Monthly Archives: May 2017

FHA Multifamily Delays Implementation of CNA e Tool Date

With this Mortgagee Letter, the Department of Housing and Urban Development (HUD) amends Mortgagee Letter 2016-26, published December 30, 2016, by delaying the implementation date for the new Capital Needs Assessment tools (CNA e Tool). The updated CNA e Tool is being released concurrent with this Mortgagee Letter. To ensure adequate time for users to familiarize themselves with the tools, the required use of the CNA e Tool for all CNAs submitted under covered programs is delayed from July 1, 2017, as stated in Mortgagee Letter 2016-26, to October 1, 2017. Use of the CNA e Tool will be voluntary for all CNAs submitted through September 30, 2017. All CNAs submitted to HUD on or after October 1, 2017 must be submitted through the CNA e Tool to fulfill program requirements. All other provisions of Mortgagee Letter 2016-26 remain in effect, including programs covered. Questions regarding this Mortgagee Letter may be directed to David Wilderman at (202) 402-2803. For technical questions concerning the system tools or system access call your designated help desk or contact Sean Cortopassi at 202 402 4087. Persons with hearing or speech impairments may access assistance via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

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Fannie Mae Updates Selling Guide

Selling Guide Updates The Selling Guide has been updated to include changes to the following:  Student Loan Solutions  Project Eligibility Review Waiver for Fannie Mae to Fannie Mae Limited Cash-Out Refinances  Properties Listed for Sale in the Previous Six Months  PERS Expiration Dates  Truncated Asset Account Numbers  Flash Settlement for Mortgage-Backed Securities  Servicing Execution Tool Bifurcation Option Terms and Conditions  Miscellaneous Selling Guide Update Each of the updates is described below. The affected topics for each policy change are listed on the Attachment. Lenders should review each topic to gain a full understanding of the policy changes. The updated topics are dated April 25, 2017. Student Loan Solutions Student Loan Payment Calculation We are simplifying the options available to calculate the monthly payment amount for student loans. The resulting policy will be easier for lenders to apply, and may result in a lower qualifying payment for borrowers with student loans. If a payment amount is provided on the credit report, that amount can be used for qualifying purposes. If the credit report does not identify a payment amount (or reflects $0), the lender can use either 1% of the outstanding student loan balance, or a calculated payment that will fully amortize the loan based on the documented loan repayment terms. The current Desktop Underwriter® (DU®) message issued when an installment debt on the loan application does not include a monthly payment will be updated in a future release to reflect this new policy. Until then, lenders may disregard the statement in the message specifying the previous policy and follow the requirements in the Selling Guide. Effective Date This policy change is effective immediately. Debts Paid by Others We are simplifying our requirements for excluding non-mortgage debts from the debt-to-income ratio. Non-mortgage debts include debt such as installment loans, student loans, and other monthly debts as defined in the Guide. If the lender obtains documentation that a non-mortgage debt has been satisfactorily paid by another party for the past 12 months, then the debt can be excluded from the debt-to-income ratio. This policy applies regardless of whether the other party is obligated on the debt.

Effective Date Lenders may implement this flexibility immediately. The DU message on omitted debts will require documentation to support the omission of the debt, but will not reference the documentation requirements specified above as DU is not able to identify if the debt was omitted as a result of this policy. Student Loan Cash-out Refinance With this update, we are introducing the student loan cash-out refinance feature, a cost-effective alternative to use existing home equity to pay off student loan debt. This feature provides the opportunity for borrowers to payoff one or more student loans through the refinance transaction, potentially reducing their monthly debt payments. The loan-level price adjustment that applies to cash-out refinance transactions will be waived when all requirements have been met. The student loan cash-out refinance feature contains elements of both a cash-out refinance and a limited cash-out refinance transaction as described in the table below.


Fannie Mae Updates Standard Modification Interest Rate Adjustment Exhibit

The Fannie Mae Standard Modification Interest Rate is subject to periodic adjustments based on an evaluation of prevailing market rates. The servicer must use the current Fannie Mae Standard Modification Interest Rate indicated below when evaluating a borrower for a conventional mortgage loan modification, excluding Fannie Mae HAMP Modifications. NOTE: As a reminder, the interest rate used to determine the final modification terms must be the same fixed interest rate that was used when determining eligibility for the Trial Period Plan and calculating the Trial Period Plan payment.

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CFPB Issues Final Rule Officially Delaying Effective Date of Prepaid Accounts under Regulations E and Z Rule

The Bureau of Consumer Financial Protection (Bureau or CFPB) is issuing this final rule to create comprehensive consumer protections for prepaid accounts under Regulation E, which implements the Electronic Fund Transfer Act; Regulation Z, which implements the Truth in Lending Act; and the official interpretations to those regulations. The final rule modifies general Regulation E requirements to create tailored provisions governing disclosures, limited liability and error resolution, and periodic statements, and adds new requirements regarding the posting of account agreements. Additionally, the final rule regulates overdraft credit features that may be offered in conjunction with prepaid accounts. Subject to certain exceptions, such credit features will be covered under Regulation Z where the credit feature is offered by the prepaid account issuer, its affiliate, or its business partner and credit can be accessed in the course of a transaction conducted with a prepaid card. DATES: This rule is effective on October 1, 2017. The requirement in § 1005.19(b) to submit prepaid account agreements to the Bureau is delayed until October 1, 2018.

I. Summary of the Final Rule Regulation E implements the Electronic Fund Transfer Act (EFTA), and Regulation Z implements the Truth in Lending Act (TILA). On November 13, 2014, the Bureau issued a proposed rule to amend Regulations E and Z, which was published in the Federal Register on December 23, 2014 (the proposal or the proposed rule).1 The Bureau is publishing herein final amendments to extend Regulation E coverage to prepaid accounts and to adopt provisions specific to such accounts, and to generally expand Regulation Z’s coverage to overdraft credit features that may be offered in conjunction with prepaid accounts. The Bureau is generally adopting the rule as proposed, with certain modifications based on public comments and other considerations as discussed in detail in part IV below. This final rule represents the culmination of several years of research and analysis by the Bureau regarding prepaid products. Scope. The final rule’s definition of prepaid accounts specifically includes payroll card accounts and government benefit accounts that are currently subject to Regulation E. In addition, it covers accounts that are marketed or labeled as “prepaid” that are redeemable upon presentation at multiple, unaffiliated merchants for goods or services, or that are usable at automated teller machines (ATMs). It also covers accounts that are issued on a prepaid basis or

capable of being loaded with funds, whose primary function is to conduct transactions with multiple, unaffiliated merchants for goods or services, or at ATMs, or to conduct person-toperson (P2P) transfers, and that are not checking accounts, share draft accounts, or negotiable order of withdrawal (NOW) accounts. The final rule adopts a number of exclusions from the definition of prepaid account, including for gift cards and gift certificates; accounts used for savings or reimbursements related to certain health, dependent care, and transit or parking expenses; accounts used to distribute qualified disaster relief payments; and the P2P functionality of accounts established by or through the United States government whose primary function is to conduct closed-loop transactions on U.S. military installations or vessels, or similar government facilities. Pre-acquisition disclosures. The final rule establishes pre-acquisition disclosure requirements specific to prepaid accounts. Under the final rule, financial institutions must generally provide both a “short form” disclosure and a “long form” disclosure before a consumer acquires a prepaid account. The final rule provides guidance as to what constitutes acquisition for purposes of disclosure delivery; in general, a consumer acquires a prepaid account by purchasing, opening, or choosing to be paid via a prepaid account. The final rule offers an alternative timing regime for the delivery of the long form disclosure for prepaid accounts acquired at retail locations and by telephone, provided certain conditions are met. For this purpose, a retail location is a store or other physical site where a consumer can purchase a prepaid account in person and that is operated by an entity other than the financial institution that issues the prepaid account. The short form disclosure sets forth the prepaid account’s most important fees and certain other information to facilitate consumer understanding of the account’s key terms and



Does Talking to Yourself Make You Smarter or Crazier ?

You’d probably think someone who talks to themselves out loud is a little “off,” but they might actually be on to something. Talking to yourself is a great way to better understand what you’re learning.

But this type of self-talk isn’t chatting about the weather with your other, more interesting split personality. No, as Ulrich Boser, author of Learn Better, explains at Harvard Business Review, it’s not so much “having a conversation with yourself” as it is “self-explaining.” As in, talking through everything you’ve learned with yourself as if you’re teaching someone else. We know that teaching others is a great way to firmly grasp a subject, but why not focus on your favorite student: you?

Why does this type of monologuing help? Boser says it slows you down so you construct thoughts more deliberately. That kind of reflection allows you to solidify what you’ve learned and gain more from the experience overall. Questions like “What do I find confusing?” and “Do I really know this?” help as well. And talking to yourself allows you to ask “Why?” and answer it as best you can without letting your mind wander. The act of speaking keeps you focused. If you can verbally answer your own difficult questions well, you know that you know what you need to know, you know?

Summarization is also a powerful tool when learning, and even more so when you do it verbally. It can improve your reading comprehension, and it gives you an opportunity to make important connections you may not have seen before. After a lesson, lecture, meeting, or reading session, see if you can explain to yourself out loud what you just learned. It will feel a bit silly at first, but you’ll get over that when you experience the benefits for yourself.


PACE Financing for Clean Energy is the New Mortgage Loan ??

Residential Property Assessed Clean Energy (PACE) programs have been an unqualified success story for consumers’ pocketbooks and the economy, helping to finance almost $4 billion in clean energy upgrades and create tens of thousands of jobs. Despite this success, some in Congress are advancing a bill that would undercut the future of these programs.

In early April, Senator Tom Cotton (R-AR) introduced legislation that aims to increase consumer protection for homeowners using PACE financing to upgrade their homes. ACEEE applauds Senator Cotton for his attempts to ensure that vulnerable consumers, particularly seniors, have the information they need to decide whether to use PACE financing.

We appreciate the good intentions behind S. 838. Unfortunately, instead of helping consumers make more informed choices, the bill could leave consumers unable to make any choice at all. The bill would force regulators to treat PACE financing as a mortgage, which it isn’t. Forcing PACE financing into a regulatory structure designed for a different industry would impose requirements that would be extremely difficult, or even impossible, to meet. The result might not be a safer residential PACE industry, but rather no residential PACE industry.

The bill seems innocuous enough: It would require that PACE financing be regulated under the Truth in Lending Act (TILA).

It’s hard to oppose something that sounds as virtuous as “Truth in Lending,” and TILA is a very important safeguard for people who want to take out mortgages and borrow money in other ways. As its name suggests, TILA requires lenders to be clear in disclosing the details of the loans’ terms. It offers additional protections for mortgages, triggering added requirements for anyone engaged in making mortgage loans.

Requiring PACE programs to disclose financial terms and details the same way mortgages and other loans do is a great idea. Markets function best when both lender and borrower understand what they are getting into, and some of the additional protections that TILA gives mortgage borrowers make sense for the PACE industry as well. In particular, giving prospective borrowers three days to change their minds for any reason and without penalty seems like a common sense addition and is one that the PACE industry supports.

However, regulating PACE as though it were a mortgage goes much further and has broader consequences. The Cotton bill would trigger other state and federal regulations intended specifically for the mortgage industry. The combination of regulations would require PACE financers to be licensed mortgage originators, which also doesn’t sound like a bad idea, until you realize that residential PACE programs require local governments to participate. The local governments would have to become licensed mortgage originators, something that would be practically impossible. It would also place restrictions on how the local governments could bill PACE recipients, which would impact their entire property tax collection system. These and related problems demonstrate the perils of trying to apply a regulatory system meant for one industry to another. It would be a shame if well-intended efforts to protect consumers resulted in the elimination of residential PACE.

As we noted in a previous blog post, the Department of Energy, PACE financers, and consumer advocates have been working together to develop guidelines that protect borrowers and still allow PACE to function. California, which is home to the vast majority of PACE activity, recently passed its own legislation to regulate the PACE industry, including the same kind of disclosure requirements and three-day right to cancel as in TILA. That bill had the support of California Realtors, mortgage bankers, and the PACE industry. Leaders in the PACE industry are actively asking Congress to regulate them in a way that offers security for homeowners and allows PACE to continue.

ACEEE is a strong proponent of energy efficiency – when it makes sense. We won’t support a program that takes advantage of consumers. We support efficiency in large part because of the benefits it provides them. Consumers deserve protection, but that doesn’t mean we should throw the baby out with the bathwater.

Rather than pursue a strategy to shoehorn PACE into a regulatory framework meant for something else, a better approach would be to create a new structure that fits the specific features of PACE financing. That would bring security to both sides of the equation and help make the benefits of PACE available to more consumers, not fewer.


Dodd Frank Changes Are Coming and the Potential Impact on Commercial Banks

The House Financial Service Committee approved the Financial CHOICE Act 2.0 today, signaling the first concrete move to roll back consumer protections and gut the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

The committee voted today to send the Financial CHOICE Act 2.0 — introduced by bank-backed Texas Rep. Jeb Hensarling last month — to the full house for consideration, likely sometime next month.

According to The Hill, today’s 34-26 party-line vote came after nearly 24 hours of debate and markups of the bill, which included several amendments that would have preserved some of the provisions under the Dodd-Frank Act.

The 589-page legislation [PDF], which has received significant opposition from advocates, retailers, and others, is a revision of the previous Financial CHOICE Act introduced by Hensarling last year.

As it stands, the Financial CHOICE 2.0 Act would, among other things:

• Require the Consumer Financial Protection Bureau to get congressional approval before taking enforcement action against financial institutions

• Restrict the Bureau’s ability to write rules regulating financial companies

• Revoke the agency’s authority to restrict arbitration

• Revoke the CFPB’s authority to conduct education campaigns

• Prevent the Bureau from making public the complaints it collects from consumers in its Consumer Complaint Database

• Revamp the agency’s structure by allowing the CFPB director to be fired at will by the President

• Require the agency’s budget to be subject to the annual congressional appropriations process

• Prevent the CFPB from having oversight over the payday lending industry

• Rename the CFPB to the Consumer Law Enforcement Agency

• Require banks to undergo stress tests every other year, with banks agreeing to increase their capital never having to undergo stress tests

• Revoke the so-called qualitative test that evaluates a bank’s plan for managing capital and risk

• Remove requirements under the Durbin Amendment [PDF] that guided how much credit card networks could charge retailers for processing debit card transactions

The bill’s approval by the House Financial Service Committee was met with strong opposition by consumer advocates, the retail industry, and other lawmakers.

Our colleagues at Consumers Union say the bill’s approval puts consumers at risk while protecting the financial interests of big banks and shady lenders.

“Congress created the CFPB to ensure consumers get a fair deal and to protect them from predatory practices that can undermine their financial security,” Pamela Banks, senior policy counsel for Consumers Union, said in a statement. “This bill strips the CFPB of most of its power and would leave consumers vulnerable to fraud, hidden fees and costly gotchas by banks and unscrupulous financial firms.”

Several groups, including the National Consumer Law Center, Americans for Financial Reform, and Public Citizen, lambasted the bill’s provision restricting the CFPB and Security and Exchange Commission’s authority to restrict forced arbitration.

“Contrary to its title, H.R. 10 would deprive consumers and investors of any choice of their day in court when resolving serious disputes with powerful financial institutions and force them into a rigged system,” Amanda Werner, arbitration campaign manager with Americans for Financial Reform and Public Citizen, said in a statement.

Werner noted that forced arbitration clauses “only serve to kill consumer class action lawsuits and cover up widespread fraud and abuse.”

The Center For American Progress said in a statement that the Financial CHOICE Act is only the right choice for Wall Street bankers.

“It shows a blatant disregard for the painful lessons learned during the 2007–2008 financial crisis,” Marc Jarsulic, Vice President for Economic Policy at the Center for American Progress, said in a statement. “The so-called CHOICE Act removes protections against taxpayer-funded bailouts, erodes consumer protections, and undercuts necessary tools to hold Wall Street accountable.”

Even the retail industry, which had urged Congress to not roll back financial reforms involving debit card transactions, called out the Committee for moving forward with the legislation.

The Retail Industry Leaders Association — which counts a number of major retailers, such as Apple, Best Buy, Gap, Target, Walmart, and others, as members — said in a statement that it would keep fighting the Financial CHOICE Act’s provisions related to swipe fees. RILA and other industry groups believe that by revoking the swipe fee reforms, retailers would pass on the new, more expensive processing costs to consumers.

“While we believe in financial reforms that make sense for America’s community banks and local credit unions, the repeal of hard-fought debit swipe fee reform included in the CHOICE Act gives big banks and card networks a green light to raise costs on every business in America that accepts debit cards,” Austen Jensen, Vice President of Government Affairs and Financial Services for RILA, said in a statement.

On the other side of the debate, the American Bankers Association called today’s vote an important step.

“We commend Chairman Hensarling and members of the Committee for their tireless efforts to help our nation’s banking industry serve their customers and communities,” Rob Nichols, ABA president and CEO, said in a statement, calling the Financial CHOICE Act “needed regulatory relief.”


What Innovations are Critical for Smaller Commercial Banks

When it comes to innovation, community banks generally don’t have the resources—either financial or people—to compete with the country’s largest banks—where the technical staff focused just on innovation alone is probably several times larger than a smaller institution’s entire workforce.

Of course, no one expects smaller banks to compete with a megabank like Wells Fargo & Co., but there are smaller institutions that are playing the innovation game very well.

One of those is Radius Bank, a Boston-based bank that has approximately $1 billion in assets and four years ago made the radical decision to close all of its branches except for one, and convert its local brick-and-mortar retail operation to a digital platform that operates nationally. President and CEO Michael Butler, who appeared on a panel of like minded bankers at Bank Director’s FinXTech Annual Summit in New York on April 26, said that one of the more challenging aspects of that decision was changing Radius’ culture to support its new business strategy. Not all of the bank’s employees were happy about the change in strategy, and Butler said there has been approximately a 50 percent turnover in the bank’s workforce over the last four years. Many of the older employees who resisted the change have been replaced by younger, more tech savvy employees who normally would choose to work at a tech company rather than a bank. Butler said the company has spent a lot of time trying to create the kind of “vibe” that will attract those kind of individuals. “It’s a lot about the people you bring into your organization,” said Butler. At 57, Butler has the background of a traditional banker even though he has led the charge towards digitalization. “My job as the grey hair is to not let them kill themselves,” he joked about some of the bank’s younger staff members.

Another panel member—Jay Tuli, senior vice president for retail banking and residential lending at Leader Bank, a $1 billion bank located in Arlington, Massachusetts—was instrumental in creating ZRent, an online portal that the bank launched in January 2015. It enables landlords to automatically collect rent payments via ACH transactions. ZRent has been a successful customer acquisition tool for Leader Bank, and it is now licensing the software to other banks that want to use it.

Radius and Leader Bank are both located in the Boston area (Arlington is just six miles northwest of the city), so they have the advantage of taping a deep talent pool in one of the country’s most attractive locations, with a number of highly regarded universities in their backyard. Like Radius, Leader Bank has seen a big turnover in its staff over the last eight years. Tuli said that the average age of its 300 or so employees is 31. “There’s a lot of young talent in Boston, and we’ve benefited from that,” he said.

So, if being located in a large urban market is a key element in the innovation game, how to account for the success of Somerset Trust Co., a $1 billion bank headquartered in Somerset, Pennsylvania, a small community situated about 80 miles southeast of Pittsburgh? Somerset had just 6,277 residents according to the 2010 census. A third panelist, Chief Operating Officer John C. Gill, said the bank has always placed a very high premium on having excellent technology, and sees this as a critical component of its organic growth strategy. Only about 19 percent of its consumer banking transactions occur in the branch today. It sees innovation as an imperative despite its rural location.

Somerset has learned to play the innovation game by partnering up with fintech companies. A couple of years ago, Somerset teamed up with Malauzai Software in Austin, Texas, to develop a mobile banking solution that allows Somerset’s retail banking customers to securely check balances, use picture bill pay and remotely deposit checks from any location or device. There are banks much larger in size that are still working on delivering these capabilities to their retail customers. Working with another fintech company, Bethlehem, Pennsylvania-based BOLTS Technologies, Somerset has also launched a new mobile account opening platform that has greatly reduced the time it takes to open a new account, and is expected to save the bank approximately $200,000 a year. Somerset and BOLTS were finalists in the 2017 Best of FinXTech Awards, which were announced at the event.

Gill said that Somerset is very comfortable partnering with fintech companies to develop product capabilities that it would not be able to develop on its own. “Banks have the customers and low cost funding,” he said. “Fintech companies bring innovation.”


Outlook for the Big Banks Under the Current Administration

For a brief moment, Wall Street stopped on Monday, as if time was suspended in an alternative reality.

President Trump, for the first time as resident of the White House, said aloud that he was considering breaking up the nation’s biggest banks. Of course, he had said it on the campaign trail, but this seemed different.

“I’m looking at that right now,” Mr. Trump told Bloomberg News during an interview in the Oval Office. “There’s some people that want to go back to the old system, right? So we’re going to look at that.”

The headline ricocheted around the email boxes of senior bank executives across the industry. At the Milken Global Conference in Los Angeles, where Treasury Secretary Steven Mnuchin had just finished speaking — and didn’t mention breaking up the banks — the hallways quickly buzzed about the comment, according to participants, as their phones lit up. Shares of bank stocks dived lower within seconds of the headline, only to recover quickly.

Mr. Trump’s comments shouldn’t come as a surprise: His chief economic adviser, Gary D. Cohn — formerly president of Goldman Sachs — has been not-so-quietly trying to socialize the idea of bringing back the Glass-Steagall Act, the Depression-era law that was enacted to prevent investment and commercial banks from combining. The law was repealed in 1999, helping to bring about the supersized banking giants that dominate the market today.

Before Monday’s musings, Mr. Trump’s thoughts on the matter had felt like a theoretical exercise, those who have met with him say.

What would be surprising, however, is if Mr. Trump made it a reality. It would be one thing for him to “do a big number” on Dodd-Frank, the 2010 law that imposed stricter regulations on banks in the aftermath of the financial crisis — he has repeatedly stated that he wants to pare it back, repealing parts of the law. But it would be a much more seismic shift to bring back Glass-Steagall, which would be the equivalent of doing “a big number” on the banks themselves. The biggest names in banking would presumably face the choice of having to shed either their commercial banking arm or their investment banking division.

When Mr. Trump met with business executives in February at the White House, he turned to Jamie Dimon, chief executive of JPMorgan Chase, an unabashed defender of big banks, for advice. JPMorgan Chase would not exist in its current form were it not for the 1999 repeal of Glass-Steagall.

“There’s nobody better to tell me about Dodd-Frank than Jamie, so you’re going to tell me about it,” Mr. Trump said at the time, to the consternation of proponents of more banking regulation.

Viewed through the prism of goosing the economy and creating jobs — as Mr. Trump has pledged his efforts should be viewed — it’s hard to see how breaking up the biggest banks would help, especially in the short term. Indeed, it would most likely have the opposite effect.

Mr. Trump’s chief complaint about Wall Street is that he doesn’t think lenders are extending enough money. “I have so many people, friends of mine, that had nice businesses. They can’t borrow money,” he famously said. “They just can’t get any money because the banks just won’t let them borrow, because of the rules and regulations in Dodd-Frank.”

Given that commercial lending is at a record, according to the Federal Reserve, that’s a hard statement to square.

But let’s be generous and assume for a moment that he is right. What is undoubtedly true is that big banks would probably be even more conservative with their loan books during whatever transition would be required to comply with a new version of Glass-Steagall. Such a law would inject as much uncertainty into the economy as Dodd-Frank did initially, when banks were sorting out how they would comply. The process did throw some big banks’ lending into a state of paralysis.

And while proponents of ending too-big-to-fail love to point to the repeal of Glass-Steagall as the culprit, by now that meme should have resolved itself.

“I don’t think that Glass-Steagall was a cause of the crisis,” Ben Bernanke, the former Federal Reserve chairman, who has no horse in this race, told me matter-of-factly.

Indeed, he said, he would be worried if the law were brought back, because it would hamstring the government if it ever needed to intervene in a crisis similar to what happened in 2008. “If Glass-Steagall had been in effect, we couldn’t have had some of the failing firms taken over,” Mr. Bernanke said. “JPMorgan took over Bear Stearns, and so on.”

On the other hand, Neel Kashkari, the president of the Minneapolis Federal Reserve and a former Treasury staff member who oversaw the bailouts of the banks, has been on a campaign to break up the biggest banks, concerned that they still pose too much of a risk to taxpayers if they were to fail.

Mr. Trump’s comments came on the same day that he and his team spoke with about 100 community bankers led by Cam Fine, president and chief executive of the Independent Community Bankers of America. One issue they discussed was the idea of a two-tiered system of regulations, one for big banks and another for community banks. Whether that construct is now being interpreted as a new version of Glass-Steagall or a breakup of the banks remains an open question.

But let’s be clear: If Mr. Trump were to try to bring back what he described on the campaign trail as Glass-Steagall, it wouldn’t be to prevent the next crisis. He would have to be convinced that bringing back the law would stoke the economy. And that’s an even scarier prospect, because it means firms like Morgan Stanley, Goldman Sachs and Bank of America, which have been forced to reduce the risk they take, would ultimately be less regulated.

There are a lot of good reasons to reform Dodd-Frank. And there are lots of good ways to make regulations less onerous to the nation’s smaller banks, which complain they are drowning in legal and compliance bills; giving them some relief could indeed open the loan spigot even more. But both of those measures would be very different from bringing back Glass-Steagall.

Whether Mr. Trump’s talk translates into action on this front remains to be seen. The prevailing view seems to be: “Be prepared for more headline risk for big banks as lawmakers keep piling on the anti-Wall Street rhetoric — most of it will be substantively meaningless,” according to Ian Katz of Capital Alpha, whose comments were highlighted by Ben White of Politico.

Of course, with President Trump, the prevailing view could change in an instant.


Mortgage Insurance and TRID – Helpful Compliance Answers

The Dodd-Frank Act required the CFPB to propose regulation that combines RESPA-TILA disclosures (GFE, TIL, HUD-1). The proposed rules were released July 2012, and on November 20, 2013, the CFPB issued the final Rule. The effective date of the Rule was October 3, 2015.

The Good Faith Estimate (GFE) and the initial Truth in Lending disclosure (initial TIL) have been combined into a new form, the Loan Estimate (LE). The Loan Estimate form is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying, and must be provided to consumers no later than the third business day after they submit a loan application.

The HUD-1 and final Truth in Lending have been combined into another new form, the Closing Disclosure (CD), which is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction. This form must be provided to consumers at least three business days before consummation of the loan.


Where do I disclose MI on the LE and CD?

MI will be disclosed in at least one of the following locations:

  • Projected Payments – Payment Calculation
  • Loan Costs – B. Services You Cannot Shop For
  • Other Costs – F. Prepaids
  • Other Costs – G. Initial Escrow Payment at Closing

What is a triggering event? When completing the ‘Projected Payments’ section, how should I disclose MI payments over time?

A triggering event occurs when a lender must terminate MI under applicable law. Declines in MI premiums are not considered a triggering event. The lender should use the date on which automatic cancellation occurs, even if the borrower may cancel the insurance earlier.

Does the lender have an obligation to send a revised LE if the MI amount changes?

With BPMI Zero Monthly, no payment will be due at consummation. Therefore the MI premiums should not be disclosed as a closing cost on page 2 of the LE or CD. If the creditor is providing a revised LE because a cost unrelated to MI has changed, the creditor should also then re-disclose any MI premium rate change.

What types of MI fall under the 0% tolerance cost?

Any BPMI payment that is not escrowed must be disclosed on the LE and CD, and is subject to 0% tolerance. BPMI Single Premium, the Annual Premium due at closing, the non-escrowed portion of Monthly, and the upfront portion of BPMI Split Premium are subject to 0% tolerance.

Do any types of MI fall under the 10% tolerance cost?


What types of MI fall under the no tolerance cost (best info available)?

Any MI payment that is escrowed, including BPMI Monthly or Zero Monthly, the monthly portion of Split Premium, the escrowed annual portion of Annual Premium, and any Lender Paid MI (LPMI), is NOT subject to a tolerance rule. These MI premiums must be based on best information reasonably available, but are otherwise not subject to tolerance limitations.

Has the new definition of a loan application changed anything for how I do business with Genworth?


Where do I disclose LPMI?

LPMI does not need to be disclosed on the LE. But it will need to be disclosed on the CD as follows:

  • LPMI Single and LPMI Split premium paid at consummation must be disclosed on page 2, section B. “Services Borrower Did Not Shop For” as “Paid by Others.”
  • LPMI Monthly or Annual premium payment made at consummation disclosed on page 2, section F. “Prepaids” as “Paid by Others.”

If the LE initially includes Monthly BPMI, but then switches to a Single Premium MI premium plan, does the creditor need to re-disclose?

Yes. You will need to issue a revised LE within three business days of receiving “information sufficient to establish” that the borrower has opted for BPMI Single and disclose that under section B. “Services You Cannot Shop For.” However, if the initial LE includes the BPMI Single, and then the borrower opts for Zero Monthly, the opposite is not true. The creditor does not need to re-disclose.

Will Genworth still offer Amortized (Declining) Renewal on their MI premium plans?

Yes, we will still offer Declining as well as Level (Constant) renewals. For Amortized (Declining) Renewal, the renewal rate is applied annually to the outstanding loan balance for years 1 – term. Declines in MI payments are not considered “triggering events” and therefore do not need to be disclosed on the Projected Payments section of the new forms.

Where can I go to learn more about TRID and how it impacts mortgage insurance?

A: Check out Genworth Mortgage Insurance’s pre-recorded TRID webinar here delivered by MaryKay Scully, Director of Customer Education. MaryKay’s training will cover an introduction to the timeline for disclosure, implementation, and regulation as well as online resources for more detailed information, and the new definition of an “Application”.

LEGAL DISCLAIMER: Genworth Mortgage Insurance believes the information contained in this publication to be accurate as of 11/2/2015. However, this information is not intended to be legal advice. Genworth is providing this information without any representations or warranties, express or implied, and shall not be liable for any direct, indirect, incidental, punitive or consequential damages due to any person’s reliance on the information. Lender should satisfy itself that this guidance is adequate for its purposes.


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