Spring 2015 Federal Highlights

President Obama Issues Temporary Extension of One Year Period of Protections for Servicemembers from Enforcement of Mortgages            

President Obama signed the Foreclosure Relief and Extension for Servicemembers Act of 2014, which extends a previous modification of the Servicemembers Civil Relief Act.

Under the Servicemembers Civil Relief Act, a Court may stay an action to enforce a mortgage or may adjust the mortgage obligation to preserve the interests of all parties if the action was filed within one year after a servicemember’s period of military service. A foreclosure sale is not valid if made within one year after a servicemember’s period of military service unless made pursuant to a court order or a servicemember’s waiver. When the Servicemembers Civil Relief Act was passed, these protections only existed for nine months after the period of military service instead of one year. In 2012, the periods were changed to one year. This change was set to expire on December 31, 2014. The Act extends the change until December 31, 2015. Thus, the one year periods will remain effective until the end of 2015.

CFPB Adjusts Asset-Size Exemption Threshold for Higher Priced Mortgage Loan Escrow Account Requirements

The CFPB issued a Final Rule adjusting the asset-size threshold for certain institutions to be exempt from the Truth In Lending Act and Regulation Z’s requirement that creditors establish escrow accounts for the payment of property taxes and insurance premiums on certain higher-priced mortgage loans. The Final Rule was effective January 1, 2015.

For 2015, the asset-size exemption threshold is $2.060 billion. Loans made by creditors with assets less than the threshold and who meet other requirements set forth in Regulation Z are exempt from the escrow account requirements for higher-priced mortgage loans. The adjustment to this threshold also affects the definitions of “small creditor portfolio” qualified mortgage loans and “balloon payment” qualified mortgage loans, both of which reference the asset-size exemption threshold for higher-priced mortgage loan escrow account requirements.

CFPB Issues Final Policy on Publication of Consumer Complaint Narratives

The CFPB finalized its policy giving consumers the opportunity to make public their complaints about consumer financial products and services. Consumers now have the option when submitting a complaint to share their version of what happened in the CFPB’s public Consumer Complaint Database. When consumers submit a complaint to the Bureau, they fill in information such as who they are, who the complaint is against, and when it occurred. They are also given a text box to describe what happened and can attach documents to the complaint. The Bureau forwards the complaint to the company for response, gives the consumer a tracking number, and keeps the consumer updated on its status.

The CFPB will not publish the complaint narrative unless the consumer provides informed consent. Complaints are listed in the database only after the company responds to the complaint or after it has had the complaint for 15 days, whichever comes first. The CFPB will disclose the consumer narrative when the company provides its public-facing response, or after the company has had the complaint for 60 calendar days, whichever comes first. Consented-to narratives will not be posted for at least 90 days after the policy has been published in the Federal Register to give companies ample time to learn about this new system.

The final policy is accessible at: http://files.consumerfinance.gov/f/201503_cfpb_disclosure-of-consumer-complaint-narrative-data.pdf

CFPB Releases Know Before You Owe Mortgage Shopping Toolkit

The CFPB issued its new mortgage shopping toolkit. The toolkit can be accessed here: http://www.consumerfinance.gov/learnmore/#respa

The CFPB’s new toolkit is required to be used in connection with disclosures under the TILA-RESPA Integrated Disclosures Rule (“TRID”), which is effective August 1, 2015. For loans subject to TRID, the toolkit replaces the HUD Settlement Costs Booklet that lenders are currently required to provide to mortgage applicants.

FHA’s Revised Model Prepayment Disclosures

The FHA released a final notice revising provisions which previously allowed FHA-approved mortgagees to charge interest through the end of the month in which a mortgage is prepaid. Under the revised provisions, which were effective January 21, 2015, mortgagees are only permitted to charge interest through the actual date on which the mortgage is paid. The revised provisions also require mortgagees to provide an annual written notice (in an approved form) which contains a statement of the outstanding principal amount for prepayment.

The FHA issued revised model prepayment disclosure statement language that reflects the changes. The revised language may be found here: http://portal.hud.gov/hudportal/documents/huddoc?id=SFH_FHA_INFO_15-08.pdf.

HUD’s Revised “Notification to Homeowners of Availability of Housing Counseling Services” Mortgagee Letter 2015-04

HUD updated the content of and provided a model template for the notice of the availability of HUD-approved housing counseling (“the Notice”). The updated requirements are set forth in Mortgagee Letter 2015-04, which you can find here: http://portal.hud.gov/hudportal/documents/huddoc?id=15-04ml.pdf. Approved mortgagees must begin complying with the updated requirements no later than 60 days from the date of the mortgagee letter. Since the mortgagee letter was issued on February 4th, 2015, mortgagees must comply no later than April 5th.

Mortgagees are required to provide delinquent borrowers with the Notice beginning on the 32nd day but no later than the 45th day from the date payment was due. HUD has created a model template for the Notice. Mortgagees may order the template from HUD’s Direct Distribution Center. Mortgagees may use the model template or use a different format that includes all of the text from the model template. Mortgagees using the model template may not alter the template in any way.

HUD Adopts CFPB’s Adjustments to QM Points and Fees Limit 

HUD issued an announcement adopting the CFPB’s annual inflation adjustments to the limits on points and fees for a transaction to be considered a “qualified mortgage.” The announcement is effective February 17, 2015.

HUD’s definition of “qualified mortgage” in its regulations includes a reference to the points and fees limits in the CFPB’s regulations. To be a “qualified mortgage” under the CFPB’s definition, a transaction’s “points and fees” must not exceed certain limits which depend on the loan amount. The CFPB adjusts the limits annually to reflect inflation. HUD’s announcement clarifies that all of the CFPB’s adjustments to its points and fees limits that are consistent with the CFPB’s rules are to be incorporated into HUD’s points and fees limits. The CFPB most recently adjusted the limits on August 15, 2014.

HUD Trial Payment Plan Requirements

HUD issued Mortgagee Letter 2015-07, which addresses requirements related to Trial Payment Plan Agreements. The letter is available at: http://portal.hud.gov/hudportal/documents/huddoc?id=15-07ml.pdf. Mortgagees must implement the requirements of the letter for all trial payment plans offered to borrowers on or after June 1, 2015.

HUD requires that certain mortgagors complete a trial payment plan before executing a loan modification under HUD’s loss mitigation program. Mortgagee Letter 2015-07 address requirements relating to the duration of trial payment plans, the trial payment plan agreement and required signatures, retention of documentation relating to trial payment plans, reporting trial payment plans to HUD, and when a trial payment plan is considered to have failed.

Supreme Court Upholds Department of Labor’s Opinion Letter on the Applicability of the Fair Labor Standards Act to Mortgage Loan Officers

The United States Supreme Court issued a ruling on March 9, 2015, upholding a Department of Labor (“Department”) interpretation that mortgage loan officers do not qualify for the “administrative exemption” to the Fair Labor Standards Act (“FLSA”).

In 2006, the Department issued an opinion letter finding that the administrative exemption applied to mortgage loan officers. Under the 2006 letter, employers were generally not required to comply with the overtime and minimum age requirements with regard to mortgage loan officers.

In 2010, The Department changed its position, rescinded the 2006 letter, and issued an Administrator’s Interpretation stating that the administrative exemption does not apply to mortgage loan officers.

The Mortgage Bankers Association (“MBA”) challenged the 2010 Administrator’s Interpretation on the basis that the Department violated the Administrative Procedures Act when it issued the 2010 interpretation. The Supreme Court ruled in favor of the Department and against the MBA by holding that the 2010 interpretation is valid. Thus, the 2006 letter is no longer in force.

The decision means that employers may no longer rely on the Department’s 2006 letter in determining whether they must comply with overtime and minimum wage requirements with regard to mortgage loan officers. Please note that the Court did not hold that FLSA’s overtime and minimum wage requirements necessarily apply to mortgage loan officers. It merely upheld the Department’s interpretation of the administrative exemption. There may be other exemptions that apply.

Posted in Federal Highlights, Newsletters


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