Don’t End Up In Fair Housing Jail!

Title:  Don’t End Up in Fair Housing Jail!

Karen Deis, Publisher, www.MortgageCurrentcy.com  & Tammy Butler, www.OptimaBlue.com

Here’s a story that is happening more and more as the CFPB hires more people to “police” FAIR HOUSING – Can you defend yourself in case of an audit?

Examiner:  Mr. Mortgage Company:  can you please tell me why this client did not receive the lowest rate offered to her on this day?

Mr. Mortgage:  Uh, well let me call the loan originator.  Oh, he is not here anymore, okay I’ll call the processor.  Oh, she is on maternity leave.  Can someone look in the LOS and tell me if you see any notes on that file?  None about rate, huh!  Well, we will pull that file, get the rate sheets from that day and review everything.  I’m sure there was a good reason.

Examiner:  Fantastic, and while you’re at it, can you also pull the data together for these 350 files?  We have questions on those too.

Sound like a nightmare?  For many lenders this is a reality.  Yes, I know Fair Housing audits are not the most exciting topic; however it is the most important item you can focus on when it comes to making an exam easier.

We’ve created a Fair Housing Compliance Checklist and at the end of this article, you’ll find a “partial list.  Email Karen@mortgagecurrentcy.com for the complete 3-page checklist.

Here is how it works.  The loan originator answers the questions on the checklist.  The answers can be “yes,” “no” and/or a comment.  If they do not give you the answer that you have set up as a rule, then it needs to be noted in the file.

I have several pages of example questions; you will have to determine which ones you want to use.  The goal is to get your team brainstorming regarding the questions that you want to memorialize.

Here are some ways other lenders are using the Compliance Checklist function:

  1. Requiring explanation when the loan originator gave the client a higher rate (assuming equal price) than one of the offered programs.  This might be as simple as one lender taking the loan and another will not.  The examiner is searching for the reason.
  2. Requiring written explanation when a loan is re-locked.  What changed on the file that the program or rate needed to change?  This prevents any notion of baiting and switching.
  3. Reining in your TPO’s to get written reasons for loan selections.
  4. Ensuring that internal workflow is followed.  As an example, do you require a fully completed loan application prior to a lock in?
  5. Can the loan be locked only with this investor, or any investor?  If limited, why?

These are just a few ways the Compliance Checklist functionality is being used.  I cannot urge you strongly enough to get this started.  Ask anyone who has been through an audit and they will tell you that notations about what happened and when are so very important – and save you an enormous amount of time.

Oh, one more thing, they are monitoring real estate agents too.   A real estate agent recently got a letter that he was violating Fair Housing rules when he advertised a home as “adults only—no one under age 16” on the listing.

CFPB is out there and they have the people to monitor, audit and fine you!

Fair Housing Compliance Check List – Pricing Questions

Prices being equal, did you offer the client the lowest rate option available to them?

Is this a re-lock?  If yes, what changed on the file that it needs a re-lock?

Is this file dependent on the underwriting guidelines of the
investor you selected? If yes, what specifically?

Is the length of the lock being requested compatible with the time to close?

If you are requesting a 15-day lock, is the loan clear to close?

If you are requesting less than 60 days for a refinance or short sale, is that time frame realistic?  If yes, please indicate the loan status in the notations.

Is your final price par?

If your final price is above par, are you charging any discount points? If yes, are you giving a lender credit?  If yes, then how much is the lender credit?

Is your rate lock within (x% – lender determines) of the initial disclosed rate?

What are the client credit scores?  Please list (lender decides which scores they want listed in the notation).

Is this loan a pre-qualification?  If yes, when is closing anticipated?

Is this loan under contract?  If yes, what is the closing date?

What are the lender credits? Require notation.

If the price is below 100 or outside of your LO contract, did you receive prior exception?  If yes, by whom?  Did you document the reason for the exception in the loan file? (Lender sets what they mean by “document.”)

Does the requested pricing meet the parameters of your LO contract?  If no, give reason and who authorized lock.

Has this loan been locked with us during the last 120 days?

If you are requesting a re-lock, is the rate going up?  If so, is this based on a credit verification issue?  Notation needed for explanation.

If you are requesting a re-lock, and the rate or price are increasing, do you have written documentation in the file as to what changed and how that resulted in a higher rate or price?  Require notation.

Have The Regulators Seen Their Shadows?

Have the Regulators Seen their Shadow?

Karen Deis, Publisher, www.MortgageCurrentcy.com – View free video blog on home page.

Well, it seems like the agencies have “seen their shadow” and crawled back into a hole—because there were only a few updates within the last 30 days!

As part of the continuing mini-series of breaking apart the various rules from the Consumer Protection Finance Bureau, we are dissecting each topic that is important to loan originators, and writing about one every month—until they go into effect in 2014.

Part two of the mini-series talks about the Qualified Mortgage Rule and the five tiers of loan amount thresholds when it comes to the maximum amount of income that can be earned for each tier.  There are five different loan amount tiers to be aware of:

Greater than $100,000

$60,000 to $100,000

$20,000 to $60,000

$12,500 to $20,000

And less than $12,500

The maximum income earned on each tier is inclusive of fees and points that are NOT included in your commission.  It also states that those maximum commissions will be adjusted based on the CPI for inflation at the first of every year.

Loan Officer Compensation Rule defines the term “loan originator” in part two of the mini-series.  While it’s not new, it basically says that anyone who quotes rates, assists the consumer in filling out a loan application, or negotiates loan terms and issues approval letters is a loan originator.   SO, if processors, underwriters or assistants do any of these things, they must be licensed.

Something new that doesn’t affect you but we wanted you to know about is that if a seller finances residential property that they own, and provides financing for 4 or more properties within a 12-month time period, they are considered a “loan originator.”

So, if a builder is providing self-financing to home buyers AFTER the home has been completed, a builder would be considered a “loan originator.” However, if they are providing construction loan financing only, they would not have to be licensed.

Just a couple of update from FHA!

There will be a new 92900 form with the new MIP disclosures, but the form won’t go into effect until June 3.  HUD said they are not going to provide a copy of the new form until the changes go into effect, but check with your LOS systems to make sure they are working on the updated version.

And, there was a strange email from HUD.  On March 2, they sent an email with a link to a new TOTAL Scorecard update.  The link took everyone to an OLD update.  We searched the websites, contacted the HUD officials, and the mystery continues—no one knows where to find the March 2 update.   So watch for it in the future.

And, there has been nothing from VA in quite a while—it’s probably one of the most stable loan programs available today.

Remember, getting a loan approved and closed these days IS rocket science.

 

 

 

Big Brother is Watching – Joint Venture between FHFA and CFPB to Monitor the Mortgage Market

Joint Venture between FHFA and CFPB to Monitor the Mortgage Market!

A new national mortgage database is being created to provide the ability to track and monitor various topics.  Some of the ways this database would be used would be to:

  • Monitor the relative health of the mortgage markets and consumers by tracking mortgage loan performance, such as payments being made on time and information on loan modifications, foreclosures and bankruptcies
  • Provide new insight on consumer decision-making by  using the database to conduct surveys
  • Monitor new and emerging products in the mortgage market that would assist regulators in understanding potential problems or  new risks via volume and performance data
  • View both first- and second-lien mortgages for a  given borrower which would allow policymakers the ability to see how many mortgages borrowers may have and how they are performing
  • Understand the impact of consumers’ debt burdens  with the ability to view or have information on a borrower’s other debt obligations, including auto loans or student debt.

This database will include information from the birth of a mortgage loan through the servicing and will include a variety of borrower characteristics.  The database will include loan-level data about the mortgage such as the borrower’s financial profile, their credit profile, the mortgage product and associated terms and ongoing payment history.

The data would be updated on a monthly basis and would be able to track as far back as 1998.

What does it really mean to you? 

Does this mean Big Brother is upon us?  Yes it does.  This is being presented as a solution that the FHFA was required to implement under the Housing and Recovery Act of 2008, which was to conduct a monthly mortgage market survey. 

They go on to say that the database will not contain any personally identifiable information, but I find that hard to believe. 

Can this be a good thing?  It depends on the real purpose of this national database and how it will be used.  It seems innocent enough on the surface, but if used inappropriately it could further restrict the independence and decision-making that is currently left to a borrower or lender based on their own personal risk appetite.

Much of this information is currently available from many private entities that collect various bits of our lives, but it is not all inclusive with any one entity and there is no one central place that holds all this information in one place, UNTIL NOW! The government will now have access to this information. 

It will take a while to build this database, but the CFPB and FHFA are indicating that early versions of the database could be ready as early as sometime in 2013.

Karen Deis, Publisher of www.MortgageCurrentcy.com, an ezine that keeps you up to date on all the mortgage rule updates because getting a loan approved and closed these days IS rocket science! 

Is a Simpler Mortgage Application Process On the Way?

Regardless of what type of loan you are interested in getting, the paperwork and process of getting a loan can be confusing. Sure, there are different types of loans (popular ones include VA loans, FHA loans, Conventional loans and jumbo loans) and the paperwork will be different for each type of loan – but that is not the only confusing part of the process. Each lender has different “overlays” which means getting an FHA loan from one lender may follow a slightly different process than getting a loan from a different lender.

To further complicate things, there are mortgage brokers, bankers and large banks — and each one has their own process to follow that can be confusing.

Lucky for consumers, the CFPB has been established to hopefully make the entire process simpler regardless of what type of loan you apply for.

The Consumer Financial Protection Bureau (CFPB), established following the passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, was implemented specifically to create, implement and enforce laws that protect consumer interests as they pertain to financial dealings, including mortgage applications.

As a direct response to complaints from consumers that they did not receive ample information or assistance from their lenders, the Bureau recently unveiled plans to simplify the mortgage application process and to provide increased protection for consumers who are taking out high-cost mortgages. If implemented, these regulations will provide the transparency needed for consumers to avoid costly hidden fees and uncertainties during the home-buying process. The proposed regulations currently open for public comments, and the final version of the regulations should be finalized by early 2013.

What the New Regulations Entail

Until now, federal law has demanded that loan applicants receive two sets of similar forms, one required by the Real Estate Settlement Procedures Act (RESPA) and the second required by the Truth in Lending Act (TILA). Aptly dubbed “Know Before You Owe” mortgage forms, the CFPB’s proposal would continue to require two sets of forms, but the information contained within would be less repetitive, such that one form would focus entirely on stipulating the closing costs, while the other would describe the mortgage process as a whole, including the costs and risks, information which would hopefully reduce the risk of foreclosure or defaulting on the loan.

The new forms proposed by the CFPB have been reviewed by both consumers and mortgage professionals, and have received thousands of comments from the public. Ten rounds of testing have been done in order to fine-tune the documents to ensure that they address the issues as clearly and concisely as possible. The CFPB website current presents the proposed forms for public feedback which can be submitted until November 6, 2012.

In addition to changes in the paperwork required when applying for a mortgage, the CFPB has proposed that mortgage lenders adjust the paperwork presented to borrowers in the form of monthly statements, so that moving forward, each monthly mortgage statement would include a breakdown of the different aspects of the mortgage payment such as interest and principal, as well as information listing where borrowers can seek help if they are concerned about their ability to pay their mortgage.

In the same vein, the new regulations would also require lenders would to inform borrowers in advance of any upcoming interest rate hikes, and to provide suggestions as to where the borrower can receive assistance if he or she expects that the rate hike will make the monthly payments unaffordable.

If implemented, the CFPB will monitor lenders to ensure that they respond to all borrower inquiries within a defined time period, a measure aimed at preventing borrowers from entering foreclosure simply because they could not connect with their lender to find an alternate solution which may include refinancing, speaking with a HUD (US Department of Housing and Urban Development) counselor or filing for government assistance.

Finally, the CFPB is working to protect borrowers taking out high-cost mortgages by restricting fees for late payments or modifying the terms of the loan, and requiring loan counseling for all recipients of high-cost mortgages. Public comments about the new stipulations for high-cost borrowers can be submitted to the CFPB until September 7, 2012.

Whether or not the proposed CFPB regulations are actualized, it is critical for mortgage borrowers to understand their options as they pertain both to borrowing conditions and repayment options during an unexpected financial crisis. Those who are unsure about their options or who don’t feel comfortable making a final decision should be encouraged to seek additional advice or to review the material presented so that they can make a comfortable, informed decision before committing to a long term loan.

Finally, A Govt Agency That Wants to Hear From You!

Looks like the CPFB has been working on hard on creating new loan disclosure forms and guess what?

They want to hear from you–yes YOU!

I’ve copied the email that they sent out!  They want you to choose between two loan scenarios (Jasmine and Nandina) and tell them why you would choose one loan option over the other one.  There is also a short questionnaire asking you for suggestions on what else you’d like to know about.

Would you please take a look and choose one of the other.  Please let us know which loan option you choose and why!  What suggestions did you make?  THIS IS YOUR CHANCE TO PROVIDE INPUT (which is totally rare for a government agency anyway!)  Karen Deis, Publisher, www.MortgageCurrentcy.com (Reading the fine print–so you don’t have to!)

 

                                                                       Email Notice From CFPB: 

Since May, we have been asking you to help us improve mortgage disclosure. By comparing different draft forms, you’ve helped us understand how to communicate information more effectively.

Now we need you to do something just a little different.

This time we’ve posted just one version of a disclosure, but with two different mortgage loan products. We’d like you to look at them and decide which one you would choose.

Make your choice today:
www.consumerfinance.gov/knowbeforeyouowe

We’re shifting gears for a simple reason: Comparing two versions of a form is useful, but in the real world, consumers should be able to use disclosures to compare different loan offers, not different forms. An effective disclosure form should help people make the best decisions for themselves and their families.

We want to see how well this version of the form lets people do that. Can consumers use the form to choose the right loan for themselves and their families? Can lenders or advisers make a clear recommendation about the best loan?

Tell us which loan you prefer. Help us make mortgage disclosure forms easier to understand and use:
www.consumerfinance.gov/knowbeforeyouowe

Thank you for your help,
The Consumer Financial Protection Bureau