Compliance News
In First American'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.January 2010
FEDERAL ANNOUNCEMENTS |
Federal Reserve System—Division of Consumer and Community Affairs—CA 09-13 (December 4, 2009)
If a servicer declines to modify a loan under the Home Affordable Modification Program ("HAMP"),
then the servicer must adhere to Regulation B’s adverse action notice requirements. The adverse action
requirements do not apply to loans that are currently delinquent or in default. However, if a borrower is
denied a HAMP modification and his/her loan is not currently delinquent or in default,
then an adverse action notice must be provided. This would include loans at risk of imminent default.
12 CFR Part 701 (Effective December 24, 2009)
Federal credit unions who participate in the HAMP program offered by the Treasury Department are permitted to
modify a second mortgage loan to match the term of a modified first mortgage loan, which may exceed 20 years.
Previously, second mortgage loans were subject to a 20 year maturity limit.
STATE ANNOUNCEMENTS |
California Department of Real Estate Announcement (effective January 1, 2010)
Brokers licensed under the Department of Real Estate must discontinue using the RE 883 Mortgage Loan Disclosure
Statement/Good Faith Estimate form ("RE 883"). Instead, licensed brokers must provide the RE 882 Mortgage Loan
Disclosure Statement ("RE 882") and the new Good Faith Estimate ("GFE"). Use of the RE 882 and the GFE will
satisfy the requirements of the Real Estate Settlement and Procedures Act ("RESPA") and California real estate law.
LPS has removed the RE 883.
Also, licensed brokers making non-traditional mortgages must provide the GFE in addition to the RE
885 Mortgage Loan Disclosure Statement/Good Faith Estimate.
Illinois Senate Bill 1894 (effective December 31, 2009)
The Predatory Lending Database Program ("Program") has been expanded to include Kane, Peoria, and Will counties.
Currently, participation in the Program is required in Cook County. This means that mortgages subject to the
Program must have a certificate of compliance attached to the mortgage prior to recordation. The Program will impact mortgage applications taken on or after July 1, 2010.
New York Regulation 38.3 (Effective December 23, 2009)
Procedures concerning applications taken by mortgage brokers, mortgage bankers, and exempt organizations have been
amended. At the time a written application is taken, the following statement must be disclosed:
"It is a crime to intentionally falsify information on this application." If an oral application is taken,
then the statement must be made orally to the applicant.
If the lender charges discount points, mortgage bankers and exempt organizations must disclose the following
statement: "Discount points should lower the interest rate paid on the loan but may not lower the overall
cost of the loan. If you refinance or pay off your loan quickly, you will lose the benefit of any lower interest
rate provided by the discount points. Furthermore, if you finance the discount points, this will increase
the amount of money that you must repay to the lender and you will have to pay interest on the discount points
as part of the amount you have borrowed." This statement must be disclosed prior to taking an application,
application fee, credit report fee, or property appraisal fee.
LPS has the disclosures available for client use.
AGENCY ANNOUNCEMENTS |
Fannie Mae Announcement 09-36 and Freddie Mac Bulletin 2009-28 (December 14, 2009)
A written notice must be sent to every borrower evaluated for HAMP when the borrower is not offered a trial period
plan, a permanent HAMP modification, or at risk of losing eligibility to participate in HAMP due to failure to
provide required financial documentation. Notices must meet the requirements of the Equal Credit Opportunity
Act as well as all laws, rules and regulations that may be applicable to the transaction.
Additionally, other features of HAMP have been modified. Borrowers facing imminent default may elect to
provide signed federal income tax. Previously, borrowers were required to provide their most recently filed
federal income tax return in addition to the signed and completed Internal Revenue Service Request for Transcript
of Tax Return (Form 4506-T) or Short Form Request for Individual Tax Return Transcript (Form 4506T-EZ).
Servicers now have the option to verify earned income through reliable third party documentation describing the
income. Finally, a title endorsement or similar insurance product and recordation of the executed modification
is required in the event the amount capitalized is greater than $50,000.00. This is an increase from amounts
greater than $20,000.00.
LPS has the notices available for client use.
Freddie Mac Bulletin 2009-28 (December 14, 2009)
New HAMP documents have been provided and may be used prior to March 1, 2010, but must be used on or after March 1, 2010:
- Making Home Affordable Program Request for Modification and Affidavit ("RMA") -- Form 1114;
- Making Home Affordable Program Hardship Affidavit ("MHA Hardship Affidavit") -- Form 1115;
- Home Affordable Modification Program Trial Period Plan Notice (Stated Income) ("Trial Period Plan Notice – Stated") -- Form 1116; and
- Home Affordable Modification Program Trial Period Plan Notice (Verified Income) ("Trial Period Plan Notice – Verified") -- Form 1117.
On or after March 1, 2010, the RMA and the new Trial Period Plan Notices (Forms 1116 and 1117) replace the following documents:
- HAMP Hardship Affidavit, Form 1122;
- MHA Hardship Affidavit, Form 1115; and
- SIGTARP Fraud Notice, Form 1125.
Also, on or after March 1, 2010, the Trial Period Plan Notices (Forms 1116 and 1117) replace the following forms:
- HAMP Trial Period Plan, Form 3156
- HAMP Trial Period Plan Cover Letter – Stated, Form 1123; and
- HAMP Trial Period Plan Cover Letter – Verified, Form 1124.
LPS has these documents available for client use.
HUD Mortgagee Letter 2009-53 (December 30, 2009)
The Department of Housing and Urban Development announced a change to its Federal Housing Administration ("FHA")
insured loans. FHA loans are no longer subject to an origination fee that is 1% of the mortgage amount.
The origination fee cap remains unchanged for Home Equity Conversion Mortgages and Section 230(k) rehabilitation loans.
Veterans Administration Circular 26-10-01 (January 7, 2010; effective until January 1, 2012)
The Department of Veterans Affairs ("VA") clarified that VA loans remain subject to a 1% origination fee.
Lenders taking VA loan applications on or after May 1, 2010 must itemize the fees included in the "Our Origination Charge" of
the HUD-1 Settlement Statement ("HUD-1"). This itemization may be set forth as a line item breakout within the 800 series of
the HUD-1 or as an origination statement itemizing the fees. The VA requires that the origination statement be signed and dated by the borrower.
LPS will have the origination statement available for client use on or before May 1, 2010.
Effective immediately, the VA Interest Rate and Discount Disclosure Statement is not required when the new GFE and HUD-1 are used.
Veterans Administration Circular 26-10-02 (January 8, 2010; effective February 1, 2010)
The VA has authorized HAMP modifications for VA loans. A HAMP modification may be considered for a VA loan as long as the following three requirements are met: (1) the borrower does not qualify for traditional home retention loss mitigation (repayment plans, special forbearances, and traditional loan modifications); (2) the property is the borrower’s primary residence; and (3) the HAMP modification is agreed upon by December 12, 2012.
