MBA Compliance Tracking Site; Impound Account Site; State-Level News

Huh? This is the last business day of the first half of 2013? Where does time go? And there will be plenty of folks on vacation next week, with its mid-week holiday. Some smart folks out there think, just like a good portion of volume that didn't fund in December 2012 carried forward into 2013, many of the loans locked now that aren't close will close in July - so July fundings should be decent. "Where does that leave August or September?" they wonder among themselves. Lenders wonder that too, especially any shop which built its foundation on refinancing. Those companies are desperately attempting to capture a portion of the hot purchase market, but it can take years to develop a good relationship with a decent builder or Realtor.

Educating compliance folks is critical, with so much going on. The MBA has created the new "Are You Ready 2014" webpage that centralizes the association's resources regarding education, conferences, documents from the regulator, like CFPB, and MBA analysis. It even includes an easy way to submit questions to the CFPB. The questions are emailed to CFPB and copied to the MBA so it can monitor what is on the agency's plate.

Saturday's commentary reiterated that California requires lenders to pay 2% interest on impound accounts if the borrower requests it. I received this note on a link: "Rob, although this may be somewhat outdated, for state-by state requirements on impound accounts check out this link."

When the CFPB issued its final Ability to Repay and Qualified Mortgage Rule in January, it raised several concerns regarding the requirement to include loan originator compensation in the points and fees calculation. CFPB warned that a strict interpretation of that points and fees limit would mean that all loan originator compensation, including compensation that subsequently flows from one party to another, must be counted in the points and fees calculation. Such "double-counting" of compensation would mean that even fewer loans would be eligible for QM treatment, and even more loans would trigger HOEPA's additional protections.

The CFPB attempts to fix this problem in its Final Rule, which wholly adopts the recommendations of the Office of the Comptroller of the Currency. The Final Rule excludes from points and fees loan originator compensation that is: Paid by a consumer directly to a mortgage broker where that compensation is already captured as part of the finance charge; Paid by a mortgage broker to its employee(s); or Paid by a creditor to its employee(s). Thanks to Buckley Sandler, an extensive article can be found here.

There has been a lot of state news lately. For those doing loans in Texas we were told recently that a Supreme Court ruling came out and now discount monies counts towards 3% of closing costs. What does that mean? As one originator wrote me, "Well it means that it will almost be impossible to give someone a cash-out on the smaller loan amounts because the fees are capped. Especially if they have low fico scores because no matter how high the rate you can't get to par pricing or provide rebate to offset those costs."

And law firm Black, Mann & Graham, LLP, reported that, "The Texas Supreme Court issued an opinion that basically prohibits using a power of attorney to close a Texas 50(a)(6) unless certain conditions are met, which are explained below. In addition, the opinion brings in to question the issue of discount points as it relates to the 3% cap. Recall that the 2002 appellate court Tarver decision held that discount points are interest and, thus, excluded from the 3% cap. The Supreme Court decision today calls that opinion into question because of the Supreme Court opinion's definition of interest for the purposes of a 50(a)(6) loan ("the amount equal to the loan principal multiplied by the interest rate").

"Therefore, for 50(a)(6) loans closing today or after today, this firm advises as follows: From today forward, all 50(a)(6) loans to be closed under a power of attorney should be pulled and not sent to the title company. Any 50(a)(6) loans that were sent to the title company today should not close and be returned.  In addition, 50(a)(6) loans that were sent before today that are to close today or after today should not close and be returned. Until we can obtain some clarity on the Supreme Court's opinion regarding discount points as they relate to the 3% cap, 50(a)(6) loans should not close with discount points unless they are included as part of the 3% cap.

"I know this is going to be a burden today with everything else you are working on but the Supreme Court opinion issued today on powers of attorney is very clear:  "Executing the required consent or a power of attorney are part of the closing process and must occur only at one of the locations allowed by the constitutional provision [i.e., the permanent physical address of the office or branch office of the lender, attorney or title company]." This means that a POA not executed by the principal at one of these locations is no longer acceptable for a home equity loan. All loans closed prior to today are not affected by this decision."

Bankers Advisory reports that the state of Hawaii recently amended Chapter 454M of the Hawaii revised statutes by adding provisions which authorize the Commissioner of Financial Institutions to conduct exams and investigations. Additional amendments were made to adjust fees for mortgage servicer licensees to use the NMLS licensing system. These amendments are effective immediately.

In Maine, the Maine Senate enacted an amendment to update the Maine Fair Credit Reporting Act to be consistent with federal law. The new amendment repeals former Fair Credit Reporting Act section 10 MRSA c.210 and replaces it with new section 10 MRSA c.209-B, set to take effect September 18, 2013. The amended Fair Credit Reporting Act largely updates the process and requirements by which a security freeze is placed on a consumer report by a consumer reporting agency. A consumer reporting agency is defined by the Act as "a person that, for monetary fees, dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information of other information on consumers for the purpose of furnishing consumer reports or investigative consumer reports to 3rd parties".

Requests for security freezes must be made in writing by certified mail to a consumer reporting agency. When a consumer has been a victim of identity theft they must include a copy of the police report, investigative report or complaint filed with law enforcement regarding the identity theft. The freeze must be placed by a consumer reporting agency within 5 business days of receipt of the consumer's written request.

The state of Florida recently enacted several foreclosure provisions under House Bill No. 87 which become effective immediately. House Bill No. 87 revised the limitations period for commencing an action to enforce a claim of a deficiency judgment after a residential mortgage foreclosure action. The existing law provides a five year statute of limitations period for any action founded on a written contract. However, the new foreclosure law states that an action to enforce a claim of a deficiency related to a note secured by a residential mortgage must be filed within one year. The one year limitations period begins either the day after the court issues the mortgagee a certificate of non-redemption or the day after the mortgagee accepts a deed in lieu of foreclosure from the mortgagor.

The state of Mississippi recently revised several SAFE Act provisions through the enactment of Senate Bill No. 2696. The new law has an effective date of July 1, 2013 and includes several amendments. For example, it gives a revised definition of "qualifying individual" as it is used in the Act and as it pertains to applications for mortgage broker or lender licenses through the Nationwide Mortgage Licensing System and Registry (NMLS). Under the law, an application for a mortgage broker or lender license must include documentation by a person named as the qualifying individual of the company. A qualifying individual is an owner or employee of a mortgage broker or lender who submits documentation of two years' experience directly related to mortgage activities and who is primarily responsible for the operations of the licensed mortgage broker or mortgage lender.

The new Mississippi law requires stockholders, owners, directors and executive officers of an applicant for licensing as a mortgage broker or lender to furnish identity information about the applicant to the NMLS. Applicant identity information includes fingerprints, personal history and experience as well as an authorization for the NMLS to obtain an applicant's credit report and any other information related to administrative, civil or criminal findings against the applicant. Upon receipt of an application for licensure, the law requires an investigation to determine that the applicant, its officers, directors and principals are of good character and ethical reputation, that the applicant demonstrates reasonable financial responsibility, and that the applicant has fair and reasonable policies and procedures to receive and promptly process customer grievances and inquiries.

And the law requires the Commissioner of the Mississippi Department of Banking and Consumer Finance to issue a mortgage broker or lender license if all license application requirements are met. However, an application for licensure may be denied if the applicant has had a mortgage lender, broker or servicer license revoked in any jurisdiction or if the applicant has been convicted of, or pled guilty or no contest to, a felony during the seven-year period preceding the date of application for licensing, or any crime of moral turpitude at any time preceding the date of application.

The Ohio Division of Financial Institutions recently adopted regulations detailing the issuance of temporary Loan Originator Licenses for out-of-state loan originators new to the state. These new regulations further define the regulations allowing temporary licenses passed by the General Assembly that went into effect in March of 2013. And these new provisions allow a loan originator from another state to temporarily originate loans in Ohio if certain restrictions are met. This law is designed for originators that are new to the state and want to work while waiting for approval to receive an Ohio originators license. In order to apply for a license under this provision an out-of-state originator must hold a valid originator license and be registered with the nationwide mortgage licensing system and registry (NMLS). The temporary license is valid for 90 days with the option of a 30 day renewal at the discretion of the superintendent of financial institutions.

Sure enough, what many had thought is coming to fruition: the market was overdone on the downside. Yesterday lower coupon mortgage-backed securities rallied on calming remarks from Fed officials: 30-year FNMA 3s and 3.5s improved by roughly .875 while the 10-yr "only" improved by .5 (closing at 2.48%). Traders are reporting that mortgage banker supply has really fallen, and as there has been no change in the Fed's buying pattern ($3.5 billion per day) prices have improved.  In sum, the calming remarks from Fed officials, once again telling us nothing new but still moving markets, were, "I want to emphasize the importance of data over date," "The FOMC's policy depends on the progress we make towards our objectives. This means that the policy-including the pace of asset purchases-depends on the outlook rather than the calendar," and "The pace of purchases, the composition of purchases, and the ultimate size of the Fed's balance sheet still depend on how economic conditions evolve."

Today we'll have the Chicago PMI for June (+56 expected from +57.7 last), final June Consumer Sentiment (82.8 versus 82.7), and several Fed officials giving speeches on various topics. So far rates are nearly unchanged from the close on Thursday, and the 10-yr yield is hovering around 2.50%.

Bert took his Saint Bernard to the vet. "Doctor," he said sadly, "I'm afraid I'm going to have to ask you to cut off my dog's tail."

The vet stepped back, "Bert, why should I do such a terrible thing?"

"Because my mother-in-law's arriving tomorrow, and I don't want anything to make her think she's welcome."