ABA Summarizes Pending Mortgage Reform into 2013, "Critical to Lenders"

By: Jann Swanson •

The American Bankers Association (ABA) has reminded its members and others in the industry that the next few months are critical to lenders because of an even dozen new rules and regulations that are pending.   Comment periods are still open on some of the changes, affected parties need to be preparing to adapt to others, while some issues will require more time and discussion before any decisions are made

Get out your calendars.

September:
Comments are due September 7 on two issues.  The Federal Housing Finance Agency has voiced objections to proposals from the City of Chicago and two California communities to use eminent domain to seize performing mortgages and restructure them to reflect current market value of the collateral.  FHFA is requesting input on its concerns.

The second comment period ending that day regards a proposed rule from the Consumer Financial Protection Bureau (CFPB) that would expand the definition of "high cost mortgages" and increase restrictions on them.  A final rule is due on or before January 21, 2013.

October:
October 9 is the deadline for comments on proposed RESPA and Truth in Lending Act (TILA) rules that will require servicers to provide borrowers with periodic statements, rate reset notices, and error resolution.   ABA has expressed concern that these new rules will prose an undue burden on servicers, particularly small firms.

While the most significant appraisal reforms are already in place, CFPB has formulated the final Dodd-Frank appraisal reforms which require physical property visits and new requirements for appraisal independence.  Final comments are due by October 15.

Comments are also due by October 15 on a joint proposal from six federal regulators to require lenders writing high-risk mortgages to provide borrower with a free copy of appraisal reports and imposes other documentation requirements.

The most recent set of proposed rules governing loan originator compensation by CFPB are open for comments until October 16.  ABA has expressed concern that these rules will open lenders to massive liability risks.

Final rules for all four of the rules sets listed above must be finalized on or before January 21, 2013.

November:
After months of draft disclosures CFPB has invited comments on proposed merged RESPA and TILA forms.  ABA has expressed concern that the 1,100 page CFPB proposal neither adequately simplifies the forms nor takes into account other pending mortgage reforms.  Comments are due November 6.

In addition to the open comment periods, ABA also reminded its members and others in the industry of pending issues and discussions of which they should be aware.  These include:

  • GSE Reform. While a strategic plan was issued over a year ago by FHFA, it is unlikely that Congress will undertake any resolution of the Fannie Mae and Freddie Mac conservatorships until after the election. ABA generally supports FHFA's proposals but says there are likely to be further develops that will impact the GSEs in the near term such as the use of income from increased guarantee fees.
     
  • Final Escrow Rule: A Federal Reserve rule amending TILA to lengthen the time requirement for maintaining escrow accounts for high-priced mortgages is still pending. ABA is concerned that the rule imposes heavy disclosure requirements beyond those mandated by Dodd-Frank and that the Federal Reserve has exceeded its authority in proposing the rule. ABA expects a final rule in December.
     
  • Fair Lending: ABA said that Fair lending issues continue to be a top priority for lenders. There is a proposed rule from Housing and Urban Development (HUD) and other proposals from federal regulators that are likely to increase federal scrutiny in this area.
     
  • Ability to Repay and Qualified Mortgages. The proposed rule establishes standards for qualified mortgages which are expected to set the threshold for determining which mortgages meet the ability to repay standards of Dodd-Frank. ABA said that this rule risks transforming the mortgage market in ways "that dramatically harm credit availability, the viability of the mortgage lending business and the housing recovery." ABA is strongly advocating for the inclusion of a legal safe harbor over a lesser "rebuttable presumption" standard. The final rule is due January 21, 2013.
     
  • Risk Retention and Qualified Residential Mortgages. ABA expects that, following an earlier comment period, the Federal Reserve and other agencies will re-propose the rule, probably after CFPB finalizes its own qualified mortgage rulemaking.