CFPB

More CFPB News: A Possible Deadline Extension and a Useful Toolkit

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 Don’t get excited about the rumor!

gossipWhen Steven Antonakes of the CFPB spoke to a group of consumer bankers on March 25, he initiated a series of news articles and fueled a rumor mill among bankers and others that the August 1, 2015 date for implementation of the new integrated mortgage disclosures might be extended.

Mr. Antonakes was responding to a concern that some industry vendors may not be ready for the deadline.

Here’s the quote that caused the ruckus: “To the extent there is new information or we’re hearing directly from vendors that folks aren’t going to be ready…we should continue to talk about that. I can’t promise you (changes) but to the extent we will have a better understanding of the concerns, that is something we will consider.”

Lenders and others unquestionably got their hopes up that the August 1 date would be extended. But CFPB spokesman Sam Gilford quickly stated that the bureau has no current plans to delay implementation.

And Michele Korsmo, CEO of America Land Title Association said in an ALTA Advocacy Update of March 30, “Before anyone gets excited, I am telling you today that implementation of the new Integrated Mortgage disclosures will be required on August 1st, 2015.”

 Don’t count on the deadline being extended. Get ready!

Lenders continue to hope for leniency in the enforcement for a period of time after August 1, but no strategy for lenience has been implemented to date.

In other CFPB news, the bureau recently released a “Know Before You Owe” home loan toolkit, a comprehensive step-by-step guide to help consumers understand the closing process. The toolkit contains interactive worksheets and tips for obtaining additional information. I encourage closing attorneys to use this guide to educate clients.

We have all been concerned about owner’s titletoolbox insurance being called “optional” in the new disclosures. I was encouraged to see that this toolkit contains positive information about title insurance, including the fact that title insurance can safeguard the owner’s financial investment. Common claims were stated to be outstanding taxes and mechanics’ liens.

This toolkit might be a good tool for all of us!

Lenders’ Closing Plans Solidify As August 1 Approaches

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news news newsCitibank recently notified settlement agents (closing attorneys in South Carolina) that they will be requested to register with the FPSDirect Vendor Website at the time they agree to handle a Citibank closing. This website was created to provide the bank’s settlement agents with an easy and efficient method of loan document delivery, closing date confirmation and funding approval, among other matters. The memo stated the bank’s goal is to save the time of faxing and the insecurity of email.

Wells Fargo issued a Settlement Agent Communication on March 16 indicating that, like Bank of America, it plans to integrate with Closing Insight™ with a goal of improving the way instructions, fees and other information is shared. The memo stated: “Unlike today where we typically use email to pass these important details back and forth, Closing Insight™ will support an interactive, online collaboration that includes a full view of information from both parties, and provides an audit trail and quality checks to reduce errors.”

We have learned and the Wells Fargo communication states that many closing attorneys will be able to access Closing Insight™ through connections with their existing software packages. Wells’ communication also states that attorneys without closing software packages will not be left out because a secure web portal will be available. Wells reiterated its goal of continuing to do business with local service providers, but emphasized that it expects closing attorneys to be ready, willing and able to comply with requirements and closing instructions.

Wells Fargo also answered four recent FAQs:

“If co-borrowers plan to sign the loan documents on different dates, which date applies for compliance with the three business day receipt requirement of the CD? The borrower’s CD must have been received not less than three business days before the earliest signing date. This question highlights the importance of communicating specifics about signing plans to your Wells Fargo closing contact, including cases when a mobile signing agent or mail away signing is being requested.

Will Wells Fargo be providing loan closing documents to the settlement agent at the same time the borrower’s CD is delivered? Our goal is to provide the closing documents to the settlement agent shortly after the borrower’s CD has been finalized and provided to the borrower. In most cases, you should receive the closing documents earlier than in the past.

Will Wells Fargo permit any other party to deliver the borrower’s CD to meet the three business day closing requirement for a rush closing situation? No. We have determined that we must be responsible for delivering the borrower’s CD to meet and track the three business day receipt requirement for all transactions We will continue to encourage all parties involved to stay in close communication and work together proactively to minimize the need for expedited CD delivery.

Is my company required to be ALTA Best Practices Certified by August 1 to continue to close Wells Fargo loans?  No. Completing your certification by August 1 will not be a Wells Fargo requirement. However, we hope that if your company is not yet certified you will – at minimum – have already completed a self-assessment and addressed any identified gaps. As communicated in our March 6, 2014, newsletter, Wells Fargo supports the ALTA Best Practices as sound business practices that should ideally already be in place for businesses providing title and closing services to our customers.”

Wells Fargo also stated that it has entered into a business arrangement with ClosingCorp, a leading provider of fee management solutions, to obtain actual fee information from selected settlement agents who closing a high number of Wells Fargo loans.

Lenders Announce They Will Control More of the Residential Closing Process

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Regional bank will require third-party BP certifications on a short time frame!

work in progressLet’s take the big bank first. Bank of America recently shared more details about changes in its closing processes after August 1, 2015.  In addition to delivering Closing Disclosures, BofA will take the responsibility for complying with the three-business day waiting period. It will not require closing attorneys to monitor the timing of the delivery of the initial CD or any required re-disclosures.

BofA stated that close collaboration will be needed with closing attorneys for requests of information and notices of all loan and fee changes through its selected platform, RealEC® Technologies Closing Insight™. Closing attorneys will be notified of re-disclosure requirements and new closing dates through Closing Insight™.

BofA said it expects to engage closing attorneys to begin fee collaboration a minimum of ten calendar days prior to closing, and it intends to generate and send the CD six business days prior to closing.*

Now let’s look at an interesting announcement from a small bank, and please pay attention to the short time frame.

Mississippi based regional BancorpSouth announced in early March that its approved closing must comply with ALTA’s Best Practices through a certification from an independent third party vendor acceptable to the bank. Self-certifications will not be accepted.certified - blue (small)

The announcement stated that Memphis Consumer Credit Association and many of the large accounting firms have agreed to provide the certification. The bank asked closing attorneys to advise by March 23 whether they intend to obtain the certification. And the deadline for obtaining the certification was stated to be July 31.

*In almost all South Carolina transactions, we expect the “consummation date” to be the same as the closing date and the same as the date BofA refers to in this memorandum as the signing date.

Three Lenders Make CFPB Announcements

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Two additional lenders will deliver the borrower’s Closing Disclosure

extra extra kid- citi chaseCiti and Chase have joined Well Fargo and Bank of America by announcing that they will deliver borrowers’ Closing Disclosures after the CFPB rules take effect on August 1, 2015.

Citi’s announcement was made on January 28, 2015, followed by Chase’s announcement on February 26. Both lenders stated that closing attorneys will continue to be responsible for sellers’ Closing Disclosures in purchase transactions. Closing attorneys will be required to deliver copies of sellers’ Closing Disclosures to the respective lender.

Citi’s announcement shared some information with its settlement agents that has previously been made clear by the rule itself. That is, there will be several weeks or months after August 1 when the old forms will be used because it is the application date as of August 1 that triggers the use of the new forms, and early use of the Closing Disclosure is not allowed. Citi also pointed out that the new rules do not apply to home equity loans.

Closing attorneys should note that their software systems will have to accommodate old and new versions of the forms because of the transition and because all loans will not be subject to the new rules.bandwagon - one way (smaller)

Union Bank announced on February 26 that it will use the web-based tool Closing Insight™ to simplify the multi-party closing process and support efforts to ensure regulatory compliance. The announcement stated that no other means of communication or document delivery will be accepted.

We will continue to read and keep you informed!

Good News for Small Lenders

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changes comingCFPB proposed rule change may also benefit South Carolina closing attorneys.

On January 29, the CFPB proposed its ability to repay and qualified mortgage rules to facilitate additional mortgage lending by credit unions and community banks. South Carolina closing attorneys who handle transactions for small lenders could benefit from these proposed rule changes because the business coming from these lenders would increase in volume.

Comments are due on the proposals by March 30. South Carolina closing attorneys should consider commenting positively on this proposal.

“Responsible lending by community banks and credit unions did not cause the financial crisis, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray.

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Credit unions and other small lenders have been lobbying for flexibility under the new rules, and this development is considered to be a victory for them.

The proposed rules would expand the definition of “small creditor” by raising the limit on first lien-mortgages from 500 to 2,000, excluding the mortgages held in the portfolios of the creditor and their affiliates. The CFPB said that this change would increase the approximate number of small lenders from 9,700 to 10,400.

Small lender status allows these lenders to make loans where the homeowner’s total debt payments exceed 43 percent of pretax income.

The proposal would also extend the ability of small creditors in rural or underserved areas to issue loans with balloon payments and still have them qualify as qualified mortgage loans. The definition of “rural” was extended to any census block that is not in an urban area as defined by the Census Bureau.stay tuned

A copy of the proposal can be found at the Consumer Financial Protection Bureau’s  website, or by clicking here.

Don’t Expect Uniform Closing Procedures in 2015

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And … Bank of America makes a big announcement.

changes comingLenders will not collaborate on a standard and consistent process for closings under the new CFPB rules effective August 1, 2015, at least not according to Wells Fargo.

Wells Fargo’s December 10, 2014 Settlement Agent Communication answered nine FAQs from settlement agents, the first of which sought confirmation on whether to expect standard closing procedures from lenders. Wells responded with a “no,” and stated that each lender is accountable and must determine its own method for achieving compliance.

This mega lender had announced on September 24 that it will control the generation and delivery of the buyer/borrower Closing Disclosure (“CD”), the form that will replace the HUD-1 Settlement Statement. The stated rationale was that the new CD is governed by the Truth-in-Lending Act (“TILA”), not the Real Estate Settlement Procedures Act (RESPA), and the risks and penalties for lenders are more severe under TILA.

Bank of America announced on December 17 that it will follow suit by generating and delivering the buyer/borrower CD.  Both banks have indicated settlement agents will generate the seller’s CD. Other lenders have not announced whether they will follow this procedure. It is entirely possible that settlement agents (closing attorneys in South Carolina) will prepare the CDs for other lenders.

The December 10 memo did state that Wells will work closely with settlement agents to determine fees, prorations, and other content required for the CD and, importantly, Wells will not assume the responsibility for disbursing loans. This quote from the Communication provides some comfort with regard to Wells’ attitude about keeping local settlement agents involved in the closing process:

“The settlement agent is critical and continues to be responsible for executing the closing including document signing, notarization, disbursement of funds, document recordation and delivery of final documents post-closing.”

Also comforting was the promise of training plans for settlement agents in collaboration with American Land Title Association, title underwriters and other service providers. The plans are said to include many educational communications and an information guide.

Bank of America stated that it will use Closing Insight™, an industry tool developed by Real EC Technologies®. All documents, date and information will be exchanged through Closing Insight™, discontinuing the use of e-mail, fax and other document delivery methods.

Bank of America also indicated that the requirement for the buyer/borrower to receive the CD three business days prior to closing will intensify the need for the bank to work very closely with the settlement agent to schedule the details of the closing.

stay tunedFor more information about Real EC ® Technologies and Closing Insight™, Bank of America invited settlement agents to visit their website at www.bkfs.com/realec.  The December 17 memo indicated that many title and escrow production systems are working with RealEC® Technologies to enhance current integrations in support of Closing Insight™. The bank suggested that settlement agents reach out to their title and escrow production system provider directly.

Stay tuned!

Lions, and Tigers and Seller Financing, Oh My!

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If you are closing seller financed transactions on primary residences including contracts for deed (hereafter referred to as seller financing), or if you have clients who are accepting seller financing, you should take the time to educate yourself and your clients on the current pitfalls.  Please refer to Martha McConnell’s excellent article entitled “Seller Financing – the New ‘Jabberwocky’!” in the Summer 2014 issue of Chicago Record Title for a detailed report on what has led to this serious concern.

lions1 Because it is a complicated issue, I am not sure I can express a bottom line in any kind of succinct manner, but I will attempt to do so here.

The CFPB has been given the power to supervise and regulate laws that impact seller financing, including the SAFE Act, TILA, the Ability to Repay and Qualified Mortgage Rule, HOEPA and the Loan Originator Rule.

Under the applicable federal rules, it is possible that sellers engaging in seller financing may have to become licensed as “loan originators” or “mortgage brokers”.  The loans may have to be fully amortized, and it is possible that these seller/lenders may have to make determinations and disclosures that have not previously been required. Certain exclusions are available, but the rules are complex and detailed, and should be handled with care.

Inconsistencies between the federal and state versions of the SAFE Act, both of which require licensing and registration of loan originators, is another area of concern.

Clients who fail to become licensed or to fall into an exclusion may find they are unable to foreclose, and may, along with the attorneys who closed the transactions and the title policies that insured them, be subject to claims and litigation. In addition, the CFPB has broad enforcement powers including the power to impose civil monetary penalties ranging from $5,000 to $1 million per day.

This is an area of the law that is going to require monitoring and thought in the coming months. Legislation in South Carolina to address the inconsistencies in our version of the SAFE Act may be one avenue for improvement. In the meantime, please take great care if you or your clients venture into seller financing.