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Dodd-Frank Amendments

In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, a law that sought to overhaul the nation’s financial regulatory system. The sweeping legislation is more than 2,300 pages long and contains hundreds of provisions that will bring the largest overhaul the financial services sector has seen since the Great Depression.
Title X of the Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB). The creation of a new regulatory agency to oversee RESPA was a significant change. It was not, however, the only change Dodd-Frank made to RESPA. It also contained a number of RESPA amendments as illustrated below.
Changes to RESPA

Section 1061(b)(7) transfers RESPA’s regulatory authority from the U.S. Department of Housing and Urban Development (HUD) to the CFPB.

Servicer prohibitions

Section 1463(a) of the Dodd-Frank Act amended RESPA by setting forth a number of servicer prohibitions. According to the act, servicers of federally related mortgage loans will not:

  • Obtain force-placed hazard insurance unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract’s requirements to maintain property insurance;
  • Charge fees for responding to valid qualified written requests (QWR);
  • Fail to take timely action to respond to a borrower’s requests to correct errors relating to allocation of payments, final balance for purposes of paying off the loan, or avoiding foreclosure, or other standard servicer’s duties;
  • Fail to respond within 10 business days to a request from a borrower to provide the identity, address and other relevant contact information about the owner or assignee of the loan; or
  • Fail to comply with any other regulation mandated by the CFPB.

Forced-placed insurance

Under Section 1463, mortgage loan servicers must meet certain criteria in order to obtain force-placed insurance. They must provide a written notice to the borrower before placing the force-placed insurance on the property. The notice must contain specific information, which the act lays out.

Section 1463 of the Dodd-Frank Act amended RESPA Section 6 by adding new subsections.

Section 6(K)(1)(A) provides that “A servicer cannot obtain force-placed hazard insurance unless there is a reasonable basis to believe the borrower has failed to comply with the loan contract’s requirements to maintain property insurance.”

Section 6(K)(2) defines force-placed insurance as “hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage.”

Section 6(l) provides the factors that must be met before a servicer may obtain force-placed insurance. The borrower must receive written notice about the insurance. The servicer must also send a second written notice at least 30 days after mailing the first notice. Lastly, the servicer must not have received information from the borrower that hazard insurance had been secured. The borrower may demonstrate that hazard insurance exists by sending written confirmation to the servicer. If insurance is already in place, the servicer must terminate the force-placed insurance and refund the borrower the amount of the force-placed insurance paid when other insurance was in place.

The law also provides that all charges related to force-placed insurance must be bona fide and reasonable.

Penalty amounts and response times

Dodd-Frank also increases penalty amounts for RESPA violations and decreases response times to QWRs. RESPA currently states that a servicer must acknowledge a QWR in 20 days and provide a detailed response to the QWR in 60 days. Section 1463(c) of the Dodd-Frank Act mandates that the 20 days be decreased to five and the 60 days be decreased to 30. However, Dodd-Frank allows for a 15-day extension of the 30 days detailed response time if the servicer notifies the borrower of the extension and the reason for the delay.

The act also requires mortgage loan servicers to respond within 10 business days to a request from a borrower to provide the identity, address, and other relevant contact information about the owner or assignee of the loan.

Section 1463(b) amends RESPA Section 2605(f), increasing the penalty amounts for a RESPA violation. RESPA Section 2605(f)(1)(B) and (2)(B) allow $1,000 in statutory damages for a “pattern or practice of noncompliance.” Dodd-Frank Section 1463(b) increases that amount to $2,000.

RESPA Section 2605(f)(2)(B)(i) states the total amount of statutory damages in a class action may not exceed the lesser of $500,000 or one percent of the net worth of the servicer. Dodd-Frank Section 1463(b) increases the $500,000 to $1 million.

Administration of escrow accounts

Section 1463(d) of the Dodd-Frank Act amends RESPA Section 2605(g), which pertains to the administration of escrow accounts. Dodd-Frank adds new language stating that the servicer has 20 days after a loan is paid off to return the balance in the escrow account to the borrower. The lender also has the option of crediting that amount for a new mortgage loan to the borrower with the same lender.

Uniform settlement statement

Section 1475 of the Dodd-Frank Act amends RESPA Section 2603, which pertains to the uniform settlement statement. The act adds language stating that the statement may include a disclosure of a fee paid directly to an appraisal management company (AMC) and the administration fee charged by the company, when the appraisal is conducted by an AMC.

Mortgage information booklet

Dodd-Frank Section 1450 amends RESPA Section 2604 by updating the contents of the mortgage information booklet required under RESPA and when it should be distributed to consumers.


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12 USC Section 2605 or Section 6 is titled Servicing of mortgage loans and administration of escrow accounts. It pertains to qualified written requests, notices of transfer of servicing and the administration of escrow accounts.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
12 USC Section 2609 or Section 10 is titled Limitation on requirement of advance deposits in escrow accounts. It governs escrow accounts including notifications and statements to borrowers. Section 10 also sets out penalties for those who violate the section.
RESPA Section 3 provides that a thing of value includes any payment, advance, funds, loan, service or other consideration

Regulation X says thing of value includes: monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person’s expenses or reduction in credit against an existing obligation.
A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form represents the closing transaction and provides each party with a complete list of incoming and outgoing funds. RESPA requires the HUD-1 to be used as the standard real estate settlement form in all transactions in the U.S. involving federally related mortgage loans.
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