All posts by Synergy

CFPB Issues Proposed Policy Guidance Regarding Disclosure of Loan-Level HMDA Data

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued a rule amending the 2015 updates to the Home Mortgage Disclosure Act (HMDA) rule. The Bureau has temporarily changed reporting requirements for banks and credit unions that issue home-equity lines of credit, and clarified the information that financial institutions are required to collect and report about their mortgage lending.

“The Home Mortgage Disclosure Act is a vital source of information on the health and fairness of the mortgage market,” said CFPB Director Richard Cordray. “Today’s amendments show that the Consumer Bureau is committed to ensuring that financial institutions are able to comply with the rule, and to promoting transparency across the largest consumer financial market in the world.”

The Home Mortgage Disclosure Act—originally enacted in 1975—requires most lenders to report information about the home loans that they originate or purchase, as well as applications received. Banking regulators and the public can use this data to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment in order to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.

As directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB updated the HMDA regulation in 2015 to improve the quality and type of data reported by financial institutions. Most of the updated requirements take effect in January 2018, and the industry is working to bring operations into compliance.

Reporting Threshold

Under rules that are scheduled to take effect in January 2018, financial institutions would have been required under the Home Mortgage Disclosure Act to report home-equity lines of credit if they made 100 such loans in each of the last two years. Today’s final rule has increased that threshold to 500 loans through calendar years 2018 and 2019 so that the Bureau can consider whether to make a permanent adjustment. This change was initially proposed in July 2017.

This temporary increase in the threshold will provide time for the Bureau to consider whether to initiate another rulemaking to address the appropriate level for the threshold for data collected beginning January 1, 2020.

Clarifications and Technical Corrections

Today’s final rule contains a number of clarifications, technical corrections, and minor changes to the HMDA regulation. These include clarifying certain key terms, such as “temporary financing” and “automated underwriting system.” The changes finalized today will also, for example, establish transition rules for reporting certain loans purchased by financial institutions. Another change will facilitate reporting the census tract of a property, using a geocoding tool that will be provided on the Bureau’s website. These changes were initially proposed in April 2017.

The CFPB is committed to well-tailored and effective regulations and has sought to carefully calibrate its efforts to ensure consistency with respect to consumer financial protections across the financial services marketplace.

The final rule is available at:

http://files.consumerfinance.gov/f/documents/201708_cfpb_final-rule_home-mortgage-disclosure_regulation-c.pdf 

The CFPB is also releasing today an executive summary of the final rule, updates to technical filing instructions, and other implementation materials.  The CFPB hopes that these materials will help financial institutions understand and implement the changes adopted in the final rule.

The regulatory implementation materials are available here: 

https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/hmda-implementation/

The technical instructions are available here:

 https://www.consumerfinance.gov/data-research/hmda/for-filers

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers  to take more control over their economic lives. For more information, visit consumerfinance.gov.  

Source: https://www.consumerfinance.gov/about-us/newsroom/cfpb-temporarily-changes-mortgage-data-rule-reporting-threshold-community-banks-and-credit-unions/

Freddie Mac Announces Guide Bulletin 2017-21

SUBJECT: EXTENSION OF CERTAIN HURRICANE-RELATED REQUIREMENTS AND PROPERTY INSPECTION REIMBURSEMENT FOR ELIGIBLE DISASTER AREAS This Guide Bulletin announces that our temporary selling and Servicing requirements related to Hurricane Harvey and Hurricane Irma in Bulletins 2017-14, 2017-16 and 2017-19 are extended to Mortgages and Borrowers whose Mortgaged Premises or places of employment are located in Eligible Disaster Areas impacted by all hurricanes on and after August 25, 2017 and through the 2017 hurricane season. However, the temporary suspension of foreclosure sales and evictions will only apply to Mortgaged Premises located in an Eligible Disaster Area as a result of Hurricane Harvey, Hurricane Irma and now Hurricane Maria. In the event of another hurricane, all previously announced selling flexibilities will be available as of the date of the Federal Emergency Management Agency (FEMA) major disaster declaration in Eligible Disaster Areas without further instruction from Freddie Mac. Freddie Mac selling-related systems will be updated as soon as possible after the disaster. We are also announcing details concerning property inspections and reporting requirements for Mortgages with properties in Eligible Disaster Areas.

TEMPORARY SELLING REQUIREMENTS Property inspection fee reimbursement Freddie Mac will reimburse Sellers through September 30, 2018 for property inspections completed prior to the sale or securitization of Mortgages secured by properties in Eligible Disaster Areas as a result of a 2017 hurricane:  Freddie Mac will reimburse Sellers after the Mortgage has been sold or securitized  The original appraisal must have been obtained prior to the area having been declared an Eligible Disaster Area  Freddie Mac will reimburse Sellers for actual inspection costs not to exceed $75 for an individual Mortgage  The Seller must maintain copies of the inspection invoice(s) in the Mortgage file More details regarding the reimbursement process will be posted on our Natural Disaster Relief web page. We will follow up with a Single-Family Update e-mail when additional information is available.

TEMPORARY SERVICING REQUIREMENTS FOR MORTGAGES IMPACTED BY HURRICANE MARIA Suspension of foreclosure sales For Mortgages secured by properties located in Eligible Disaster Areas affected by Hurricane Maria, Freddie Mac is requiring Servicers to suspend all foreclosure sales beginning on the date that FEMA declared the area to be an Eligible Disaster Area and lasting through December 31, 2017. However, if the Mortgaged Premises was identified as vacant or abandoned prior to Hurricane Maria, and the Servicer has completed its property inspection and confirmed that there is no insurable damage or ability to receive FEMA funds on the Mortgaged Premises, the Servicer may choose to proceed with the foreclosure sale on that Mortgage prior to December 31, 2017. TO: Freddie Mac Sellers and Servicers September 25, 2017 | 2017-21

Suspension of evictions:

Freddie Mac is notifying counsel providing default related legal services to suspend all eviction activities as of the date of this Bulletin for Borrowers with Mortgaged Premises in locations designated as an Eligible Disaster Area as a result of Hurricane Maria. We will continue to assess the damage and will reevaluate our requirements as circumstances dictate.

TEMPORARY SERVICING REQUIREMENTS FOR MORTGAGES IMPACTED BY AN ELIGIBLE DISASTER Reimbursement process for property inspections of Mortgaged Premises in Eligible Disaster Areas Effective for all property inspections conducted on and after August 29, 2017 of Mortgaged Premises in an Eligible Disaster Area As announced in Bulletins 2017-14 and 2017-19, Freddie Mac is aware that Servicers may need to conduct a property inspection of a Mortgaged Premises in an Eligible Disaster Area that would not normally be reimbursable in accordance with Guide Sections 9202.12 and 9701.9. As a result, we are announcing a temporary process for Servicers to seek reimbursement of the actual costs, subject to applicable expense limits, for exterior property inspections completed in accordance with Section 8404.2 and interior property inspections completed in accordance with Section 8202.11. For exterior property inspections, Servicers must use expense code 404005 (Exterior Property Inspection) with an expense limit of $15. For interior property inspections, Servicers must use expense code 404007 (Interior Property Inspection) with an expense limit of $20. However, if a Servicer already ordered or obtained a “FEMA inspection” where the cost exceeded the normal expense reimbursement amounts, Freddie Mac will reimburse those amounts if incurred prior to the date of this Bulletin. Servicers may temporarily submit property inspection reimbursement requests once per month via an Excel® spreadsheet to NPL_Invoices@freddiemac.com. The e-mail subject line should reference “Disaster related property inspection reimbursement request,” and the spreadsheet must include the following information for all Mortgages that a Servicer is seeking reimbursement for that month:  Freddie Mac Loan Number  Seller/Servicer Payee Code  Expense Code  Reimbursement request amount  Property inspection expense date paid  Vendor Name A Servicer unsure of its Seller/Servicer Payee code should send an e-mail request to 104_Expense@freddiemac.com. A property inspection completed on a Mortgage that was 60 or more days delinquent would already be required, and so is eligible for reimbursement in accordance with Sections 9202.12 and 9701.9. In this instance, Servicers must submit expense reimbursement requests in accordance with those Guide sections, and not through the temporary process described above.

EDR for Eligible Disasters We remind Servicers to report:  All Mortgages that are affected by an Eligible Disaster and are 31 or more days delinquent to Freddie Mac via EDR transmission within the first three Business Days of the month following the month the Servicer learned of the Eligible Disaster  Default action code 09 (Forbearance) for each month while the disaster forbearance plan status is relevant  Default action date (report the forbearance plan start date, which date may be prior to the Mortgage becoming 31 or more days delinquent)  Default reason code 034 (Eligible Disaster Area) for Mortgages where the Borrower’s Mortgaged Premises or place of employment is located in an Eligible Disaster Area  Default action code AW to notify us of the date of the Servicer’s first quality right party contact (QRPC) with the Borrower, which date must only be reported one time, in the month following the month when the event took place  Default action code AX to notify us of the date of the Servicer’s last QRPC with the Borrower, which date must only be reported one time, in the month following the month when the event took place Servicers should review Guide Exhibit 82, Electronic Default Reporting Transmission Code List, and the Electronic Default Reporting Quick Reference Guide for details on EDR.

CONCLUSION If you have any questions about the changes announced in this Bulletin, please contact your Freddie Mac representative or call the Customer Support Contact Center at (800) FREDDIE.

Sincerely,

Christina K. Boyle Senior Vice President Single-Family Sales and Relationship Management

Source: http://www.freddiemac.com/singlefamily/guide/bulletins/pdf/bll1721.pdf

The Smart Move to Make After The Equifax Breach

With the angry glare of the public eye squarely focused on Equifax after announcing a massive breach and blamed it on a computer server flaw other companies had fixed months before, the company is waiving fees on credit freezes. Which is good news because it’s the only thing that’s going to save your bacon.

The company had previously offered victims a free year of credit report monitoring — but customers and advocates were quick to point out that this wouldn’t actually stop anyone’s identity from getting exploited from the data heist affecting nearly 143 million Americans. Hackers would still be able to open up new credit cards and go on spending sprees, apply for other loans or mortgages, and leave you holding the bag for the debt or the bad name.

 

Source : https://www.nbcnews.com/business/consumer/amp/one-move-make-after-equifax-breach-n800776

10 Traits of Successful People

Those who enjoy success, financial or otherwise, have a different perspective to the rest of us. They do not tolerate people who do not support their success, people who are not on their team. They take the long term view, often forgoing short term benefits, like holidays, for long term achievements, the result of hard work. They never stop learning and are not afraid to ask for help and are willing to make mistakes and take responsibility for them.

They could come from any background but these qualities make them successful over time.

1. They Are Driven
They obsessively pursue their goals achievement by achievement, iteration by iteration until they are in no doubt that their goal has been achieved. They do not have time to watch TV and all the simulations it hypnotizes people with. They are driving energy into their financial success.

2. They Sacrifice Present Comfort for Future Success
Often wealthy people started with low income and made space in their finances for some investment, whether in their education, financial instruments, property or some other asset that will add value over time. To make that space they often forgo the attractions of the latest fancy car or restaurant dinner.

3. They Are Self Confident
Self Confidence means never playing the victim, recognizing, instead, that attributing negative emotions to the actions of others disempowers them. Victims blame others for their circumstances and so they place all their power with others. Successful people realise that their power lies within them and that they must act to make changes. People who experience business success will always have to be tough in taking criticism and rejection, and you have to be self confident to do that.

4. They Limit Debt
Debt is a thorny issue. It is hard in the modern business environment to avoid debt, but expensive, unproductive debt is a millstone around the neck. Credit cards, over droughts, car loans, house loans, all these are profoundly unproductive and expensive. The value of what is bought with the money often depreciates, sometimes immediately after you’ve bought it, and the interest is expensive. Financially successful people will only borrow money to invest in assets that will yield a return in the future and in this way the cost of credit will pay for itself.

5. They Take Responsibility for Their Circumstances
Business success is dependent upon accepting that there will be bumps in the road, obstacles in the stream and difficult people in their lives. Financially successful people know that to blame others for the circumstances they find themselves in, especially bad circumstances, is self defeating, placing the power to effect change on others. Even if circumstances are difficult, there are always options. Taking responsibility opens them up to those options.

6. Long Term Perspective
The long term is the future, where we all end up. Planning for the long term future will help you make stable investment and business decisions. We have all heard of lottery winners whose wealth evaporates before them with nothing to show for it afterwards. This is the result of spending for the short term. Money invested with the long term in mind will generate wealth over time.

7. They Give Value
The essence of what people want from their wealth is value. Those who give value can expect to receive wealth in return for that value. Those who consistently give value can consistently expect to receive money in return, whether it is a business making a product or a craftsman plying his or her trade or an employee doing the best job possible.

8. They Know Education Is An Investment
Education can take the form of an expensive course or simply reading a book, listening to an audio book in the car on the way to work or asking for advice from a trusted source. Either way knowledge is the product and knowledge allows you to learn from others so that you can take the shortcuts and not make as many mistakes as if you did not have the knowledge. It’s simple really.

9. They Are Goal Oriented
There are those who, in their jobs, are only willing to do just enough to avoid being fired and they spend their lives veering from one dead end job to another. Financially successful people are goal oriented and pursue that goal with all the energy they can muster, and if that means working extra hours or travelling or getting advice from a mentor then they will do that to achieve the goal.

10. They Are Passionate
Their drive to achieve success is fueled by passion, the excitement, fulfillment and intensity of self actualization. The passionate pursue success not merely for themselves but for the service of all.

Financially successful people are driven to succeed by their passionate desire to provide service to the world. They do this by offering value, going the extra mile where it is never crowded. They take the long term view, avoiding debt and they constantly update their knowledge with education.

Source: http://www.viralnovelty.net/10-things-financially-successful-people-consistently/

HUD Announces New Reverse Mortgage Rules

The House of Representatives could soon consider a bill that would bring several changes to the Consumer Financial Protection Bureau’s “Know Before You Owe mortgage disclosure rule”, also known as the TILA-RESPA Integrated Disclosure rule or TRID.

The new bill is called the “TRID Improvement Act of 2017,” and has yet to be officially introduced into the House, but the bill was discussed on Capitol Hill on Thursday during a meeting of the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee.

The bill is sponsored by Rep. French Hill, R-Arkansas.

According to the Republican arm of the House Financial Services Committee, the TRID Improvement Act of 2017 would amend the Real Estate Settlement Procedures Act and the Truth in Lending Act to expand the time period granted to a creditor to cure a good-faith violation on a loan estimate or closing disclosure from 60 to 210 days.

The bill would also amend RESPA to “allow for the calculation of a simultaneous issue discount when disclosing title insurance premiums.”

Additional details about the bill can be seen in a discussion draft of the bill that was posted Thursday to the House Financial Services Committee’s website. Click here to read the discussion draft in full.

The bill’s proposed changes come just over a month before the CFPB’s finalized updates to TRID rule officially take effect on Oct. 10, 2017.

The Federal Register published the rule last month, marking the 60-day period until the amendments take effect.

The bureau released the updates back in July, answering industry calls asked for greater clarity and certainty on the controversial rule.

For much more on the history of TRID, click here.

During the hearing, the Financial Institutions and Consumer Credit Subcommittee also discussed a number of other bills, including the “Community Institution Mortgage Relief Act of 2017.”

That bill, which is set to be formally introduced by Rep. Claudia Tenney, R-New York, would amends the Truth in Lending Act to direct the Consumer Financial Protection Bureau to “exempt from certain escrow or impound requirements a loan secured by a first lien on a consumer’s principal dwelling if the loan is held by a creditor with assets of $50 billion or less.”

The bill would also require the CFPB to provide certain exemptions to the mortgage loan servicing and escrow account administration requirements of the Real Estate Settlement Procedures Act for servicers of 30,000 or fewer mortgages.

“The legislation discussed in the Subcommittee today will better allow financial companies to serve their customers,” Subcommittee Chairman Rep. Blaine Luetkemeyer, R-Missouri. “From banks and credit unions to attorneys, we’ve seen an impeded ability for businesses across the nation to offer financial services and guidance. In order to preserve consumer choice and financial independence, Congress must tackle regulatory reform and simplify rules. The policies outlined in today’s legislation start to break down those barriers.”

Source : https://www.housingwire.com/articles/41253-house-to-consider-bill-to-change-trid-rules

Pending TRID Changes Are on the Way

The House of Representatives could soon consider a bill that would bring several changes to the Consumer Financial Protection Bureau’s “Know Before You Owe mortgage disclosure rule”, also known as the TILA-RESPA Integrated Disclosure rule or TRID.

The new bill is called the “TRID Improvement Act of 2017,” and has yet to be officially introduced into the House, but the bill was discussed on Capitol Hill on Thursday during a meeting of the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee.

The bill is sponsored by Rep. French Hill, R-Arkansas.

According to the Republican arm of the House Financial Services Committee, the TRID Improvement Act of 2017 would amend the Real Estate Settlement Procedures Act and the Truth in Lending Act to expand the time period granted to a creditor to cure a good-faith violation on a loan estimate or closing disclosure from 60 to 210 days.

The bill would also amend RESPA to “allow for the calculation of a simultaneous issue discount when disclosing title insurance premiums.”

Additional details about the bill can be seen in a discussion draft of the bill that was posted Thursday to the House Financial Services Committee’s website. Click here to read the discussion draft in full.

The bill’s proposed changes come just over a month before the CFPB’s finalized updates to TRID rule officially take effect on Oct. 10, 2017.

The Federal Register published the rule last month, marking the 60-day period until the amendments take effect.

The bureau released the updates back in July, answering industry calls asked for greater clarity and certainty on the controversial rule.

For much more on the history of TRID, click here.

During the hearing, the Financial Institutions and Consumer Credit Subcommittee also discussed a number of other bills, including the “Community Institution Mortgage Relief Act of 2017.”

That bill, which is set to be formally introduced by Rep. Claudia Tenney, R-New York, would amends the Truth in Lending Act to direct the Consumer Financial Protection Bureau to “exempt from certain escrow or impound requirements a loan secured by a first lien on a consumer’s principal dwelling if the loan is held by a creditor with assets of $50 billion or less.”

The bill would also require the CFPB to provide certain exemptions to the mortgage loan servicing and escrow account administration requirements of the Real Estate Settlement Procedures Act for servicers of 30,000 or fewer mortgages.

“The legislation discussed in the Subcommittee today will better allow financial companies to serve their customers,” Subcommittee Chairman Rep. Blaine Luetkemeyer, R-Missouri. “From banks and credit unions to attorneys, we’ve seen an impeded ability for businesses across the nation to offer financial services and guidance. In order to preserve consumer choice and financial independence, Congress must tackle regulatory reform and simplify rules. The policies outlined in today’s legislation start to break down those barriers.”

 

Source: https://www.housingwire.com/articles/41253-house-to-consider-bill-to-change-trid-rules

What are the Compliance Risks With Electronic Documents ?

By Rachael Sokolowski

In the satirical 1980s film Risky Business, a Chicago teen’s parents leave him home alone while they go on vacation. The result is a series of unintended mishaps, involving prostitution and a pop-up brothel, high speed chases and a waterlogged Porsche, stolen furniture and a crack in his mother’s prized Steuben glass egg. Joel, the teenager, manages to restore the house to order, including the Steuben egg on the mantle, just as his parents walk in. Although Joel’s mother notices a crack in the glass egg, she does not ask how the crack happened or why there is a crack. She only asks how Joel could have let the crack happened and simply expresses her disappointment.

With its humorous depiction of how one simple decision can set off a series of catastrophic events, the movie Risky Business may have some bearing in the mortgage industry in the way electronic mortgage documents and data are handled. All may appear to be fine at the end of the process, but there could be a series of unintended issues along the way which may contribute to a less than perfect conclusion. For starters, there is a disconnect between the representation of the data in the document and the electronic data used by mortgage technology systems. Throughout the life of the loan, from origination, closing, servicing, and securitization, the document and the data from the document operate in parallel universes, much like Joel and his parents.

In today’s mortgage processing of paper documents, there is a reliance on humans, instead of technology, to determine inconsistencies. With paper, the only way to automate the processing of the information on the documents is to extract the data and this is typically performed after closing. The extraction may be done in one of two ways. In one method, a person manually keys the information on a document into a system. To reduce the error rate and to improve accuracy, two or three different people enter the data and the inputs are cross-checked against each other for inconsistencies. The accuracy rate varies between 98 and 99 percent for this type of manual keying.

A second approach is to automatically recognize text and numbers on the paper document. Automatic recognition involves utilizing technology, such as optical character recognition (OCR) and business rules about the document, to determine the letters and numbers. OCR systems, just as counterpart systems for voice recognition, make mistakes and are not 100 percent accurate. To have confidence in the quality of the data, regardless of whether it is input by hand or by technology, a certain amount of human intervention is required to audit inconsistencies, to perform exception processing and to control data quality.

Regardless of the method, after extraction, there must be a check for inconsistencies. If the data representing the loan amount was extracted incorrectly, this will have major consequences for the downstream systems processing the loan. Eyes must compare the two sets of information to assure a match. This process is commonly referred to in the industry as “stare-and-compare.” A person stares at the paper document or an image of the paper document and compares it with the data in the system. There is always a human involved in the final stage of the extraction process for a quality review of the data. But, it is not fiscally feasible to have a person to perform this check on every document in every mortgage loan. This creates the possibility for inconsistency in those loans that are not subjected to a compliance check.

This whole process from data extraction to stare-and-compare may happen more than once. It may occur in the loan origination system (LOS) and/or the lender’s system and/or the servicing system and/or the loan delivery system for the investor and/or whatever technology touches the mortgage. Each time data is re-entered into a system, there is a risk of error and inconsistencies. Paper will never be eliminated in the mortgage process or at least not in our lifetimes. But where in the process should these parallel universes be checked to determine that they are in sync? Before closing or after closing? And which entity in the entire loan process should be responsible for the verification of the data on the document and the data used by mortgage systems?

It is time to ask why this disconnect exists and whether this is causing operational and compliance issues for the industry. There are operational and technological solutions to reduce the risks. There is no need for these parallel universes.

The only way to eliminate the need to stare-and-compare is to capture the loan information once, and to minimize the reliance on paper documentation. Processing documents in this way is the premise of an electronic Mortgage, or eMortgage, and is often referred to as “lights-out” processing. In the early 2000s, the Mortgage Industry Standards Maintenance Organization (MISMO) with support from the Government-Sponsored Enterprises (GSEs), developed a standard representation for eMortgage documents called the SMART document. The MISMO specification carries the data of the document in a standardized format with a direct link to the visual presentation in a single, self-contained electronic document. It is possible to automatically verify that the data provided for machine consumption matches the information presented to humans. The SMART document is currently in use today for the electronic promissory note document and only for that one document.

A SMART document eNote eliminates the need for stare-and-compare. So, why not use this electronic specification for all loan documents? In the case of the promissory note document, there are special considerations since the document is a negotiable instrument. The promissory note is as good as cash and there needs to be an assurance that the document has not been tampered with—such as the loan amount changing after the document was signed. It is also important to know who is the holder or possessor of the electronic document. Since it is easy to make copies of and/or change an electronic document, the industry agreed to designate a registry to identify the “authoritative copy” or the electronic equivalent of the paper original and to ensure the electronic document had not changed in any way after the last borrower signed the document. Since 2004, the Mortgage Electronic Registration Systems “eRegistry” provides this information. The GSEs have defined delivery requirements for accepting electronic promissory notes and MISMO defines the eMortgage as “A mortgage loan where the closing documents—through an eClosing process that includes, at a minimum, the Promissory Note—are created, accessed, presented, executed, transferred, and stored electronically.”

This definition narrows what can be described as an eMortgage. Only loans with an electronic promissory note document qualify. And despite this legal and technical infrastructure for electronic mortgages, the number of eMortgages remains static at around one percent of all mortgages. Why is this?

The issue is the age of the SMART document specification that the GSEs require for delivery. This version was developed in the early 2000s. The industry has been slow to upgrade the SMART document specification to accommodate all loan documents, including the eNote, by using the updated MISMO Version 3 SMART document specification. With this version, there is a single reference model for all data about a loan throughout its lifecycle as well as all the data necessary for mortgage documents. The reference model also includes metadata information (such as the type of document), audit trails, and the ability to add information about document signers and signatures. Version 3 holds much promise for the industry to be widely used for all mortgage documents in the future as any mortgage document can be represented in the MISMO standard. However, there is a risk that the industry is mimicking the paper processes and will still rely on stare-and-compare for detecting inconsistencies. Why is this when a technology solution exists that does not require human intervention?

The MISMO eMortgage workgroup has developed different types of electronic documents to meet varying requirements. Four types of SMART documents are defined: Basic, Retrievable, Tamper Evident and Verifiable and these are known as document profiles. The profiles build on each other and become more extensive, from Basic to Verifiable much like a set of nesting Russian Matryoshka dolls. The most rudimentary one is the Basic profile. It contains the minimal amount of information wrapped up in a SMART Doc structure that includes the view (most typically a PDF), the document’s type (e.g., promissory note, closing disclosure, loan estimate, etc.), and, if the document is signed, information related to signatures. The intent of this profile is for electronic documents where the data is not used in the loan processing. An example would be the mortgage servicing disclosure. The Retrievable profile adds MISMO standard data to what is defined in the Basic profile and uses PDF/A for the view of the electronic document. PDF is an open International Standard Organization (ISO) standard and PDF/A guarantees future presentation of the electronic document despite technology changes and provides a mechanism to prevent changes to the document. The retrievable profile is used when the document data’s needs to be carried with the PDF image. There is no linkage between the data and the PDF for automatic processing to verify that the data matches the viewable representation of the document.

The GSEs have defined an industry dataset and electronic document format to support the closing disclosure forms, called the Uniform Closing Dataset (UCD). It uses the data and requirements for MISMO Version 3 SMART documents in the Retrievable profile. By requiring the use of the SMART document, the closing disclosure’s data is delivered along with electronic representation of the document. But one problem remains since there is no way to systematically check that the data in the UCD dataset matches what the borrower viewed before signing at the closing table. This disconnect introduces the potential for inconsistencies and furthers the reliance on stare-and-compare. This risk increases when the data comes from different sources which is very common for the closing disclosure.

And now, what is next for the eNote? The eNote needs a higher level of security that the electronic document has not been altered. The MISMO SMART document Tamper Evident profile requires an audit trail of events and a final digital signature for evidence of tampering. This digital signature is used for identification on the MERS eRegistry. This is necessary for the eNote. There must be confidence that the document and its data, such as the loan amount, have not changed since the borrower signed at the closing table. Is the Tamper Evident profile sufficient for the eNote? At present the GSEs believe so. But just like the closing disclosure, the possibility exists that the data does not match the PDF and, again, furthers the reliance on stare-and-compare after closing.

A solution for this situation exists in the Verifiable Profile. It includes all the features of the Tamper Evident profile plus links between the MISMO data and the information presented in the viewable image of the document. This provides a systematic and automated way to validate that the two match. The Verifiable Profile matches what is in place today for eNotes. The GSEs are currently not requiring this profile. For the eNote, the possibility exists that the data does not match the PDF. There is a risk here.

At some point in the process, a check that the data matches the document needs to occur. But where? And how? There are currently two different approaches: automated or manual. With an automated approach, the validation is pushed to the beginning of the loan process. The check that the data matches the document is an automated validation that can occur at any point in the loan process including before closing, during closing and after closing. Manually checking the data and documents is performed by humans after closing has occurred and only on a random set of documents. But is this operationally the right point for this check? Would it not make more sense to perform this check before closing? Or include technological solutions that do not require human intervention for inconsistencies such as those that were implemented years ago for the eNote?

Right now, it is unclear when the validation should occur and who should do it. The assurance that the data matches the document is performed in redundant and costly systems and processes that do not always have a technological mechanism to communicate with each other. There are impacts to staff and costs. What happens in the future when the technology provider of the eNote is no longer in business and there are errors in the data used to service and securitize the loan? Which entity will be responsible?

Technology should be used to remove mundane and labor intensive tasks. Technology should be leveraged to overcome the operational difficulties that arise when data is generated from different sources. But that is not the case for the closing disclosure or for eNotes as a MISMO Version 3 SMART document. Instead, the industry is relying on decades old processes for verification of information from paper documents. This is risk-e business, with a potential crack in the system.

Rachael Sokolowski, president of Magnolia Technologies LLC, is a recognized leader and technology evangelist in the mortgage banking industry. She can be reached at RSokolowski@MagnoliaTech.com.

Source: http://www.mortgagecompliancemagazine.com/technology/risk-e-business-undetected-compliance-risk-data-electronic-documents/

Housing Bubble 2.0 – Hottest Markets For Flipping

ATTOM Data Solutions today released its Q2 2017 U.S. Home Flipping Report which reveals that residential home flippers, the same speculative crew that nearly blew up the entire global financial system in 2008, are now making more money than ever.  In fact, in 2Q the average flipped house generated gross profits of $67,516 which is well above the $60,000 peak previously set back in 2005.

The report also shows an average gross flipping profit of $67,516 for homes flipped in the second quarter,representing a 48.4 percent return on investment (ROI) for flippers — down from 49.0 percent in the previous quarter and down from 49.6 percent in Q2 2016 to the lowest level since Q3 2015. After peaking at 51.1 percent in Q3 2016, average gross flipping ROI nationwide has decreased for three consecutive quarters.

“Home flippers are employing a number of strategies to give them an edge in the increasingly competitive environment where flipping yields are being compressed,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available — often due to foreclosure or some other type of distress. Many of those lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals.

“In markets where distressed discounts have largely dried up, flippers are showing more willingness to leverage financing when acquiring properties, often purchasing closer to full market value and then relying more heavily on price appreciation to fuel their flipping profits,” Blomquist added.

So where are flippers earning the highest returns these days?  Attom says that lower cost states like Pennsylvania, Louisiana and Ohio seem offer the most attractive returns while cities in the flipping paradise of California are only managing to generate lackluster mid-20% returns on their investment.

Homes flipped in Pennsylvania yielded the highest average gross flipping ROI nationwide in Q2 2017 (103.1 percent), followed by Louisiana (100.0 percent), Ohio (88.9 percent), New Jersey (81.7 percent), and the District of Columbia (81.2 percent).

Among 101 metropolitan statistical areas analyzed in the report, those with the highest average gross flipping ROI were Pittsburgh, Pennsylvania (146.6 percent); Baton Rouge, Louisiana (120.3 percent); Philadelphia, Pennsylvania (114.0 percent); Harrisburg, Pennsylvania (103.3 percent); and Cleveland, Ohio (101.8 percent).

Metro areas with the lowest average gross flipping returns in Q2 2017 were Honolulu, Hawaii (17.8 percent); Boise, Idaho (23.5 percent); Austin, Texas (26.0 percent); San Jose, California (27.0 percent); and San Francisco, California (27.1 percent).

Of course, capital tends to follow out-sized returns which is presumable why 1 in 4 homes sold in the following zip codes are now flowing through speculative flippers.

 

Meanwhile, here are the other markets around the country where flipping is also heating up.

Counter to the national trend, 54 metropolitan statistical areas — 53 percent of the 101 metro areas analyzed in the report — posted a year-over-year increase in home flipping rates in the second quarter, led by Baton Rouge, Louisiana (up 72 percent); Rochester, New York (up 39 percent); Daphne-Fairhope-Foley, Alabama (up 29 percent); New York (up 24 percent); and Modesto, California (up 24 percent).

Other markets where the Q2 2017 home flipping rate increased at least 10 percent from a year ago included Birmingham, Alabama (up 22 percent); Grand Rapids, Michigan (up 20 percent); Dallas-Fort Worth, Texas (up 13 percent); Oklahoma City, Oklahoma (up 12 percent); St. Louis (up 11 percent); Providence, Rhode Island (up 11 percent); and Cincinnati, Ohio (up 10 percent).

All that said, flipping isn’t always easy in every market.  Take Denver, for example, where real estate investor Paul Schemmel said it became so difficult to flip houses at a profit that he had to ‘evolve’ his business strategy…so now he just pays full price for existing homes, bulldozes them and builds brand new mcmansions.  Genius plan, if we understand it correctly.

“I’ve constantly evolved to make money in the Denver market,” said Schemmel, who said he has flipped hundreds of homes since 2008 but was finding it harder to compete in the conventional home flipping arena. “Why don’t I just buy at full price, scrape the lot and build a new house. … And then I started making money again. I don’t even rehab any more. I demolish and I build a new home. … I can pay full price for a property, but my competition cannot.”

Of course, you should not worry at all that flipped homes are increasingly being financed with mortgages…

More than 35 percent of homes flipped in Q2 2017 were purchased by the flipper with financing, up from 33.2 percent in the previous quarter and up from 32.3 percent a year ago to the highest level since Q3 2008 — a nearly nine-year high.

The estimated total dollar volume of financing for homes flipped in the second quarter was $4.4 billion, up from $3.9 billion in the previous quarter and up from $3.4 billion a year ago to the highest level since Q3 2007 — a nearly 10-year high.

Among 101 metropolitan statistical areas analyzed in the report, those with the highest percentage of Q2 2017 home flips purchased with financing by the flipper were Colorado Springs, Colorado (68.4 percent); Denver, Colorado (56.1 percent); Boston, Massachusetts (53.3 percent); Providence, Rhode Island (51.7 percent); and San Diego, California (49.0 percent).

“Across California the gross dollar profits available for property flips remains one of the highest in the country; however low market inventories, increases in home prices, and decreasing home affordability have decreased the number of opportunities available to secure prospective properties to invest,” said Michael Mahon, president at First Team Real Estate, covering the Southern California housing market.

Source: http://www.zerohedge.com/news/2017-09-14/here-are-zip-codes-where-1-4-home-sales-are-flips?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Mortgage Regulation Deadlines Are Coming

The compliance efforts of the mortgage industry are ongoing. The CFPB has finalized, or is in the process of finalizing, updates to mortgage-related regulations, including the TILA-RESPA Integrated Disclosure Rule (“TRID” or the Know Before You Owe Rule) and Regulation C, which implements the requirements of the Home Mortgage Disclosure Act. Accordingly, industry is continuing its efforts in complying with the updated rules.
Recent and pending updates include:
TRID Updates: The CFPB published its updates to the TRID Rules in July 2017. Among other changes, the updates include tolerance provisions for the total of payments that parallel the tolerances for the finance charge and disclosures affected by the finance charge. The updates also include clarifications for disclosing construction loans and codification of guidance CFPB had previously provided orally or via webinar. The mandatory compliance date is October 1, 2018, but industry has the option to comply with the updates on a rolling basis leading up to the compliance date.
TRID “Black Hole” Proposal: The CFPB has separately proposed a fix for the TRID Rule’s “black hole” issue. The “black hole” occurs when a mortgage lender is unable to use the Closing Disclosure to reset fee tolerances because closing is delayed or rescheduled after the initial Closing Disclosure has been provided. The CFPB issued a proposal on August 11, 2017 regarding a fix for the “black hole,” and comments are due on October 10, 2017.
HMDA/Regulation C Amendments: The CFPB and FFIEC have published several updates to the HMDA/Regulation C reporting rules. Updates include new filing instructions and several clarifications finalized by the CFPB, such as a temporary increase in the threshold reporting HELOCs (from 100 to 500) for the 2018 and 2019 calendar years, and clarifications of several HDMA/Regulation C terms.
However, foremost for industry with regard to HMDA as the final quarter of the year approaches is compliance with the new data collection requirements of the amended HMDA rule. The rule, released on October 15, 2015, revises and in many ways expands the breadth and scope of HMDA data collection requirements—which includes the addition of roughly 25 new data fields and the modification of an additional 12 data fields. Per the rule, industry participants will need to start collecting the new data for credit decisions that will be made in January 2018, to prepare for the first reporting under the amended HMDA Rule. The 2018 data will need to be reported by March 2019.

Source :  https://www.lexology.com/library/detail.aspx?g=2eb8f641-3c1e-40bf-8b0b-acfe894cb6bf

HUD – Provides List of Regulatory Waivers

SUMMARY:

Section 106 of the Department of Housing and Urban Development Reform Act of 1989 (the HUD Reform Act) requires HUD to publish quarterly Federal Register notices of all regulatory waivers that HUD has approved. Each notice covers the quarterly period since the previous Federal Register notice. The purpose of this notice is to comply with the requirements of section 106 of the HUD Reform Act. This notice contains a list of regulatory waivers granted by HUD during the period beginning on January 1, 2017, and ending on March 31, 2017.

FOR FURTHER INFORMATION CONTACT:

For general information about this notice, contact Aaron Santa Anna, Assistant General Counsel for Regulations, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500, telephone 202-708-3055 (this is not a toll-free number). Persons with hearing- or speech-impairments may access this number through TTY by calling the toll-free Federal Relay Service at 800-877-8339.

For information concerning a particular waiver that was granted and for which public notice is provided in this document, contact the person whose name and address follow the description of the waiver granted in the accompanying list of waivers that have been granted in the first quarter of calendar year 2017.

SUPPLEMENTARY INFORMATION:

Section 106 of the HUD Reform Act added a new section 7(q) to the Department of Housing and Urban Development Act (42 U.S.C. 3535(q)), which provides that:

1. Any waiver of a regulation must be in writing and must specify the grounds for approving the waiver;

2. Authority to approve a waiver of a regulation may be delegated by the Secretary only to an individual of Assistant Secretary or equivalent rank, and the person to whom authority to waive is delegated must also have authority to issue the particular regulation to be waived;

3. Not less than quarterly, the Secretary must notify the public of all waivers of regulations that HUD has approved, by publishing a notice in the Federal Register. These notices (each covering the period since the most recent previous notification) shall:

a. Identify the project, activity, or undertaking involved;

b. Describe the nature of the provision waived and the designation of the provision;

c. Indicate the name and title of the person who granted the waiver request;

d. Describe briefly the grounds for approval of the request; and

e. State how additional information about a particular waiver may be obtained.

Section 106 of the HUD Reform Act also contains requirements applicable to waivers of HUD handbook provisions that are not relevant to the purpose of this notice.

This notice follows procedures provided in HUD’s Statement of Policy on Waiver of Regulations and Directives issued on April 22, 1991 (56 FR 16337). In accordance with those procedures and with the requirements of section 106 of the HUD Reform Act, waivers of regulations are granted by the Assistant Secretary with jurisdiction over the regulations for which a waiver was requested. In those cases in which a General Deputy Assistant Secretary granted the waiver, the General Deputy Assistant Secretary was serving in the absence of the Assistant Secretary in accordance with the office’s Order of Succession.

This notice covers waivers of regulations granted by HUD from January 1, 2017 through March 31, 2017. For ease of reference, the waivers granted by HUD are listed by HUD program office (for example, the Office of Community Planning and Development, the Office of Fair Housing and Equal Opportunity, the Office of Housing, and the Office of Public and Indian Housing, etc.). Within each program office grouping, the waivers are listed sequentially by the regulatory section of title 24 of the Code of Federal Regulations (CFR) that is being waived. For example, a waiver of a provision in 24 CFR part 58 would be listed before a waiver of a provision in 24 CFR part 570.

Where more than one regulatory provision is involved in the grant of a particular waiver request, the action is listed under the section number of the first regulatory requirement that appears in 24 CFR and that is being waived. For example, a waiver of both § 58.73 and § 58.74 would appear sequentially in the listing under § 58.73.

Waiver of regulations that involve the same initial regulatory citation are in Start Printed Page 29304time sequence beginning with the earliest-dated regulatory waiver.

Should HUD receive additional information about waivers granted during the period covered by this report (the first quarter of calendar year 2017) before the next report is published (the second quarter of calendar year 2017), HUD will include any additional waivers granted for the first quarter in the next report.

Accordingly, information about approved waiver requests pertaining to HUD regulations is provided in the Appendix that follows this notice.

Dated: June 23, 2017.

Ariel Pereira,

Associate General Counsel for Legislation and Regulations.

Appendix

Listing of Waivers of Regulatory Requirements Granted by Offices of the Department of Housing and Urban Development January 1, 2017 Through March 31, 2017

Note to Reader:

More information about the granting of these waivers, including a copy of the waiver request and approval, may be obtained by contacting the person whose name is listed as the contact person directly after each set of regulatory waivers granted.

The regulatory waivers granted appear in the following order:

I. Regulatory waivers granted by the Office of Community Planning and Development.

II. Regulatory waivers granted by the Office of Housing.

III. Regulatory waivers granted by the Office of Public and Indian Housing.

I. Regulatory Waivers Granted by the Office of Community Planning and Development

For further information about the following regulatory waivers, please see the name of the contact person that immediately follows the description of the waiver granted.

  •  Regulation: 24 CFR 92.2.

Project/Activity: The City of Gainesville, Florida requested a waiver of 24 CFR 92.2 paragraph (3)(iv), which states that officers or employees of a government entity may not be officers or employees of a community housing development organization (CHDO). The City requested this waiver to permit the Mayor of the City of Archer, Mr. Corey Harris, Florida to act as the Executive Director of the City of Gainesville’s only CHDO.

Nature of Requirement: Paragraph (3)(iv) of the definition of a CHDO in the HOME regulations at 24 CFR 92.2 prohibits an employee of a governmental entity from serving as an employee of a CHDO. This provision ensures that there is no conflict of interest between a participating jurisdiction and a CHDO that received HOME funding from the participating jurisdiction. The provision also guarantees that a CHDO is indeed a community-based and community controlled organization.

Granted By: Harriet Tregoning, Principal Deputy Assistant Secretary, D.

Date Granted: January 10, 2017.

Reason Waived: Mr. Harris is currently the Mayor of Archer Florida; a City within Alachua County and a wholly separate and non-contiguous entity from the City of Gainesville. Mr. Harris is also the Executive Director of NHDC; the only designated CHDO in the City of Gainesville. The City of Gainesville does not expend HOME funds outside of the City’s limits, including the City of Archer. Further, Mr. Harris, as the Mayor of the City of Archer and as the Executive Director of NHDC, has no official decision-making authority or influence in the City of Gainesville’s funding decision’s. The City stated that NHDC is the only viable CHDO within the City of Gainesville’s jurisdiction, and the exclusion of NHDC as its CHDO would create hardship. The waiver permitted Mr. Harris to remain in both position and enabled the City of Gainesville to retain its only CHDO.

Contact: Virginia Sardone, Director, Office of Affordable Housing Programs, Office of Community Planning and Development, Department of Housing and Urban Development, 451 Seventh Street SW., Room 7164, Washington, DC 20410, telephone (202) 708-2684.

  •  Regulation: 24 CFR 92.252(d)(1).

Project/Activity: The City of Daly, California requested a waiver of 24 CFR 92.252(d)(1), which requires a participating jurisdiction to establish maximum monthly allowances for utilities and services (excluding telephone) and update the allowances annually. The City requested this waiver to allow use of utility allowance established by local public housing agency (PHA) for a HOME-assisted project under construction—Sweeny Lane Apartments.

Nature of Requirement: The regulation at 24 CFR 92.252(d)(1) requires participating jurisdictions to establish maximum monthly allowances for utilities and services (excluding telephone) and update the allowances annually. Participating jurisdictions must use the HUD Utility Schedule Model or otherwise determine the utility allowance for the project based on the type of utilities used at the project. Consequently, participating jurisdictions are no longer permitted to use the utility allowance established by the local PHA for HOME-assisted rental projects for which HOME funds were committed on or after August 23, 2013.

Granted By: Harriet Tregoning, Principal Deputy Assistant Secretary, D.

Date Granted: January 19, 2017.

Reason Waived: The HOME requirements for establishing a utility allowances conflict with Project Based Voucher program requirements. Consequently, it is not possible to use two different utility allowances to set the rent for a single unit and it is administratively burdensome to require a project owner establish and implement different utility allowances for HOME-assisted units and non-HOME assisted units in a project.

Contact: Virginia Sardone, Director, Office of Affordable Housing Programs, Office of Community Planning and Development, Department of Housing and Urban Development, 451 Seventh Street SW., Room 7164, Washington, DC 20410, telephone (202) 708-2684.

  •  Regulation: 24 CFR 92.252(d)(1).

Project/Activity: The City of Sacramento, California requested a waiver of 24 CFR 92. 92.252(d)(1), which requires a participating jurisdiction to establish maximum monthly allowances for utilities and services (excluding telephone) and update the allowances annually. The City requested this waiver to allow use of the utility allowance established by the local public housing agency (PHA) for two existing HOME projects—Sierra Vista Apartments and Washington Plaza Apartments.

Nature of Requirement: The regulation at 24 CFR 92.252(d)(1) requires a participating jurisdiction to establish maximum monthly allowances for utilities and services (excluding telephone) and update the allowances annually. Participating jurisdictions must use the HUD Utility Schedule Model or otherwise determine the utility allowance for the project based on the type of utilities used at the project. Consequently, participating jurisdictions are no longer permitted to use the utility allowance established by the local PHA for HOME-assisted rental projects for which HOME funds were committed on or after August 23, 2013.

Granted By: Harriet Tregoning, Principal Deputy Assistant Secretary, D.

Date Granted: January 19, 2017.

 

Source: https://www.federalregister.gov/documents/2017/06/28/2017-13552/notice-of-regulatory-waiver-requests-granted-for-the-first-quarter-of-calendar-year-2017

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