Consumer Compliance Outlook
News from Washington
On November 12, 2008, HUD announced a final rule under RESPA to revise the disclosure of key loan terms and closing costs on the good faith estimate (GFE) and the HUD-1/HUD-1a. The revised GFE organizes loan information into tables with subheadings (e.g., “summary of your loan”), while the revised HUD-1 now includes a “loan terms” summary. The final rule also 1) limits charges that can be imposed to deliver the GFE; 2) requires “yield spread premiums” to be included in the disclosed origination charge; 3) expands the definition of “mortgage broker” to include exclusive agents of a lender who provide origination services; 4) amends the definition of “required use” to include incentives for using a particular service provider; and 5) clarifies escrow account requirements and mortgage servicing transfer provisions. Lenders will be required to use the revised forms effective January 1, 2010. The “required use” provision is effective January 16, 2009.
On October 20, 2008, the Board published its final rule to amend Regulation C, the implementing regulation for the Home Mortgage Disclosure Act (HMDA), to change the definition of a rate spread. Under the current definition, the price of a loan must be reported on the HMDA loan application register if the rate spread — the difference between the price of the loan and the rate for Treasury securities of comparable maturity — exceeds 300 basis points for first-lien loans and 500 basis points for second-lien loans. The final rule changes the definition to match the definition of a higher-priced mortgage loan under the final HOEPA rule, which is discussed beginning on page 1 of this issue. Under HOEPA, a loan is higher priced if its annual percentage rate exceeds by 150 basis points for first-lien loans the average prime offer rate for mortgages of comparable type and 350 basis points for second-lien loans. The Board will publish average prime offer rates on a weekly basis on the Federal Financial Institutions Examination Council's (FFIEC) website. The effective date is October 1, 2009.
On October 16, 2008, the Board issued a joint supervision letter (SR 08-8/CA 08-11) clarifying certain Federal Reserve supervisory policies regarding compliance risk management programs and oversight at large banking organizations with complex compliance profiles. The letter addresses 1) supervisory policies for firmwide compliance risk management and oversight programs; 2) compliance staff independence; 3) compliance monitoring and testing; and 4) responsibilities of boards of directors and senior management for compliance risk management and oversight.
On September 10, 2008, the FFIEC released 2007 data for mortgage loan transactions covered by HMDA. The data cover lending activity (applications, originations and denials, and purchases) for 2007, including 21.4 million applications and 4.8 million purchases, for a total of 26.2 million records in 2007. The Board recently published a draft of a forthcoming Federal Reserve Bulletin article that analyzes the data.
The Housing and Economic Recovery Act of 2008 created the new Federal Housing Finance Agency (FHFA) to regulate Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. On September 9, 2008, the FHFA published a notice of the “Establishment of a New Independent Agency” in the Federal Register. The notice provides formal public notice of the existence of the FHFA, its purpose, and the chapter of the Code of Federal Regulations where its regulations will be codified.
On September 5, 2008, the Board announced its recommended practices and procedures for customers affected by the 2008 hurricane season.
On September 4, 2008, HUD published a final rule to amend its HECM program. The rule extends the date for calculating a maximum HECM claim amount to the date of closing and allows for the eligibility of HECM loans that have been assigned under regulatory provisions and remain in effect, but are not in default, to be refinanced with a discounted initial mortgage insurance premium. The rule became effective on October 6, 2008.
On August 26, 2008, the Board adopted the FFIEC's revised examination procedures for Regulation E. The revisions incorporate amendments to Regulation E made in 2001, 2006, and 2007, including changes to the Official Staff Commentary on electronic check conversion, alternatives to periodic statements for payroll cards, and a new exception for providing receipts at electronic terminals when the amount of the transaction is $15 or less.
On August 26, 2008, the Board adopted the FFIEC's revised examination procedures for Regulations M and Z. The changes concern interim final rules that the Board issued for electronic disclosures under the Electronic Signatures in Global and National Commerce Act (E-Sign Act).
On August 5, 2008, the Board announced its annual adjustment to the dollar amount of fees that trigger additional disclosure requirements under Regulation Z for certain home mortgage loans. The new dollar amount has been adjusted to $583 for 2009, effective January 1, 2009.
The Board published a new consumer publication “A Consumer's Guide to Mortgage Refinancings,” which is available on its website. The guide provides comprehensive consumer information about mortgage refinancings.