In Mortgagee Letter 2011-10 (ML 2011-10) issued February 14, 2011, the FHA announced a 25 basis points (bps) increase in the annual mortgage insurance premiums effective for case numbers assigned on or after April 18, 2011. There will be no changes in the upfront mortgage insurance premium. The annual MIP increase applies to all mortgages insured under FHA’s Single Family Mortgage Insurance Programs except:
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Read articles below for analysis and discussion of recent trends by BM&G’s industry experts.
FHA Extends Property Flipping Exemption to December 31, 2011
In today’s issue of the Federal Register (76 FR 6149), the FHA published notice that it is extending its temporary waiver of its property flipping regulations (see 24 CFR §203.37a) until December 31, 2011. Pertinent parts of the notice are reprinted below: Waiver This notice announces that FHA is extending the availability of the temporary waiver of its regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition, until December 31, 2011. This waiver, which was issued in January 2010, took effect for all sales contracts executed on or after February 1, 2010, and is set to expire on February 1, 2011. Prior to the waiver, a mortgage was not eligible for FHA insurance if the contract of sale for the purchase of the property that is the subject of the mortgage is executed within 90 days of the prior acquisition by the seller and the seller does not come under any of the exemptions to this 90-day period that are specified in the regulation. … [T]he waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, … [a]dditionally, the waiver is subject to certain conditions, and eligible mortgages must meet these conditions to take advantage of the waiver. … Although no changes are made to the conditions to which the waiver is subject, this notice also includes guidance on the waiver conditions in response to questions that have arisen from time to time during the first year in which the waiver was made available.
Federal Agencies Announce Initial NMLSR Registration Period for Mortgage Loan Originators – January 31, 2011, through July 29, 2011
On January 31, 2011, the following federal agencies – Office of the Comptroller of the Currency; Board of Governors of the Federal Reserve System; Federal Deposit Insurance Corporation; Office of Thrift Supervision; Farm Credit Administration; and National Credit Union Administration – jointly published a notice on their respective websites announcing that the initial registration period for Federal registrations required by the S.A.F.E. Act and the federal agencies’ implementing rules (see our memorandum issued July 28, 2010) will run from January 31, 2011, through July 29, 2011. The federal agencies will soon publish the official notice about this initial registration period in the Federal Register.
Regulation Z Mortgage Loan Sale Disclosure Requirements – Revised §226.39
On September 24, 2010, the Federal Reserve Board (FRB) published in the Federal Register (75 FR 58489) a final rule amending Regulation Z by revising §226.39. The final rule implements Section 131(g) of the Truth in Lending Act (TILA), which was enacted on May 20, 2009, as Section 404(a) of the “Helping Families Save Their Homes Act.” (See our July 30, 2009 memorandum discussing Section 131(g) of TILA.) Section 131(g) of TILA became effective immediately (i.e., – May 20, 2009) and established a new requirement for notifying consumers of the sale or transfer of their mortgage loans. Consistent with Section 131(g), the final rule requires a person who acquires a mortgage loan to provide disclosures in writing notifying the consumer of the sale or transfer of the consumer’s mortgage loan no later than 30 days after the date on which the loan was sold, transferred or assigned. The final rule’s revision of §226.39 is substantially similar to the interim rule published by the FRB on November 20, 2009, which initially implemented Section 131(g) of TILA by adding §226.39. The final rule’s revision of §226.39 is effective as of January 1, 2011.
Model Privacy Form Under Gramm-Leach-Bliley Act (74 FR 62890)
The following federal agencies – Office of the Comptroller of the Currency (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision (OTS); National Credit Union Administration (NCUA); and Federal Trade Commission (FTC) – published final amendments to their respective privacy rules (collectively “privacy rule”) that implement the privacy provisions of the Gramm-Leach-Bliley Act (“GLB Act”). The privacy rule requires financial institutions to provide initial and annual privacy notices to their customers. The federal agencies have amended their respective privacy rule to include a model privacy form (“model form”) that financial institutions may rely on as a safe harbor to provide disclosures under the privacy rule. In addition, the federal agencies are eliminating the safe harbor permitted for privacy notices based on the Sample Clauses currently contained in the privacy rule if the notice is provided after December 31, 2010. While the federal agencies are eliminating the Sample Clauses (effective January 1, 2012) and related safe harbor (effective January 1, 2011), institutions may continue to use notices containing the Sample Clauses, so long as these notices comply with the privacy rule.
Mortgagee Letter 2011-04 – FHA Capture of NMLS Information
This is to advise all clients that on January 5, 2011, FHA published the above Mortgagee letter (copy attached) notifying all FHA mortgagees that FHA will begin collecting the unique identifiers assigned by the Nationwide Mortgage Licensing System and Registry (NMLS) to individuals and entities participating in the origination of loans submitted for insurance by FHA at a number of points in the lender approval and loan origination processes, as described below.
Post-dated Election Not to Cancel Extends Rescission Period for Three Years – Daniels v. Equitable Bank, SSB, 2010 WL 4260600 (E.D.Wis., Oct. 29, 2010
For loans subject to the federal right of rescission (see, TILA §125(a), 15 U.S.C. §1635(a) and Regulation Z §226.23(a), (b)), the Daniels case is the latest in a long line of federal district and appellate court cases holding that requiring a consumer to sign a post-dated election not to rescind before the end of the three-business day rescission period renders the notice of the consumer’s right to rescind unclear, in violation of TILA, and extends the rescission period for up to three years after consummation. In the past, we have been made aware of instances in which a lender or a title company (without the lender’s knowledge) allowed the consumer to execute and post-date, at closing, an acknowledgment stating that “more than three business days have passed since the closing and that the consumer did not rescind the loan during that time.” We have previously advised you that Regulation Z prohibits this practice, as do the federal courts that have ruled on this issue. In light of the Daniels case, we again remind you to not allow a consumer to execute an acknowledgment within the three-business day rescission period that states the consumer did not rescind the transaction. We also recommend you inform your closing and funding staff and title companies that this practice is prohibited.
Mortgagee Letter 2010-43 – New FHA Flood Zone Requirements
This is to advise all clients that on December 28, 2010, FHA published the above Mortgagee letter (copy attached) that revises its flood zone requirements. Effective for all case numbers assigned on or after March 1, 2011: 1. Mortgagees must obtain life-of-loan flood zone determination services for all properties securing FHA loans. 2. Properties located within a designated Coastal Barrier Resource System unit are not eligible for an FHA-insured loan. Attached to Mortgagee Letter 2010-43 is an Appendix that identifies the flood insurance requirements for the various property types covered by the letter.
Federal Reserve Board Interim Rule Revises Prior Interim Rule Regarding Payment Schedule Disclosures -New §§226.18(s) and (t) of Regulation Z
In the December 29, 2010 issue of the Federal Register (75 FR 81836), the Board of Governors of the Federal Reserve System (FRB) published an interim rule (Dec.-Rule) making technical revisions to its September 24, 2010 interim rule (Sept.-Rule), which implemented certain requirements of the 2008 Mortgage Disclosure Improvement Act, that required disclosure of payment examples if the loan’s interest rate or payments can change. (See our memorandum dated October 28, 2010, posted on our Web site at: http://www.bmandg.com/Articles/ArticleView/tabid/94/smid/426/ArticleID/84/Default.aspx.)
Community Reinvestment Act Joint Final Rule Revises Definition of “Community Development” (75 FR 79278)
In the December 20, 2011 issue of the Federal Register, the following federal agencies – Office of the Comptroller of the Currency (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision (OTS) – published a joint final rule to revise the definition of “community development” in their respective Community Reinvestment Act (CRA) rules. These rules may be found in the Code of Federal Regulations, respectively, at 12 CFR Part 25 (OCC), Part 228 (FRB), Part 345 (FDIC), and Part 563e (OTS).