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IMO you need separate flood determinations for each property, otherwise how will you know which property is in the flood zone if the determination comes back positive? I’m also thinking about the life of loan monitoring you most likely have with your flood determination vendor. There could be map change affecting one property and not another, which could make it difficult for you to determine which property has had a change – and when your being held to strict timeframes, as with flood regulations, the cleaner you can make the process the better.
I don’t find a definition or reference to an another Regulation’s definition of affiliate for this section. The CFPB’s Regulation P and X, as well as the FRB’s Regulation W have definitions of affiliate that are very similar and, IMO, commonly accepted to define affiliate.
The required provider list you’re thinking of went away with the revised GFE. Now, if you allow a customer to shop for a third party settlement service, you must provide the borrower with a list of settlement service providers at the time of the GFE, on a separate piece of paper.
From Reg X, Appendix C, page 2:
Your Charges for All Other Settlement Services”There is a 10 percent tolerance applied to the sum of the prices of each service listed in Block 3, Block 4, Block 5, Block 6, and Block 7, where the loan originator requires the use of a particular provider or the borrower uses a provider selected or identified by the loan originator. Any services in Block 4, Block 5, or Block 6 for which the borrower selects a provider other than one identified by the loan originator are not subject to any tolerance and, at settlement, would not be included in the sum of the charges on which the 10 percent tolerance is based. Where a loan originator permits a borrower to shop for third party settlement services, the loan originator must provide the borrower with a written list of settlement services providers at the time of the GFE, on a separate sheet of paper.em>
As far as I know, Regulation O hasn’t been amended yet. So based on what information we have at this point, IMO if you have an credit exposure with your repurchase agreements then you should refer to 12 CFR 215.4 and 215.5. The prior approval section in 215.4 applies to all extensions of credit to insiders (exec. officers, directors and principal shareholders and any related interests of these individuals) that exceed the stated threshold. Once Regulation O is amended what’s required should become clearer.
Yes, high cost mortgages are HOEPA loans. And you are correct, Jack discussed the new thresholds in the most recent session.
The final rule will extend the QM safe harbor to small creditors with first lien qualified mortgages under 1026.43(e)(5) even if the APR is between 1.5 – 3.5 percentage points higher than the APOR. It is raising this threshold to ensure small creditors still make loans that consumers need – since smaller creditors have a higher cost of funds their rates may be higher and therefore they should be given greater tolerance. The CFPB feared that if small creditors can’t make these loans within the safe harbor parameters then they may not be made at all which would leave a segment of consumers underserved.
Unfortunately, The escrow trigger is not changing, so if you make an HPML under 12 CFR 1026.35 you’ll still have to comply with the escrow requirements unless you meet one of the exemptions in 1026.35(b)(2).
If you have a standard policy in place you need to follow the proper notification process outlined in the flood regulations. That is send the 45 day notice and allow the borrower time to obtain a policy. You may not force place or charge them for insurance during that time. On day 46 you should force place if they haven’t obtained insurance. Here’s a link to the regulation: https://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=3d5de1e4a10cfcd995b50851357bba4d&rgn=div8&view=text&node=12:1.0.1.1.20.0.8.7&idno=12
If you have an MPPP policy in place you may renew this policy on it’s renewal date rather than waiting until 45 days after it expires. But you need to follow the MPPP notification process which includes letters that go out 45 days before the policy is set to expire, 15 days before it is set to expire, and a final letter when the policy is renewed (the latter two are only required in the event the borrower doesn’t purchase the required insurance.) You can find the MPPP notification process here in Addendum 2: https://www.fema.gov/library/viewRecord.do?id=3820
I agree with cmitchell. They’re trying to assist banks without a large compliance staff. There’s no real limit on size of bank to which they apply.
The intros of the SECGs state:
Our goal with this guide is to provide a comprehensive rule summary in a plain language and FAQ format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.
Below is an excerpt from the proposed revisions to the servicing rules. The proposed comment below is one of many pertaining specifically to the small servicer exemption.
It further clarifies what is already stated in commentary 1026.41(e)(4)(ii).The proposed comment 41(e)(4)(ii)-1 would set forth the two requirements for determining if a servicer is a small servicer and would clarify that both requirements apply to the mortgage loans serviced by the servicer as well as by its affiliates. The comment would set forth both requirements: (1) A servicer, together with its affiliates, must service 5,000 or fewer mortgage loans, and (2) the servicer must only service mortgage loans for which the servicer (or an affiliate) is the creditor or assignee. Proposed comment 41(e)(4)(ii)-2 would further clarify that to be the “creditor or assignee” of a mortgage loan, the servicer (or an affiliate) must either currently own the mortgage loan or must have been the entity to which the mortgage loan was initially payable (that is, the originator of the mortgage loan). A servicer that only services such mortgage loans may qualify as a small servicer so long as the servicer also only services 5,000 or fewer mortgage loans.
As the proposed comment clarifies the requirement, if your bank is below the 5,000 threshold and is the original creditor of these loans then you should qualify for the small creditor exemption.
There are three pieces of guidance/regulation to consider in regard to appraisals/valuations: 1) Reg Z’s appraisal rules for HMPLs and valuation independence rules; 2) Regulation B’s notice and delivery requirements in 12 CFR 1002.14 and its commentary; and 3) the Interagency Appraisal and Evaluation Guidelines. Both Reg Z and Reg B have notice and delivery
requirements. If the loan is an HPML you’ll need to look to Reg Z for requirements (there are many) under 1026.35(c). Finally, the Interagency Guidance details what is required for appraisals and valuations. There isn’t anything, that I’m aware of, that says you automatically need a new appraisal for each transaction.
My question is, how do you verify there hasn’t been any changes in the market conditions or physical aspect of the property that would affect the collateral (as required by your policy)? If this is through a valuation of the property, then you would need to disclose that per Reg B’s rules.
Since the refinancing is a new transaction rather than a renewal of the existing loan (in which case the borrower would have already received the Reg B disclosure and copy of appraisal for that transaction) I believe the safest approach is to give a new disclosure and copy of the appraisal that you are using in connection with the refinance.The commentary to 12 CFR 1026.35(b)(1) states that 35(b)(1) (the requirement to escrow for taxes and insurance) applies to principal dwellings. Therefore, IMO your additional properties wouldn’t require escrow only the principal dwelling.
As for the loan modification/change in terms if it is isn’t a refinance then there would no change in the escrow requirements from when the loan was established. If the old loan will be paid off and replaced by a new loan then the new escrow requirements would be applicable. Take a look at 12 CFR 1026.20 and its commentary to determine if you have a modification or refinance.Your bank may implement escrow for an existing loan by having the borrower(s) sign an escrow agreement (the borrower would have to agree to it) and sending them the initial escrow statement within 45 days of establishing the escrow account. With that said, it shouldn’t be a standard practice to wait until after closing to establish escrow accounts.
We had a similar situation at a bank where I worked. You should be able to talk to your flood determination company and explain your situation. They have most likely seen this before and can review the location of the barn using the parcel number and aerial maps to determine if the barn is located in a flood zone. If part of the barn is in a flood zone then you will need flood insurance on the barn.
From page 106 of the Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act final rule: “As discussed below in the section-by-section analysis of § 1026.43(e)(5), the Bureau is adopting § 1026.43(e)(5) consistent with existing § 1026.35(b)(2) with regard to the asset size and annual loan origination thresholds defining a small creditor. The Bureau did not propose and did not solicit comment regarding other amendments to the escrow provisions in § 1026.35(b)(2).”
The final rule will extend the QM safe harbor to small creditors with first lien qualified mortgages under 1026.43(e)(5) even if the APR is between 1.5 – 3.5 percentage points higher than the APOR. It is raising this threshold to ensure small creditors still make loans that consumers need – since smaller creditors have a higher cost of funds, their rates may be higher and, therefore, they should be given greater tolerance. The CFPB feared that if small creditors can’t make these loans within the safe harbor parameters then they may not be made at all which would leave a segment of consumers unserved.
If you are not making HPMLs you shouldn’t have a problem with the APOR threshold for the safe harbor. So if you have a qualified mortgage that is not a higher priced covered transactions then you have a safe harbor for that loan. Unfortunately, The escrow trigger is not changing so if you make an HPML under 12 CFR 1026.35 you’ll still have to comply with the escrow requirements unless you meet one of the exemptions in 1026.35(b)(2).
