are prohibited from using the new disclosures for applications that are received prior to that August 1st date and will instead need to follow the current disclosure requirements under Regulations X and Z, and use the existing forms (e.g. Truth-In-Lending disclosures, GFE, Settlement Statements, etc.). The Federal regulators have built in a “transition period” or overlap of time, during which both sets of disclosures will need to be available and creditors will need to use the forms/disclosures that are appropriate to the specific transaction at hand. As applications received prior to August 1st, 2015 are consummated, withdrawn, or canceled, use of the existing GFE, Settlement Statements, and Truth-In-Lending forms will, for the most part, no longer apply. Closed-end reverse mortgages will still be subject to the current disclosure requirements under Regulations X and Z. As this particular “overlap” of disclosures can be particularly tricky, you really need to contact our Client Services Department for full details (Jenny@oaktreebiz.com – 800.537.9598). While August 1st may seem like a long way off, from a practical standpoint it isn’t, and for that reason, the construction of the new forms at Oak Tree is well underway to be certain of their availability in time for the new deadline. Given the size of the new documents and the scope of the transaction-specific information that must be mapped or otherwise programmed by your data processor, once you receive your proofs you will want to approve and return them as quickly as possible.

ELECTRONIC FUND TRANSFER AGREEMENT (REGULATION E) The Electronic Fund Transfer Act is a consumer protection statute that, among other things, limits a consumer’s potential liability for unauthorized transactions made with an approved account access device. The exact amount of the liability is for the most part, determined through the use of a tiered approach that is driven by the time within which a consumer notifies the financial institution. For example, when a consumer notifies a financial institution within two (2) business days after his learning of the loss or theft of the access device, the regulation provides that the consumer’s liability will be restricted to the lesser of $50.00 or the sum of the unauthorized transfers that occur before notice. In the event that the consumer fails to notify the financial institution within two (2) business days after learning of the loss or theft of the access device, the consumer’s liability will increase to the lesser of $500.00, or: (i) $50.00 or the amount of unauthorized transfers that occur within the two (2) business days, whichever is less plus (ii) The amount of unauthorized transfers that occur after the close of two (2) business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period. The consumer may be liable for additional amounts, depending on the specific set of circumstances.

Since this regulation only establishes a consumer’s maximum liability, institutions are permitted to reduce these limits. Such is the case with the Zero Liability Rules that have been issued by both Visa and MasterCard. With respect to MasterCard, their revised zero liability rule now requires that the consumer use reasonable care in safeguarding the Card from loss or theft; and upon becoming aware of such loss or theft, promptly report that loss or theft to the Credit Union.

There’s more detail to be had here (“the fine print”) and we’re always available to pass it along to you. When you use Oak Tree for your credit union document needs, you can be sure we are keeping an eye on these kinds of changes to keep your forms compliant. We will ensure you are ready for the next “New Integrated RESPA/TILA Disclosures”.

(note: this is an older blog entry and has been edited since originally posted.)

Regulation Z Amended

Regulation Z Amended Allow for Cure of Qualified Mortgage Points and Fees Violations

2015 Credit Union Regulation Z Changes

There’s welcome news on the residential mortgage lending front. After assessing nearly a year’s worth of real-world experience, the Consumer Financial Protection Bureau (CFPB) came to the conclusion that it had to do something about the reluctance of many mortgage lenders to offer qualified mortgages with points and fees close to the limit imposed by the federal Truth in Lending regulations. Under Regulation Z, in order for a loan of $100,000 or more to meet the qualified mortgage standard, the total points and fees cannot exceed three percent (3.0%) of the total loan amount. For loans less than $100,000, the points and fees cannot exceed the applicable limit described on a graduated dollar/percentage scale. Regulation Z amended to address this.

The CFPB recognized that many lenders have been unwilling to take the risk that a loan intended to be a qualified mortgage might inadvertently exceed the points and fees threshold, and have been either overpricing their loans to account for the higher risk or self-imposing a lower points and fees threshold in order to ensure compliance with the Qualified Mortgage rule. To address this shortcoming, the CFPB amended its qualified mortgage rules by publishing in the Federal Register on November 3, 2014 (79 FR 65300) a Final Rule designed to make it more palatable for lenders to expand their product offerings to cover the full range of points and fees permitted under the qualified mortgage rules. This limited “right to cure” amendment was effective upon publication of the Final Rule.

In the Supplementary Information published with the November 3, 2014 Final Rule, the CFPB noted that “…the complex nature of the points and fees calculation and the potential liability associated with non-qualified mortgages have caused some creditors to impose operational buffers on points and fees that are well under the limits in the rule….” It went on to say that “…creditors that are uncertain of the qualified mortgage status of loans near the applicable points and fees limit may overprice the risk of the loan, passing on the costs of legal uncertainty to the consumer….” Industry sources and the CFPB’s analysis revealed that, rather than incur potential problems with sales to the secondary market, and the greater risk of liability posed by a non-qualified mortgage, many lenders have elected not to offer loans in that price range, or to charge higher rates for qualified mortgages with points and fees near the maximum qualifying limits.

The CFPB concluded that lenders have been unwilling to price loans near the qualified mortgage points and fees threshold because, once a loan has been consummated, it’s too late to make any adjustments to the points and fees. At that point, regardless of the lender’s intent, the loan either is – or isn’t – a qualified mortgage. What was needed was the ability to rectify an inadvertent overcharge. As noted in the preamble to the Final Rule, the CFPB agreed with lending industry groups that allowing a points and fees cure “…would provide creditors the opportunity to achieve precise compliance after consummation, which in turn would allow creditors to approve more loans, or provide loans at a lower cost to, consumers at the boundaries of the points and fees limits under the rule.” From the perspective of the CFPB, an added benefit of the new rule is that “…the cure provision will encourage some creditors to undertake or strengthen rigorous post-consummation review[s] of loans…,” which will result in more consumers receiving cure payments than would otherwise have been the case.

The CFPB amended Regulation Z by adding a new subsection (12 CFR 1026.43(e)(3)(iii)) to provide lenders with “…a limited, post-consummation cure mechanism for loans that exceed the points and fees for qualified mortgages, but that meet the other requirements for being a qualified mortgage loan at consummation.” The new rule, which took effect November 3, 2014, gives lenders greater incentive to offer mortgage products that cover the full qualified mortgage footprint.

The new “points and fees cure” rule gives lenders a window of opportunity after a loan has been consummated to ensure that the total points and fees charged in connection with that loan did not exceed the applicable limits outlined in Regulation Z (§ 1026.43(e)(3)(i)). If a lender determines during its post-closing review that a loan intended to be a qualified mortgage included points and fees that exceed the threshold applicable to that loan, the lender can cure the defect by paying the consumer the amount of the overcharge, plus interest on that amount, within 210 days of loan closing. Payments of an overcharge after 210 days cannot result in a loan being a qualified mortgage.

The rule specifies certain events that can curtail the opportunity for the lender to cure an overcharge during the 210-day window. The lender cannot cure the defect, even if it pays the amount of the overcharge to the consumer if the consumer institutes any legal action in connection with the loan; or if the consumer furnishes a written notice to the lender (or the assignee or servicer) that the total points and fees exceed applicable limits; or if the consumer becomes 60 or more days past due on the loan during the 210-day period. The CFPB’s rationale for terminating the cure option under these circumstances is that if any of these conditions arise during the first 210-days after a loan has been consummated, it wasn’t a qualified mortgage.

Under the new rule, payment to the consumer of the overage plus interest “…may be made by any means mutually agreeable to the consumer and the creditor or assignee, as applicable, or by check” (Regulation Z Commentary, § 1026.43(e)(3)(iii)-1). If payment is made by check, the lender satisfies the requirement by delivering or placing the check in the mail within 210-days after the loan has closed.

The relatively short 210-day window (which is further shortened by the potential for a loan to become 60 or more days delinquent in as little as half that time) means that time is of the essence. To take advantage of the qualified mortgage cure rule, lenders are encouraged to establish post-consummation policies and procedures that expedite the detection of potential points and fee violations. Recognizing that it may not be practical for a lender or assignee to conduct a review of every qualified mortgage, the new rule allows lenders to skip loans where it is confident that the total points and fees are within tolerance and focus only on those where the total points and fees are close to the maximum points and fees thresholds. This is intended to allow lenders to quickly identify and cure problem loans.

With this Final Rule, lenders have the opportunity to fine-tune their qualified mortgage product offerings. A targeted set of policies and procedures that focus solely on the points and fees assessed in connection with a loan can quickly reveal which loans have met that aspect of the qualified mortgage standards, and which have not (more comprehensive loan reviews can be performed under their normal time frames). Lenders can then decide whether to pay the amount of any overcharge to the consumer (along with interest on that amount at the note rate from the date of consummation to the date of repayment), thereby ensuring that the loan is a qualified mortgage, or take no action and assume the risks associated with holding a non-qualified mortgage. But in either case, lenders will know precisely where they stand with respect to their qualified mortgage portfolios and can price loans accordingly.

By providing lenders with the opportunity to take full advantage of the qualified mortgage safe harbor, the CFPB hopes that the new cure provision will result in more consumers receiving loans with better rates, and at lower costs. That’s a win-win situation for lenders and their customers and a welcome change to the regulatory landscape.

By Michael A. Kus, PLLC

(note: this is an older blog entry and has been edited since originally posted.)

Quality of Life

The Credit Union Contribution

Make no mistake – “Quality of Life” drives us all. Our actions each day, sleeping, waking up, eating, working, exercising, socializing, and so very much more, are all motivated by individual day-to-day factors such as being tired, hungry, lonely, wanting better fitness, wanting to “feel” better, and so on. But at the end of the day, what we all want is a better “Quality of Life”; for us and for our loved ones.  As a part of the Credit Union Community, it is important to think of the quality of life and the credit union’s contribution to it as it pertains to the members and the staff.

This is exactly what your members are after. Each and every member walking through your Credit Union’s door, calling your Call Center, Emailing you, Chatting with you online, Responding to your Direct Mail – they’re all looking for something they believe will improve their Quality of Life – true needs, true wants, and true desires.

Your Credit Union’s internal policies dictate just how far you can go to respond to your member’s needs, wants, and desires, but within those policies, YOU MAKE A DIFFERENCE!

The Difference

This difference – improving their Quality of Life – can be profound. A safe place to invest their money, a debit/ATM card for safe access to their funds, a credit card for important purchases, an auto loan for a better/safer set of wheels, a home equity loan to access their well earned but unassessed property equity – all ways that YOU can help.

There is a saying that being a professional means doing what you need to do even if at times you don’t really feel like it. Passing through this barrier can indeed help you help others, and improve their Quality of Life along the way. By being there where you are, when you are, fully prepared, and knowing your job better than anyone else, you stand to help improve each and every member’s Quality of Life that you come in contact with.

So make your way through your day, of course working on improving your own Quality of Life, but realize that your members are expecting the same – and doing just that is in your hands.

At Oak Tree, like you, we’re constantly taking stock in our purpose in your day by giving you the very best in easy to use forms that are safe, compliant, and purposeful, making it easier for you to do your part to never miss any opportunity to improve your members “Quality of Life.”

For more information please visit www.oaktreebiz.com, and learn about our products & services for your credit union.