This memorandum is to advise all clients of the following technical changes by the TDSML to the disclosures required, respectively, under §79.122 and §80.9 of Title 7 of the Texas Administrative Code. These changes are set out in the April 29, 2011 issue of the Texas Register. 1. State savings banks are required by §79.122 to place in their privacy notices to consumers a promulgated notice advising consumers how to file complains. This complaint notice contains the TDSML’s current email address: smlinfo@sml.state.tx.us. Effective May 5, 2011, that email address changes to: smlinfo@sml.texas.gov.
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Read articles below for analysis and discussion of recent trends by BM&G’s industry experts.
Truth-in-Lending Itemization of Amount Financed in a Transaction involving Consumer Paid Loan Originator Compensation
For an application received by a creditor on and after April 1, 2011, the creditor and the broker, if applicable, are required to comply with the compensation rules promulgated by the Board of Governors of the Federal Reserve System (“FRB”) in Regulation Z §226.36(d). In a transaction in which the loan originator’s compensation is paid by the consumer, under §226.36(d), clients will need to identify the transaction as consumer paid compensation.
NMLS Mortgage Call Report Training Workshops
Starting May 2, 2011, state mortgage licensees will be required to submit Mortgage Call Reports to the NMLS as required by the federal SAFE Act and the applicable state SAFE Act statutes. These workshops will provide an overview of the requirements and “how to” for submitting the Mortgage Call Report in NMLS. The NMLS placed a notice about the workshops on its Web site, which may be accessed at: http://mortgage.nationwidelicensingsystem.org/news/events/Pages/MCRWorkshop.aspx.
Regulation Z Threshold Amount Exemption Raised – Revised Section 226.3(b) of Regulation Z
Effective July 21, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amends the Truth in Lending Act (TILA) by increasing the threshold amount for exempt consumer credit transactions from $25,000 to $50,000. In addition, the Dodd-Frank Act provides that, on or after December 31, 2011, this threshold amount must be adjusted annually by any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. Accordingly, in the April 4, 2011, issue of the Federal Register (76 FR 18354) the Board of Governors of the Federal Reserve System (FRB) published a final rule (the Final Rule) making corresponding amendments to Section 226.3(b) of Regulation Z and its accompanying official staff commentary.
Federal Reserve Board Interim Final Rule Adds Appraisal Independence Requirements – New Section 226.42 of Regulation Z
In the October 28, 2010, issue of the Federal Register (75 FR 66554), as corrected in the December 23, 2010, issue of the Federal Register (75 FR 80675), the Board of Governors of the Federal Reserve System (FRB) published an interim final rule (the Interim Rule) designed to ensure that real estate appraisers use their independent professional judgment in appraising homes without influence or pressure from parties interested in the loan transaction and that the appraiser receive customary and reasonable compensation for their services. The Interim Rule implements new Section 129E of the Truth in Lending Act (TILA), which was enacted as Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) to establish new requirements for appraisal independence for consumer loans secured by the consumer’s principal dwelling. To implement this new TILA appraisal independence requirement, the Interim Rule adds Section 226.42 to Regulation Z, which replaces Section 226.36(b) that contained similar appraisal requirements. Pursuant to the Dodd-Frank Act, supra, the issuance of this Interim Rule renders the Home Valuation Code of Conduct of no further force or effect. (But see our October 18, 2010 memorandum on the new Fannie Mae Appraiser Independence Requirements in Fannie Mae Announcement SEL-2010-14.)
Regulation Z APR Threshold for Required Escrow Account Increased for “Jumbo” Loans – New Section 226.35(b)(3)(v) effective April 1, 2011
Finally, some good news from the Federal Reserve Board (FRB). In today’s issue of the Federal Register (76 FR 11319), the FRB published a final rule establishing a higher APR threshold for “jumbo” first lien, higher-priced mortgage loans in regard to the escrow account requirements implemented by §226.35(b)(3) of Regulation Z.
FHA Increases Annual MIP Effective April 18, 2011 (ML 2011-10)
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:
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.