Mortgage Laws Part 3

creates certain protections for high-cost mortgages

loans with high interest rates and high fees

targeting communities with limited access to credit with offers for risky subprime mortgages

• APR is 6.5 percentage points above average prime offer rate
• subordinate lien: 8.5 percentage points

• Special HOEPA Disclosure
• Notice of Balloon Payment
• Amount Borrowed
• Notice of the Inclusion of Insurance Premiums
• Variable-Rate Disclosure

intended for first-time borrowers who may not be familiar with lending process or the risks associated with high-cost mortgages

requires creditors to base lending decisions on a reasonable, good faith determination

for high-cost mortgage, borrower must have certificate of HUD-approved counseling

• Balloon payments (exceptions)
• Negative amortization
• advances payments
• increased interest rate after default
• improperly calculated rebates
• prepayment penalties
• acceleration of debt (exceptions)

• closed-end loans that exceed average prime offer rate by:
• 1.5 percentage points
• 2.5 percentage points for jumbo loans
• 3.5 percentage points for subordinate lien

• 1) Establishment of an escrow account for taxes and insurance
• 2) Appraisal Requirements

any account established or controlled by a servicer on behalf of a borrower to pay taxes, insurance, or other charges

• maintained for at least 5 years
• borrower may request cancellation if balance is less than 80%

• subordinate-lien HPMLs
• transaction secured by shares
• transaction to finance the inititial construction of a dwelling
• temporary or bridge loan with a term less than a year
• reverse mortgage
• HELOCs

general rule that creditor may not offer an HPML to a consumer without obtaining a written appraisal

• qualified mortgages
• transactions secured by a manufactured home
• transactions secured by a mobile home, boat or trailer
• transactions to finance the initial construction of a dwelling
• bridge loans 12 months or less
• reverse mortgages

• seller acquired home 90 or fewer days prior and new price is more than 10% more
• seller acquired home 91 to 180 days prior and new price is more than 20% more
• ----creditor may not charge for second appraisal

• government
• acquired property thru foreclosure
• nonprofit entities
• seller acquired properties
• employers
• servicemember
• federal disaster areas
• rural areas

• intends to discourage harmful practices like:
• basing comp on terms or loan
• allowing dual comp
• creating incentives for steering

• intended to help consumers compare costs and shop competitively for mortgages
• no more than three business days after the creditor receives application
• no later than seven business days prior to consummation (includes all days except Sunday and legal public holidays)

disclose the actual terms of a transaction and the costs of a mortgage

this information must be retained for at least three years

the aggregate amount of closing costs and recording fees does not exceed estimate by more than 10%

• changed circumstances
• change in eligibility
• consumer-requested revisions
• delays caused by the consumer
• delays related to construction loans

• Adjustable Payment Table
• Adjustable Interest Rate

• no later than three business days prior to consummation, include all days except for Sundays and legal public holidays
• also includes a Projected Payments table and a Costs at Closing table

allows borrowers to request that lenders cancel PMI when their loan balance reaches 80%, or until 78% LTV is reached

only one disclosure requirement, provide the borrower with an annual notice telling them it is possible to request cancellation of PMI

numerous disclosure and notification requirements

identify urban areas where the availability of home financing at reasonable terms is limited

• 1) determine if depository institutions are meeting the housing needs of their communities
• 2) identify discriminatory lending practices and patterns
• 3) Determine how to distribute public-sector investments where they are needed

most are effective start of 2018, some are effective start of 2020

requires them to collect extensive data about each mortgage loan application and origination

Mortgage lenders report the information to federal regulators using LAR

• 1970
• to ensure the accuracy, fairness, and privacy of consumers' personal information
• to protect the rights of consumers, the law creates special obligations and restrictions for CRAs

the communication of any information from a consumer reporting agency that relates to a consumer's worthiness, credit standing, credit capacity, character, personal characteristics, or mode of living

any person who regularly engages for fees or on a cooperative nonprofit basis in the practice of assembling or evaluating of consumer credit information in order to provide consumer reports

a consumer report that is obtained thru personal interviews

if requested, CRAs must clearly disclose all information in the consumer's file

additional provisions to FCRA in order to address the problem of identity theft to facilitate consumers' access to the info retained by CRAs and to improve the accuracy of consumer reports

• disclosure of credit score
• response to consumer's request for information on fraudulent transactions
• rule for the proper disposal of consumer info

measure included in FACTA to address identity theft

a pattern, practice, or specific activity that indicates the possible existence of identity theft

requires creditors and financial institutions to establish an Identity Theft Prevention Program

• identify patters, practices that may indicate possible existence of theft
• detecting irregularties when obtaining info from a person opening an account
• preventing and mitigating identity theft by responding appropriately
• updating the program periodically to identify new risks

• notifications or warnings from a CRA
• suspicious documents
• suspicious personal identifying info
• suspicious activity related to the covered account
• notices from customers, identity theft victims, law enforcement

the law addresses a broad range of issues that relate to financial and investment activities, including mortgage lending and investing

• International Money Laundering Abatement
• Anti-Terrorist Financing Act of 2001

• Establish a CIP (Consumer Identification Program)
• create an AML (Anti-money laundering program)
• make suspicious activity reports
• report receipt of currency in excess of $5000

to ensure that financial institutions, including mortgage brokers and lenders,protect nonpublic personal info

personally identifiable financial information provided by a consumer to a financial institution

• Initial Privacy Notice
• Opt-Out Notices
• Annual Privacy Notices

to ensure the protection of privacy of personal info with the creation, implementation and maintenance of an effective security program

addresses misrepresentations in the advertising of mortgage products

general goal is to address the validity of documents, records, and signatures that are in electronic form. Applies to interstate and foreign commerce. Many states have their own laws

allows consumers to restrict unwanted sales calls. Consumers are requires to take the initiative to place their names on the registry

• prompt verbal disclosure
• -the identity of the caller
• -the fact that the purpose of the call is to sell goods or services
• -the nature of the goods/services being sold
• -assurance that no purchase or payment is required to participate in any type of promotion

• use of threats, intimidation or profane language
• placing calls to consumers before 8am or after 9pm
• making false or misleading statements
• requireing payment of a fee in advance
• charging a consumer for goods or services without consent
• failing to transmit number over caller ID
• initiating a call to a consumer on the Do-Not-Call Registry

• Fraud for Profit
• Fraud for Housing

the conspiratorial involvement of unscrupulous individuals coming from all areas of the mortgage lending industry

a borrower misrepresents their employment history, credit history, intention to occupy a property, etc

enacted to facilitate the prosecution of those who commit mortgage fraud and to increase the financial resources that are available to investigate and prosecute fraud cases

retain records to show compliance with the rules for at least three years after consummation of a covered transaction

very broad

defines a qualified mortgage by identifying lending terms that these residential mortgage loans may not include

• a term longer than 30 years
• points and fees that exceed a % of the total loan amount (generally 3% but varies based on loan amount)
• negative amortization
• balloon payments (some exceptions)
• ability to defer repayment of principal (interest-only loans)

• a maximum debt-to-income ratio of 43%
• verification of income and assets
• calculation of regular and substantially equal periodic payments

prime loans

subprime / high-priced loans

• consummated before 2021
• -the loan has all product features of a qualified mortgage