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News By Edition
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RESPA News Monthly Edition
RESPA News Monthly February 2014
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Servicing rules go into effect today
Posted Date: Thursday, January 9, 2014
It’s nearly a year to the day that the Consumer Financial Protection Bureau released its new mortgage servicing rules. Today, the rules go into effect.
Some believe that the new rules will cause hardship for prospective borrowers. Others urged the bureau to postpone the new rules, worried about the industry’s ability to be compliant in time. CFPB Director Richard Cordray refuted those concerns, saying that the measures are not truly new, but are instead examples of what good banks have been doing for many years. Cordray has also stated that the CFPB will vigilantly oversee and enforce the servicing rules.
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Rental agreement gets Missouri lender in hot water with CFPB
Posted Date: Thursday, January 16, 2014
The Consumer Financial Protection Bureau (CFPB) ordered a Missouri mortgage lender, Fidelity Mortgage Corp., and its former owner and current president, Mark Figert, to pay $81,076 for allegedly funneling illegal kickbacks to a bank in exchange for real estate referrals. Neither the lender nor Figert admitted to any wrongdoing.
“Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,” said CFPB Director Richard Cordray. “The CFPB will continue to take action against schemes that steer consumers to lenders through unscrupulous and illegal business practices.”
Figert was the owner and president of Fidelity Financial Mortgage Corp. (FFMC), a company located in St. Louis that originated federally related residential mortgage loans. Bank of Sullivan, in Sullivan, Missouri, created Fidelity Mortgage Corp. Fidelity purchased assets and liabilities from FFMC in early 2012. Figert became the president of Fidelity. The company took over one of the FFMC’s St. Louis offices and began originating residential mortgage loans.
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Seven indicted in alleged $49.6 million mortgage fraud scheme
Posted Date: Thursday, January 16, 2014
The U.S. Department of Justice announced the unsealing of a 15-count indictment, charging seven people in an alleged mortgage fraud scheme, which resulted in the approval of approximately $49.6 million in fraudulent loans and millions in losses to lenders.
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CFPB seeking input on closing process
Posted Date: Monday, January 6, 2014
The Consumer Financial Protection Bureau published a notice in the Federal Register on Jan. 3, requesting information from the public about the mortgage closing process. The bureau said it wants to develop a more streamlined and efficient closing process and seeks information on “key consumer pain points associated” with closings and how those pain points can be addressed by market innovations and new technology. Settlement closing agents, real estate agents, housing attorneys, mortgage lenders and loan servicers are encouraged to comment.
“The next phase of CFPB’s Know Before You Owe initiative aims to identify ways to improve the mortgage closing process for consumers,” the bureau wrote. “This notice seeks information from market participants, consumers and other stakeholders who work closely with consumers. The information will inform the CFPB’s understanding of what consumers find most problematic about the current closing process and inform the CFPB’s vision for an improved closing experience.”
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Changes to closing process: Get your comments in now – Part 2
Posted Date: Monday, January 27, 2014
The Consumer Financial Protection Bureau wants to know how the closing process can be improved, and the comment period time is winding down. The bureau plans to use these comments to guide initiatives to make changes to closings. Many of the commenters who have written in believe that borrowers need to get information sooner and that they need to have better access to those who can answer questions. Other commenters think the CFPB is causing more problems for borrowers.
Of the people who have commented so far, there were many who suggested that the borrower should review the HUD-1 with someone before the closing. Some argue that lenders should be required to review the settlement statement with buyers at least 24 hours prior to closing and answer questions. Under Regulation X, the borrower can request to inspect the HUD-1 one day prior to closing, but there is no requirement that the document is reviewed before closing.
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Consumer group urges additional mortgage reform
Posted Date: Friday, January 10, 2014
The National Consumer Law Center published a release on Jan. 9 applauding the Consumer Financial Protection Bureau for its new mortgage rules and urging the bureau to implement further reforms.
“We applaud the CFPB’s new mortgage rules, which … will move the market toward safer loans and better loan servicing,” said Alys Cohen, staff attorney at NCLC.
“The CFPB has made clear that the rules will continue to evolve as implementation progresses and we urge it to eliminate gaps that could provide space for some predatory conduct. The foreclosure crisis is still with us. It is essential that we prevent the next one from happening.”
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NCUA releases comprehensive mortgage servicing compliance outline
Posted Date: Thursday, January 16, 2014
In a regulatory alert to federally insured credit unions, the National Credit Union Administration provided a comprehensive outline about the Consumer Financial Protection Bureau’s mortgage servicing rule and how to comply.
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Bureau releases revised consumer publications
Posted Date: Friday, January 10, 2014
The Consumer Financial Protection Bureau published a notice in the Federal Register on Jan. 10, announcing three revised consumer publications including a consumer information brochure and two booklets required under RESPA’s Regulation X and the Truth in Lending Act’s Regulation Z. Businesses and institutions are not required to provide the revised publications right away and may instead use up their supplies of the earlier versions.
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Bureau updates mortgage origination, servicing exam procedures
Posted Date: Thursday, January 16, 2014
The Consumer Financial Protection Bureau’s new mortgage rules went into effect on Jan. 10. Along with those rules, the bureau also modified its examination procedures for mortgage origination and mortgage servicing.
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Bureau announces adjustment to escrow account asset-size threshold
Posted Date: Monday, January 6, 2014
The Consumer Financial Protection Bureau issued a final rule adjusting the asset-size threshold for certain creditors to qualify for an exemption from the requirement to establish an escrow account for a higher-priced mortgage loan under Regulation Z, which implements the Truth in Lending Act.
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ABA asks bureau for help with homeownership counseling disclosure
Posted Date: Monday, January 6, 2014
The American Bankers Association and Consumer Mortgage Coalition sent a letter to the Consumer Financial Protection Bureau and the U.S. Department of Housing and Urban Development requesting assistance in preparing the homeownership counseling disclosure. Rules that go into effect on Jan. 10 require lenders to provide a list of homeownership counseling organizations to mortgage loan applicants. The trade associations claim, however, that the database where lenders can obtain information regarding the organizations is not clear or user-friendly.
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Credit union association remains concerned about new mortgage rules
Posted Date: Friday, January 10, 2014
In a Jan. 8 letter to the Consumer Financial Protection Bureau, B. Dan Berger, the president and chief executive officer for the National Association of Federal Credit Unions, said the group is concerned that the new mortgage rules could negatively impact credit availability and asked the bureau to listen to credit unions’ concerns about the regulations and make changes when appropriate.
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SoftPro announces new hire, significant growth
Posted Date: Thursday, January 16, 2014
SoftPro, a provider of title, closing and escrow software, announced its 155th hire over the last 12 months, bringing its employee base to more than 300 nationwide.
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Required use class action ends in settlement
Posted Date: Monday, January 20, 2014
The parties in a RESPA class action that contained allegations of required use and kickbacks in exchange for referrals reached a settlement that was approved by the U.S. District Court for the Middle District of Louisiana on Jan. 16. The plaintiffs filed suit in 2007, alleging that a homebuilder and seller and the real estate agent representing the company in the sale of homes violated RESPA by requiring homebuyers to purchase title insurance from a specific title company and accepting a kickback in exchange for referrals. The defendants denied the allegations.
The facts
A group of plaintiffs, included named plaintiffs Annie Barnett Adams, Chanel Costa, Garrin Costa, Patricia Bonds, Carlace Brooks, Joseph Richardson and Gretchen Bullock, purchased homes located at the Lakes at Oak Grove subdivision in Ascension Parish, La. Southland Trace, was the builder and seller of the homes. The company was represented in the sale of the homes by Gladney, a real estate agent and employee of Burns & Company.
According to the plaintiffs, Southland Trace along with Burns & Company required all purchasers of the Lakes at Oak Grove homes to sign a standard purchase agreement. The purchase agreement allegedly required the homebuyers to use Baton Rouge Title Company and an associated attorney, Schoen. The plaintiffs further claimed that Baton Rouge Title and Schoen paid a kickback in exchange for the referrals.
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Court says discovery rule not applicable to RESPA issues
Posted Date: Monday, January 6, 2014
When Wells Fargo Bank NA foreclosed on Marina Cheung Yiu and Yin Kuen Cheung’s home in 2012, the couple sued the bank, arguing that it lacked authority to initiate foreclosure and alleging that the bank violated federal and state laws, including RESPA. The court determined that if any alleged violations happened, they took place after RESPA’s statute of limitations had run. The plaintiffs attempted to argue that they could not discover the violations within the time limit set forth under RESPA. The court determined, however, that the discovery rule was inapplicable.
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Court finds false HUD fees sufficient probable cause for arrest
Posted Date: Thursday, January 9, 2014
After she was prosecuted and acquitted for alleged mortgage fraud, a settlement agent sued several Commonwealth of Pennsylvania employees for violations of her constitutional rights including a Fourth Amendment violation for false imprisonment. The state argued that it had probable cause to arrest her, including evidence that she falsified information on HUD-1 Settlement Statements. The district court found in favor of the state and the case was appealed to the 3rd Circuit Court of Appeals.
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Constitutional challenge against CFPB fails
Posted Date: Monday, January 20, 2014
The Consumer Financial Protection Bureau filed a complaint in California federal court against Morgan Drexen Inc., a Nevada corporation that offers debt relief services on Aug. 20, 2013, claiming the company charged illegal upfront fees and deceived consumers. The company filed a motion to dismiss, arguing that the CFPB’s structure renders it unconstitutional, which the district court denied.
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Four more states begin using uniform mortgage test
Posted Date: Friday, January 10, 2014
As of Jan. 1, four more states/U.S. territory agencies began using the National mortgage loan originator test, bringing the total number of agencies that use the test to 39. The Secure and Fair Enforcement for Mortgage Licensing Act, which was passed in July 2008, mandated that states had to pass legislation requiring the licensure of MLOs according to national standards.
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Mortgage rules harmful to homeownership?
Posted Date: Monday, January 20, 2014
During a hearing before the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit, witnesses from community banks, credit unions and Habitat for Humanity told the subcommittee that Dodd-Frank’s mandated mortgage regulations will harm homeownership.
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ISGN’s new program helps lenders evaluate compliance risks
Posted Date: Wednesday, February 19, 2014
ISGN Corp., a provider of end-to-end technology solutions and services to the mortgage industry, announced during the Mortgage Brokers Association’s National Mortgage Servicing Conference and Expo that it has partnered again with TRUPOINT Partners to offer its CFPB Compliance RiskCheck. A software-as-a-service, cloud-based tool, CFPB Compliance RiskCheck was designed specifically for small to midsize lenders in need of a cost-effective and efficient risk evaluation tool.
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Freddie Mac offers incentives for HomeStep sales
Posted Date: Wednesday, February 19, 2014
HomeSteps, the real estate sales division of Freddie Mac, announced a special 2014 winter sales promotion that will pay cash incentives to real estate agents who list or sell HomeSteps homes in 23 select states between Feb. 18, and April 15. The 2014 HomeSteps Winter Sales Promotion also offers homebuyers a choice of incentives, including funds to cover condominium association fees.
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Borrowers sue title insurer for overstated HUD-1 fees
Posted Date: Monday, February 17, 2014
A group of New Jersey homeowners who refinanced their mortgages filed a lawsuit against their title insurer, alleging the insurer overstated its title insurance fees on the HUD-1 Settlement Statement.
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OCC issues mortgage banking booklet
Posted Date: Monday, February 17, 2014
The Office of the Comptroller of the Currency issued a mortgage banking booklet on Feb. 7. This is an updated document that replaces the previous mortgage banking booklet, which was issued in March 1996. It also replaces Section 750, “Mortgage Banking” issued in November 2008 as part of the former Office of Thrift Supervision’s examination handbook for the examination of federal savings associations. The updated document addresses recent amendments to RESPA’s Regulation X issued by the Consumer Financial Protection Bureau.
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Consumer Advisory Board to meet in nation’s capital
Posted Date: Monday, February 17, 2014
The Consumer Financial Protection Bureau announced that its Consumer Advisory Board is meeting with Director Richard Cordray on Feb. 27 to discuss the consumer experience in the credit reporting market.
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Data security webinar offers answers to your compliance questions - Webinar
Posted Date: Thursday, February 13, 2014
The Legal Description and sponsor Real Estate Data Shield have teamed up to offer an educational webinar to provide answers to these questions and, specifically, to instruct on what it means to “implement” to ensure data security compliance. The webinar will be held Thursday, Feb. 20, 2 – 3:30 p.m. ET and features three data security, information technology and privacy law experts.
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HUD and Department of Treasury release January Housing Scorecard
Posted Date: Thursday, February 13, 2014
The U.S. Department of Housing and Urban Development and the U.S. Department of the Treasury released the January edition of the Obama Administration’s Housing Scorecard. The latest data show progress among key indicators. In 2013, home sales had their strongest performance in several years, foreclosure starts were at their lowest annual level since 2005 and homeowners’ equity is up $3.4 trillion since the beginning of 2012. While this scorecard notes positive trends in the housing market, officials caution that the economy is still healing.
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Loan officer pleads guilty in mortgage fraud scheme
Posted Date: Monday, February 10, 2014
A New Jersey loan officer admitted to a role in a large-scale mortgage fraud scheme that allegedly caused millions of dollars in losses. The scheme involved false HUD-1 Settlement Statements and loan applications and the use of straw buyers.
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Average charges: What you need to know – Part 1
Posted Date: Thursday, February 6, 2014
In its final RESPA/Truth in Lending Act integrated mortgage disclosure form rule, the Consumer Financial Protection Bureau retained the average charge exception originally adopted by the U.S. Department of Housing and Urban Development. Generally under RESPA, a lender or settlement service provider is prohibited from charging the borrower more for a settlement service than the amount actually paid for the service. Average charge is an exception to that requirement and can be beneficial if used properly.
History
Before the CFPB was granted authority over RESPA, HUD was the regulator in charge. During HUD’s reign, a variety of class action suits were filed under RESPA where the plaintiffs alleged they were overcharged for third-party fees. In some instances, a settlement service provider cannot determine the actual fee for a service at the time the lender or broker is required to disclose the fees to the consumer. Because of this the providers were sometimes charging too much or too little for a third-party service.
For example, let’s say a title agent assumed that a mortgage document will be comprised of 12 pages, and that the recording costs to the consumer will be $2 per page. The total the agent charged the consumer to record the mortgage was $24. Then, it turns out that the mortgage was only 10 pages and only cost $20 to record. The title agent charged the consumer an extra $4.
This type of scenario led to class action suits because consumers believed the title agent violated RESPA by charging a fee that exceeded the cost of the actual service.
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RESPA News provides Part 2 of webinar training series for new forms - Webinar
Posted Date: Thursday, February 6, 2014
RESPA News and Dodd Frank Update have teamed up to provide industry professionals with two training webinars that deliver in-depth instruction on the impactful provisions of the new regulations. Sponsored by WFG National Title Insurance Co., Part 2 of the Mortgage Disclosure Forms Training Series airs Thursday, Feb. 13 at 2 p.m. ET. Part 2 will offer line-by-line instruction and real-life examples.
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Borrower sues lender over interest rate change
Posted Date: Thursday, February 6, 2014
A borrower sued his mortgage lender after the lender increased the interest rate on his loan without sending him a revised good faith estimate. The borrower claimed that the original GFE was a binding contract and that because the language in the GFE stated that the initial interest rate was “available through N/A,” the interest rate should have been available indefinitely. The borrower argued that the lender breached the contract when the rate was increased. Read on to find out what the courts said.
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Firm makes updates, helps companies evaluate compliance
Posted Date: Thursday, January 30, 2014
Promontory Financial Group has completed a major update to the regulatory compliance monitoring and testing suite of its RADAR platform. The update reflects significant changes to RESPA and the Truth in Lending Act that went into effect in January.
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Nevada AG searching for couple involved in RESPA-related scam
Posted Date: Monday, January 27, 2014
The Nevada attorney general is searching for two people who were allegedly involved in a mortgage lending fraud scam. The scam involved a forensic audit that purported to review mortgage loans for RESPA violations. The alleged scammers told clients that they would be entitled to a legal remedy resulting in the elimination of their mortgage obligation if a RESPA violation was discovered.
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Man allegedly used false HUD-1s in $3.2 million fraud
Posted Date: Monday, January 27, 2014
An Illinois man who operated two real estate-related firms was indicted on federal mortgage fraud charges. The alleged fraud involved false representations in documents, including loan applications and HUD-1 Settlement Statements concerning sales prices and the buyers’ employment, assets, income and intention to occupy the property.
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Changes to closing process: Get your comments in now – Part 1
Posted Date: Thursday, January 23, 2014
The Consumer Financial Protection Bureau (CFPB) has asked the public to comment on how the closing process should be changed. Time is winding down to get your responses in. So far, the bureau has received more than 170 comments, urging a more restricted, uniform closing process. The deadline for comments is Feb. 7. Do you think the closing process needs to be changed? Have you told the CFPB your thoughts?
The CFPB published a notice in the Federal Register on Jan. 3, requesting comments regarding the mortgage closing process. The bureau said it wants to develop a more streamlined and efficient closing process. The agency seeks information about problems with the closing process and how they can be addressed.
The bureau released its final RESPA/Truth in Lending Act integrated disclosure rule on Nov. 20, 2013, which gets rid of the current Good Faith Estimate (GFE) and HUD-1 Settlement Statement and introduces the Loan Estimate form and the Closing Disclosure. The rule changes made by that rule do not go into effect until August 2015. Until then, the closing disclosure forms remain as they are. Now that the bureau has the disclosure rule finalized, it is moving on to the closing process itself. It is looking for ways to improve the closing for consumers.
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OIG releases audit of CFPB civil penalty fund
Posted Date: Thursday, January 23, 2014
The Federal Reserve’s Office of Inspector General released an audit of the Consumer Financial Protection Bureau’s civil penalty fund, which was conducted between June 2013 and November 2013. The OIG identified opportunities for the bureau to improve on the controls it developed to implement the civil penalty fund.
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CFPB looking for new advisory board members
Posted Date: Thursday, January 16, 2014
Under the Dodd-Frank Act, the Consumer Financial Protection Bureau is required to establish a Consumer Advisory Board, which advises and consults with the bureau regarding its functions and provides information about emerging trends and practices in the consumer financial markets. The bureau is inviting the public to apply for membership to the Consumer Advisory Board as well as to its Community Bank Advisory Council, and Credit Union Advisory Council. Applications are due by the end of February.
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RESPA News provides webinar training series for new forms - Webinar
Posted Date: Thursday, January 9, 2014
The Consumer Financial Protection Bureau has released its final integrated RESPA/Truth in Lending Act disclosure form rule. Preparing for the use of the new forms will require extensive staff training, retooling and systems upgrades to ensure compliance. RESPA News and Dodd Frank Update have teamed up to provide industry professionals with two training webinars that will deliver in-depth instruction on the impactful provisions of the new regulations.
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Real estate agent sentenced to prison for fraud
Posted Date: Thursday, January 9, 2014
A California real estate agent was sentenced to 15 months in prison and ordered to pay more than half a million dollars in restitution for her role in a mortgage loan fraud scheme. The scheme involved the use of false loan documentation and the receipt of millions of dollars in kickbacks.
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Bureau guides consumers on how to make mortgage servicing complaints
Posted Date: Thursday, January 9, 2014
The new mortgage servicing rules go into effect on Jan. 10. The previous regulations required servicers to respond to borrowers’ qualified written requests. The QWR requirements were specific, and the servicer was not required under RESPA’s provisions to respond a borrower’s inquiry if the communication was not in the correct QWR format. The Consumer Financial Protection Bureau’s mortgage servicing final rule significantly changes when servicers are required to respond to borrowers’ requests.
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