01.31.2013
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Updates
CFPB Issue Escrow Requirements Rules
On Thursday, January 10, 2013, the Consumer Financial Protection Bureau (the "CFPB") issued a final rule that amends Regulation Z to implement certain amendments to the Truth in Lending Act ("TILA") made by Sections 1461 and 1462 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). Regulation Z currently requires creditors to establish escrow accounts for higher-priced mortgage loans secured by a first lien on a principal dwelling. The rule implements statutory changes that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. The rule also exempts certain transactions from the statute’s escrow requirement. The primary exemption applies to mortgage transactions extended by creditors that operate predominantly in rural or underserved areas, originate a limited number of first-lien covered transactions, have assets below a certain threshold, and do not maintain escrow accounts on mortgage obligations they currently service.
CFPB Issue High-Cost Mortgage and Homeownership Counseling Rules
On Thursday, January 10, 2013, the CFPB issued a final rule that implements certain amendments to TILA and the Real Estate Settlement Procedures Act made by Sections 1414, 1431, and 1433 of the Dodd-Frank Act. The final rule amends Regulation Z by expanding the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 ("HOEPA"), revising and expanding the tests for coverage under HOEPA, and imposing additional restrictions on mortgages that are covered by HOEPA, including a pre-loan counseling requirement. The final rule also amends Regulation Z and Regulation X by imposing certain other requirements related to homeownership counseling, including a requirement that consumers receive information about homeownership counseling providers.
CFPB Issue Appraisal Disclosure Rules
On Friday, January 18, 2013, the CFPB amended Regulation B, which implements the Equal Credit Opportunity Act ("ECOA"), and the CFPB’s official interpretations of the regulation. The final rule implements amendments to ECOA made by Section 1474 of the Dodd-Frank Act. In general, the revisions to Regulation B require creditors to provide to applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling, and require creditors to notify applicants in writing that copies of appraisals will be provided to them promptly.
CFPB Issue Loan Originator Compensation Rules
On Sunday, January 20, 2013, the CFPB amended Regulation Z to implement amendments to the TILA made by Section 1403 of the Dodd-Frank Act. This final rule implements requirements and restrictions imposed by Section 1403 concerning loan originator compensation, qualifications of, and registration or licensing of loan originators, compliance procedures for depository institutions, mandatory arbitration, and the financing of single-premium credit insurance. These amendments revise or provide additional commentary on Regulation Z’s restrictions on loan originator compensation, including application of these restrictions to prohibitions on dual compensation and compensation based on a term of a transaction or a proxy for a term of a transaction, and to recordkeeping requirements. This final rule also establishes tests for when loan originators can be compensated through certain profits-based compensation arrangements. At this time the CFPB is not prohibiting payments to and receipt of payments by loan originators when a consumer pays upfront points or fees in the mortgage transaction. Rather the CFPB proposes to study how points and fees function in the marketplace and the impact of this final rule and other mortgage-related rulemaking on consumers’ understanding of and choices with respect to points and fees. This final rule is designed primarily to protect consumers by reducing incentives for loan originators to direct consumers into loans with onerous terms and by ensuring that loan originators are adequately qualified.
© 2013 Perkins Coie LLP
