Foremost mortgage rule: Read the fine print
It is now common knowledge that the Consumer Financial Protection Bureau is implementing new regulations on January 17, 2014, trickling down through the grapevine to yesterday’s news. However, the news ends on the issue that there are new regulations, few go into detail about what the new rules entail.
The CFPB amended and issued the final ruling on Regulation Z, the Truth in Lending Act, and Regulation X, the Real Estate Settlement Procedures Act, on January 10, 2013.
At the SourceMedia mortgage servicing conference in Dallas, Texas, Nanci Weissgold, partner at K&L Gates, and Antonio Chimienti, senior vice president at Bayview Loan Servicing, dug into key upcoming regulation changes.
Servicers not only need to abide by federal regulations, but they additionally need to follow individual state rules. "As we have said, the federal law is setting the floor. States can exceed it, causing additionally regulations for servicers to follow," Weissgold explained.
The CFPB created a vast amount of new rules, but key rules under TILA include periodic billing and payment crediting and payoffs. On the other side, notable rules under RESPA include forced-placed insurance and early intervention.
Diving into a few changes under TILA, servicers must provide periodic billing statements, which applies to closed-end consumer credit transactions secured by dwelling excluding reverse mortgages and timeshares. TILA also requires servicers to promptly credit periodic payments from borrowers as of the day of receipt, which consists of principal, interest and escrow.
Servicers face several challenges, according to Weissgold, including engaging technology support, integrating state law restrictions and understanding how requirements apply to different activities.
One key detail in RESPA is the forced-placed insurance rule, prohibiting a servicer from charging a borrower for force-laced insurance unless it has reasonable basis to believe the borrower has failed to maintain hazard insurance and has provided the required notices.
Additionally, the final rule requires servicers to establish or make good faith efforts to establish live contact with borrowers, where appropriate, that loss mitigation options may be available.
"As for good faith efforts, while the rules make no specifics, the standard do give flexibility. Good faith efforts are reasonable efforts that are taken under the circumstances," Chimienti said.
The implementations of the new regulations are quickly approaching, and they cannot be conquered overnight. In 30 minutes the panelists could barely get through a slideshow of just a few of new rules and regulations, it will take lenders and servicers a lot longer.
As covered in an earlier panel, companies will need to make sure they have the right team set up to handle and properly deal with the new transitions.