Compliance News
In CoreLogic's Compliance News Archive you will find easy access to our library of GSE announcements, court findings, legislative changes, specific changes to state requirements, governmental guidance on issues that directly affect the mortgage document industry and more.July 2010
FEDERAL ANNOUNCEMENTS |
Department of Treasury Supplemental Directive 10-05 (effective the later of October 1, 2010 or implementation of version 4.0 HAMP NPV model)
A Principal Reduction Alternative ("PRA") has been introduced to provide relief to borrowers whose homes are worth significantly less than the balance owed under their first lien mortgage loans. Servicers must evaluate the benefit of principal reduction for every HAMP eligible loan with high negative equity. The Second Lien Modification Program also requires principal reduction in an amount at least proportional to any principal reduction offered for a HAMP modified first lien loan.
The Trial Period Plan Notice and Home Affordable Modification Agreement will be revised to show language regarding the deferred principal reduction terms. Further, servicers must respond to a borrower within 30 calendar days of receipt of a request for a principal reduction. If applicable, such servicer response must include the reason(s) why the borrower was not offered a principal reduction.
Document Services will have the revised Trial Period Plan Notice and Home Affordable Modification Agreement available for client use.
Department of Treasury HAMP Update: Interim Unemployment Program Reporting (effective August 1, 2010)
The Department of Treasury Supplemental Directive 10-04 reported that active trial period plans must be canceled in the Treasury system of record in the month in which the Unemployment Program (“UP”) plan becomes effective. Servicers now are advised NOT to cancel active trial period plans that have been converted to UP plans until further notice.
STATE ANNOUNCEMENTS |
Arizona House Bill 2242 (effective July 29, 2010)
Reverse mortgages are defined as nonrecourse consumer credit obligations in which (1) a consensual security instrument has been created in the borrower’s principal dwelling; (2) any principal, interest, or shared appreciation or equity is due and payable only after the borrower dies, the dwelling is transferred, or the borrower ceases to occupy the dwelling as a principal place of residence; (3) cash advances may be provided to the borrower based on the equity or the value of the residence or as loan proceeds for the borrower to purchase a dwelling that is secured by the reverse mortgage; and (4) it is not a home equity conversion mortgage as insured by the Department of Housing and Urban Development ("HUD").
Prior to accepting a final application or assessing any fees, the originator must provide the borrower with a list of at least five housing counseling agencies, two of these must provide counseling via the telephone. Originators must receive from the borrower a certification indicating that borrower has received housing counseling and this certification must be maintained for the term of the reverse mortgage.
Before entering into a reverse mortgage, the following must be disclosed in writing: (1) all costs charged by the originator, which include costs of estate planning, financial advice, and other services that are related to the reverse mortgage but not required in order to obtain the reverse mortgage; (2) the terms and provisions of insurance, repairs, alterations, payment of taxes, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, and any additional and secondary liens; and (3) the projected total costs of the reverse mortgage based on the projected total future loan balance for at least two loan terms.
Then at least ten days prior to loan closing, the borrower must be provided a statement setting forth: (1) that a borrower’s liability is limited; (2) explaining the borrower’s rights, obligations, and remedies concerning temporary absences from the home and late payments and payment default by the originator; and (3) all conditions requiring satisfaction of the reverse mortgage.
The interest rate and other fees to be charged during the period that begins on the date the reverse mortgage becomes due and payable and that ends when repayment in full is made must be prominently disclosed in the reverse mortgage agreement.
Reverse mortgages must contain restrictions against the borrower funding unnecessary costs for obtaining the reverse mortgage, such as costs of estate planning, financial advice, or related services. A counseling fee paid to a qualified counselor is not considered an unnecessary cost.
Document Services will have the disclosures available for client use.
Arizona House Bill 2479 (effective July 29, 2010)
With respect to deeds or conveyances, every grantee who is a bank, corporation, or partnership subject to regulation under Arizona statutes must set forth its name, state of incorporation/organization/
licensing/charter/ or registration, and the country under which it is chartered or formed. The failure to include any of the required information shall not impact the validity of the deed or conveyance.
Illinois Senate Bill 1894 (effective December 31, 2009)
As reported in the January 2010 memoranda, the Predatory Lending Database Program (“Program”) was expanded to include Kane, Peoria, and Will counties. Previously, participation in the Program was required only in Cook County. This means that mortgages subject to the Program must have a certificate of compliance attached to the mortgage prior to recordation. Mortgage applications taken on or after July 1, 2010 are impacted.
Louisiana House Bill 1468 (effective August 15, 2010)
A reverse mortgage is defined as a nonrecourse loan secured by immovable property, in which the borrower is provided purchase money proceeds or cash advances based on the equity in the residence. Payment of principal or interest is not required until the entire loan becomes due and payable. A program reverse mortgage is a reverse mortgage insured by HUD; whereas, a conventional reverse mortgage is considered a reverse mortgage loan not insured by HUD.
The first page of any mortgage securing a reverse mortgage must contain the following statement in ten point bold font: "This mortgage secures a reverse mortgage loan."
Before accepting a final application or assessing any fees for a conventional reverse mortgage loan, the lender must provide the prospective borrower with a list of at least five nonprofit, HUD approved counseling agencies. If a lender is making a conventional reverse mortgage loan, the lender may not pay any counseling service fees without providing the borrower a statement indicating that such payment may create a conflict of interest. Borrowers applying for a conventional reverse mortgage must provide a certification indicating that counseling was received from a nonprofit, HUD approved counseling agency. Such certification must be signed by the borrower and counselor, plus set forth the date, names, addresses, and telephone numbers of the borrower and counselor.
At least seven calendar days prior to closing a conventional reverse mortgage loan, the lender must provide the borrower with a loan term sheet or commitment letter setting forth the loan terms and informing the borrower that he/she is not obligated to proceed with the transaction.
Reverse mortgage lenders have a duty to elders, which are persons at least sixty years old, to provide a notice setting forth items to discuss with a loan counselor. The discussion items include: (1) how unexpected medical or other events causing the borrower to move out of the borrower’s home earlier than anticipated will impact the total annual costs of the loan; (2) the extent to which the borrower’s financial needs would be better fulfilled by options other than a reverse mortgage loan, such options include less costly equity lines of credit, property tax deferral programs, or government aid programs; (3) whether the borrower intends to use the proceeds of the loan to purchase an annuity or other financial or insurance product and the consequences of doing so; (4) the effect of repayment of the reverse mortgage loan on other residents of the domicile that is securing the reverse mortgage loan after all borrowers are deceased or permanently abandon the home; (5) the borrower’s ability to finance routine or catastrophic home repairs, especially if maintenance is a factor that may determine when the loan becomes payable; (6) the impact that the loan may have on the borrower’s tax obligations and eligibility for government assistance programs, and the effect that losing equity in the home securing the loan will have on borrower’s estate and heirs; and (7) the borrower’s ability to refinance alternative living accommodations, such as assisted living or long-term care, after borrower’s equity is depleted.
Document Services will have the disclosures available for client use.
Maryland House Bill 799 (effective date October 1, 2010)
Reverse mortgage loans are defined as nonrecourse loans secured by the borrower’s principal dwelling, in which the borrower is provided with purchase money proceeds, a lump sum payment, periodic cash advances, a line of credit, or any combination of these payment plans based on the equity in the borrower’s principal dwelling. Payment of principal and interest is not required until the loan becomes due and payable.
Reverse mortgage loans must conform to the Home Equity Conversion Mortgage ("HECM") requirements set forth by HUD, regardless of whether the loan is insured by HUD. However, non-HUD insured reverse mortgages are not subject to the following: (1) limit origination fees to $6,000.00, or as adjusted per HUD guidelines; (2) impose maximum claim amounts or other loan limit restrictions; or (3) require government insurance for the loan.
After receiving an application for a reverse mortgage, a lender must provide the prospective borrower with a 12 point or larger font type written checklist, which advises the borrower to discuss certain items with a counselor. These counseling discussion items are the same as those set forth within Louisiana House Bill 1468 above.
Document Services will have the disclosure available for client use.
North Carolina Regulation 04NCAC03M.0702 (effective date June 1, 2010)
Servicers must acknowledge a borrower’s request for loss mitigation in writing and no later than 10 business days after the request is received. Once a servicer has received the necessary information to determine whether a borrower qualifies for loss mitigation assistance, the servicer must respond to the borrower no later than 30 business days after receipt of necessary information.
If the servicer denies a loss mitigation request, the servicer’s final response must include the reason for the denial and the name and contact information of a person employed by the servicer that has the authority to reconsider the denial. Additionally, the final response must include the following verbiage in boldface type and in a print no smaller than the largest print used within the denial:
"If you believe the loss mitigation request has been wrongly denied, you may file a complaint with the North Carolina Office of the Commissioner of Banks website, www. nccob.gov."
AGENCY ANNOUNCEMENTS |
Fannie Mae Lender Letter LL-2010-07 (June 3, 2010)
The Alternative Modification program has been extended to September 30, 2010. Prior to the extension, the program terminated on August 31, 2010.
Fannie Mae Announcement SVC-2010-08 (June 25, 2010)
On or after July 15, 2010, servicers must verify income, liabilities, and monthly expenses for all borrowers prior to granting a permanent standard Fannie Mae modification. A standard Fannie Mae modification includes all modification programs except for those subject to the Home Affordable Modification Program.
Freddie Mac Bulletin 2010-13 (June 15, 2010)
Approval to sell Texas Equity Section 50(a)(6) mortgages is no longer required from Freddie Mac.
Freddie Mac Bulletin 2010-14 (June 18, 2010)
The HAMP Backup Modification will apply to all active stated income HAMP trial period plans with a trial period plan effective date on or before May 1, 2010. Previously, the effective date was April 1, 2010.
