For loans subject to the federal right of rescission (see, TILA §125(a), 15 U.S.C. §1635(a) and Regulation Z §226.23(a), (b)), the Daniels case is the latest in a long line of federal district and appellate court cases holding that requiring a consumer to sign a post-dated election not to rescind before the end of the three-business day rescission period renders the notice of the consumer’s right to rescind unclear, in violation of TILA, and extends the rescission period for up to three years after consummation. In the past, we have been made aware of instances in which a lender or a title company (without the lender’s knowledge) allowed the consumer to execute and post-date, at closing, an acknowledgment stating that “more than three business days have passed since the closing and that the consumer did not rescind the loan during that time.” We have previously advised you that Regulation Z prohibits this practice, as do the federal courts that have ruled on this issue. In light of the Daniels case, we again remind you to not allow a consumer to execute an acknowledgment within the three-business day rescission period that states the consumer did not rescind the transaction. We also recommend you inform your closing and funding staff and title companies that this practice is prohibited.
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Read articles below for analysis and discussion of recent trends by BM&G’s industry experts.
Mortgagee Letter 2010-43 – New FHA Flood Zone Requirements
This is to advise all clients that on December 28, 2010, FHA published the above Mortgagee letter (copy attached) that revises its flood zone requirements. Effective for all case numbers assigned on or after March 1, 2011: 1. Mortgagees must obtain life-of-loan flood zone determination services for all properties securing FHA loans. 2. Properties located within a designated Coastal Barrier Resource System unit are not eligible for an FHA-insured loan. Attached to Mortgagee Letter 2010-43 is an Appendix that identifies the flood insurance requirements for the various property types covered by the letter.
Federal Reserve Board Interim Rule Revises Prior Interim Rule Regarding Payment Schedule Disclosures -New §§226.18(s) and (t) of Regulation Z
In the December 29, 2010 issue of the Federal Register (75 FR 81836), the Board of Governors of the Federal Reserve System (FRB) published an interim rule (Dec.-Rule) making technical revisions to its September 24, 2010 interim rule (Sept.-Rule), which implemented certain requirements of the 2008 Mortgage Disclosure Improvement Act, that required disclosure of payment examples if the loan’s interest rate or payments can change. (See our memorandum dated October 28, 2010, posted on our Web site at: http://www.bmandg.com/Articles/ArticleView/tabid/94/smid/426/ArticleID/84/Default.aspx.)
Community Reinvestment Act Joint Final Rule Revises Definition of “Community Development” (75 FR 79278)
In the December 20, 2011 issue of the Federal Register, the following federal agencies – Office of the Comptroller of the Currency (OCC); Board of Governors of the Federal Reserve System (FRB); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision (OTS) – published a joint final rule to revise the definition of “community development” in their respective Community Reinvestment Act (CRA) rules. These rules may be found in the Code of Federal Regulations, respectively, at 12 CFR Part 25 (OCC), Part 228 (FRB), Part 345 (FDIC), and Part 563e (OTS).
FHA-approved Loan Correspondent’s Deadline to Close Loans in Loan Correspondent’s Name Temporarily Extended, With Conditions, to March 31, 2011
Today, the FHA Commissioner issued a Special Edition announcement that, in pertinent part, temporarily extends FHA-approval of currently approved loan correspondents for the purpose of permitting existing loans in the loan correspondents’ pipelines to close in their names, with conditions. According to the announcement, this temporary extension applies only to loans for which, as of December 31, 2010.
New Interagency Appraisal and Evaluation Guidelines
In the December 10, 2010 Federal Register (75 FR 77450) the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), and the National Credit Union Administration (NCUA) (the Agencies) jointly issued new Interagency Appraisal and Evaluation Guidelines (Guidelines) for federally regulated financial institutions. These new Guidelines supersede the 1994 Interagency Appraisal and Evaluation Guidelines.
SAR Reporting and Anti-money Laundering Proposed Rules For Non-Bank Residential Mortgage Lenders and Originators
In the December 9, 2010 Federal Register (75 FR 76677) the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of Treasury, issued proposed rules in a notice of proposed rule making (NPRM) that proposes to make non-bank residential mortgage lenders and originators (e.g., independent mortgage loan companies and mortgage brokers) subject to the anti-money laundering (AML) and suspicious activities reporting (SAR) requirements of the federal Bank Secrecy Act.
FHA Notice of 2011 Maximum Loan Limits
In the December 8, 2010 issue of the Federal Register (75 FR 76482), HUD published the following Notice regarding FHA single-family maximum loan limits for 2011: “This notice announces that FHA has posted on its Web site the single-family maximum loan limits for 2011. The loan limit limits can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/.
HUD Publishes Guidance for Interpretive Rule on Home Warranty Company Payments to Real Estate Brokers and Agents
In the December 1, 2010 issue of the Federal Register, HUD provided guidance by answering certain questions raised in the public comments HUD received since publishing its Interpretative Rule in the June 25, 2010 issue of the Federal Register regarding the propriety under Section 8 of RESPA of compensation paid by a home warranty company (HWC) to a real estate broker or agent in connection with the sale of a homeowner warranty to a homebuyer or seller in a transaction involving a federally related mortgage loan. The Interpretative Rule was the subject of our memorandum of the same date published on our Website www.bmandg.com.
Warehouse Lending RESPA Guidance – What is HUD Up to Now?
In the November 24, 2010, issue of the Federal Register (75 F.R. 71724), the Department of Housing and Urban Development (HUD) published Notice that it is considering issuing RESPA guidance regarding warehouse lending and other financing mechanisms used to fund federally related mortgage loans. HUD states that it is seeking information on the current state of warehouse lending and how that method of funding currently operates within residential real estate mortgage transactions and wants input from the mortgage lending industry and others. To accomplish this, the Notice poses ten questions, some of which contain follow-up questions. Those persons interesting in responding to the Notice, however, are not limited to answering these questions and may provide any relevant information regarding warehouse lending and other mechanisms currently used to fund federally related mortgage loans.