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  • Conference of State Bank Supervisors announces single, national exam for mortgage loan originator licensing

    Lending

    On August 8, the Conference of State Bank Supervisors announced that all states and U.S. territories now use a single, common exam to assess mortgage loan originators (MLOs) in order to simplify the licensing process and streamline the mortgage industry. MLSs who pass the National SAFE MLO Test with Uniform State Content (National Test) will no longer be required to take additional state-specific tests in order to be licensed within any state or U.S. territory. The National Test is part of CSBS’ Vision 2020, which is geared towards streamlining the state regulatory system to support business innovation and harmonize licensing and supervisory practices, while still protecting the rights of consumers. 

    Find continuing InfoBytes coverage on CSBS’ Vision 2020 here.

    Lending CSBS Mortgage Origination Licensing Vision 2020

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  • CFPB updates TRID Small Entity Compliance Guide and Guide to Forms

    Agency Rule-Making & Guidance

    On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.

    Agency Rule-Making & Guidance TRID Mortgages Mortgage Origination Regulation X Regulation Z Consumer Finance CFPB

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  • DOJ settles with Minnesota community bank to resolve fair lending violations

    Lending

    On May 8, the Department of Justice announced a settlement with a Minnesota community bank to resolve allegations that the lender excluded predominantly minority neighborhoods from its mortgage lending service in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). According to the complaint filed in 2017, between 2010 and 2015, the bank engaged in unlawful redlining in and around Minneapolis-St. Paul, Minnesota by meeting the residential credit needs of individuals in majority-white census tracts, but avoided serving similar needs in majority-minority census tracts. The settlement requires the bank to expand its banking services in predominantly minority neighborhoods, including opening one full service branch within the specified census tract. In addition to compliance monitoring and reporting requirements, the bank is also required to (i) employ a Community Development Officer and an Executive leader; (ii) spend a minimum of $300,000 on advertising, outreach, and education and credit repair initiatives; (iii) invest a minimum of $300,000 in a program for special purpose loan subsidies; and (iv) continue to provide fair lending training to all employees.

     

    Lending DOJ Fair Lending Redlining ECOA Fair Housing Mortgage Lenders Mortgage Origination

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  • FFIEC releases 2017 HMDA data; CFPB releases new annual report on mortgage market activity and trends

    Federal Issues

    On May 7, the Federal Financial Institutions Examinations Council released the 2017 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions covering information submitted by financial institutions on or before April 18. The data will not remain static, but instead will be updated on an on-going basis to reflect late submissions and resubmissions. The data currently include information on 14.1 million actions: 12.1 million home loan applications, 7.3 million of which resulted in loan originations, and 2.1 million in purchased loans. Observations from the CFPB on the data include: (i) total number of originated loans decreased by 12.4 percent; home-purchase lending increased by 4 percent; (ii) nondepository, independent mortgage companies accounted for 56.1 percent of first-lien owner-occupied home purchase loans (up from 53.3 percent in 2016); and (iii) the share of refinance loans to low- and moderate-income borrowers increased from 16.9 percent to 22.9 percent.

    On the same day, the CFPB also released its first annual series of data points describing mortgage market activity based on data reported under HMDA. The report summarizes the 2017 HMDA data and recent trends in the mortgage market.

     

    Federal Issues CFPB FFIEC HMDA Mortgages Mortgage Origination

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  • West Virginia passes bill amending licensing requirements for mortgage loan originators

    Lending

    On March 22, the West Virginia governor signed HB 4285, which amends provisions under the West Virginia Safe Mortgage Licensing Act (Act) related to licensing requirements for mortgage loan originators, including those related to continuing education. HB 4285, among other things, (i) updates requirements for applicants registering for mortgage loan originator licenses; (ii) requires nonresident mortgage loan originators licensed under the Act to “acknowledge that they are subject to the jurisdiction of the courts of West Virginia”; (iii) outlines provisional license exceptions for loan originators; and (iv) specifies prelicensing and relicensing education requirements. The amendments take effect May 31.

    Lending State Issues State Legislation Mortgage Origination Mortgages Licensing

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  • CFPB Issues Consent Order for Steering to Real Estate Settlement Services Provider

    Consumer Finance

    On September 27, the CFPB issued a consent order against a real estate settlement services provider for allegedly steering consumers to a title insurer owned in part by three of its executives without disclosing its affiliated business interests, as required by RESPA. According to the consent order, the company received money “beyond the commission it would normally have been entitled to collect” due to an agreement or understanding that it would refer its business to the title insurer, but it did not make the disclosures of the affiliate relationships required by RESPA to over 7,000 consumers. The CFPB’s order requires the company to pay up to $1.25 million in redress to affected consumers and to implement policies and procedures to ensure proper disclosure of applicable referrals to consumers in the future.

    Consumer Finance CFPB Enforcement RESPA Mortgage Origination

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  • Illinois Governor Enacts Amendments to Predatory Lending Database Article

    State Issues

    On September 15, Illinois Governor Bruce Rauner signed into law amendments to the state’s Residential Real Property Disclosure Act to change provisions under its Predatory Lending Database Article. Public Act 100-0509 sets forth the following changes, among others: (i) certificates of compliance or certificates of exemption must now contain at least “one of the borrower’s names on the mortgage loan and the property index number for the subject property”; (ii) amends the definitions of “counseling” by removing the reference to “telephone counseling” and “originator” to reference “mortgage loan originator”; (iii) eliminates the requirement that originators shall provide information regarding affiliated or third party service providers or monies received from a broker or originator for inclusion in the predatory lending database; and (iv) provides additions to the information that must be collected and submitted by the title insurance company or closing agent for inclusion in the predatory lending database, such as a detailed list of all notices provided to the borrower at closing, including information in connection with the Integrated Closing Disclosure and the Integrated Loan Estimate Disclosure required under TILA-RESPA. The amendments took effect September 15, 2017.

    State Issues State Legislation Predatory Lending Mortgages TRID TILA RESPA GFE Mortgage Origination

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  • CFPB’s Summer Edition of Supervisory Highlights Discloses Findings Across Many Financial Services Areas

    Consumer Finance

    On September 12, the CFPB released its summer 2017 Supervisory Highlights, which outlines its supervisory and oversight actions in areas such as auto loan servicing, credit card account management, debt collection, deposit account supervision, mortgage origination and servicing, remittances, service provider programs, short-term small-dollar lending, and fair lending. According to the Supervisory Highlights, recent supervisory resolutions have “resulted in total restitution payments of approximately $14 million to more than 104,000 consumers during the review period” between January 2017 and June 2017.

    As examples, in the area of auto loan servicing, examiners discovered vehicles were being repossessed even though the repossession should have been cancelled. Coding errors, document mishandling, and failure to timely cancel the repossession order were cited causes. Regarding fair lending examination findings, the CFPB discovered, in general, “deficiencies in oversight by board and senior management, monitoring and corrective action processes, compliance audits, and oversight of third-party service providers.” Examiners also conducted ECOA Baseline Reviews on mortgage servicers and discovered weaknesses in servicers’ fair lending compliance management systems. Findings in other areas include the following:

    • consumers were provided inaccurate information about when bank checking account service fees would be waived, and banks misrepresented overdraft protection;
    • debt collectors engaged in improper debt collection practices related to short-term, small-dollar loans, including attempts to collect debts owed by a different person or contacting third parties about consumers’ debts;
    • companies overcharged mortgage closing fees or wrongly charged application fees that are prohibited by the Bureau’s Know Before You Owe mortgage disclosure rules; and
    • borrowers were denied the opportunity to take full advantage of the mortgage loss mitigation options, and mortgage servicers failed to “exercise reasonable diligence in collecting information needed to complete the borrower’s application.”

    The Bureau also set forth new examination procedures for HMDA data collection and reporting requirements as well as student loan servicers, in addition to providing guidance for covered persons and service providers regarding pay-by-phone fee assessments.

    Consumer Finance CFPB Enforcement Auto Finance Credit Cards Debt Collection Fair Lending ECOA Compliance Mortgage Origination Mortgage Servicing HMDA Student Lending Loss Mitigation

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  • OCC Issues Guidance for Banks Originating Mortgages with LTV Ratios Greater than 100 Percent as Part of Community Revitalization Efforts

    Lending

    On August 21, in an effort to assist in revitalizing distressed communities, the OCC released guidance for national banks and federal savings associations considering owner-occupied residential mortgage originations with loan-to-value (LTV) ratios greater than 100 percent. Bulletin 2017-28 includes, among other thing, the program criteria, which includes (i) permanent first-lien mortgages with LTV ratios exceeding 100 percent at time of origination, without mortgage insurance or other acceptable collateral, and with an original loan balance of $200,000 or less, (ii) communities that are “officially targeted for revitalization by a federal, state, or municipal government entity or agency,” (iii) a set of program policies and procedures, and (iv) providing notice to the OCC thirty days prior to starting or modifying a program.

    Established programs will be actively monitored and evaluated to examine the performance of the LTV loans, and the programs as a whole will be evaluated at least annually to determine the extent to which they are aiding in revitalization efforts. Depending on its findings, the OCC reserves the right to amend or rescind Bulletin 2017-28, but maintains that any loans originated in agreement with the required provisions will not be affected “solely because of any measurable amendment or rescission of this [B]ulletin.”“Bank lending under such a program may serve the credit needs of individual borrowers and the community, and the bank may receive Community Reinvestment Act consideration depending on the specifics of the program,” the OCC noted.

    Lending Agency Rule-Making & Guidance OCC CRA Mortgage Origination LTV Ratio

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  • DOJ Announces Settlements with Non-Bank Mortgage Lender to Resolve Alleged False Claims Act Violations

    Lending

    On August 8, the DOJ announced a $74.5 million settlement with a non-bank mortgage lender and certain affiliates to resolve potential claims that they violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development and the Veterans Administration (VA), and by selling certain loans to Fannie Mae and Freddie Mac that did not meet applicable requirements. According to the terms of the two settlement agreements, $65 million of the settlement will be paid to resolve allegations relating to FHA loans, and $9.45 million will be paid to resolve potential civil claims relating to certain specified VA, Fannie Mae, and Freddie Mac loans. The settlements also fully resolved a False Claims Act qui tam lawsuit that had been pending in the United States District Court for the Eastern District of New York.

    The settlement included no admission of liability by the lender. The lender issued a statement responding to the settlements: “We have agreed to resolve these matters, which cover certain legacy origination and underwriting activities, without admitting liability, in order to avoid the distraction and expense of potential litigation. While we cooperated fully in these investigations since receiving subpoenas in 2013, we concluded that settling these matters is in the best interest of [the company] and its constituents.”

    Lending Mortgages False Claims Act / FIRREA Mortgage Origination HUD Fannie Mae Freddie Mac FHA Settlement DOJ Nonbank Supervision

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