Summary of Regulatory Changes in Mortgage Banking

Please see below, a summary of regulatory changes that have taken effect recently, and might affect you in your business.

MDIA-Mortgage Disclosure Improvement Act. 

The Housing and Economic Recovery Act of 2009 amended the truth in lending act (Regulation Z).  This applies to primary and second homes, and was effective July 30^th.

• Lenders must show proof that all borrowers (or owners in the case of refinance) were provided a  TIL (truth in lending disclosure) within three business days of application.
• Until the TIL has been delivered, no fees (except credit report fees) may be collected.
• Until the three days to get the TIL to a consumer and seven business days prior to closing can a transaction be closed.  Essentially, you cannot close in less than 10 days. (If the borrower signs the TIL on Day 1 in person, you can decrease the time frame by three days).
• The Final TIL cannot differ from the most recent TIL by more than 0.125%.  If the difference is greater than 0.125% the borrower must be given a new TIL.  You then have to wait 3 business days to close the loan if the TIL was given in person or wait until the 6^th business day if sent by mail.

RESPA Reform (Effective 1/1/2010)

• There is a new definition of what constitutes an application.  Eight items are required for the file to be considered an application.  If the file has less than those 8 elements, it is considered a pre-qualification.
• Until all 8 elements are met, a Good Faith Estimate cannot be given.
• No fees can be collected until GFE is given.
• There are new GFE and HUD1 forms that everyone must use.
• There are strict tolerances on how much fees can change from initial GFE to the HUD1.

FHA issued a mortgagee letter calling on lenders to follow the HVCC rules effective Jan 1^st, 2010.

• HVCC deals with appraiser independence.

• Lenders will have to use some sort of rotation or random selection process to choose appraisers.
• No interaction with the appraiser is allowed prior to the appraisal report being done except to provide them with the necessary information to complete the report.  Most companies have banned anyone in a sales capacity from interacting with the appraisers.  Usually, communication with the appraiser regarding issues of value is restricted to the underwriter.