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Wednesday, April 23, 2014

CFPB Staff Answer Banker Questions on Mortgage Compliance

CFPB staff members answered ABA members’ mortgage compliance questions during a live webcast. Key takeaways included:
  • Creditors may use lender and seller credits to reduce the amounts that are calculated into the points and fees test. A written statement of who is providing which credits is sufficient to indicate compliance, a CFPB staffer said.
  • Home equity line of credit resets do not constitute new transactions that would trigger full Ability-to-Repay rule underwriting.
  • Loan originator bonuses deriving from funds that exclude mortgage profits are not subject to the otherwise applicable 10 percent limits on loan originator compensation.
  • Regarding questions about whether the required 120-day period of delinquency before beginning foreclosure proceedings is sequential or cumulative, CFPB staff noted that “there is no definition of delinquency” in the regulations. They suggested banks look to common principles for the undefined term in state law, contracts and industry standards — while reminding bankers of a borrower’s private right of action for failing to comply.
  • Creditors are not permitted to begin foreclosure proceedings prior to a 120-day delinquency for any reason other than a violation of a due-on-sale clause or joining a foreclosure initiated by a subordinate lienholder. However, the CFPB noted that a bank could accelerate a loan if the borrower violates a term of the loan contract unrelated to delinquency, such as failing to pay property taxes, and commence foreclosure if the borrower does not pay the accelerated amount within 120 days.
Other questions covered construction-to-permanent loans, appraisals and valuations, collection contracts, periodic statements and prompt crediting. A recording of the webcast will be available for download on shortly.

Order a recording.

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