FHA Clarifies Discrepancy In New Handbook Relating To Model Mortgages
The Federal Housing Administration (“FHA”) announced a waiver of a provision in Single Family Housing Policy Handbook 4000.1 relating to the required content of security instruments.
FHA Allows Two New Automatic Extensions to Timelines for Initiation of Foreclosures
The Federal Housing Administration (“FHA”) issued a mortgagee letter providing guidance on the requirement that a mortgagee utilize a loss mitigation option or initiate foreclosure within six months of a borrower’s default. The letter is effective for all FHA-insured mortgages in default on or after October 1, 2015.
HUD Issues Revised HUD 92900-A HUD/VA Addendum to Uniform Residential Loan Application
The Department of Housing and Urban Development (“HUD”) issued Mortgagee Letter 2016-06 on March 15, 2016. The letter states that mortgagees are required to use the revised HUD 92900-A HUD/VA addendum to the Uniform Residential Loan Application for case numbers assigned on or after August 1, 2016. Please note that mortgagees may not use the new form until its effective date.
HUD Issues Guidance on Fair Housing
On April 4, 2016, the Department of Housing and Urban Development (“HUD”) issued guidance to providers of housing and real estate-related transactions related to the Fair Housing Act and the use of criminal records.
In the letter, HUD says that criminal history-based restrictions on housing opportunities violate the Fair Housing Act if, without justification, the burden of the restrictions falls more often on individuals who are members of a protected class, or if the criminal history-based restriction is used by a provider to intentionally discriminate.
The letter focuses primarily on decisions by housing providers, such as landlords and property managers. However, the Fair Housing Act prohibits discrimination in all “real estate-related transactions,” which includes the making and purchasing of loans secured by residential real estate.
CFPB Issues Compliance Bulletin on FCRA
The Consumer Financial Protection Bureau (“CFPB”) issued a compliance bulletin on the Fair Credit Reporting Act’s requirement that furnishers of consumer information establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information furnished to credit reporting agencies (“CRAs”).
The bulletin does not create new legal obligations; it just reminds furnishers of existing requirements. The bulletin says that if furnishers violate Regulation V, the CFPB intends to take appropriate supervisory and enforcement actions to address violations and seek all appropriate remedial measures, including redress to consumers.
CFPB Corrects Typographical Error In TRID Preamble
The Consumer Financial Protection Bureau (“CFPB”) issued a correction of a sentence in the preamble to the TILA-RESPA Integrated Disclosures Rule (“TRID”). It was effective immediately.
The correction says that property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees are not subject to tolerances. Before the correction, the preamble said that these charges are subject to tolerances, but the CFPB says that this was a “typographical error.”
Please note that the preamble is not binding law, and creditors must comply with the rule and commentary. Even though the preamble now says that property taxes are not subject to tolerances, the rule and commentary themselves do not identify prepaid property taxes as charges that are not subject to tolerances.
CFPB Releases HMDA File Specifications for 2017 and 2018
The Consumer Financial Protection Bureau (“CFPB”) released data submission resources for financial institutions that are required to file Home Mortgage Disclosure Act (“HMDA”) data. The resources include guides for filing data collected in 2017 and 2018.
CFPB Finalizes Policy On “No Action Letters”
The Consumer Financial Protection Bureau (“CFPB”) finalized its “No Action Letter” Policy, which provides that an industry participant who intends to offer a new financial product or service, and who is uncertain as to how specific statutes and regulations enforced by the CFPB will apply to the product or service, may request a letter from the CFPB advising that the CFPB does not intend to recommend initiation of an enforcement or supervisory action regarding a specific issue.
CFPB Establishes Application Process to Designate Rural Areas
The President signed the “Fixing America’s Surface Transportation Act” (“FAST Act”) on December 4th. While the Act primarily addressed transportation and infrastructure issues, it also contained several provisions relating to consumer financial services. One of those provisions pertains to creditors extending loans in “rural” counties. These creditors are granted certain exceptions under Regulation Z’s “ability to repay” and “higher-priced mortgage loan” rules. The FAST Act required 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 adopted a rule establishing an application process under which a person may apply to the CFPB to have an area designated as a “rural area.” The rule was effective March 3, 2016, and the CFPB began accepting applications on March 31, 2016.
CFPB Adopts Interim Final Rule Expanding Exemptions For Creditors Operating In Rural Or Underserved Areas
The Consumer Financial Protection Bureau (“CFPB”) adopted an interim final rule implementing certain provisions of the “Fixing America’s Surface Transportation Act” (“FAST Act”). The rule was effective March 31st.
The FAST Act expanded the CFPB’s authority to provide exemptions from certain requirements under the Truth In Lending Act (“TILA”) and Regulation Z for creditors who operate “in rural or underserved areas” and meet certain other criteria.
The CFPB’s Interim Final Rule expands these exemptions by amending Regulation Z to provide that a creditor satisfies the rural-or-underserved component of the eligibility criteria if the creditor originated a covered transaction secured by a property located in a rural or underserved area in the preceding calendar year, or, if the application was received before April 1st, during either of the two preceding calendar years. Please note that there are other requirements that a creditor must meet to be eligible for these exemptions.
The Interim Final Rule also clarifies that creditors who established escrow accounts to comply with the current rule are eligible for the exemption under the new criteria.
CFPB Issues Recommendations on Preventing and Responding to Elder Financial Exploitation
On March 23, 2016, The Consumer Financial Protection Bureau (“CFPB”) issued a report and an advisory to financial institutions in regards to preventing and responding to financial exploitation of the elderly.
The report and advisory notice are intended to provide guidance and recommendations on how to identify, protect against, and report financial abuse of elderly consumers, and do not create any new legal obligations.
SCRA Protections Extended Through 2017
The Servicemembers Civil Relief Act (“SCRA”) provides protection from foreclosure for servicemembers during and after their military service. On January 1, 2016, several amendments which extended the ninety (90) day period to one year expired. Following the expiration, a foreclosure sale for breach of an obligation secured by a mortgage was invalid if made during, or within ninety (90) days after, the period of the servicemember’s military service except (1) upon a court order granted before the foreclosure sale; or (2) if made pursuant to a written agreement with the servicemember waiving the protection. Further, a court could stay court proceedings to enforce a mortgage loan against a servicemember that were filed during, or within ninety (90) days after, the period of military service.
On March 21st, the House of Representatives passed S. 2393, the “Foreclosure Relief and Extension for Servicemembers Act of 2015”, extending SCRA protection for one year (rather than 90 days) following a servicemember’s military service. The President signed the bill into law on March 31st. These protections will remain in place through December 31, 2017.
RHS Expands Lender Indemnification Requirements, Amends Refinance Provisions, and Defines “Qualified Mortgage”
The Rural Housing Service (“RHS”) adopted a Final Rule relating to lender indemnification requirements and other issues. The Rule also clarifies when an RHS-guaranteed loan is a “qualified mortgage.” The Rule was effective on April 28, 2016.
VA Issues Policy Clarification for TRID Fee Itemization Requirements and Loan Expenses Not Expressly Permitted by the Department of Veteran’s Affairs
The Department of Veterans Affairs (“VA”) issued a circular to explain the VA requirements related to the Closing Disclosure required by the TILA-RESPA Integrated Disclosure (“TRID”) rule. The requirements described in the circular are effective for all VA guaranteed home loans originated on or after June 1, 2016.
Under VA regulations, only certain fees are allowed to be charged to veterans. The VA has provided two exhibits to illustrate how to properly fill out the Closing Disclosure for VA guaranteed home loans. The exhibits clarify the proper way to account for charges to the veteran and charges paid by others such as lender or seller credits so that the VA can determine that the lender has complied with VA limitations on charges and fees. The VA requires the Closing Disclosure to be signed by the borrower.