In the April 20, 2010 issue of the Federal Register (75 FR 20718) the Federal Housing Administration (FHA) published its final rule, effective May 20, 2010, amending part 202 of FHA regulations (24 CFR Part 202) that: (1) increases the net worth requirements for FHA-approved lenders; (2) eliminates the FHA approval process for loan correspondents; and, (3) incorporates criteria specified in the Helping Families Save Their Homes Act of 2009 (HFSH Act). This memorandum attempts to redact what we consider are the more important parts of the final rule and HUD’s preamble published with the final rule in the above-cited issue of the Federal Register and does not address all aspects of the final rule or HUD’s preamble. You are advised to read the complete text of the final rule and HUD’s preamble and not to rely solely on this memorandum. The complete text of the final rule is attached to this memorandum for your information and use.
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Updated RESPA FAQs, dated April 2, 2010
On April 2, 2010, HUD released New RESPA Rule FAQs, an update to the January 28, 2010, FAQs. The April 2, 2010, FAQs may be found, in their entirety, via the following link http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs422010.pdf and some of the updates within the FAQs are briefly addressed below: 1. GFE, General, #33 & #34 (pgs. 11-12). These two FAQs address preapprovals. HUD states that a preapproval is never to be used as a substitute for a GFE, and that the RESPA rules do not address preapprovals. HUD reiterates that once the loan originator has the information that triggers a GFE, they must still provide the GFE. A lender may never issue only a preapproval for a refinance loan; the lender must also issue a GFE. 2. GFE, General, #35 & #36 (pg. 12). These two FAQs address the use of a worksheet without a GFE and in conjunction with the GFE. They clarify that a worksheet may be used provided that the worksheet does not look like a GFE and does not lead the consumer to believe it is a GFE. The worksheet may be used without a GFE if the consumer has not provided the information necessary to generate a GFE. The worksheet may also be used in conjunction with a GFE, but never in lieu of a GFE.
Increase in Upfront Premiums for Mortgage Insurance
On January 21, 2010, FHA issued M.L. 2010-02 that announced effective for FHA loans with case numbers assigned on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium (“UFMIP”) of 2.25 percent. The full text of M.L. 2010-02, is attached to this memorandum, and is briefly summarized below:
Mortgage Loan Officer May Not Be Exempt From Overtime Pay
On March 24, 2010, the Wage and Hour Division of the U.S Department of Labor issued Administrator’s Interpretation No. 2010-1, regarding the applicability of the administrative employee exemption of the Fair Labor Standards Act, 29 U.S.C. §213(a)(1), to mortgage loan officers. It is the Administrator’s interpretation that employees who perform the typical job duties of a mortgage loan officer, as described in Administrator’s Interpretation No. 2010-1, do not qualify as bona fide administrative employees exempt under § 213(a)(1) of the Fair Labor Standards Act(“Act”). Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than one and one-half times their regular rates of pay.
Community Reinvestment Act – Interagency Questions and Answers
The following federal agencies (collectively, the “federal agencies”) – Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision – implement the Community Reinvestment Act (CRA) through their respective CRA regulations. These CRA regulations are interpreted primarily through the Interagency Questions and Answers Regarding Community Reinvestment (“Questions and Answers”), which provide guidance for use by the federal agency personnel, financial institutions, and the public.
Proposed Residential Mortgage Loan Originator Regulations
The Finance Commission of Texas (“Finance Commission”) proposes amendments to Sections 80.1, 80.2, 80.8, 80.9, 80.10, 80.11, 80.12, 80.13, 80.14, 80.15, 80.20, 80.21, 80.22, and 80.23 of the Mortgage Broker and Loan Officer Licensing regulations contained in the Texas Administrative Code at 7 TAC Chapter 80. In addition, the Finance Commission proposes new Subchapter L, Licensing, Sections 80.301, 80.302, 80.303, 80.304, 80.305, 80.306, and 80.307. The text of these proposed amended and new regulations (“Proposed Rules”) may be found in the above cited issue of the Texas Register, and you are advised to read these Proposed Rules and not rely on the summary contained in this memorandum.
Mortgage Banker Registration and Loan Officer Licensing
Effective January 7, 2010, the Finance Commission of Texas amended the Mortgage Banker Rules (Rules) contained in the Texas Administrative Code, 7 TAC Chapter 81. Sections 81.1 and 81.2 of the Rules are amended and new Rules 81.3 through 81.19 are added. The text of these amended and new rules are attached to this memorandum. The amended and new Rules were adopted by the Finance Commssion to implement the provisions of House Bills 10, 963 and 2779 passed by the 81st Texas Legislature (see our November 13, 2009 memorandum on House Bills 10 and 2779) and to assist the Texas Department of Savings and Mortgage Lending (TDSML) in preparing to participate in the National Mortgage License System Registry. House Bills 10 and 2779 make substantial modifications to Chapter 157 of the Finance Code (Mortgage Banker Registration and Residential Mortgage Loan Originator License Act) relating to the registration and regulation of mortgage bankers and residential mortgage loan originators. These amended and new Rules substantially mirror the current Mortgage Broker and Loan Officer Licensing rules in the Texas Administrative Code, 7 TAC Chapter 80, (see our November 13, 2009 memorandum). The amended and new Rules relate to the following sections of Chapter 157 of the Finance Code: Sections 157.001, 157.002, 157.007, 157.008, 157.012, 157.015, 157.016, 157.020, and 157.021.
Discount Points – Discount Points are not included in Home Equity Cap
On January 8, 2009, the Texas Court of Appeals, Third District, at Austin, issued its opinion1 in the civil suit filed by the Association of Community Organizations for Reform Now (ACORN) seeking to invalidate a number of the home equity interpretations (Rules) issued jointly by the Finance Commission of Texas and the Credit Union Commission of Texas (Commissions). The ACORN opinion, in addition to other decisions affecting the Rules that will be the subject of a later memorandum, affirmed the trial court’s judgment invalidating Rule 153.1(11), which defines “interest” for purposes of the three percent fee cap imposed by Section 50(a)(6)(E) of Article XVI of the Texas Constitution (3% fee cap). Rule 153.1(11) defines interest to be “interest as defined in the Texas Finance Code §301.002(4) [sic] and as interpreted by the courts.” Section 301.002(a)(4) defines interest, in pertinent part, as “compensation for the use, forbearance, or detention of money.”
FHA Mortgagee Letter 2009-53 – Origination Fee Cap Removed
On December 30, 2009, FHA, in accordance with the regulatory changes to 24 CFR §203.27, issued M.L. 2009-53 that, among other matters, removed the one percent origination fee cap for FHA’s standard mortgage insurance programs. The Home Equity Conversion Mortgage (HECM) and the Section 203(k) Rehabilitation Mortgage Insurance programs retain their statutory origination fee caps. As noted in No. 2 below, in order to correct a misstatement, FHA revised M.L. 2009-53. The full text of revised M.L. 2009-53, which is attached to this memorandum, is briefly summarized below:
Legislative Update, 81st Regular Session of the Texas Legislature, 2009 – Bills Effective on and after September 1, 2009
This is the third and last legislative update from the 81st Regular Session of the Texas Legislature, 2009, prepared by this firm and summarizes House and Senate Bills effective on September 1, 2009, that we consider are of interest to our clients.