Real estate valuations have come under increased scrutiny in the wake of the recent mortgage downturn. Remaining compliant is challenging with all the new rules, regulations, guidelines, and regulatory bodies that resulted from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Below are several proposals that have been issued by various federal regulators over the past couple months that are important for you to follow.
Interagency Guidance on Mortgage Servicing Practices Concerning Military Homeowners with PCS Orders:
This guideline pertains to the risks related to military homeowners who have informed their servicer that they have received Permanent Change of Station (PCS) orders, which requires them to relocate to a new military installation. The Federal Housing Finance Agency (FHFA) will enable military service members who are current on their Fannie Mae or Freddie Mac mortgages to sell their homes in a short sale when given PCS orders, and will allow the short sale to go through, waiving any deficiency judgment against the borrower. This new guideline will cover any military borrower who purchased a house on or before June 30th, 2012, and also details other protections military members are entitled to. Lastly, it requires servicers to provide timely information to military families on all their rights. To view the proposed guidance in its entirety, please visit: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20120621a1.pdf.
Fast Help for Homeowners Act:
The proposed ‘Fast Help for Homeowners Act’ will require a second mortgage lender of a federal mortgage loan to review and make a decision on a short sale agreement within 45 days. If these lenders fail to make a decision within that 45 day timeframe, the short sale will automatically be approved on the 46th day. The National Association of Realtors (NAR) has seen the problem with delayed short sales first-hand, and claims that second mortgage lenders have frequently held up or even cancelled short sale transactions altogether to try to collect the largest possible payout in exchange for releasing a homeowner’s lien. This proposed act will prevent this from happening in the future, and to view the act in its entirety, please visit: http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.6153.IH:
CFPB’s Mortgage Servicing Rules:
The Consumer Financial Protection Bureau (CFPB) has officially proposed two sets of rules to help protect homeowners from fraudulent mortgage servicers. The first set of proposed rules would provide consumers with clear and timely information about their mortgages so they can avoid unexpected costs by requiring: clearer monthly mortgage statements, warnings before interest rates adjust, options for avoiding “forced-placed” insurance, and early options for avoiding foreclosure. The second set of proposed rules would create common-sense requirements for handling consumer accounts, correcting errors, and evaluating borrowers for options to avoid foreclosure, and would do this by requiring: payments to be promptly credited, the maintaining of accurate information, quick correction of errors, providing delinquent borrowers with direct access to servicing personnel.
The public will have 60 days, until October 9th, 2012, to review and provide comments on the proposed rules, and the CFPB will review and analyze the comments before issing the final rules in January 2013. For more information, please visit: http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-proposes-rules-to-protect-mortgage-borrowers/.
CFPB’s Upfront Points and Fees Rule:
The Dodd-Frank Act and Consumer Protection Act place certain restrictions on points and fees offered with most mortgages. Without this proposed rulemaking, the Dodd-Frank Act would prohibit payment of upfront points and fees for most mortgages, even when a consumer prefers a loan with a lower interest rate and some upfront costs. The CFPB’s current proposal on upfront points and fees would require lenders to make a no-point and no fee loan option available for consumers, and would require an interest-rate reduction when consumers elect to pay upfront points or fees. For more information, please visit: http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-proposes-rules-to-bring-greater-accountability-to-mortgage-market/.
CFPB’s LO Compensation Rule:
The CFPB has expanded existing regulations that govern a loan originator's compensation and mandatory qualifications that it says will bring greater accountability to the mortgage loan origination market. The CFPB’s proposed changes would: set qualification and screening standards, prohibit payment of steering incentives to mortgage loan originators, and place restrictions on arbitration clauses and financing of credit insurance.
The public will have 60 days, until October 16th, 2012, to review and provide comments on the proposed rules, and the CFPB will analyze the comments before issuing the final rules in January 2013. For more information on this proposal, please visit: http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-proposes-rules-to-bring-greater-accountability-to-mortgage-market/.
Requirements for Higher-Risk Mortgage Loans:
Proposed by six federal regulatory agencies, this proposal would implement amendments to the Truth and Lending Act, which was enacted by the Dodd-Frank and Consumer Protection Acts in 2010. The proposed requirements for higher-risk loans would require a lender to use a licensed or certified appraiser who prepares a written report based on a physical inspection of the interior of the property. Lenders would also be required to disclose information to applicants regarding the purpose of the appraisal, and they must provide consumers with a free copy of any appraisal report they conduct. In addition, lenders would have to obtain an additional appraisal—at no cost to the consumer—for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price during the previous six months. To view the proposed requirements in their entirety, please visit: http://files.consumerfinance.gov/f/201208_cfpb_HRM_proposed_rule.pdf.