CFPB Issues HMDA Rule
The Consumer Financial Protection Bureau (“CFPB”) issued a final rule updating the reporting requirements of the Home Mortgage Disclosure Act (“HMDA”). Most parts of the rule are effective January 1, 2018. Therefore, the new data must be collected for 2018 and then reported in 2019.
The rule substantially revises the current HMDA regulations. Here are some of the highlights from the rule:
• The rule adopts loan-volume thresholds for determining whether an institution must report HMDA data. An institution must report if it originated at least twenty-five (25) closed-end mortgage loans or at least one hundred (100) open-end lines of credit in each of the two preceding calendar years, assuming that the institution is otherwise covered by the rule. An institution is only required to report the type of loans for which it meets the threshold; for example, an institution that originated at least twenty-five (25) closed-end mortgage loans but only fifty (50) open-end lines of credit would only be required to report data relating to its closed-end mortgage lending.
• The rule requires reporting for loans or lines of credit secured by a dwelling that are for personal, family, or household purposes. This includes home equity lines of credit and reverse mortgages.
• The rule requires financial institutions to report several new data points. The new required data includes:
(1) Information about the borrower and the underwriting process, including age, credit score, debt-to-income ratio, combined loan-to-value ratio, automated underwriting system results, and the channel through which the application was made;
(2) Information about the property, including property value, lien priority, postal address, construction method, the number of individual dwelling units related to the property, and certain information about manufactured and multi-family housing;
(3) Information about the loan, including loan costs, pricing information (lender credits, origination charges, discount points), loan term, loan type, interest rate, introductory rate period, non-amortizing features, and the term in months of any prepayment penalty;
(4) Unique identifiers relating to the loan, the property, the loan originator, and the financial institution.
• The rule requires the collection and reporting of disaggregated data on race and ethnicity. For example, the sample data collection form in the appendix to the rule allows the applicant to identify as “Mexican,” “Puerto Rican,” “Cuban,” or “Other Hispanic or Latino” instead of just “Hispanic.” The rule also requires financial institutions to report the basis on which the applicant’s ethnicity, sex, or race was collected, whether by visual observation or surname, when the applicant does not provide this information.
• Financial institutions that reported at least 60,000 covered loans and applications for the preceding calendar year will be required to report quarterly data.
• Institutions will no longer be required to provide a public disclosure statement and loan/application register (“LAR”). Rather, financial institutions will be required to provide notice to the public that the information is available on the CFPB’s website.
FFIEC Issues Revised Management Booklet
The Federal Financial Institutions Examination Council (“FFIEC”) issued a revised Management booklet on November 10th, 2015. The booklet is part of the FFIEC’s Information Technology Examination Handbook. It outlines sound governance principles relating to information technology.
CFPB Issues Compliance Bulletin On Consumer Authorizations For Preauthorized Electronic Fund Transfers
The Consumer Financial Protection Bureau (“CFPB”) issued a compliance bulletin setting forth its expectations for companies that obtain consumers’ authorizations for preauthorized electronic fund transfers. The CFPB issued this bulletin because it has observed during examinations that some entities are not fully complying with the requirements of the Electronic Fund Transfers Act (“EFTA”) and Regulation E.
The bulletin generally provides that companies must comply with the EFTA and Regulation E, although it emphasizes two specific requirements. First, the bulletin explains that Regulation E permits a company to obtain the consumer’s oral authorization for preauthorized electronic fund transfers over the phone, but only if the company complies with the requirements of the Electronic Signatures In Global and National Commerce (“E-Sign”) Act relating to electronic signatures and electronic records.
The bulletin also notes that Regulation E requires a company that obtains a consumer’s authorization to provide a copy of the terms of the authorization to the consumer.
FHFA Announces GSE Conforming Loan Limits For 2016
The Federal Housing Finance Agency (“FHFA”) announced that the maximum conforming loan limit for first mortgages secured by one-unit properties acquired by Fannie Mae and Freddie Mac in 2016 will be $417,000.00, with the exception of thirty-nine “high-cost counties.”
The $417,000.00 figure is unchanged from 2015. The loan limits will increase in the thirty-nine high-cost counties.
Please note that some states incorporate FHFA’s conforming loan limits into their “high-cost home loan” and other laws. For example, some states provide that only loans that do not exceed FHFA’s conforming loan limits may be considered high-cost.
Agencies Establish 2016 Threshold For Exemption From Higher-Priced Mortgage Loan Appraisal Requirements
The Consumer Financial Protection Bureau, Federal Reserve Board, and the Office of the Comptroller of the Currency announced that the threshold for the exemption from Regulation Z’s appraisal requirements for higher-priced mortgage loans will remain at $25,500 for 2016.
GSEs Update Uniform Closing Dataset Specification and Resources
The Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) jointly announced updates relating to the Uniform Closing Dataset (“UCD”). The announcements relate to updates to the UCD specification, including (1) newly added data points, (2) changes to conditionality for several data points, (3) changes/addition to the enumerated values, and (4) updates to conditionality details. Several resources relating to the UCD have also been updated.
FHA Publishes Forward Mortgage Limits for 2016
The Federal Housing Administration (“FHA”) published the maximum forward mortgage limits for FHA-insured mortgages for 2016. The 2016 limits are effective for FHA case numbers assigned on or after January 1st, 2016.
The loan limits increased in 188 counties. There were no jurisdictions where loan limits decreased. There were no changes to the low cost area or high cost area limits nor were there changes to the exceptions for Alaska, Hawaii, Guam, and the Virgin Islands.
Consumer Financial Services Provisions in FAST Act
The president signed the “Fixing America’s Surface Transportation Act” (“FAST Act”) on December 4th. While the Act primarily addresses transportation and infrastructure issues, it also contains several provisions relating to consumer financial services, including the following:
Annual Privacy Act Notice
The FAST Act creates an exception to the requirement that financial institutions send annual privacy notices under the Gramm-Leach-Bliley Act (“GLB Act”).
Rural and Underserved Areas
Creditors extending loans in “rural” counties are granted certain exceptions under Regulation Z’s “ability to repay” and “higher-priced mortgage loan” rules. The FAST Act also requires the Consumer Financial Protection Bureau (“CFPB”) to establish a process that will allow persons doing business in a state to request that the CFPB identify an area in the state as a “rural” area. The CFPB must establish this process within ninety days after the effective date of the Act, or by March 2nd, 2016.
The FAST Act also:
• Modifies two exemptions that the CFPB is authorized to provide under the Truth In Lending Act (“TILA”) for creditors operating in rural or underserved areas. Currently, under TILA, the CFPB may exempt loans made by creditors who, among other requirements, operate “predominantly in rural or underserved areas,” from certain escrow requirements and may treat loans made by such creditors as “qualified mortgages” even if the loans have balloon payments. The FAST Act eliminates the word “predominantly” from these exceptions. Although this amendment has no immediate impact, it authorizes the CFPB to expand the scope of these exemptions.
Increases the asset threshold for small banks to be subject to an eighteen-month examination cycle from $500 million to $1 billion. Generally, institutions over this threshold are subject to a twelve-month examination cycle.
CFPB Adjusts Asset-Size Threshold For Exemption From Escrow Account Requirements for Higher Priced Mortgage Loans
The Consumer Financial Protection Bureau (“CFPB”) adjusted the asset-size threshold for an exemption from the Truth In Lending Act’s (“TILA’s”) escrow account requirements for higher-priced mortgage loans.
For 2016, the threshold is $2.052 billion. This is a slight decrease from 2015, when the threshold was $2.060 billion. So if a creditor’s assets, including the assets of certain affiliates, were less than $2.052 billion on December 31st, 2015, then the creditor may qualify for the exemption from the escrow account requirements for higher-priced mortgage loans. This threshold will apply for applications received before April 1st, 2017. Please note that there are other requirements that the creditor must meet to take advantage of the exemption.
CFPB Adjusts Asset-Size Threshold For Exemption From HMDA Reporting
The Consumer Financial Protection Bureau (“CFPB”) adjusted the asset-size threshold for the exemption from reporting requirements under the Home Mortgage Disclosure Act (“HMDA”) for banks, savings associations and credit unions. The threshold for 2016 is $44 million. Therefore, banks with assets of $44 million or less as of December 31st, 2015 are exempt for 2016. There was no change from last year. The 2015 threshold was also $44 million.
CFPB Sends Letter To MBA On TRID Liability
The Consumer Financial Protection Bureau (“CFPB”) sent a letter to the Mortgage Bankers Association (“MBA”) addressing the CFPB’s enforcement of the TILA-RESPA Integrated Disclosure Rule (“TRID”) and the CFPB’s view on liability for errors in the Loan Estimate and Closing Disclosure required by TRID. The letter says that the CFPB’s examiners, in their initial examinations, will be “squarely focused on whether companies have made good faith efforts to come into compliance with the rule” and that initial examinations will be “corrective and diagnostic, rather than punitive.” The letter also says that the CFPB “recognize[s] that a certain level of minor errors in the early days of implementation [are] to be expected.”
VA Issues FAQ On Qualified Mortgage Interim Final Rule
The Department of Veterans Affairs (“VA”) issued responses to a set of frequently asked questions regarding its interim final rule on qualified mortgages (“QMs”). Among other issues, the FAQ clarifies the following:
• All loans guaranteed, insured, or made by VA are considered QMs.
• All VA purchase-money loans are “Safe Harbor QMs,” meaning that there is a conclusive presumption that such loans satisfy the Ability to Repay (“ATR”) requirements of the Dodd-Frank Act.
• VA Interest Rate Reduction Refinance Loans (“IRRRLs”) are only Safe Harbor QMs if they meet certain requirements. These requirements are listed in the FAQ. An IRRRL that does not meet these requirements is a “Rebuttable Presumption QM,” meaning that there is a rebuttable presumption that the loan meets the ATR requirements.
• One of the requirements for an IRRRL to be considered a Safe Harbor QM is that all of the fees and charges finance as part of the loan or paid at closing must be shown to be recouped within thirty-six (36) months of the new loan closing. Prepaid expenses, such as real estate taxes and homeowners’ insurance, are not counted as total closing costs for the purpose of the recoupment period.
• Lender credits may be excluded from the recoupment calculation only to the extent they offset allowable fees and charges.
• IRRRL loans continue to be exempt from income verification requirements so long as certain requirements set forth in the Dodd-Frank Act are met.