CFBP Rules Taking Effect in 2013
1) Remittance Transfer Rule (Amendment to Reg. E)
The remittance transfer rule is designed to protect consumers who send money to foreign countries via Electronic Funds Transfers, or "remittance transfers." The rule requires that the company making the transfer (often non-depository "money transmitters") provide the consumer with a disclosure and receipt that lists the exchange rate, fees and taxes charged, and the amount of money to be delivered abroad. An amendment to the rule in July 2013 made it optional, in certain circumstances, to disclose fees and taxes imposed by the designated recipient’s institution, since the originating institution does not always have that information for money transmitters. The amendment also clarifies the responsibility and potential liability of a remittance transfer provider when a sender provides incorrect or insufficient information. The rule also requires that consumers be given 30 minutes to cancel the transfer without penalty, among several other protections. This rule is effective October 28, 2013. See full NASCUS Summary here.
2) Loan Originator Compensation & Qualification
This final rule is designed primarily to protect consumers by reducing incentives for loan originators to steer consumers into loans with particular terms and by ensuring that loan originators are adequately qualified. A few of the main provisions include prohibitions against dual compensation of originators, compensation based on a term of the transaction, and lending at higher rates than necessary in order to generate higher fees. The amendments to § 1026.36(h) and (i), which prohibit use of mandatory arbitration clauses, financing of single-premium credit insurance, and certain other waivers are effective on June 1, 2013. All other provisions of the rule are effective on January 1, 2014.
3) Appraisals for Higher-Priced Mortgage Loans
This final rule was issued jointly with the FRB, FDIC, FHFA, NCUA, and OCC. It implements changes to the Truth in Lending Act required by Dodd-Frank. Essentially, the rule requires a lender to obtain an appraisal by a certified or licensed appraiser for mortgages with an APR that exceeds the average prime offer rate by a specified percentage (i.e. subprime loans). The lender must also provide the consumer with free copies of all appraisals prior to the loan closing. Additional protections are provided if the home is "flipped," meaning the previous owner owned it for less than six months. This rule is effective January 18, 2014.
4) Appraisal Disclosure & Delivery Requirements (Reg. B)
In general, the revisions to Regulation B require creditors to provide to applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling, and require creditors to notify applicants in writing that copies of appraisals will be provided to them promptly. The rule is effective January 18, 2014.
5) Mortgage Servicing Rules (Reg. X & Z)
The Regulation X final rule implements Dodd-Frank Act sections addressing servicers’ obligations to correct errors asserted by mortgage loan borrowers; to provide certain information requested by such borrowers; and to provide protections to such borrowers in connection with force-placed insurance. This final rule addresses servicers’ obligations to establish reasonable policies and procedures to achieve certain delineated objectives; to provide information about mortgage loss mitigation options to delinquent borrowers; to establish policies and procedures for providing delinquent borrowers with continuity of contact with servicer personnel capable of performing certain functions; and to evaluate borrowers’ applications for available loss mitigation options. The Regulation Z final rule implements Dodd-Frank Act sections addressing initial rate adjustment notices for adjustable-rate mortgages, periodic statements for residential mortgage loans, prompt crediting of mortgage payments, and responses to requests for payoff amounts. These rules are effective on January 10, 2014.
6) Qualified Mortgage Rule (Reg. Z)
This rule requires lenders to make a reasonable, good-faith determination regarding a consumer’s ability to repay a loan secured by a dwelling. The rule also limits prepayment penalties and has a three year records retention requirement. The rule extends an exception to the general prohibition on balloon features for high-cost mortgages to allow small creditors to continue originating balloon high-cost mortgages if the loans otherwise meet the requirements of qualified mortgages. This exception was originally limited to small institutions in “rural” and “underserved” areas, but was expanded to all small institutions in a September 2013 amendment to the final rule. Some liability protections are provided to lenders for qualified mortgages. This rule is effective January 10, 2014.
7) Escrow Requirements Rule (Reg. Z)
This rule extends the amount of time that a lender must maintain an escrow account for a higher-priced mortgage loan from one year to five years. The rule provides some exemptions for small creditors that operate predominately in rural or underserved areas. A September 2013 amendment to the final rule allows credit unions that operated in rural or underserved areas in any of the previous three years to maintain that classification, even if they do not meet the standard for the current year. This rule takes effect on June 1, 2013.
8) Homeownership Counseling Amendments (Reg. X & Z)
These rules expand the types of mortgage loans that are subject to the Home Ownership and Equity Protections Act ("HOEPA") protections and adds a pre-loan counseling requirement for all HOEPA loans. The rules are designed to provide added protection to consumers who are being offered a high-cost mortgage, first mortgage, refinancing loan, or home equity loan. This rule is effective January 10, 2014.