tag:blogger.com,1999:blog-80114535884426453842024-02-07T13:36:53.243-05:00CFPB ForumCFPB Forum provides news and views about the Consumer Financial Protection Bureau (CFPB). CFPB Forum is a “discussion venue,” providing a web space for viewers to better their understanding and become more informed
about the CFPB.Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.comBlogger60125tag:blogger.com,1999:blog-8011453588442645384.post-76197368563055625672017-04-26T10:15:00.001-04:002017-04-26T10:22:26.551-04:00Bi-Weekly Baloney<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div class="MsoNormal" style="background-color: #dadadc; color: #464646; font-family: Calibri; font-size: 13px; line-height: normal; margin-bottom: 0in;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><a href="http://lenderscompliancegroup.com/2.html" style="color: #4336fb; text-decoration-line: none;" target="_blank">Jonathan Foxx</a><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: #dadadc; color: #464646; font-family: Calibri; font-size: 13px; line-height: normal; margin-bottom: 0in;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Managing Director</span></div>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"></span></div>
<div class="MsoNormal" style="background-color: #dadadc; color: #464646; font-family: Calibri; font-size: 13px; line-height: normal; margin-bottom: 0in;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Lenders Compliance Group</span></div>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Almost two years ago, the Consumer Financial Protection Bureau (CFPB)
filed a lawsuit in federal district court against Nationwide Biweekly Administration,
Inc., Loan Payment Administration LLC (collectively, “Nationwide”), and the
companies’ owner, Daniel Lipsky, alleging that Nationwide misrepresented the
interest savings consumers would achieve through a bi-weekly mortgage payment
program and also misled consumers about the cost of the program. The CFPB was
seeking compensation for harmed consumers, a civil penalty, and an injunction
against the companies and their owner.</span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">An interesting feature of this lawsuit is the role that teaser ads, in
general, and telemarketing sales scripts, in particular, have on exposure to
regulatory violations.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">This past Monday, after some haggling back and forth in the usual mix
and bantering of legal procedures, the two entities found themselves in court
at a bench trial.<span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 11pt; line-height: 107%;">[*]</span></span><!--[endif]--></span>
The CFPB told a California federal judge at the beginning of the trial that
Nationwide violated consumer protection laws by suggesting it was affiliated
with the homeowners’ mortgage providers and hiding its fee structure in
deceptive mailers and sales calls.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The CFPB argued during opening arguments that Nationwide sent deceptive
mailers to potential customers that included the name of the bank holding their
mortgage and stated the loan amount. These mailers allegedly told the customers
that if they declined the bi-weekly program, they were “waiving” loan savings.
When potential customers called in, sales representatives supposedly would say
that Nationwide “has a working relationship with your bank.” According to the
CFPB, these were misrepresentations that violated the Consumer Financial
Protection Act and the Telemarketing Sales Rule.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The violations can be grouped into the following four categories, each
of which I will explicate briefly.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">1) <b>Falsely promising consumers
they could achieve savings without paying more:<o:p></o:p></b></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">In direct mail, online, and other marketing materials, Nationwide
claimed that consumers who enrolled in its “Interest Minimizer” program would
save money without increasing their mortgage payments. In a video on Nationwide’s
website, Lipsky stated, “you’re not increasing your payment. You’re just
switching to a smaller bi-weekly or weekly amount.” The CFPB alleged that, in
fact, consumers in the program paid processing fees for each bi-weekly payment
on top of the initial set-up fee to Nationwide, plus the equivalent of one
additional monthly payment each year.</span><br />
<a name='more'></a><span style="font-family: "arial" , "helvetica" , sans-serif;"><o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">2) <b>Falsely promising immediate
savings that take years to achieve:<o:p></o:p></b></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Despite promises of immediate savings, the CFPB alleged that a consumer
would have had to stay enrolled for many years to recoup the fees that
Nationwide charged. Nationwide used a metric for its calculations, claiming
that the median consumer in its Interest Minimizer program in 2013 had a
30-year mortgage for approximately $160,000 with an interest rate of 4.125
percent. But the CFPB calculated that a consumer with those loan terms would
have to stay in the program for nine years to recoup the fees – at which point
the consumer would have paid more than $1,200 in fees to Nationwide. Moreover,
only 25 percent of the consumers enrolled at the end of 2014 had been enrolled
for longer than four years.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">3)<b> Misleading consumers about
the cost of the program:<o:p></o:p></b></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">It was the CFPB’s contention that Nationwide’s direct mail and
marketing materials falsely claimed that consumers’ extra payments “are
directed 100% to the principal of the loan.” However, Nationwide kept the first
extra bi-weekly payment (up to $995) as the set-up fee. When consumers asked
Nationwide sales representatives how much the program costs, some of the
company’s sales scripts allegedly instructed the representative to redirect the
consumer, and other scripts said representatives should only mention the fee if
consumers “persist to ask about fees.” According to the CFPB, none of the
scripts stated the dollar amount of the setup fee.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">4) <b>Falsely claiming to be
affiliated with mortgage lenders or servicers:</b><o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Nationwide’s marketing materials allegedly misrepresented that it was
affiliated with consumers’ mortgage lenders or servicers. For example, in one
telemarketing sales script, when consumers ask, “Do you work with/affiliated
with my lender?” sales representatives were supposedly instructed, “Do NOT say
‘No’” – when the accurate answer is actually “No.”<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">I’m not particularly impressed with Nationwide’s case, especially when
its counsel tries to give the impression that Nationwide meant well! Counsel
praised Nationwide’s founder Lipsky’s “entrepreneurial spirit,” and said he and
the company had grown more vigilant after a regulatory “learning curve” during
which he obtained state-by-state licensing – and a 2008 lawsuit brought by the
Ohio Attorney General’s Office over similar claims, which, by the way, ended
two years later with a settlement for consumer refunds, injunctive relief and
$30,000 in penalties. I call this the “errant fool” defense, where we seek
mercy from the court by claiming mistakes were made, but at least they were
well-meaning mistakes. Or, to give Nationwide’s counsel a chance to speak,
“This is just a company trying to sell a wonderful financial concept, trying to
do so in a way that complies with regulations, and a hyper-vigilant agency
looking at things in a way a reasonable consumer would not.” Yeah! That’s the
ticket! Blame the CFPB!<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Let’s put this in perspective. Nationwide bifurcates a bank’s monthly
payment system in half and automatically makes withdrawals from a customer’s
bank account. According to the CFPB, call representatives would falsely
indicate that the program would save callers money and reduce the length of the
mortgage, but then rushed through their explanation of Nationwide’s one-time
sign-up fee, which could total as much as $995, plus its $3.50 service fee for
each withdrawal. You read that right: a sign-up fee of $995 and $3.50 fee for
each withdrawal!<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">According to plaintiff’s counsel, “the letters promise monthly consumer
savings, but that’s not true, given how loan repayment works. It would take
nine years to achieve any net savings.” Furthermore, “the misrepresentations at
issue were pervasive. They appeared on every sales call. There’s no dispute
defendants made representations to consumers in mailers and scripts and
consumers bought the product. What’s in dispute is whether there were
misrepresentations about the hidden non-refundable set-up fee and the fact
consumers must stay in it for several years before seeing any savings.”<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">All of which begs the question that if this is such a “wonderful financial
concept” why did the CFPB’s first two witnesses, both of whom were Nationwide
phone center sales representatives, say that although Nationwide gave them a
script to follow during calls, they were allegedly told never to answer the
question “are you my lender?” with a simple “No,” but to read a paragraph-long
explanation of Nationwide’s status as the largest mortgage services company in
the country? Or why they also would allegedly never say the dollar amount of
the set-up fee that was going to be withdrawn from the first payment to
Nationwide? Let’s give those witnesses voice: “In training, we were told we
needed to read from the script exactly as written…That was found to be the most
successful method. If we were to say the dollar amount, it would peak the
curiosity of the consumer and we would get more objections.”<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">To which all that defense counsel could muster on cross was to question
whether omissions about the fees misled customers or were intended to.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Here’s the convoluted logic posed by defense counsel:<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">“When you determined
what the biweekly debit was, there was no way to populate the Word document [of
the script] with that number, right? A generic phrase in the script allowed the
same script to be used, right?” … “Half
the time the customer asked what was that about set-up fee. That was after you
read the script portion about the fee. So they knew there was one.”<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">All this being an obvious attempt to take the legal consequences of
intentional action off the table!<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">But this observation from one of those sales representatives gives it
away, stating that when Nationwide briefly altered its script to include the
set-up fee, there was a drop in the rate at which representatives closed sales
and got customers to enroll - from 25 percent to about 20 percent.<o:p></o:p></span></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<br /></div>
</div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">I’m going with what Pablo Picasso once said: “What one does is what
counts.”<o:p></o:p></span></div>
</div>
<div style="text-align: justify;">
<br /></div>
<div>
<div style="text-align: justify;">
<!--[if !supportFootnotes]--><span style="font-family: "arial" , "helvetica" , sans-serif;"><br clear="all" />
</span></div>
<hr size="1" style="text-align: left;" width="33%" />
<!--[endif]-->
<br />
<div id="ftn1">
<div class="MsoFootnoteText">
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 107%;">[*]</span></span><!--[endif]--></span> <span style="font-size: x-small;">Consumer
Financial Protection Bureau v. Nationwide Biweekly Administration Inc et al.,
case number 3:15-cv-02106 in the U.S. District Court for the Northern District
of California</span></span><o:p></o:p></div>
</div>
</div>
</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-46645321380968954392016-09-09T13:43:00.002-04:002016-09-09T13:43:51.438-04:00Flipping the Bird at the CFPB!<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<div style="text-align: justify;">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><a href="http://lenderscompliancegroup.com/2.html" target="_blank">Jonathan Foxx</a></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Managing Director</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">Lenders Compliance Group</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span><span style="font-family: "arial" , "helvetica" , sans-serif;">Do you really want to tell the Consumer Financial Protection Bureau (CFPB) that it doesn’t regulate you?<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Before flipping the bird at the CFPB, a company had better do some deep and serious deliberations!<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Take the case of Intercept Corp., a company that the CFPB asserted allegedly took money from consumers’ bank accounts without authorization to do so. It was claimed that the company willfully ignored red flags and thereby allowed its client companies to take consumers’ funds.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Here’s what happened, as described in the complaint,<span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size: 11pt; line-height: 15.6933px;">[i]</span></span></span> and argued in federal court a few days ago.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Intercept does business as InterceptEFT. The CFPB claimed that InterceptEFT, and its President, Bryan Smith, and also its CEO, Craig Dresser, <span style="background: white; mso-bidi-font-family: Arial;">knew about the alleged illegal withdrawals but they did nothing to protect consumers.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="background: white; mso-bidi-font-family: Arial;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Intercept tried a gambit that, in this instance, seems to have been destined to failure: when in doubt, remove the opposing litigant for lack of standing. So, let’s do it, let’s try to remove the CFPB! Let’s contend - or maybe “pretend” should be the best word here - that we’re not governed by the Consumer Financial Protection Act (CFPA). Sure, that will work!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="background: white; mso-bidi-font-family: Arial;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The CFPB, it seems, successfully argued otherwise.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="background: white; mso-bidi-font-family: Arial;"><span style="font-family: "arial" , "helvetica" , sans-serif;">What does InterceptEFT do? The CFPB describes this company as a financial service that is mainly used for consumer purposes – meaning personal, family, or household needs. It is a third party vendor. The CFPB took the position that although consumers don’t directly work with this third party vendor doesn’t alter the service, and the company's classification doesn't change just because the complaint doesn’t explicitly state that its products are offered for those consumer purposes.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">Specifically, the CFPB alleges that Intercept and its executives processed transactions for clients they knew, or should have known, were making fraudulent or other illegal transactions, even after being warned several times of the wrongdoing. The injury to consumers reached into the many millions lifted from consumers’ bank accounts.</span><br style="box-sizing: border-box;" /><br style="box-sizing: border-box;" />Now the gambit: <span style="background: white;">Intercept claimed that it met exceptions for the law, including one that would allow it to escape the suit <i>because not all of its clients are covered by the CFPA</i>.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The CFPB descanted critically:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">“That reading would produce the absurd result that an entity could not be a service provider if it provided support services to even a single non-covered-person client - regardless of the entity’s conduct with respect to covered persons.” … “Intercept provides no justification for such an arbitrary result, and indeed there is none.”</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">As to attempts to remove the President and the CEO from the litigation, the CFPB said that they should<span style="background: white;"> be held accountable as individuals because they’re involved in the company’s day-to-day operations and not just “uninvolved company figureheads or passive shareholders.” These company officers had said that they worked with the banks on due diligence checks, so their work was not recklessness.</span><br style="box-sizing: border-box;" /><br style="box-sizing: border-box;" /><span style="background: white;">But, that position came under this withering fire from the CFPB:<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">“[That argument] contradicts the factual allegations in the complaint, which describe how numerous banks warned Smith and Dresser about apparent fraud and illegality and how the two men responded, not by acting on those concerns, but by seeking to minimize and work around them.” ... “Smith and Dresser cannot now hope to hide behind the very warnings they previously chose to ignore.”</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">The injury was substantive, claimed the CFPB. The Bureau said that <span style="background: white;">it had proved substantial injury was caused as direct monetary losses, as described by category in the suit. Indeed, consumers couldn’t have avoided the harm because they didn’t even know about the unauthorized withdrawals in the first place.</span><br /><br style="box-sizing: border-box;" /><span style="background: white;">So, first gambit: fail.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="background: white; mso-bidi-font-family: Arial;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Second gambit: obfuscate, complicate, baffle and befuddle.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">InterceptEFT launched a second line of counter-attack. As the CFPB stated in its suit, “…rather than confronting these allegations head-on, defendants claim not to understand them, asserting that the complaint is too vague or ambiguous for defendants even to present a defense on this element of unfairness.”</span><br style="box-sizing: border-box;" /><br style="box-sizing: border-box;" /><span style="background: white;">If adumbration is the tactic, better be prepared with a phalanx of facts! Unfortunately, Intercept had few facts to support their endeavor to becloud the issues. Although the Bureau did not name the clients, the complaint points to specific communications that Intercept had concerning access as well as its more common practices – such as allegedly ignoring specific warnings.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">Second gambit: arrested development.</span><br /><br style="box-sizing: border-box;" /><span style="background: white;">Third gambit: invoke statute of limitations.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">Worth mentioning is that the motion to dismiss had also claimed the suit was barred under the statute of limitations. This really could not go anywhere, since the CFPB said the dates Intercept proffered regarding the government's discovery of the alleged violations were irrelevant because they were determined by when the Federal Trade</span><span style="background: white;"> Commission</span><span class="apple-converted-space"><span style="background: white; mso-bidi-font-family: Arial;"> </span><span style="background: white; mso-bidi-font-family: Arial;">did a separate investigation, not the one conducted by the Bureau itself.<o:p></o:p></span></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">Third gambit: boomerang.</span><br /><br style="box-sizing: border-box;" /><span style="background: white;">Now comes the last and fourth gambit, one that is like a last gasp of air in a hot air tunnel: challenge the constitutionality of the Consumer Financial Protection Bureau.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">Intercept raised a motion challenging the constitutionality of the CFPB as an agency. The Bureau squelched that line of reasoning by stating every court that has considered the Bureau’s constitutionality has ruled in the government’s favor and that Intercept didn’t provide any new, substantial arguments that would justify a ruling otherwise.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="background: white; mso-bidi-font-family: Arial;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Fourth gambit: crash and burn.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="background: white; mso-bidi-font-family: Arial;">In sum, the Bureau pled that </span>Intercept and its officers failed to meet the standard of proof needed to dismiss a case at this stage. The court will determine if the foregoing gambits will put this case down or keep it going forward on some subtle and abstruse vapors. </span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">But why prolong the agony?</span></div>
<div style="text-align: start;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br clear="all" /></span>
<hr align="left" size="1" width="33%" />
<br />
<div id="edn1">
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: x-small;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="line-height: 13.91px;">[i]</span></span></span> <span style="background: white;">Consumer Financial Protection Bureau v. Intercept Corp. et al., case number</span> <span style="background: white;">3:16-cv-00144</span><span style="background: white;">, in the U.S. District Court for the District of North Dakota.</span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></span></div>
</div>
</div>
</div>
</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-16515532378373937952016-04-12T13:55:00.000-04:002016-04-18T13:21:01.037-04:00Going after the Big Cheese (PHH takes on CFPB’s Director)<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">As many
of you know, I have been following the PHH dispute with the CFPB virtually from
its inception. Although PHH is a large organization, let’s face it, this is
still like a mouse (PHH) squeaking at an elephant (CFPB)! The bite, in this
instance, happens to be a $109 million penalty that the CFPB is assessing
against PHH.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Reduced
to the least common denominator, this is a fight against the authority vested
in the Director of the CFPB, or, better said, the authority that the Director presumes
to have vested in himself versus a play at arrogating to himself certain
authority that he simply does not have. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Going
after the Big Cheese himself is no mean feat!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">But PHH
has assembled a highly skilled and prominent legal team.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">And there are <i>amici curiae</i> on both sides.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Let me
back up a few steps and give a wider angle. PHH appealed to the DC Circuit
Court because the Bureau’s Director Richard Cordray raised a $6 million penalty
for mortgage insurance kickbacks - such penalty issued by an administrative law
judge - to a whopping $109 million. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">To ensure that the information presented
at bar was applicable to Dodd-Frank, the hearing judges required the Bureau to
provide answers in oral arguments regarding substantive provisions as to the president’s
authority to remove the CFPB director only for cause, and, importantly, about
how the Court should view an administrative agency led by a single director
rather than the more typical commission structure.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Today is the day for those oral
arguments!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Here’s one bottom line that may come
from the foregoing aspects of the dispute: if the Bureau loses, the Director
may find that his authority, presumed or otherwise, will be vitiated. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">An access point to the litigation is to
challenge the constitutionality of the Bureau itself! Areas of contention,
right from the inception, have been the supposed, czarist-like construct of
having a single director in charge of the Bureau, plus the view that the CFPB’s
funding should come from congressional appropriations rather than from the
Federal Reserve’s own budget.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Is it surprising that the DC Circuit
recently required the Bureau to be prepared to face questions about whether
Dodd-Frank’s provision - stating that the president can remove the CFPB
director only for “inefficiency, neglect of duty, or malfeasance in office” - passed
constitutional muster? Actually, I don’t think so. After all, the Bureau has
been challenged on these issues all along and there is clearly an interest in
determining the scope of authorities vested in the Director. If adjudication seems
to reach to an unassailable decision, the viability of claims involving the
CFPB’s constitutionality may be finally resolved. Or maybe not! The Supreme Court
would be the next step along this circuitous path to a decision.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Should we be surprised that the Court is
looking for answers about potential remedies for any problems that the
applicable provision brings, including potentially removing it from the statute
and allowing the president to remove the CFPB director without any specific cause?<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
</div>
<div style="text-align: justify;">
<span style="background-color: white; font-family: "arial" , "helvetica" , sans-serif; font-size: 12pt;">Again, I am not surprised. If it turns
out that the cures (remedies) are worse than the infection (overreaching
authority) and the treatment needs to be changed, the Court will need to
determine the extent to which such changes could affect the Director’s
authority.</span></div>
<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><br />
<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></div>
<span style="font-family: "arial" , "helvetica" , sans-serif;">
<div style="font-size: 12pt; text-align: justify;">
<span style="background-color: white; font-size: 12pt;">So, even though PHH is challenging Director Cordray’s
interpretation of violations under RESPA that allowed him to distend a $6
million penalty handed down by an administrative law judge into an engorged, ballooned
penalty of $109 million that the CFPB director handed down when PHH appealed,
the fact is the instant arguments are really going quite far beyond that issue.</span></div>
<div style="text-align: justify;">
<br /></div>
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;"><div style="text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;">Here’s a pivot point: whether the Constitution
allows Congress to put in restrictions on when the president can fire officials
at an administrative agency. Short answer: Yes, it is constitutional if you go
by the Supreme Court’s decision in 2010 in Free Enterprise Fund v.<span class="apple-converted-space"> </span></span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;">Public Company
Accounting Oversight Board</span><span class="MsoHyperlink" style="background-color: transparent;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;">,</span></span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;"> which affirmed the DC Court’s ruling that such
protections were constitutional.</span><br />
<a name='more'></a></div>
</span><div style="text-align: justify;">
<br /></div>
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;"><div style="text-align: justify;">
<span style="font-size: 12pt;">But here’s some drama: Judge Brett M. Kavanaugh,
the Circuit judge that leads the impaneled court, happened to cast a dissenting
vote in that case. His view was that a president should not have to notify
Congress as to why the director of an administrative agency is removed.</span></div>
</span>
<div style="text-align: justify;">
<br /></div>
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;"><div style="text-align: justify;">
<span style="font-size: 12pt;">Thus, removing that provision from the statute could
very well limit the Bureau’s independence – and, </span><i style="font-size: 12pt;">mutatis mutandis</i><span style="font-size: 12pt;">, limit as well that distinct authority of other
administrative agencies for which the statute requires a reason for the dismissal
of officials. Put bluntly, the Bureau currently acts independently and does not
have to discuss with the White House its decisions regarding enforcement
actions. That could change, depending on the Court’s decision.</span></div>
</span>
<div style="text-align: justify;">
<br /></div>
<span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;"><div style="text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;">There are a few moving parts, too. For instance,
another case that will be considered is the 1935 Supreme Court’s decision in
Humphrey’s Executor v. United States, which allowed for restrictions on the
removal of<span class="apple-converted-space"> </span></span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;">Federal Trade
Commission</span><span class="apple-converted-space" style="background-color: transparent;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;"> </span></span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 12pt;">commissioners. It will
be considered because, among other things, the Bureau itself relied on that
case in its filings with the DC Circuit. The CFPB’s lawyers will likely be
showered with plenty of questions from the bench about the Humphrey case.</span></div>
</span></span><br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">As I have said numerous times in these brief
epistles on the CFPB’s enforcement tactics, regulating by enforcement deprives
judicial review. It may be expedient, from the Bureau’s standpoint, but it
leaves us with no judicial precedent.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The role of the Court as finder of fact,
thereby vetting the issues, and weighing the claims pursuant to the appropriate
statutory framework, should be a viable option to an enforcement by settlement
that provides a one-sided interpretation.</span><o:p></o:p></span><br />
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span></span>
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><a href="http://lenderscompliancegroup.com/2.html" target="_blank">Jonathan Foxx</a></span></span><br />
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">President & Managing Director</span></span><br />
<span style="background: white; font-size: 12pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">Lenders Compliance Group</span></span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-61573811773266832572016-01-12T12:38:00.001-05:002016-01-17T19:32:21.681-05:00Recess Appointment Gambit<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">Some people just won’t take No for an answer!</span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt;">
<span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The most recent fool’s errand is offered thanks to the irrepressible, litigious efforts of the <span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">State National Bank of Big Spring, Texas, and two advocacy groups, conservative think tank Competitive Enterprise Institute and the 60 Plus Association.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">In State National Bank of Big Spring et al. v. Geithner et al. (U.S. District Court, DC, Case<span class="apple-converted-space"> </span></span>1:12-cv-01032), the plaintiff seeks to disabuse the Consumer Financial Protection Bureau (“Bureau”) of its constitutionality.<o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">Here is one of the lawsuits that started droning high and mighty soon after the Bureau received its enumerated authorities in the summer of 2011.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">The bank sued in June 2012, arguing that the Bureau has an inordinate amount of power because (1) the Bureau’s director can't be removed at will, and (2) the agency's funding is routed around the congressional appropriations process.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">A little over a year later, in August 2013, the case was booted, only to be resuscitated in July 2015 by the D.C. Circuit, since the appeals court found the bank has standing to challenge the Bureau’s constitutionality – based on the fact that the Bureau regulated the remittance market, which is the bank’s business. That said, there had been no enforcement action.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">Lacking an enforcement action to protest, maybe the bank just wanted to get out in front of the problem before it started!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">The bank went forward with a summary judgment challenge in November 2015.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">In any event, about the 2012 suit’s allegation: the claim is that the law creating the Bureau, Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is unconstitutional. The bank claimed the president's inability to remove the Bureau’s director without good cause violates the separation of powers doctrine, a claim, the Bureau argues, that ignores Supreme Court precedent.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">This gambit has been pushed hither and yon for some time. For instance, right from the start there has been a challenge to the recess appointment of Richard Cordray to be the Bureau's first director. President Barack Obama used a recess appointment to put Mr. Cordray in charge of the Bureau, albeit only after mostly Republican senators refused to vote on his nomination. Their opposition was based on the structure and congressional oversight of the Bureau, not really at all based on Mr. Cordray’s credentials.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">But Conservatives have long held that the recess appointment violated the Constitution, engendering the recess appointment itself by keeping the Congress technically open by holding a series of <i>pro forma </i>sessions, gaveling in sessions for minutes or seconds, in order to meet the lowest bar for being open for business.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">So, we’re back in court!<o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt;">
</div>
<div style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Now, the Bureau has asked </span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, Helvetica, sans-serif;">a Washington, D.C., federal court for summary judgment. Filing last Friday, the Bureau asserts that the bank’s challenge to the Bureau's constitutionality can't get around long-standing precedent supporting legislators' authority to create independent agencies.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">Here’s two of the pivotal quotes:</span></div>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">
</span>
<br />
<blockquote class="tr_bq" style="text-align: justify;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">“SNB’s arguments that Title X violates constitutional separation-of-powers principles rest on policy arguments with no support in the constitutional text or judicial precedent.” </span></blockquote>
<blockquote class="tr_bq" style="text-align: justify;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">“The challenged provisions of Title X – considered either individually or collectively – are consistent with Articles I and II of the Constitution, as they have been interpreted and applied by the Supreme Court.”</span></blockquote>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">
</span>
<br />
<div class="MsoNormal" style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt;">
</div>
<div style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The Bureau argues that the Supreme Court had ruled in 1935, in Humphrey’s Executor v. United States, that Congress has the authority to create independent agencies with overseers appointed by the president who can only be removed for good cause.</span><br />
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><br /></span>
<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">Thus, asserts the Bureau, the authority is grounded in the establishment of the<span class="apple-converted-space"> </span>Federal Communications Commission, which was at issue in that case, or any of several other federal agencies, including the<span class="apple-converted-space"> </span></span><span style="background-color: transparent; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">Securities and Exchange Commission,</span><span class="apple-converted-space" style="background-color: transparent; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"> </span><span style="background-color: transparent; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">that are considered to have been created under the same authority.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">Given precedent, the Bureau’s view is that, whether or not the Bureau is headed by a single, appointed director or several commissioners (or multiple directors or a phalanx of overseers), is entirely irrelevant and nugatory. In defending the single appointee, the Bureau’s brief states: “If anything, it should be easier for the president to hold accountable a single officer than several.” </span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">Furthermore, the Bureau stated that the foregoing argument didn't appear in the bank's complaint and that it can't raise the claim now in its own motion for summary judgment filed in early November. Indeed, it is argued that the bank was not harmed by the rules approved by Director Cordray, and, in cases where the bank claims it was harmed, invalidating them would not serve to correct the injuries alleged by the bank.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">From a regulatory perspective, the Bureau is correct with respect to the validity of rules approved by the Bureau’s director. Even if the court were to consider the validity of rules approved by Director Cordray during his recess appointment, the D.C. Circuit has upheld such rules when later ratified by an agency.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">I think you can see how this Hatfields and McCoys battle can get very complicated.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">I expect this species of litigation to find its way into the dustbin of history.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;">Still, as Alexander Pope said, "Hope springs eternal in the human breast."</span></div>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"></span></span></span><br />
<div style="text-align: justify;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><br /></span></span></span>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">-----------------------------------------------------------------------------------------------------------</span></span></span><br />
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><br /></span></span></span>
<div class="MsoNormal" style="font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;"><a href="http://lenderscompliancegroup.com/2.html" style="color: #3811ff; text-decoration: none;">Jonathan Foxx</a></span></span></span></span></div>
<div class="MsoNormal" style="font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13.2px; line-height: 16.8px; margin-bottom: 0.0001pt;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">President & Managing Director</span></span></span></span><br />
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;">Lenders Compliance Group</span></span></span></span><br />
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></span></span></span></div>
</div>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.2px; line-height: 16.8px;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;">
</span></span></span>Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-85337611618816511012015-09-08T00:30:00.000-04:002015-09-08T00:30:00.917-04:00Closing Disclosure: Deep Dive – Pages One and Two<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="http://lenderscompliancegroup.com/20.html" target="_blank">Download White Paper</a></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">Jonathan Foxx</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">President & Managing Director</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Lenders Compliance Group</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">This is the fourth article of a six-part
series devoted to TILA/RESPA Integration Disclosure. Although the series,
structured as White Papers, was initially established with four parts, I have
added a fifth and sixth part to discuss additional features of the Closing
Disclosure. In this article, I will take you through a review of <u>Page One</u>
and <u>Page Two</u> of the Closing Disclosure. In the fifth part, I will
discuss Page Three. The sixth and final part of the series will provide an
outline of Page Four and Page Five. Through a review of important highlights, I
invite you to join me in a deep dive into the intricate features of the Closing
Disclosure. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the first article, I discussed
the mission of TILA-RESPA Integration and the Loan Estimate (LE).<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[i]</span></span><!--[endif]--></span>
The second article introduced and treated the numerous features of the Closing
Disclosure (CD).<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[ii]</span></span><!--[endif]--></span>
In the third article, I provided the salient features of the Loan Estimate, in
considerable detail.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[iii]</span></span><!--[endif]--></span>
The first two articles were accompanied by detailed tables to be used for
certain itemized categories and action requirements.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">I would suggest that you read all
the articles in this series in order to better understand the TILA-RESPA
Integration Disclosure (TRID) rule promulgated by the Consumer Financial
Protection Bureau (CFPB). </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">One of the reasons I have written
this series is to cut through the information noise. My concern stems from the nearly
profiteering stance of the flourishing punditry to opine on TRID. This approach
to learning seems to have become the norm recently at conferences, conventions,
webinars, seminars, lectures, and pricey city-to-city forums. Indeed, also, people
with no real experience in directing regulatory compliance, though having some
training background, seem to hang out their TRID webinar shingle. I view the
latter as but shills for generating leads for their affiliated pundits. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">I happen to think that TRID is
too important, being a generational change in disclosure, to hog the helpful information
about TRID by charging a fee just so somebody could attend and possibly learn
something about it. With that in mind, my firm recently established two
proactive paths to a TRID knowledgebase:</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(1) We
established the TEAM TRID™ task force,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[iv]</span></span><!--[endif]--></span>
a relatively inexpensive, cost-effective way to get TRID integration
implementation done efficiently (viz., <a href="http://www.teamtrid.com/">www.teamtrid.com</a><span class="MsoHyperlink">)</span>; and importantly </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(2) We
established TRIDHotline.com,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[v]</span></span><!--[endif]--></span>
an <i>entirely free online service</i>,
manned by our task force, to assist people with their questions about TRID. We
want to listen to their compliance needs (viz., <a href="http://www.tridhotline.com/">www.tridhotline.com</a><span class="MsoHyperlink">).</span> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Hopefully, you will have read the
previous three articles. Now we will continue a detailed review of the new
disclosures, by providing this fourth article on the Closing Disclosure. As indicated
above, a fifth and sixth article will further elucidate the Closing Disclosure
analysis. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In focusing on the Closing Disclosure,
I will offer a perspective of its pertinent and critical highlights. As I have
stated throughout this series, I caution you to realize that this review is not
exhaustive or comprehensive, given that the TRID rule contains very complex disclosure
requirements, and there are on-going updates and interpretations involving its
implementation, some of which are borne of the CFPB’s own issuances as well as
the areas that may be subject to litigation. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Please consider my analysis carefully.
Follow along with a copy of the Closing Disclosure. I will provide, where
helpful, some information as <b><i><span style="font-variant: small-caps;">Suggested
Guidance</span></i></b>. Allow at least two hours to consider this explication.
And as I have admonished all along, make notes, raise questions, and seek answers
from competent compliance professionals!</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There are five pages to the
Closing Disclosure. We will visit each of them, with particular interest in
understanding their key features. Although I will take the CD somewhat in
order, it should be noted that this method of explanation is not meant to
suggest that each Closing Disclosure contains five pages or that in all
instances the information described appears on that page in the same order. For
example, Regulation Z allows an alternative “Calculating Cash to Close” table
for transactions without sellers.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[vi]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="text-transform: uppercase;"><span style="font-family: Arial, Helvetica, sans-serif;">Page One<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The first page of the Closing
Disclosure includes General Information, the Loan Terms table, the Projected
Payments table, and the Costs at Closing table. The CD begins with the title
“Closing Disclosure” and a form purpose statement, followed by three columns of
basic information headed “Closing Information,” “Transaction Information,” and
“Loan Information.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[vii]</span></span><!--[endif]--></span>
The page then includes three tables: “Loan Terms,” Projected Payments,” and
“Costs at Closing.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[viii]</span></span><!--[endif]--></span>
The text itself is required for federally related mortgage loans subject to
TILA-RESPA disclosure integration. Note should be taken that the model form is
for transactions subject to TILA only and not RESPA.</span><br />
<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Closing Information<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Under the heading “Closing Information,” the creditor must
disclose: </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(1) Date Issued; </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(2) Closing Date; </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(3) Disbursement Date; </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(4) Settlement Agent; </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(5) File #; </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(6) Property; and </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">(7) Sale Price or Appraised Prop. Value. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Under RESPA’s Regulation X, there
is a requirement for listing the name of the settlement agent, place of
settlement, property location, and settlement date.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[ix]</span></span><!--[endif]--></span>
The CD discloses the same information, excluding the place of settlement, plus
the date the disclosure is issued; the date funds are disbursed to the seller
or consumer, as applicable; the sale price or appraised value of the property;
and the file number assigned to the transaction by the closing agent.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[x]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Let’s look more closely at how this section of the CD is
assembled.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Date
Issued<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The creditor
must disclose the date the CD is <u>delivered</u> to the consumer, regardless
of the method of delivery, labeled “Date Issued.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xi]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Closing
Date <o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The creditor
must disclose the consummation date for the transaction, labeled “Closing
Date.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Additional
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In some
transactions, the consummation date may change after the delivery of the CD,
such as when the consumer waives the three-day waiting period between delivery
of the CD and consummation. </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Under TILA,
creditors are required to use the best information reasonably available to them
to complete the CD, so the Closing Date will be based on that best information.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xiii]</span></span><!--[endif]--></span>
If the disclosure previously provided becomes inaccurate, the creditor must
deliver a revised CD at consummation and the revised CD would disclose the
actual consummation date. Accordingly, either consummation will occur on the
date the creditor initially disclosed and be accurate, or the creditor will be
required to revise the CD to reflect the date on which consummation actually
occurs - and in either case the CD will reflect the actual date of consummation
and not an estimate.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Disbursement
Date<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">TILA requires
the creditor to disclose the date on which the “Closing Costs Financed (Paid
from your Loan Amount)” in the Calculating Cash to Close table on page 3 of the
Closing Disclosure, and “Cash From or To Seller” on page 3 of the Closing
Disclosure, are expected to be paid to the consumer and seller, respectively, and
labeled “Disbursement Date.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xiv]</span></span><a href="https://www.blogger.com/blogger.g?blogID=8011453588442645384#_edn14" title=""><!--[endif]--></a></span>
</span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In a transaction
that is not a purchase transaction, the creditor must disclose the date the
amount of the consumer’s Loan Amount and/or Payoffs and Payments (in the
Calculating Cash to Close table on page 3) is/are expected to be paid to the
consumer or a third party.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Settlement
Agent<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Creditors must
disclose the identity of the settlement agent conducting the closing, labeled
“Settlement Agent.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xv]</span></span><!--[endif]--></span>
The name of the entity that employs the settlement agent should be provided; however,
the name of the individual conducting the closing is not required.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">File
Number<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The CD must
include the number assigned to the transaction by the closing agent for
identification purposes, labeled “File #.” The file number may contain any
alphanumeric characters and need not be limited to numerals.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xvi]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Property
<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In this part of
the CD, include the street address of the property, labeled “Property.” This
item must include the address, including zip code, of the property that secures
or will secure the transaction or, if the address is unavailable, the location
of the property using a zip code. (A creditor complies by disclosing a complete
address as approved by the U.S. Postal Service.) </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Sale
Price<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In a credit
transaction involving a seller, the creditor must disclose the sale price for
the property, labeled “Sale Price.” In transactions not involving a seller
(such as in a refinancing), the creditor must disclose the appraised value of
the property, labeled “Appraised Prop. Value.”</span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">If no seller is
a party to the transaction, the value to be disclosed is that determined by the
appraisal or valuation used to underwrite the transaction, or if the creditor
has obtained a more recent appraisal or valuation, the value determined by the
more recent appraisal or valuation. For refinances where an appraisal is not
obtained, the creditor may disclose an estimated property value and the label
should be changed to “Estimated Prop. Value.” </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The creditor may
use the estimate provided by the consumer at application, or if the creditor
has performed its own estimate of the property value it may use that estimate
if it is the value the creditor used to determine approval of the transaction.
If personal property is included in the sale price of real property, the
creditor may disclose the aggregate price without a reduction for the appraised
or estimated value of the personal property.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xvii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Transaction Information<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the second column near the top
of page 1 of the CD, the creditor discloses the names and addresses of the
parties to the transaction (i.e., borrower, seller, and lender, as applicable)
under the heading “Transaction Information.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xviii]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .25in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Name and Address</u>. The name and mailing
address for each consumer and seller must be provided, and if the names and
mailing addresses do not fit in the space allocated on the Loan Disclosure, an
additional page may be appended to the end of the form.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xix]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Addendum</u>. If the form does not provide
enough space to include the required information for each seller, an addendum
may be used, provided the creditor complies with the form requirements.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xx]</span></span><!--[endif]--></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>No Seller</u>. In transactions with no
seller, such as a refinancing or home equity loan, the creditor must provide
the name of the person or persons primarily liable under the obligation or who
have a right of rescission. The disclosure of the seller’s name and address may
be left blank.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxi]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Multiple Creditors</u>. If a credit
transaction involves more than one creditor, the creditors must choose which
one of them will provide the CD and a single, complete set of disclosures must
be provided.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>To Whom Delivered</u>. If the transaction is
rescindable, a CD must be provided separately to each consumer who has the
right to rescind. In transactions that are not rescindable, a CD may be
provided to any consumer with primary liability on the obligation.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Loan Information<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the third column near the top
of page 1 of the CD, the creditor discloses information about the loan under
the heading “Loan Information.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxiii]</span></span><!--[endif]--></span>
With the exception of the mortgage insurance case number (labeled “MIC #”), the
information mirrors the basic loan information disclosures required at the top
right of page 1 of the Loan Estimate: (1) Loan Term; (2) Purpose; (3) Product;
(4) Loan Type; (5) Loan ID #; and (6) MIC #. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">NOTE: The Rate Lock disclosure of
the Loan Estimate does not appear on the Closing Disclosure because it is no
longer relevant.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .25in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The Loan ID numbers on the Loan Estimate and
Closing Disclosure must match. If a creditor uses the same loan ID number on
several revised Loan Estimates, but adds after the number a hyphen and a number
to denote the number of revised Loan Estimates in sequence, the creditor must
disclose the loan ID number before the hyphen.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxiv]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->A settlement company may use a different
identification number for a transaction, which would be disclosed not in this
column but as “File #” under the Closing Information column.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The Loan ID # must be one that enables the
creditor, consumer, and other parties to identify the transaction as the same
transaction disclosed on the Loan Estimate.</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The Loan ID # may contain any alphanumeric
character, which means that the number need not be limited to numerals.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Loan Terms Table<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Creditors use a table to disclose
key loan terms that mirror the Loan Terms table that appeared on the Loan
Estimate.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxv]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Projected Payments Table<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Under Regulation Z, the creditor
is required to disclose a table that mirrors the Projected Payments table on
the Loan Estimate, except for:<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxvi]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(1) the added
cross-reference in the statement “Amount can increase over time See page 4 for
details” that appears under the “Estimated Taxes, Insurance & Assessment”
subheading; </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(2) the
different cross-reference in the statement “See Escrow Account on page 4 for
details. You must pay for other property costs separately” that appears on the
right side of the same row; and </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(3) the
different rules applied for determining escrow payments. </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Another difference from the Loan
Estimate is that all amounts include cents.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxvii]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Determining Escrow Payments<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There are
different rules for determining escrow payments are two:</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(1) <u>For
transactions subject to RESPA</u>, the estimated escrow payments are determined
under the escrow account analysis described in Regulation X.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxviii]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(2) <u>For
transactions not subject to RESPA</u>, the estimated escrow payments may be
determined under the escrow account analysis described in Regulation X or in
the manner set forth in Regulation Z for the same escrow payment disclosure on
the Loan Estimate.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxix]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">RESPA specifies how a creditor
conducting an escrow account analysis must estimate disbursement amounts.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxx]</span></span><!--[endif]--></span>
Briefly put:</span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l9 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">A.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If the creditor knows the charge for a particular
escrow item, the creditor must use that amount in estimating the disbursement. </span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l9 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">B.<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If the creditor does not know the charge, the
creditor may base the estimate on the preceding year’s charge, but may adjust
the estimate to account for inflation. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Without getting into an extended
observation in this article, I think the foregoing requirement that the
creditor use actual charges, if known, may conflict with the TILA requirement<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxi]</span></span><!--[endif]--></span>,
as amended by the Dodd-Frank Act, that the creditor take into account the
replacement costs of the property for hazard insurance when determining the
estimated escrow account.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Under TILA,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxii]</span></span><!--[endif]--></span>
for consumer credit transactions secured by a first mortgage on the principal
dwelling of the consumer (other than a reverse mortgage or open-end credit
plan), the creditor is required to take into account the taxable assessed value
of the property during the first year after consummation, including the value
of any improvements constructed or to be constructed on the property, if known,
and the replacement costs of the property for hazard or flood insurance, when
disclosing estimated escrow payments. The Loan Estimate generally incorporates
these statutory provisions, but expands the requirements to all transactions
subject to disclosure integration.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxiii]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Clearly, the CFPB believes the
TILA requirement for estimating escrow payments is appropriate for the Loan
Estimate because it requires creditors to use a uniform standard for estimates
and facilitates comparison, the disclosure of actual payment amounts, when
known, is more appropriate for the CD to avoid conflict with Regulation X. Accordingly,
the CFPB used its regulatory flexibility authority to modify the TILA requirements<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxiv]</span></span><!--[endif]--></span>
for the estimation of escrow payment amounts on the CD, implementing the two
rules stated above, one for RESPA transactions and one for non-RESPA
transactions.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l5 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The amount of estimated escrow payments
disclosed on the CD is considered accurate if it differs from the estimated
escrow payment disclosed on the Loan Estimate due to the escrow account
analysis described in Regulation X.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxv]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l5 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor must disclose taxes, insurance and
assessment information on the Projected Payments table even when no escrow
account will be established.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Costs at Closing Table<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Standard Costs at Closing Table<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Creditors must disclose the cash
required from the consumer at consummation, with a breakdown of the amounts of
loan costs and other costs associated with the transaction.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxvi]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">This information must be included
in a table entitled “Costs at Closing” nearly identical to the Loan Estimate’s
“Costs at Closing” table, with the following differences: </span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(1) the headings
“Closing Costs” and “Cash to Close” appear without the word “Estimated;” and</span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">(2) the
cross-reference to “Calculating Cash to Close” refers to page 3 instead of page
2. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Another difference from the Loan
Estimate is that all amounts include cents.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Alternative Costs at Closing
Table<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There is an alternative “Costs at
Closing” disclosure<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxvii]</span></span><!--[endif]--></span>
with a “ From
To
Borrower” check box for cash-out refinances (i.e., transactions without a
seller).<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxviii]</span></span><!--[endif]--></span>
If the Loan Estimate disclosed the optional alternative table,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxix]</span></span><!--[endif]--></span>
then this alternative CD table is required. Also, if this alternative CD table
is used, then the creditor must use the optional alternative “Calculating Cash
to Close Table” on page 3.</span></div>
<div class="MsoNormal">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="text-transform: uppercase;"><span style="font-family: Arial, Helvetica, sans-serif;">Page Two<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Loan Costs and Other Costs Tables<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The Closing Disclosure must
contain final details about the loan costs and other costs estimated in the
“Loan Costs” and “Other Costs” tables on the Loan Estimate, using expanded
versions of those tables headed “Loan Costs” and “Other Costs” under the master
heading of “Closing Cost Details.”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xl]</span></span><!--[endif]--></span>
Disclosure items must appear in the same lettered categories as, using
terminology consistent with, and in the same sequential order as, the Loan
Estimate, facilitating the comparison of estimated and final loan terms and
costs (with adjustments for charges that move from “Services Borrower Did Not
Shop For” to “Services Borrower Did Shop For,” or vice versa, between the Loan
Estimate and the Closing Disclosure). When items are added on the Closing
Disclosure, subcategories must be re-alphabetized to reflect the addition(s).<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xli]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Two-Digit Line Numbering System and 3 or 5
Columns<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The CD adds a <u>two-digit line
numbering system</u>, in contrast to the three-digit numbering system used on
the RESPA HUD-1/1A settlement statement. For each item, the creditor must
identify any third party providing the service, if applicable. Also, for each
item, the creditor must use three (if no seller is involved) or five (if a
seller is involved) columns to separate fees, as follows:</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif;">(1)Borrower-Paid/At Closing;</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif;">(2)Borrower-Paid/Before closing;</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif;">(3)Seller-Paid/At closing;</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif;">(4)Seller-Paid/Before Closing; and</span></div>
<div class="MsoNormal" style="margin-left: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif;">(5)Paid by Others.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The “Paid by Others” column does
not distinguish between charges paid before or at closing because the
distinction is not essential for determining the amounts due to or from the consumer
and seller at consummation.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">As with the Loan Estimate, the
creditor must itemize its other charges after these specified charges within
each appropriate category, in alphabetical order.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Charges disclosed in the Loan
Costs and Other Costs tables under “Paid by Others” to include a notation of
“(L)” to designate those charges paid by the creditor (lender) pursuant to the
legal obligation between the creditor and the consumer,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlii]</span></span><!--[endif]--></span>
thereby enabling a clear enumeration of how a lender credit was applied.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xliii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Loan Costs Table<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">General Description<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Like the Loan Costs table on the
Loan Estimate, the Closing Disclosure’s Loan Cost table includes subcategories
A through C, followed by “D. TOTAL LOAN COSTS”:</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> Loan Costs </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> A. Origination Charges</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> B. Services Borrower Did Not Shop For</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> C. Services Borrower Did Shop For</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> D. TOTAL LOAN COSTS (Borrower-Paid)</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Origination Charges<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The first subcategory of loan
costs in the Loan Costs table, labeled as “A. Origination Charges,” includes
all compensation paid to a loan originator; that is, a third party associated
with the transaction, regardless of the party that pays the compensation.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xliv]</span></span><!--[endif]--></span>
Generally, the amounts should correspond to the same items disclosed as
“Origination Charges” on the Loan Estimate.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Compensation from the consumer to
a third-party loan originator is designated as borrower-paid at or before
closing, as applicable. Compensation from the creditor to a third-party loan
originator is designated as paid by others.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlv]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l2 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->There is a prohibition of compensation from both
the consumer and the creditor to the loan originator.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlvi]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor must provide the identity of any
third-party loan originator that ultimately receives compensation from the
creditor.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The amount of compensation paid to a third-party
loan originator by a creditor must be calculated according to the guidance for
calculating creditor-paid compensation for the purposes of determining the
amount of points and fees.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlvii]</span></span><!--[endif]--></span>
The amount would include the dollar value of salaries, commissions, and any
financial or similar compensation considered points and fees.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlviii]</span></span><!--[endif]--></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l2 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Regulation Z exempts from disclosure the amounts
paid to the employee of a loan originator organization, which are excluded in
the points and fees calculation.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlix]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Services Borrower Did Not Shop
For<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The second subcategory of loan
costs in the Loan Costs table, labeled as “B. Services Borrower Did Not Shop
For,” includes costs of services required by the creditor and provided by
persons other than the creditor for which the consumer could not or did not
shop. The creditor must provide the identity of the person ultimately receiving
the payment. The creditor must include any additional items of this sort it
required but did not disclose on the Loan Estimate.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[l]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Services Borrower Did Shop For<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The third subcategory of loan
costs in the Loan Costs table, labeled as “C. Services Borrower Did Shop For,”
includes services required by the creditor for which the consumer independently
shopped. The creditor must provide the identity of the person ultimately
receiving the payment. All services disclosed on the Loan Estimate as “Services
Borrower Did Shop For” but for which the consumer did not shop must be moved to
“Services Borrower Did Shop For” on the Closing Disclosure.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[li]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Total Loan Costs and Subtotal of
Loan Costs<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the last two rows of the Loan
Costs table, the creditor must disclose the total loan costs amount, labeled
“D. TOTAL LOAN COSTS (Borrower-Paid),” which is the sum of the Loan Costs
disclosed in the “Borrower Paid/At Closing” and “Borrower Paid/Before Closing”
columns. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Underneath this number, in the
appropriate columns, the creditor must include the subtotals for the costs
disclosed in the “Borrower-Paid/At Closing” and “Borrower-Paid/Before Closing”
columns for “A. Origination Charges,” “B. Services Borrower Did Not Shop For,”
and “C. Services Borrower Did Shop For.” Charges designated seller-paid at or
before closing, or paid by others, are not subtotaled here.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Other Costs Table<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">General Description<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Like the Other Costs table on the
Loan Estimate, the Closing Disclosure’s Other Costs table include subcategories
E through H, followed by “I. TOTAL OTHER COSTS” and “J. TOTAL CLOSING COSTS,”
as follows:<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[liii]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> <u>Other Costs</u> <u> <o:p></o:p></u></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> E. Taxes and Other Government Fees</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> F. Prepaids</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> G. Initial Escrow Payment at Closing</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> H. Other</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> I. TOTAL OTHER COSTS (Borrower-Paid)</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"> J. TOTAL CLOSING COSTS
(Borrower-Paid)</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Taxes and Other Government Fees<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The first subcategory of Other
Costs in the Other Costs table, labeled “E. Taxes and Other Government Fees,”
includes the same items disclosed under this subcategory on the Loan Estimate.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[liv]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l6 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Unlike for the Loan Estimate, the CD requires
itemization of the transfer taxes<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lv]</span></span><!--[endif]--></span>
and does not require all transfer taxes to be aggregated on one line.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lvi]</span></span><!--[endif]--></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l6 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The itemization of transfer taxes must reflect
the actual division of transfer taxes between the consumer and seller, instead
of only including the transfer taxes that the consumer could pay as is required
on the Loan Estimate, because any negotiations between the consumer and seller
will be resolved by consummation.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l6 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor must include the name of the
government entity assessing the transfer tax.</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l6 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Transfer taxes may be itemized as provided in
state or local law and the real estate purchase contract.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Prepaids<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The second subcategory of Other
Costs, labeled “F. Prepaids,” includes the items disclosed under this
subcategory on the Loan Estimate. The creditor must include the name of the
person ultimately receiving the payment, except for the disclosure of Prepaid
Interest, and the total of the itemized Prepaids.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lvii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The interest rate used to determine the amount
of Prepaid Interest is the Interest Rate disclosed on page one of the Closing
Disclosure.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lviii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Prepaid Interest is disclosed as a negative
number if the calculation results in a negative number.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lix]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If interest is not collected for a portion of a
month or other period between closing and the date from which interest will be
collected with the first monthly payment, then $0 must be disclosed under
Prepaid Interest.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lx]</span></span><!--[endif]--></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Property taxes are the items that meet the
definition of “mortgage-related payments”:<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxi]</span></span><!--[endif]--></span>
“[o]bligations that are related to the ownership or use of real property and
paid to a taxing authority, whether on a monthly, quarterly, annual, or other
basis,” including “obligations that are equivalent to property taxes, even if
such obligations are not denominated as ‘taxes.’”<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Initial Escrow Payment at Closing<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The third subcategory of Other
Costs, labeled “G. Initial Escrow Payment at Closing,” includes the items
disclosed under this subcategory on the Loan Estimate along with their actual
cost, the applicable aggregate adjustment under TILA,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxiii]</span></span><!--[endif]--></span>
and the total of the items.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxiv]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor must state the amounts it requires
the consumer to place into a reserve or escrow account at consummation to be
applied to recurring charges for property taxes, homeowner’s and similar
insurance, mortgage insurance, homeowner’s association dues, condominium dues,
and other periodic charges.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxv]</span></span><!--[endif]--></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Each charge must be identified with a relevant
label, monthly payment amount, and the number of months’ payments collected at
consummation.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxvi]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The method used to determine the aggregate
adjustment for purposes of establishing the reserve or escrow account is
described in TILA, the methodology for which is illustrated in Appendix E to RESPA
Regulation X.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxvii]</span></span><!--[endif]--></span>
Result of the calculation will always be a negative number or zero, except for
amounts due to rounding.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxviii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Escrow payments are paid to a creditor (or a
mortgage servicer if one has been identified at closing), while prepaid amounts
generally are paid to third parties.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The aggregate adjustment<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxix]</span></span><!--[endif]--></span>
must be listed as the last item disclosed under the “Initial Escrow Payment at
Closing” subheading.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxx]</span></span><!--[endif]--></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Amounts disclosed under this subheading are
those amounts<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxi]</span></span><!--[endif]--></span>
included in the definition of “escrow account” under RESPA.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxii]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Other<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The fourth subcategory of Other
Costs, labeled “H. Other,” like the same subcategory on the Loan Estimate,
lists other services required or obtained in the real estate closing by the
consumer, seller, or other party (and not required by the creditor or disclosed
elsewhere on the Closing Disclosure). The label for any cost that is a
component of title insurance must begin with “Title—.” The label for costs of
premiums for separate insurance, warranty, guarantee, or event-coverage
products must include the parenthetical “(optional)” at the end.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxiii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l3 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Charges falling in this subcategory include all
real estate brokerage fees, homeowner’s or condominium association charges paid
at closing, home warranties, inspection fees, and other fees that are part of
the real estate transaction but not required by the creditor or disclosed
elsewhere in Closing Cost Details.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l3 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor must calculate any owner’s title
insurance premium in a jurisdiction that permits simultaneous issuance title
insurance rates by using the full owner’s title insurance premium, adding any
simultaneous issuance premium for issuance of lender’s coverage, and then
deducting the full premium for lender’s coverage disclosed under Services
Borrower Did Not Shop For or Services Borrower Did Shop For.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxiv]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l3 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The cost of a premium for an owner’s title
insurance policy must always be labeled with “Title—” at the beginning, and
labeled “(optional)” at the end when designated borrower-paid at or before
closing.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxv]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l3 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The total amount of the real estate commission
charged by any real estate brokerage must be disclosed under this subcategory,
regardless of the identity of the party that may hold any earnest money
deposit. Additional charges made by real estate brokerages or agents are
separately itemized as additional items for services rendered, with a description
of the service and the identification of the person ultimately receiving the
payment.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxvi]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Total Other Costs and Other Costs
Subtotals</span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Following the label “I. Total
Other Costs (Borrower-Paid),” which states the total of “Borrower-Paid/At
Closing” and “Borrower-Paid/Before Closing” Other Costs, the creditor must
include the subtotal for each of the two columns of Borrower-Paid Other Costs
(“Borrower-Paid/At Closing” and “Borrower-Paid/Before Closing”). The creditor
does not include subtotals for any of the other columns (“Seller-Paid/At
Closing,” “Seller-Paid/Before Closing,” and “Paid by Others”), which are
subtotaled on the line for “Closing Costs Subtotals (D+I),” as explained below.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxvii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Total Closing Costs<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The creditor must disclose the
sum of the borrower-paid Loan Costs and Other Costs, labeled “J. TOTAL CLOSING
COSTS (Borrower-Paid),” which is the total amount of consumer-paid closing
costs (D+I). This disclosure is followed by two rows – the first row showing
the subtotals of Loan Costs (A+B+C) and Other Costs (E+F+G+H) for each column
and the second row showing any Lender Credits for each column (as negative
numbers).<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxviii]</span></span><!--[endif]--></span>
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">If a refund is provided to cure a
tolerance violation (i.e., because an amount exceeds the limitations on
increases in closing costs, the lender must include the amount in the
appropriate column of Lender Credits and an explanatory statement; for
instance, “Lender Credits (includes $200 credit for increase in Closing Costs
above legal limit)”.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="margin-left: .5in;">
<b><i><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Suggested
Guidance<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l7 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->I recommend that the lender review the
methodological requirements to designating specific closing costs paid by the
lender,<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxix]</span></span><!--[endif]--></span>
which is intended to permit the itemization of lender credits in accordance
with the legal obligation between the creditor and the consumer.</span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l7 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Generally, undesignated lender credits also must
be appropriately reflected on the CD.<span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxxx]</span></span><!--[endif]--></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">In the next article in this six-part series, I will discuss
Page Three of the Closing Disclosure. Page Three contains two sections: (1) <i>Calculating Cash to Close</i>, which requires
the creditor to disclose the “cash to close,” that is, the total amount of cash
or other funds the consumer must provide at consummation, and how the creditor
determines that amount; and (2) <i>Summaries
of Transactions</i>, which summarizes the consumer and seller portions of the
transaction.</span></div>
<div>
<!--[if !supportEndnotes]--><span style="font-family: Arial, Helvetica, sans-serif;"><br clear="all" />
</span><br />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="edn1">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[i]</span></span><!--[endif]--></span>
Foxx, Jonathan, <i>RESPA/TILA Integration – Part
I: Overview and Loan Estimate</i>, pp 28-54, National Mortgage Professional,
October 2014 </span></div>
</div>
<div id="edn2">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[ii]</span></span><!--[endif]--></span>
Foxx, Jonathan, <i>RESPA/TILA Integration –
Part II: Closing Disclosure and Action Plan</i>, pp 26-50, National Mortgage
Professional, December 2014</span></div>
</div>
<div id="edn3">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[iii]</span></span><!--[endif]--></span>
Foxx, Jonathan, <i>Loan Estimate: Deep Dive</i>,
pp xx-xx, National Mortgage Professional, June 2015</span></div>
</div>
<div id="edn4">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[iv]</span></span><!--[endif]--></span>
www.teamtrid.com </span></div>
</div>
<div id="edn5">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[v]</span></span><!--[endif]--></span>
www.tridhotline.com </span></div>
</div>
<div id="edn6">
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><span style="font-size: 10.0pt;"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[vi]</span></span><!--[endif]--></span></span><span style="font-size: 10.0pt;"> So creditors that take that option will provide
different information on CD page 3 than appears on the standard CD page 3 [see
model form H-25(E)] <o:p></o:p></span></span></div>
</div>
<div id="edn7">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[vii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)</span></div>
</div>
<div id="edn8">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[viii]</span></span><!--[endif]--></span>
The format of this disclosure is based on a model form, entitled H-25.</span></div>
</div>
<div id="edn9">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[ix]</span></span><!--[endif]--></span>
Regulation X, Appendix A</span></div>
</div>
<div id="edn10">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[x]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)</span></div>
</div>
<div id="edn11">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xi]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)(i). Comment 38(a)(3)(i)-1 refers to the commentary
for the corresponding item on the Loan Estimate, Regulation Z § 1026.37(a)(4).</span></div>
</div>
<div id="edn12">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)(ii)</span></div>
</div>
<div id="edn13">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xiii]</span></span><!--[endif]--></span>
Regulation Z § 1026.19(f)(1)(i)</span></div>
</div>
<div id="edn14">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xiv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)(iii)</span></div>
</div>
<div id="edn15">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)(iv)</span></div>
</div>
<div id="edn16">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xvi]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)(v)</span></div>
</div>
<div id="edn17">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xvii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(3)(vii) and Comment 38(a)(3)(vii)-1. Note also, when
personal property secures a transaction, a description of the personal property
may be disclosed to the extent it fits in the space provided for in the CD as
modeled on form H-25.</span></div>
</div>
<div id="edn18">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xviii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(4)</span></div>
</div>
<div id="edn19">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xix]</span></span><!--[endif]--></span>
Comment 38(a)(4)-1</span></div>
</div>
<div id="edn20">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xx]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(t)(3); also Comment 38(a)(4)-1)</span></div>
</div>
<div id="edn21">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxi]</span></span><!--[endif]--></span>
Comment 38(a)(4)-2</span></div>
</div>
<div id="edn22">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxii]</span></span><!--[endif]--></span>
Comment 38(a)(4)-3</span></div>
</div>
<div id="edn23">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxiii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(a)(5)</span></div>
</div>
<div id="edn24">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxiv]</span></span><!--[endif]--></span>
Comment 38(a)(5)(v)-1</span></div>
</div>
<div id="edn25">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(b). For guidance, see Comment 38(b)-1, referring to the
commentary on the corresponding Loan Estimate provision, Regulation Z
§ 1026.37(b).</span></div>
</div>
<div id="edn26">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxvi]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(c)</span></div>
</div>
<div id="edn27">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxvii]</span></span><!--[endif]--></span>
Comment 38(c)-1 refers to the commentary on the corresponding Loan Estimate
provision, Regulation Z § 1026.37(c)</span></div>
</div>
<div id="edn28">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxviii]</span></span><!--[endif]--></span>
Regulation X § 1024.17</span></div>
</div>
<div id="edn29">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxix]</span></span><!--[endif]--></span>
Regulation X § 1024.17, or in the manner set forth in Regulation Z
§ 1026.37(c)(5)</span></div>
</div>
<div id="edn30">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxx]</span></span><!--[endif]--></span>
Regulation X § 1024.17(c)(7)</span></div>
</div>
<div id="edn31">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxi]</span></span><!--[endif]--></span>
TILA § 128(b)(4)(B)</span></div>
</div>
<div id="edn32">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxii]</span></span><!--[endif]--></span>
TILA §128(b)(4)</span></div>
</div>
<div id="edn33">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxiii]</span></span><!--[endif]--></span>
Regulation Z § 1026.37(c)</span></div>
</div>
<div id="edn34">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxiv]</span></span><!--[endif]--></span>
TILA §128(b)(4)(B)</span></div>
</div>
<div id="edn35">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxv]</span></span><!--[endif]--></span>
Regulation X § 1024.17. See also Comment 38(c)(1)-1</span></div>
</div>
<div id="edn36">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxvi]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(d)</span></div>
</div>
<div id="edn37">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxvii]</span></span><!--[endif]--></span>
Comment 38(d)(2)-1</span></div>
</div>
<div id="edn38">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxviii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(d)(2)</span></div>
</div>
<div id="edn39">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxix]</span></span><!--[endif]--></span>
Regulation Z § 1026.37(d)(2)</span></div>
</div>
<div id="edn40">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xl]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(f) and (g)</span></div>
</div>
<div id="edn41">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xli]</span></span><!--[endif]--></span>
As with the rest of model form H-25, the text illustrated by the form is
required for federally related mortgage loans covered by the TILA-RESPA
Disclosure Integration Rule, but is a model form for transactions subject to
TILA only and not RESPA.</span></div>
</div>
<div id="edn42">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlii]</span></span><!--[endif]--></span>
Comment 38(h)-3</span></div>
</div>
<div id="edn43">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xliii]</span></span><!--[endif]--></span>
Comment 38(f)-1</span></div>
</div>
<div id="edn44">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xliv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(f)(1)</span></div>
</div>
<div id="edn45">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlv]</span></span><!--[endif]--></span>
Comment 38(f)(1)-2</span></div>
</div>
<div id="edn46">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlvi]</span></span><!--[endif]--></span>
Regulation Z § 1026.36(d)(2). See also Comment 38(f)(1)-2.</span></div>
</div>
<div id="edn47">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlvii]</span></span><!--[endif]--></span>
Regulation Z § 1026.32(b)(1)(ii)</span></div>
</div>
<div id="edn48">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlviii]</span></span><!--[endif]--></span>
Regulation Z § 1026.32(b)(1)(ii). See also Comment 38(f)(1)-3.</span></div>
</div>
<div id="edn49">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlix]</span></span><!--[endif]--></span>
Pursuant to Regulation Z § 1026.32(b)(1)(ii)</span></div>
</div>
<div id="edn50">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[l]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(f)(2) and Comment 38(f)(3)-1</span></div>
</div>
<div id="edn51">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[li]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(f)(3)</span></div>
</div>
<div id="edn52">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(f)(4)-(5) and Comment 38(f)(5)-1</span></div>
</div>
<div id="edn53">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[liii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)</span></div>
</div>
<div id="edn54">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[liv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)(1) and Comment 38(g)(1)-1, which refers to the
corresponding Loan Estimate provisions for guidance (Comments 37(g)(1)-1
through -4).</span></div>
</div>
<div id="edn55">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)(1)(ii)</span></div>
</div>
<div id="edn56">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lvi]</span></span><!--[endif]--></span>
Comment 38(g)(1)-2.</span></div>
</div>
<div id="edn57">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lvii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)(2) and Comment 38(g)(2)-1, which refers to Comments
37(g)(2)-1 and -2 for further guidance.</span></div>
</div>
<div id="edn58">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lviii]</span></span><!--[endif]--></span>
Comment 38(g)(2)-4</span></div>
</div>
<div id="edn59">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lix]</span></span><!--[endif]--></span>
Comment 38(g)(2)-2</span></div>
</div>
<div id="edn60">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lx]</span></span><!--[endif]--></span>
Comment 38(g)(2)-3</span></div>
</div>
<div id="edn61">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxi]</span></span><!--[endif]--></span>
Comment 43(b)(8)-2</span></div>
</div>
<div id="edn62">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxii]</span></span><!--[endif]--></span>
Comment 38(g)(2)-5</span></div>
</div>
<div id="edn63">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxiii]</span></span><!--[endif]--></span>
Regulation X § 1024.17(d)(2)</span></div>
</div>
<div id="edn64">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxiv]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)(3)</span></div>
</div>
<div id="edn65">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxv]</span></span><!--[endif]--></span>
Comments 38(g)(3)-1 and -4</span></div>
</div>
<div id="edn66">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxvi]</span></span><!--[endif]--></span>
Comment 38(g)(3)-1</span></div>
</div>
<div id="edn67">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxvii]</span></span><!--[endif]--></span>
Regulation X § 1024.17(d)(2)</span></div>
</div>
<div id="edn68">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxviii]</span></span><!--[endif]--></span>
Comment 38(g)(3)-2</span></div>
</div>
<div id="edn69">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxix]</span></span><!--[endif]--></span>
As required by Regulation Z § 1024.17(d)(2)</span></div>
</div>
<div id="edn70">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxx]</span></span><!--[endif]--></span>
Comment 37(g)(3)-2</span></div>
</div>
<div id="edn71">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxi]</span></span><!--[endif]--></span>
Comment 37(g)(3)-5</span></div>
</div>
<div id="edn72">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxii]</span></span><!--[endif]--></span>
Regulation X § 1024.17(b)</span></div>
</div>
<div id="edn73">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxiii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)(4)</span></div>
</div>
<div id="edn74">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxiv]</span></span><!--[endif]--></span>
Comment 38(g)(4)-2</span></div>
</div>
<div id="edn75">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxv]</span></span><!--[endif]--></span>
Idem</span></div>
</div>
<div id="edn76">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxvi]</span></span><!--[endif]--></span>
Comment 38(g)(4)-4</span></div>
</div>
<div id="edn77">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxvii]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(g)(5)-(6), Comment 38(g)(6)-1</span></div>
</div>
<div id="edn78">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxviii]</span></span><!--[endif]--></span>
Regulation Z § 1026.37(h)(1)-(3)</span></div>
</div>
<div id="edn79">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxix]</span></span><!--[endif]--></span>
Comments 38(f)-1 and 38(h)(3)-1</span></div>
</div>
<div id="edn80">
<div class="MsoEndnoteText">
<span style="font-family: Arial, Helvetica, sans-serif;"><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxxx]</span></span><!--[endif]--></span>
Regulation Z § 1026.38(h)(1), Comment 38(h)(3)-1</span></div>
<div class="MsoEndnoteText">
<br /></div>
<div class="MsoEndnoteText">
<br /></div>
<div class="MsoEndnoteText">
<br /></div>
<div class="MsoEndnoteText">
<br /></div>
</div>
</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-72396795363694993772015-06-17T09:54:00.000-04:002015-06-17T09:54:02.606-04:00Loan Estimate: Deep Dive<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="http://lenderscompliancegroup.com/20.html" target="_blank">Download White Paper</a></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Jonathan Foxx</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">President & Managing Director</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Lenders Compliance Group</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">This third article of a four-part
series beckons us to a deep dive into the Loan Estimate. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In the first article, I discussed
the mission of TILA-RESPA Integration and the <b>Loan Estimate (LE)</b>.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn1" name="_ednref1" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[i]</span></span><!--[endif]--></span></a>
The second article introduced and treated the numerous features of the <b>Closing Disclosure (CD)</b>.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn2" name="_ednref2" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[ii]</span></span><!--[endif]--></span></a>
Each of the foregoing articles were accompanied by detailed tables to be used
for certain itemized categories and action requirements.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The final and fourth article will
provide an extensive analysis of the Closing Disclosure.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">I would suggest that you read all
the articles in this series in order to better understand the TILA-RESPA
Integration Disclosure (TRID) rule promulgated by the Consumer Financial
Protection Bureau (CFPB). <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">One of the reasons I have written
this series is to cut through the information noise. My concern stems from the nearly
profiteering stance of the flourishing punditry to opine on TRID. This approach
to learning seems to have become the norm recently at conferences, conventions,
webinars, seminars, lectures, and pricey city-to-city forums. Indeed, also, people
with no real experience in directing regulatory compliance, though having some
training background, seem to hang out their TRID webinar shingle. I view the
latter as but shills for generating leads for their affiliated pundits. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Attendees sometimes leave these
convocations and <i>ad hoc</i> caboodles more
confused than beforehand. Occasionally, they call my firm and want to know who
has the correct view, Mr. Pundit A or Ms. Pundit B. I have noticed recently
that certain pundits that previously, freely offered advice on TRID are now
charging fees for their webinars or offering their guidance, for a fee, via
well-known webinar purveyors and online audio/visual enablers. I offer these
reflections not as exculpation, rather as expiation, since I have been on
panels, and given lectures and webinars, alongside many members of the conscientious
punditocracy. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">But I happen to think that TRID
is too important, being a generational change in disclosure, to hog the helpful
information about TRID by charging a fee just so somebody could attend and possibly
learn something about it. With that in mind, my firm recently did two proactive
things: (1) we established the TEAM TRID™ task force,<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn3" name="_ednref3" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[iii]</span></span><!--[endif]--></span></a>
a relatively inexpensive, cost-effective way to get TRID integration
implementation done efficiently; and importantly (2) we established
TRIDHotline.com,<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn4" name="_ednref4" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[iv]</span></span><!--[endif]--></span></a>
an <i>entirely free online service</i>,
manned by our task force, to assist people with their questions about TRID. We
want to listen to their compliance needs!<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In my view, these two foregoing
measures help to address the challenge we face as we head toward the compliance
effective date of August 1, 2015. I want to do what I can to ensure that we all
are ready! “Ready” means ready for everybody, since the stability of the residential
mortgage loan originations industry and the financial protection of the
consumer depend on understanding and implementing the many features of the TRID
rule.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Hopefully, you will have read the
previous two articles (i.e., Part I and Part II). Now we will embark on a
detailed review of the new disclosures, beginning in this third article with
the Loan Estimate. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Let’s get real close to the Loan
Estimate. In this article I will not discuss pre-application estimates and
worksheets in detail, except to mention that a creditor or other person may
choose to provide a consumer with a written preliminary estimate of terms or
costs specific to that consumer before providing the Loan Estimate. If it does
so, the creditor or other person must clearly and conspicuously state at the
top of the front of the first page of the estimate in a font size no smaller
than 12-point: “Your actual rate, payment, and costs could be higher. Get an official
Loan Estimate before choosing a loan.”<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn5" name="_ednref5" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[v]</span></span><!--[endif]--></span></a>
Furthermore, the estimate may not be made with headings, content, and format
substantially similar to the Loan Estimate or Closing Disclosure.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn6" name="_ednref6" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[vi]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">So let’s focus on the Loan
Estimate, since I plan to take you solely through the Loan Estimate in
considerable detail. I will discuss salient highlights of the Loan Estimate,
though I caution you to realize that this review is not exhaustive or
comprehensive, given that the TRID rule contains very complex disclosure requirements,
far more involved, byzantine, elaborate, incisive, and potentially enigmatic
than the compendiary features of it discussed herein.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Please follow my analysis carefully.
Allow at least two hours to consider this elucidation. Make notes, raise
questions, seek answers from competent compliance professionals!<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">HIGHLIGHTS<o:p></o:p></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Loan Estimate Form<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">For any federally related
mortgage loan,<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn7" name="_ednref7" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[vii]</span></span><!--[endif]--></span></a>
the Loan Estimate must be made using the model form set forth in Exhibit H - Form
H-24 in the CFPB’s Federal Register issuance.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn8" name="_ednref8" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[viii]</span></span><!--[endif]--></span></a>
TRID does not require the use of the model form for non-RESPA transactions;
that is, those subject to the integrated disclosures because they are subject
to TILA and secured by real property but are not subject to RESPA.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn9" name="_ednref9" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[ix]</span></span><!--[endif]--></span></a>
There are numerous text, structure, and field descriptions associated with the
LE disclosure. Thus, it would be wise not to deviate from the model provided.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">For those non-RESPA loans, the
disclosures must be made with headings, content and format substantially
similar to form H-24. Use of model form H-24, properly completed with accurate
content, would constitute compliance for those loans.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn10" name="_ednref10" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[x]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">According to the CFPB, the Loan
Estimate integrates at least seven pages of disclosures, including:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Three pages of the RESPA Good Faith Estimate;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Two pages typically used for early TILA
disclosures;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->One page typically used for the appraisal notice
under the Equal Credit Opportunity Act;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l8 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->One page typically used for the servicing
disclosure.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The Loan Estimate also incorporates
disclosures of:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The total interest percentage (TIP);<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn11" name="_ednref11" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xi]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The aggregate amount of loan charges and closing
costs the consumer must pay at consummation;<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn12" name="_ednref12" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xii]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->For refinances, the anti-deficiency protection
notice;<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn13" name="_ednref13" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xiii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The homeowner’s insurance disclosure.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn14" name="_ednref14" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xiv]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">TRID imposes strict
specifications for the Loan Estimate. For instance, unless otherwise
specifically provided, a disclosure that does not apply to a transaction should
be left blank, not marked “not applicable” or “N/A,” and, as a general rule,
may not be deleted.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn15" name="_ednref15" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xv]</span></span></span></a></span><br />
<a name='more'></a><!--[endif]--><span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There are special rules for
certain disclosures. For example, the Adjustable Payment and Adjustable
Interest Rate tables may be included only when applicable to the transaction
and otherwise must be excluded.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn16" name="_ednref16" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xvi]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The importance of complying with
the specialized requirements cannot be overstated: <i>failure to comply with the precise and detailed rules may lead to
significant liability and litigation risk, under both TILA and RESPA</i>, as
well as other statutes, such as the Equal Credit Opportunity Act, State and
federal unfair, deceptive or abusive acts or practices (UDAAP) statutes, and
State mini-TILA and mini-RESPA statutes. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Given the rigid features of the
LE, I suggest that a creditor should use Form H-24 for all loans covered by the
TRID rule, even if the loan is not a RESPA loan. TRID permits providing a cover
letter so long as the Loan Estimate is provided separately from the cover
letter.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn17" name="_ednref17" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xvii]</span></span><!--[endif]--></span></a>
Creditors may not add pages in between the pages of the Loan Estimate, or at
the end of the Loan Estimate, except as permitted by Regulation Z.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn18" name="_ednref18" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xviii]</span></span><!--[endif]--></span></a>
Creditors may not add information not required by TILA Regulation Z. If the
creditor devises its own form for loans not subject to RESPA, it must be very careful
to compare that form to Form H-24 and ensure that each difference is carefully
examined and justified. TRID does not permit any deviations from form H-24 for
forms optimized to be shown on a computer screen or tablet.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Timing and Receipt<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The creditor or mortgage broker
must provide (either give or mail) the Loan Estimate to the consumer no later
than 3 business days after receiving the consumer’s application for a mortgage
loan. The standard definition of “business day” applies (i.e., a day on which
the creditor’s offices are open to the public for carrying on substantially all
of its business functions).<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn19" name="_ednref19" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xix]</span></span><!--[endif]--></span></a>
A mortgage broker that gives a Loan Estimate must comply with all the Loan
Estimate requirements as if it were the creditor.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn20" name="_ednref20" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xx]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">If the LE is not delivered in
person, “receipt” occurs three business days after the Loan Estimate has been
delivered or placed in the mail. Alternatively, the creditor may rely on
evidence (i.e., a signed receipt for overnight delivery) that the consumer
received the disclosures earlier than the end of the three business days.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn21" name="_ednref21" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxi]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">One question that comes up often
is how to manage the timing with respect to electronic delivery. The
3-business-day period applies to methods of electronic delivery, such as email.
Thus, if a creditor sends a Loan Estimate by email on a Monday, the consumer is
considered to have received the disclosures on a Thursday, unless the creditor
relies on evidence that the consumer received the emailed disclosures earlier
(such as an acknowledgment of email receipt). Creditors relying on electronic
delivery methods must comply with the consumer consent and other applicable
provisions of the E-Sign Act.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn22" name="_ednref22" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Irrespective of E-Sign consent
provisions, we advise our clients to consider:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Whether procedures are needed to deal with
electronic disclosures returned undelivered;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Whether electronic disclosures are provided in a
form that can be retained;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The duration of electronic notices or
disclosures available to consumers through the financial institution’s systems;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Establishing a process to appropriately respond
to consumer requests for paper copies of electronic notices and disclosures;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Dealing with changes in hardware or software
that may create a risk that consumers will no longer be able to access or
retain electronic disclosures; and<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo10; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Ensuring their electronic disclosures comply
with the timing, format, content, and recordkeeping requirements of the
underlying substantive rule (i.e., Regulation Z).<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The creditor or broker must
provide the Loan Estimate to the consumer no later than the seventh business
day before consummation of the transaction (except for time-share
transactions).<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn23" name="_ednref23" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxiii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There is a more specific
“business day” definition (viz., includes non-holiday Saturdays) that applies
to the requirement that the Loan Estimate be provided at least 7 business days
before consummation. The term “consummation” means the time when the consumer
becomes contractually obligated on the credit transaction. This 7-day period
begins when the creditor delivers the Loan Estimate or places it in the mail,
not when the consumer receives or is considered to have received the
disclosures.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn24" name="_ednref24" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxiv]</span></span><!--[endif]--></span></a>
In this definition, excepting only timeshare transactions, “business day” is all
calendar days except Sundays and legal national public holidays (i.e., New
Year’s Day, Birthday of Martin Luther King, Jr., Washington’s Birthday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day, and Christmas Day). <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A question I often get is: how do
these two different definitions of “business day” affect the proper disclosure
timing? The 3-business-day period is timed from receipt of an application,
whereas the 7-business-day waiting period begins when the creditor delivers the
Loan Estimate or places it in the mail, not when the consumer receives or is
considered to have received it.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The consumer may modify or waive
the 7-day waiting period if he or she determines that the loan is needed to
meet a<i> bona fide personal financial
emergency</i>. Any modification or waiver may not occur until after a Loan Estimate
has been received. To modify or waive the 7-day waiting period, the consumer
must give the creditor a dated written statement describing the emergency,
specifically modifying or waiving the 7-day period, and bearing the signature
of all consumers who are primarily liable.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Delivery: How and By Whom<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Regulation Z allows either the
creditor or a mortgage broker to provide the Loan Estimate.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn25" name="_ednref25" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxv]</span></span><!--[endif]--></span></a>
This rule closely reflects the requirements under RESPA’s Regulation X,<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn26" name="_ednref26" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxvi]</span></span><!--[endif]--></span></a>
including:<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If a mortgage broker receives an application,
either the creditor or the broker must provide a Loan Estimate within 3
business days of receipt.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If the mortgage broker provides the Loan
Estimate, the mortgage broker must comply with all applicable requirements as
if it were the creditor.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor must ensure that the Loan Estimate
is provided in accordance with all the applicable requirements.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Disclosures provided by a mortgage broker in
accordance with the requirements satisfy the creditor’s obligation.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->If a mortgage broker issues a Loan Estimate, the
broker also must comply with the 3-year record retention requirements.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn27" name="_ednref27" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxvii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The creditor is not permitted to issue a
separate Loan Estimate or revised disclosures to correct a mortgage broker’s
error.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn28" name="_ednref28" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxviii]</span></span><!--[endif]--></span></a>
The creditor is expected to maintain communications with the broker to ensure
that the broker is acting in place of the creditor (even if the creditor does
not know about the broker’s involvement until after the Loan Estimate has been
given).<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn29" name="_ednref29" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxix]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Either the creditor or the mortgage broker may
provide revised Loan Estimates based on any of the six legitimate reasons for
revisions.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Mortgage brokers are not required to get
authorization from creditors before providing Loan Estimates.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Creditors are bound by the terms of the Loan
Estimate, subject to one of the six legitimate reasons for revisions, whether
or not the creditor has authorized the mortgage broker to provide the Loan
Estimate.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l9 level1 lfo11; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->The regulation does not explicitly require a
mortgage broker to provide application information to the creditor nor
establish other conditions brokers must satisfy before they issue a Loan
Estimate. The regulation considers the creditor to be in the best position to
set requirements contractually.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">To emphasize: <i>even if a mortgage broker provides the Loan
Estimate, the creditor remains responsible for complying with all requirements concerning
provision of the form; and a broker that provides a Loan Estimate also is
required to comply with all requirements regarding the Loan Estimate as if it
were the creditor</i>.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn30" name="_ednref30" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxx]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Application Definition<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">TRID formally does away with the
catch-all, seventh information item. Six information items are needed to
constitute an application. A creditor may provide a Loan Estimate without
receiving all of the six items of information that comprise an “application”
within the meaning of Regulation Z. But if it does this, the receipt of any of
the missing items does not constitute a “changed circumstance” to justify a
revised Loan Estimate. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Prior to providing the Loan
Estimate, a creditor may collect, but may not require, documentation verifying
information provided by the consumer in the application. For example, a
creditor may not require a purchase and sale agreement before providing a Loan
Estimate for purchase transactions but it may accept a copy if the applicant
voluntarily offers it.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A creditor need not provide a
Loan Estimate if it declines the loan or the consumer withdraws the application
within the 3-business-day period. However, if the creditor fails to provide the
Loan Estimate and then later consummates the transaction on the terms
originally applied for, then the creditor has not complied with the TRID Rule.
Therefore, if, following a decline or withdrawal within the 3-day period, the
consumer later amends the application because of the creditor’s unwillingness
to approve it on the terms originally requested, the creditor did not violate
the regulation by failing to provide a Loan Estimate based on the original
terms, but the amended application must be a new application that requires a
Loan Estimate.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In other words, procedurally, if
the creditor determines within the 3-business-day period that the application
will not be approved on the terms requested by the consumer, or if the consumer
withdraws the application within that period, the creditor does not have to
provide a Loan Estimate. If the creditor does not provide the Loan Estimate, it
will not have complied with the Loan Estimate requirements if it later
consummates the transaction on the terms originally applied for by the
consumer. If the consumer then amends the application and the creditor
determines the amended application may proceed, the amended application is a
new application that requires a Loan Estimate within the 3-business-day period.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Collection of Fees and Consumer
Documents<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">With the exception of a creditor
or other person imposing a <i>bona fide</i>
and reasonable fee for obtaining the consumer’s credit report, TRID prohibits a
creditor or other person from imposing a fee on a consumer before the consumer
has:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l7 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Received the Loan Estimate,<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn31" name="_ednref31" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxi]</span></span><!--[endif]--></span></a>
and<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l7 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Indicated an intent to proceed with the
transaction.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn32" name="_ednref32" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The consumer may indicate intent
to proceed in any manner the consumer chooses, unless the creditor requires a
particular manner of communication, provided that the creditor does not assume
silence indicates intent. The creditor must document the communication of
intent to satisfy TILA’s record retention requirements.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn33" name="_ednref33" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxiii]</span></span><!--[endif]--></span></a>
A consumer’s signature or initials on a Loan Estimate do not constitute an
intent to proceed. A creditor may not allow the Loan Estimate to be signed by
the consumer to document intent to proceed – the optional signature on the Loan
Estimate is only to document receipt of the Loan Estimate.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Oral communication in person
immediately upon delivery of the Loan Estimate sufficiently indicates intent;
also valid would be an oral communication over the phone, written communication
by email, or signing a pre-printed form, if the action occurs after receipt of
the Loan Estimate.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn34" name="_ednref34" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxiv]</span></span><!--[endif]--></span></a>
But silence is not acceptable. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">One highly charged question
usually is posed whenever I outline the requirements concerning the collection
of fees prior to the consumer receiving the Loan Estimate. The fact is no
manner of constructive receipt of fees is permitted prior to the Loan Estimates
receipt by the consumer, other than the <i>bona
fide</i> and reasonable fee for obtaining the consumer’s credit report. A
creditor or third party imposes a fee if the person requires a consumer to
provide a method of payment, <i>even if
payment is not made at that time</i>. For example, if a creditor or other
person requires the consumer to provide a $500 check to pay for a “processing
fee” before the consumer receives a Loan Estimate, the creditor does not comply
with the TRID rule, even if the creditor or other person stated that the check
would not be cashed until after a Loan Estimate was received by the consumer
and waited to cash the check until after the consumer indicated an intent to
proceed. Similarly, a creditor may not require the consumer to provide a credit
card number before the consumer receives the Loan Estimate and indicates an
intent to proceed, even if the creditor promises not to charge the card until
after that time – although the creditor may accept a credit card number for
purposes of imposing a reasonable and <i>bona
fide</i> credit report fee, and may maintain the number on file so long as no
other fee is imposed until the Loan Estimate is received, the consumer has
indicated an intent to proceed, and the creditor has received a separate
authorization to process the additional fee charge.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn35" name="_ednref35" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxv]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">With respect to consumer
documentation, a creditor or other person may not require a consumer to submit
documents verifying information related to the consumer’s application before
providing a Loan Estimate.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn36" name="_ednref36" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxvi]</span></span><!--[endif]--></span></a>
The creditor or other person may collect from the consumer any information it
requires prior to providing a Loan Estimate or at the same time as it collects
the six items of information that constitute an “application,” but the creditor
or other person may not require the consumer to submit documentation to verify
that information until a Loan Estimate has been provided. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Consider these two examples. The
creditor may ask for the sale price and property address, but may not require
the consumer to provide a purchase and sale agreement to support the
information the consumer orally provides until after a Loan Estimate has been
given. A mortgage broker may ask for the names, account numbers, and balances
of the consumer’s checking and savings accounts, but may not require the
consumer to provide bank statements or similar documentation until the Loan
Estimate has been provided.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn37" name="_ednref37" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxvii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Both this fee imposition
prohibition and the prohibition against requiring verification documentation
take effect August 1, 2015 and are not tied to the receipt of a loan
application.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Good Faith and Tolerance Rules<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">TRID continues and expands the
general RESPA rule that the charges actually paid by or imposed on the consumer
for certain settlement services and transfer taxes when the loan is closed may
not exceed the amounts included on the early disclosures, with several
exceptions.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn38" name="_ednref38" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxviii]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Like RESPA, TILA (as amended by
the TRID rule), establishes tolerance categories limiting the permissible
variations between the estimated amounts and the actual amounts: the 10%
category, the unlimited variation category, and the zero percent category.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">An amount disclosed on the Loan
Estimate is considered in good faith and in compliance with TRID if the actual
charge does not exceed the estimated amount by the amount permitted by the
applicable tolerance rule.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn39" name="_ednref39" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xxxix]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: Arial, Helvetica, sans-serif;">10% Category<o:p></o:p></span></u></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">An estimate of a charge for a
third-party service or a recording fee is in good faith if: <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(1)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->the aggregate amount of actual charges for
third-party services and recording fees does not exceed the aggregate amount of
those charges disclosed on the Loan Estimate by more than 10 percent; <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(2)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->the charge for the third-party service is not
paid to the creditor or an affiliate of the creditor;<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn40" name="_ednref40" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xl]</span></span><!--[endif]--></span></a>
and <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(3)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->the creditor permits the consumer to shop for
the third-party service. Only these items fit into the 10% category: <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l3 level2 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">a.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->fees
paid to an unaffiliated third party if the creditor <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.5in; mso-add-space: auto; mso-list: l3 level3 lfo4; mso-text-indent-alt: -9.0pt; text-align: justify; text-indent: -1.5in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: 7pt; font-stretch: normal;">
</span>i.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->permitted
the consumer to select a settlement service provider not on the written list of
service providers and <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.5in; mso-add-space: auto; mso-list: l3 level3 lfo4; mso-text-indent-alt: -9.0pt; text-align: justify; text-indent: -1.5in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: 7pt; font-stretch: normal;">
</span>ii.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->disclosed
on that list that the consumer may select the provider; and <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l3 level2 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">b.<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->recording
fees.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn41" name="_ednref41" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xli]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Assume that the Loan Estimate
includes a $300 estimated fee for a settlement agent, the settlement fee is
included in the 10% category, and the sum of all 10% category charges,
including the settlement agent fee, equals $1,000. If the actual settlement
agent fee exceeds 10% (i.e., exceeds $330), then the creditor does not violate
the tolerance rule if the sum of all 10% category charges does not exceed 10%
(i.e., $1,100). The focus of the 10% tolerance rule on aggregate amounts also
provides flexibility in disclosing individual fees. For example, if the
creditor does not include an estimated charge for a notary fee, but a $10
notary fee is charged to the consumer and the notary fee qualifies as a 10%
category fee, then the creditor does not violate the tolerance rule if the sum
of all 10% category amounts does not exceed $1,100, even though the creditor
did not disclose the notary fee on the Loan Estimate.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn42" name="_ednref42" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: Arial, Helvetica, sans-serif;">Unlimited Variation Category<o:p></o:p></span></u></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">An estimate of the following
charges is in good faith if it is consistent with the best information
reasonably available to the creditor at the time it is disclosed, regardless of
the amount of variation between it and the amount actually charged: <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l10 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(1)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->prepaid interest; <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l10 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(2)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->property insurance premiums; <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l10 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(3)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->amounts placed into an escrow, impound, reserve,
or similar account; <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l10 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(4)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->charges paid to third-party service providers
for which the consumer is permitted to shop and which the creditor did not
identify on the written list of service providers; and<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l10 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(5)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->charges paid to third-party service providers
not required by the creditor, including affiliates of the creditor. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Under TRID, a fee is not
considered “paid to” a person if the person does not retain the fee. A fee is
also not considered “paid to” a person if the person retains the fee as
reimbursement for an amount it has already paid to another party.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn43" name="_ednref43" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xliii]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Differences between the amount of
these charges disclosed in the Loan Estimate and actual charges do not
constitute a lack of good faith so long as the original estimated charge, or
lack of an estimated charge for a particular service, was based on the best
information reasonably available to the creditor when the Loan Estimate was
provided. A charge is considered to be in good faith if the creditor charges
the consumer less than the amount disclosed on the Loan Estimate.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: Arial, Helvetica, sans-serif;">Zero Percent Category<o:p></o:p></span></u></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">All other charges are in good
faith only if the actual charge does not exceed the estimated amount. These
include, but are not limited to, fees paid to the creditor, fees paid to the
mortgage broker, fees paid to an affiliate of the creditor or mortgage broker,
fees paid to an unaffiliated party if the creditor did not permit the consumer
to shop for a third-party settlement service provider, and transfer taxes.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn44" name="_ednref44" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xliv]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Changes and Revised Loan
Estimates: Six Situations<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A creditor may provide a revised
Loan Estimate at any time. The provision addressing revised Loan Estimates<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn45" name="_ednref45" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlv]</span></span><!--[endif]--></span></a>
does not prohibit a creditor from providing updated disclosures. Rather, it
provides an exception to the general rule that an actual charge must be
compared to the amount in the original Loan Estimate. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">There are six specific situations
where providing a revised Loan Estimate allows the creditor to compare the
actual amounts charged to the updated figures that have increased since the
original Loan Estimate and that justify the revised Loan Estimate. If the
creditor issued a revised Loan Estimate for a reason other than the six
situations, then the creditor must compare the actual amounts charged to the
earlier disclosures, not those on the revised Loan Estimate. I provide a brief
outline of these six situations.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn46" name="_ednref46" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlvi]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">If the creditor wants to use a
revised Loan Estimate, the creditor must provide the revised Loan Estimate
within three business days after receiving information sufficient to establish
that one of the six situations applies.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn47" name="_ednref47" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlvii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The six situations are these:<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">1)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Changed Circumstance Affecting Settlement
Charges<o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A changed
circumstance causes the estimated charges to increase or, in the case of a 10%
category charge causes the aggregate amount of those charges to increase by
more than 10 percent.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A “changed
circumstance” means:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l2 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->An extraordinary event beyond the control of any
interested party (i.e., a war or natural disaster that damages the property or
otherwise results in additional closing costs) or other unexpected event
specific to the consumer or the transaction (i.e., the title insurer goes out
of business during underwriting).<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Information specific to the consumer or
transaction that the creditor relied upon when providing the Loan Estimate and
that was inaccurate or changed after the disclosures were provided (i.e., a
consumer misrepresented income and the creditor relied on the misrepresentation
when providing the Loan Estimate, or a co-applicant becomes unemployed during
underwriting and the creditor relied on the combined income when providing the
Loan Estimate).<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l2 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->New information specific to the consumer or
transaction that the creditor did not rely on when providing the Loan Estimate
(i.e., the creditor relied on the value of the property in providing the Loan
Estimate, but during underwriting a neighbor of the seller, learning of the
impending sale, files a claim contesting the boundary of the property).<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn48" name="_ednref48" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlviii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">2)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Changed Circumstance Affecting Eligibility<o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The consumer is
ineligible for an estimated charge previously disclosed because a changed
circumstance affected the consumer’s creditworthiness or the value of the
security for the loan.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn49" name="_ednref49" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[xlix]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">3)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Revisions Requested by the Consumer<o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The consumer
requests revisions to the credit terms or the settlement that cause an
estimated charge to increase.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn50" name="_ednref50" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[l]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">4)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Interest Rate-Dependent Charges<o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The points or
lender credits change because the interest rate was not locked when the Loan
Estimate was provided. On the date the interest rate is locked the creditor
must provide a revised version of the Loan Estimate to the consumer with the
revised interest rate, points as are required to be disclosed in Section A
under Origination Charges on the Closing Disclosure, lender credits, and other
interest-rate dependent charges and terms.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn51" name="_ednref51" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[li]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">An inquiry we
have received relating to this category involves the complexity of rate lock
timing. So let’s assume that a creditor executes a rate lock agreement with the
consumer and then provides a Loan Estimate. The actual points and lender
credits are compared to the estimated points and lender credits disclosed in
the Loan Estimate to determine if those charges have increased. If the consumer
enters into a rate lock agreement after a Loan Estimate has been provided, then
the creditor must provide, on the date of the rate lock agreement, a revised
Loan Estimate reflecting the revised interest rate, points, lender credits and
any other interest rate-dependent charges and terms. Assuming that the revised
Loan Estimate is appropriate, the actual points and lender credits are compared
to those disclosed on the revised Loan Estimate to determine if the fees have
increased.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn52" name="_ednref52" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">5)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Expiration <o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The consumer
indicates an intent to proceed with the transaction more than 10 business days
after the Loan Estimate is timely provided. TRID requires no justification for
the revised Loan Estimate other than the lapse of 10 business days (using the
definition of business day that applies for Loan Estimate timing rules – days on
which the creditor’s offices are open to the public for carrying on
substantially all of its business functions).<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn53" name="_ednref53" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[liii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoListParagraph" style="mso-list: l0 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">6)<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]--><u>Delayed Settlement Date on a Construction
Loan<o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In transactions
involving new construction, when the creditor reasonably expects settlement to
occur more than 60 days after the Loan Estimate is timely provided, the
creditor must provide a revised Loan Estimate if the original Loan Estimate
clearly and conspicuously states that at any time prior to 60 days before
consummation the creditor may issue a revised Loan Estimate. If no such
statement is provided, the creditor may not issue revised disclosures unless
one of the other five situations outlined above applies. If a use and occupancy
permit has been issued for the home before the issuance of the Loan Estimate,
then the home is not considered to be under construction and the transaction would
not fit within this provision.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn54" name="_ednref54" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[liv]</span></span><!--[endif]--></span></a>
By new construction loan, I mean a loan for the purchase of a home not yet
constructed or the purchase of a new home where construction is currently
underway; I do not mean a loan for financing home improvements or remodeling,
or adding to an existing structure, or for which a use and occupancy permit has
been issued before provision of a Loan Estimate.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The timing of a revised Loan
Estimate relating to providing it prior to consummation has been the source of
much consternation. There are several scenarios, but the following are the
primary concerns: <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: .75in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(1)<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->The
creditor may not provide a revised Loan Estimate on or after the date on which
a Closing Disclosure is provided.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: .75in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(2)<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->The
consumer must receive the revised Loan Estimate not later than four business
days before consummation. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: .75in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(3)<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->If
the revised Loan Estimate is not provided to the consumer in person, the
consumer is considered to have received it three business days after the
creditor delivers or places it in the mail. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: .75in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">(4)<span style="font-size: 7pt; font-stretch: normal;"> </span><!--[endif]-->If
fewer than four business days remain between the time the revised Loan Estimate
must be provided and consummation, the creditor complies with the Loan Estimate
timing requirement by reflecting the revised disclosures in the Closing
Disclosure.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A change of circumstance may
happen within four days of consummation. What then?<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The remedy takes into
consideration that the creditor will not be able to provide and rely on a
revised Loan Estimate. Instead, the creditor may provide a Closing Disclosure
reflecting any revised charges resulting from one or more of the six specific
situations and rely on those figures, rather than the amounts disclosed on the
Loan Estimate, for purposes of determining good faith and the applicable
tolerance.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn55" name="_ednref55" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lv]</span></span><!--[endif]--></span></a>
<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Procedurally, if the changed
circumstance or other triggering event occurs between the fourth and third
business days from consummation, the creditor may reflect the revised charges
on the Closing Disclosure provided to the consumer three business days before
consummation; and if the event occurs after the first Closing Disclosure has
been provided to the consumer (i.e., within the 3-business-day waiting period
before consummation), the creditor may compare charges on the revised Closing
Disclosure with the amounts actually charged for purposes of determining good
faith and tolerances.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Rounding Rules for Loan Estimates<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">On many occasions, the TRID rule
requires rounding, but its general rule is to require numbers and percentages
to be disclosed as exact numbers. This does not mean that a number like 3.14159265
should not be rounded. A creditor may safely assume that a dollar amount would
be rounded to the nearest cent. Obviously, a borrower cannot pay $3.14159265;
the actual payment will be $3.14. A percentage amount would be rounded to 3. 141%
or 3.14%. TRID generally offers an option for percentages to either two or
three decimal places.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn56" name="_ednref56" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lvi]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">The rounding rule is influenced
by the CFPB’s view that, due to its consumer testing results, “a large number
of exact dollar amounts and percentages had the potential to cause information
overload and reduce the overall effectiveness of the disclosure.” The CFPB
believes “that rounded disclosures allow consumers to digest the information on
the Loan Estimate faster and more easily than disclosure of non-rounded
numbers. Moreover, given that many of the numbers on the Loan Estimate are
simply estimates and will likely change on the Closing Disclosure, disclosing
exact values is unnecessary and may contribute to information overload without
any real benefit to consumers.”<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn57" name="_ednref57" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lvii]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-variant: small-caps;"><span style="font-family: Arial, Helvetica, sans-serif;">Written List of Settlement
Service Providers<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Like RESPA, TILA requires a
creditor to provide a written list of settlement service providers if the
creditor allows the consumer to shop for providers.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn58" name="_ednref58" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lviii]</span></span><!--[endif]--></span></a>
<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn59" name="_ednref59" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lix]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A creditor permits a consumer to
shop for a settlement service if it permits the consumer to select the provider
of the service, subject to reasonable requirements. For instance, a creditor
may require that a settlement agent chosen by the consumer must be
appropriately licensed in the relevant jurisdiction.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn60" name="_ednref60" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lx]</span></span><!--[endif]--></span></a>
In contrast, a creditor does not permit a consumer to shop if the creditor
requires the consumer to choose a provider from a list provided by the
creditor. Thus, the written list requirement does not apply if the creditor does
not permit the consumer to shop for any of the settlement services.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In any event, the written list
must:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l6 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Identify at least one available provider of each
settlement service for which the consumer is permitted to shop. An entity that
the creditor lists for a particular service must be available to provide the
service. The settlement service providers identified on the written list must
correspond to the settlement services for which the consumer may shop, as
disclosed in the Loan Costs table on page 2 of the Loan Estimate.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l6 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->State that the consumer may choose a different
provider for that service. Model form H-27 in Appendix H of Regulation Z offers
a model statement.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l6 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, Helvetica, sans-serif;">·<span style="font-size: 7pt; font-stretch: normal;">
</span><!--[endif]-->Be provided separately from the Loan Estimate
but according to the same timing requirements.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">How should affiliates be treated,
with respect to the written list of settlement service providers? A creditor
may include affiliates on the list.<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn61" name="_ednref61" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxi]</span></span><!--[endif]--></span></a>
But the listing of an affiliated provider, under a heading that clearly states
that a consumer can shop for different providers (even if the affiliate is the
only provider listed), does not make that provider a “required provider” under
RESPA, although the listing constitutes a “referral” under RESPA<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn62" name="_ednref62" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxii]</span></span><!--[endif]--></span></a>
and the creditor must give an affiliated business arrangement (AfBA) disclosure
as required by RESPA’s Regulation X.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A creditor is allowed to state on
the written list the service providers for which the consumer is not permitted
to shop,<a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_edn63" name="_ednref63" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[lxiii]</span></span><!--[endif]--></span></a>
provided that the creditor clearly and conspicuously distinguishes those
services from the services from which the consumer is permitted to shop. <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">In providing this broad overview
of the Loan Estimate, it is my hope that this analysis encourages management to
meet to discuss the ways and means available to effectuate its proper and
timely implementation.<o:p></o:p></span></div>
<div>
<!--[if !supportEndnotes]--><span style="font-family: Arial, Helvetica, sans-serif;"><br clear="all" />
</span><br />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="edn1">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref1" name="_edn1" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[i]</span></span><!--[endif]--></span></a>
Foxx, Jonathan, <i>RESPA/TILA Integration –
Part I: Overview and Loan Estimate</i>, pp 28-54, National Mortgage
Professional, October 2014 <o:p></o:p></span></div>
</div>
<div id="edn2">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref2" name="_edn2" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[ii]</span></span><!--[endif]--></span></a>
Foxx, Jonathan, <i>RESPA/TILA Integration –
Part II: Closing Disclosure and Action Plan</i>, pp 26-50, National Mortgage
Professional, December 2014<o:p></o:p></span></div>
</div>
<div id="edn3">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref3" name="_edn3" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[iii]</span></span><!--[endif]--></span></a>
<a href="http://www.teamtrid.com/">www.teamtrid.com</a> <o:p></o:p></span></div>
</div>
<div id="edn4">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref4" name="_edn4" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[iv]</span></span><!--[endif]--></span></a>
<a href="http://www.tridhotline.com/">www.tridhotline.com</a> <o:p></o:p></span></div>
</div>
<div id="edn5">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref5" name="_edn5" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[v]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(2)(B)(ii)<o:p></o:p></span></div>
</div>
<div id="edn6">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref6" name="_edn6" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[vi]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(2)(ii)<o:p></o:p></span></div>
</div>
<div id="edn7">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref7" name="_edn7" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[vii]</span></span><!--[endif]--></span></a>
As defined by RESPA, Regulation X § 1024.2(b)<o:p></o:p></span></div>
</div>
<div id="edn8">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref8" name="_edn8" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[viii]</span></span><!--[endif]--></span></a>
78 FR 79729, 79993, December 31, 2013<o:p></o:p></span></div>
</div>
<div id="edn9">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref9" name="_edn9" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[ix]</span></span><!--[endif]--></span></a>
Construction-only loans with terms of less than 2 years that do not finance the
transfer of title to the borrower, loans secured by vacant land on which a home
will not be constructed or placed using the loan proceeds within 2 years after
settlement of the loan, and loans with a consumer purpose secured by
non-residential real property. TILA § 105(b) explicitly provides that nothing
in TILA may be construed to require a creditor to use any model form or clause
prescribed by the CFPB under that section (viz., § 105(a) being the authority
relied upon by the CFPB for these non-RESPA loans).<o:p></o:p></span></div>
</div>
<div id="edn10">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref10" name="_edn10" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[x]</span></span><!--[endif]--></span></a>
Regulation Z, Official Staff Commentary, Comment 37(o)(3)-1<o:p></o:p></span></div>
</div>
<div id="edn11">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref11" name="_edn11" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xi]</span></span><!--[endif]--></span></a>
TILA § 128(a)(19), added by Dodd-Frank Act § 1419<o:p></o:p></span></div>
</div>
<div id="edn12">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref12" name="_edn12" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xii]</span></span><!--[endif]--></span></a>
TILA § 128(a)(17), added by Dodd-Frank Act § 1419<o:p></o:p></span></div>
</div>
<div id="edn13">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref13" name="_edn13" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xiii]</span></span><!--[endif]--></span></a>
TILA § 129C(g)(3), added by Dodd-Frank Act § 1414(c)<o:p></o:p></span></div>
</div>
<div id="edn14">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref14" name="_edn14" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xiv]</span></span><!--[endif]--></span></a>
TILA § 106(c) and Regulation Z § 1026.4(d)(2)(i), required to exclude
homeowner’s insurance premiums from the finance charge.<o:p></o:p></span></div>
</div>
<div id="edn15">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref15" name="_edn15" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xv]</span></span><!--[endif]--></span></a>
Regulation Z, Official Staff Commentary, Comment 37-1<o:p></o:p></span></div>
</div>
<div id="edn16">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref16" name="_edn16" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xvi]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.37 includes special rules for certain disclosures. See also
§ 1026.37(i), (j)<o:p></o:p></span></div>
</div>
<div id="edn17">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref17" name="_edn17" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xvii]</span></span><!--[endif]--></span></a>
Applies also the Closing Disclosure with respect to allowing a separate cover
letter.<o:p></o:p></span></div>
</div>
<div id="edn18">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref18" name="_edn18" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xviii]</span></span><!--[endif]--></span></a>
Regulation Z Official Staff Commentary, Comment 37(o)(1)-1; see also § 1026.37<o:p></o:p></span></div>
</div>
<div id="edn19">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref19" name="_edn19" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xix]</span></span><!--[endif]--></span></a>
Regulation Z §§ 1026.19(e)(1)(iii)(A) and 1026.2(a)(6)<o:p></o:p></span></div>
</div>
<div id="edn20">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref20" name="_edn20" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xx]</span></span><!--[endif]--></span></a>
Regulation Z Comment 19(e)(1)(ii)-1. In a future article, I will provide an
analysis of the creditor and mortgage broker relationship relating to TRID
requirements, responsibilities, and regulatory implementation.<o:p></o:p></span></div>
</div>
<div id="edn21">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref21" name="_edn21" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxi]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(1)(iv)<o:p></o:p></span></div>
</div>
<div id="edn22">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref22" name="_edn22" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.37(o)(3)(iii), and Official Staff Commentary, Comment
19(e)(1)(iv)<o:p></o:p></span></div>
</div>
<div id="edn23">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref23" name="_edn23" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxiii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(1)(i)(C)<o:p></o:p></span></div>
</div>
<div id="edn24">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref24" name="_edn24" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxiv]</span></span><!--[endif]--></span></a>
Regulation Z §§ 1026.19(e)(1)(iii)(B) and 1026.2(a)(6). “Consummation” means
the time the consumer becomes contractually obligated on the credit
transaction. See also Regulation Z § 1026.2(a)(13).<o:p></o:p></span></div>
</div>
<div id="edn25">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref25" name="_edn25" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxv]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(1)<o:p></o:p></span></div>
</div>
<div id="edn26">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref26" name="_edn26" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxvi]</span></span><!--[endif]--></span></a>
Regulation X § 1024.7<o:p></o:p></span></div>
</div>
<div id="edn27">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref27" name="_edn27" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxvii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.25(c)<o:p></o:p></span></div>
</div>
<div id="edn28">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref28" name="_edn28" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxviii]</span></span><!--[endif]--></span></a>
This may be an area vetted through litigation. The applicable Comment states
that “the creditor is responsible and may not issue a revised disclosure
correcting the error.” Yet TILA § 130(b) generally offers the creditor the opportunity
to escape civil, enforcement or criminal liability for TILA disclosure errors
by issuing corrections within 60 days after discovery, provided that an
appropriate notification accompanies the notification. Although issuance of a
revised disclosure may not erase liability for actual settlement charges that
fall outside the tolerances for determination of good faith, it might allow the
creditor to escape liability for the damages specified by TILA § 130. The area
of dispute may be a claim that Regulation Z should not be permitted to
contradict this statutory provision.<o:p></o:p></span></div>
</div>
<div id="edn29">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref29" name="_edn29" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxix]</span></span><!--[endif]--></span></a>
Regulation Z, Official Staff Commentary, Comment 19(e)(1)(ii)-1 and-2<o:p></o:p></span></div>
</div>
<div id="edn30">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref30" name="_edn30" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxx]</span></span><!--[endif]--></span></a>
Regulation Z also follows this convention, that is, the term “creditor” used in
the Regulation Z generally refers to the creditor or the mortgage broker, as
applicable.<o:p></o:p></span></div>
</div>
<div id="edn31">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref31" name="_edn31" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxi]</span></span><!--[endif]--></span></a>
Regulation X § 1024.7(a)(4) and (b)(4) and TILA Regulation Z § 1026.19(a)(1)<o:p></o:p></span></div>
</div>
<div id="edn32">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref32" name="_edn32" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxii]</span></span><!--[endif]--></span></a>
Regulation X § 1024.7(a)(4) and (b)(4)<o:p></o:p></span></div>
</div>
<div id="edn33">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref33" name="_edn33" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxiii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.25<o:p></o:p></span></div>
</div>
<div id="edn34">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref34" name="_edn34" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxiv]</span></span><!--[endif]--></span></a>
Regulation Z, Comment 19(e)(2)(i)(A)-2<o:p></o:p></span></div>
</div>
<div id="edn35">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref35" name="_edn35" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxv]</span></span><!--[endif]--></span></a>
Regulation Z Official Staff Commentary, Comment 19(e)(2)(i)(A)-5<o:p></o:p></span></div>
</div>
<div id="edn36">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref36" name="_edn36" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxvi]</span></span><!--[endif]--></span></a>
This requirement parallels the requirement in Regulation X § 1024.7(a)(5)<o:p></o:p></span></div>
</div>
<div id="edn37">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref37" name="_edn37" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxvii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(2)(iii) and Official Staff Commentary, Comment
19(e)(2)(iii)-1<o:p></o:p></span></div>
</div>
<div id="edn38">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref38" name="_edn38" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxviii]</span></span><!--[endif]--></span></a>
A charge “paid by or imposed on the consumer” refers to the final amount for
the charge paid by or imposed on the consumer at consummation or settlement,
whichever is later.<o:p></o:p></span></div>
</div>
<div id="edn39">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref39" name="_edn39" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xxxix]</span></span><!--[endif]--></span></a>
Regulation X § 1024.7(e)-(f)<o:p></o:p></span></div>
</div>
<div id="edn40">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref40" name="_edn40" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xl]</span></span><!--[endif]--></span></a>
An<span style="background: white; color: #373739; font-size: 9pt;"> “affiliate” is </span><span style="background: white; color: #373739; font-size: 9pt;">“</span><span style="background: white; color: #373739; font-size: 9pt;">any company that controls, is controlled by, or
is under common control with another company, as set forth in the Bank Holding
Company Act of 1956.” See 12 U.S.C. 1841 et seq.</span><o:p></o:p></span></div>
</div>
<div id="edn41">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref41" name="_edn41" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xli]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(ii) and Official Staff Commentary, Comment 19(e)(3)(ii)-1<o:p></o:p></span></div>
</div>
<div id="edn42">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref42" name="_edn42" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlii]</span></span><!--[endif]--></span></a>
Regulation Z Official Staff Commentary Comment 19(e)(3)(ii)-2<o:p></o:p></span></div>
</div>
<div id="edn43">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref43" name="_edn43" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xliii]</span></span><!--[endif]--></span></a>
Regulation Z, Official Staff Commentary, Comment 19(e)(3)(i)-3<o:p></o:p></span></div>
</div>
<div id="edn44">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref44" name="_edn44" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xliv]</span></span><!--[endif]--></span></a>
In general, transfer taxes are state and local government fees on mortgages and
home sales based on the loan amount or sales price, while recording fees are state
and local government fees for recording the loan and title documents. See
Regulation Z, Official Staff Commentary, Comments 37(g)(1)-1 and -3<o:p></o:p></span></div>
</div>
<div id="edn45">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref45" name="_edn45" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlv]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)<o:p></o:p></span></div>
</div>
<div id="edn46">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref46" name="_edn46" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlvi]</span></span><!--[endif]--></span></a>
The comparison must be between the actual charges and either the charges on the
original Loan Estimate or the charges on the most recent Loan Estimate revised
to reflect one or more of the six situations.<o:p></o:p></span></div>
</div>
<div id="edn47">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref47" name="_edn47" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlvii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(iv)(D) overrides this 3-business-day rule if the reason
for the revised Loan Estimate is the locking of the interest rate. See Official
Staff Commentary, Comment 19(e)(5)(i)-2<o:p></o:p></span></div>
</div>
<div id="edn48">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref48" name="_edn48" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlviii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)(A) and Official Staff Commentary, Comment
19(e)(3)(iv)(A)-2<o:p></o:p></span></div>
</div>
<div id="edn49">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref49" name="_edn49" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[xlix]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)(B) and Official Staff Commentary, Comment
19(e)(3)(iv)(B)-1. See also Item section 8.5 in the CFPB’s <i>TILA-RESPA Integrated Disclosure Rule Compliance Guide</i>, available
at <a href="http://files.consumerfinance.gov/f/201403_cfpb_tila-respa-integrated-disclosure-rule_compliance-guide.pdf">http://files.consumerfinance.gov/f/201403_cfpb_tila-respa-integrated-disclosure-rule_compliance-guide.pdf</a><o:p></o:p></span></div>
</div>
<div id="edn50">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref50" name="_edn50" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[l]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)(C) and Official Staff Commentary Comment
19(e)(3)(iv)(C)-1<o:p></o:p></span></div>
</div>
<div id="edn51">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref51" name="_edn51" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[li]</span></span><!--[endif]--></span></a>
This requirement of disclosure on the day the interest rate is locked applies
notwithstanding the 3-business-day rule set forth in Regulation Z
§ 1026.19(e)(4)(i). See TILA Regulation Z § 1026.19(e)(3)(iv)(D) and Official
Staff Commentary, Comment 19(e)(4)(i)-2.<o:p></o:p></span></div>
</div>
<div id="edn52">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref52" name="_edn52" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)(D) and Official Staff Commentary, Comment
19(e)(3)(iv)(D)-1<o:p></o:p></span></div>
</div>
<div id="edn53">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref53" name="_edn53" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[liii]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)(E) and Official Staff Commentary, Comments
19(e)(1)(iii)-1 and 19(e)(3)(iv)(E)-1<o:p></o:p></span></div>
</div>
<div id="edn54">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref54" name="_edn54" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[liv]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(3)(iv)(F) and Official Staff Commentary, Comment
19(e)(3)(iv)(F)-1<o:p></o:p></span></div>
</div>
<div id="edn55">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref55" name="_edn55" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lv]</span></span><!--[endif]--></span></a>
Regulation Z, Official Staff Commentary, Comment 19(e)(4)(ii)-1<o:p></o:p></span></div>
</div>
<div id="edn56">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref56" name="_edn56" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lvi]</span></span><!--[endif]--></span></a>
Regulation Z Official Staff Commentary, Comment 37(o)(4)-1 and -2<o:p></o:p></span></div>
</div>
<div id="edn57">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref57" name="_edn57" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lvii]</span></span><!--[endif]--></span></a>
78 FR 79730, 79995, December 31, 2013<o:p></o:p></span></div>
</div>
<div id="edn58">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref58" name="_edn58" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lviii]</span></span><!--[endif]--></span></a>
It seems to me that the CFPB used a certain finesse by including the
requirement in the main text of the regulation. In an unusual way of imposing a
significant regulatory requirement, HUD included this requirement in Appendix C
to RESPA Regulation X, which contains instructions for completing the Good
Faith Estimate.<o:p></o:p></span></div>
</div>
<div id="edn59">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref59" name="_edn59" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lix]</span></span><!--[endif]--></span></a>
Regulation Z § 1026.19(e)(1)(vi)<o:p></o:p></span></div>
</div>
<div id="edn60">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref60" name="_edn60" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lx]</span></span><!--[endif]--></span></a>
Regulation Z Comment 19(e)(1)(vi)-1<o:p></o:p></span></div>
</div>
<div id="edn61">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref61" name="_edn61" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxi]</span></span><!--[endif]--></span></a>
Regulation Z Comment 19(e)(1)(vi)-7<o:p></o:p></span></div>
</div>
<div id="edn62">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref62" name="_edn62" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxii]</span></span><!--[endif]--></span></a>
<span style="background: white; color: #373739; font-size: 9pt;">Regulation X 1024.14(f)</span><o:p></o:p></span></div>
</div>
<div id="edn63">
<div class="MsoEndnoteText" style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><a href="file:///C:/Users/Jonathan/Desktop/Loan%20Estimate%20-%20Deep%20Dive.%20White%20Paper%20(Foxx.NMP%20-%20June%202015).docx#_ednref63" name="_edn63" title=""><span class="MsoEndnoteReference"><!--[if !supportFootnotes]--><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[lxiii]</span></span><!--[endif]--></span></a>
Regulation Z Comment 19(e)(1)(vi)-6</span><o:p></o:p></div>
</div>
</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-80468735050928404092015-02-25T16:49:00.001-05:002015-02-25T16:49:47.988-05:00The Lead Generation Company: Managing the Risk<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Jonathan Foxx</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">President & Managing Director</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;"><br /></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Generating
leads is an important way to reach consumers. It is also fraught with
regulatory risk. A lead is consumer information that signals consumer interest
or inquiry into products or services offered by a business, such as residential
mortgage lenders and originators. There are several factors to be considered,
not just licensing. I will list some rudimentary guidelines in this article,
specifically with respect to contact with the consumer. Caution is urged to
consult with a risk management professional to ensure compliance with federal
and state guidelines required by a marketing campaign to generate leads.
Although my focus is primarily on the online lead generation process, virtually
all the guidelines provided herein may be extrapolated for use in offline lead
generation campaigns.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">My
firm often is requested by clients to vet a lead generator, which I will call a
Lead Generation Company. Careful risk management advice should be considered
when developing and managing leads, whether obtained from an outsourced entity
or a loan originator’s own website, in-house, or through online lead generation
advertisements. Certainly, any loan originator that uses leads must have an internal
compliance function that accounts for proper licensing of the Lead Generation
Company (where required), monitoring of the data integrity derived therefrom,
testing conformance with the originator’s policies, and training of staff in
the appropriate use of lead generated, consumer data.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Banking
departments these days are not just looking at licensing <i>qua</i> licensing. They are looking for loan originator compensation violations
that are triggered by lead generation. For instance, they know that loans may
have different cost structures depending on how the loans were initially
received by the lender. A lead generated by the loan originator may be
compensated differently than those generated by the creditor. As long as this
doesn’t constitute a proxy for a loan term or condition, it is generally acceptable;
that is, the loan officer may also be reimbursed for lead generation and other
legitimate business costs, but the creditor must beware of how this may serve
as a proxy for terms and conditions. It is up to the lender to make this
determination (and properly document it).</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Four
Rules</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">In
any lead generating marketing, the following four rules should be implemented:</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Calibri",sans-serif; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri;">1.<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Complete,
accessible, and straightforward disclosure of all parties’ intent regarding
data collection and usage is essential;</span></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Calibri",sans-serif; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri;">2.<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Data
should not be brokered or sold without consent (or notice and choice) of all
parties involved, including the consumer and the loan originator;</span></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Calibri",sans-serif; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri;">3.<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Both
the consumer, Lead Generation Company, and the loan originator should be made
aware, through clear notices, of all parties involved in data collection and
sharing; and,</span></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Calibri",sans-serif; mso-bidi-font-family: Calibri; mso-fareast-font-family: Calibri;">4.<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">All
parties should be educated and aware of current regulations regarding consumer
protection and privacy.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">These
four rules become the bases of the policies, procedures, contractual
arrangements, and protocols that ensure a viable marketing campaign that
relies, in whole or in part, on lead generation.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Regulatory
Focus</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
regulators involved in enforcement of compliance with lead generation rules
include, but are not limited to, state banking departments, state Attorneys
General, the Federal Trade Commission (“FTC”),<span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[i]</span></span></span>
and the Consumer Financial Protection Bureau (“Bureau”). We already know that
the Bureau examines for whether the lead generator is a third-party provider
and reviews the terms and appropriateness of the relationship. The Bureau
reviews advertisements and advertising sources. It will review TV, radio, print
media, Internet, scripts, recordings, and so forth. It will determine if there
was proper consumer disclosure all along the way, from point of contact with
the consumer to point of contact with the lender, including any intimation of
fees and other terms and conditions. Plus, a review is conducted for online
data security and sharing of consumer information.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Although
the new loan originator qualification standards do not impose licensing
requirements, every lender must ensure that each loan originator in its employ
is licensed and registered in compliance with laws related to Secure and Fair
Enforcement for Mortgage Licensing Act (SAFE), if applicable. Further, entities
engaged in lead generation and marketing activities, as well as the companies
that do business with such entities, need to pay particular attention to their
activities to ensure that they do not inadvertently engage in loan originator
activity. If they do, they’ll need to make sure that they meet the new loan
originator qualification standards, including licensing requirements. Failure
to meet these standards will give rise to severe civil liability that could
impair the collectability of the loan.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
Bureau has stated that anytime a consumer gives out sensitive personal and
financial information on the Internet there are risks involved to the consumer.
In the context of Pay Day Loans, for instance, the Bureau has already warned
consumers that if a consumer applies for a loan online, the consumer could be
increasing risk significantly. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
Bureau has expressed concern that an online application or form that consumers
fill out could be sold to a loan originator that offers to originate a loan on
behalf of the consumer. Indeed, the Bureau also has indicated it has concerns
that multiple lenders or other settlement service providers could pay for this
information, thereby causing them to contact or email the consumer.</span><br />
<a name='more'></a></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Consumer
Advocacy</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">In
a November 11, 2013 announcement to consumers, the Bureau stated, “Lead
generators might not find you the lowest cost loans, and you should be cautious
of sites that promise they will. Many consumers can also be confused about who
actually made the loan, which makes getting help when you need it harder.”<span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[ii]</span></span></span>
In addition, the Bureau has provided caution regarding key words, tags, and
tactics.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Importantly,
the Bureau’s view toward the Pay Day lead generator should be applied to residential
mortgage lenders and originators that purchase leads from a Lead Generation
company. Here’s the point: the Bureau has clearly issued an answer to the
question, "What is the difference between an online payday lender and one
with a storefront?" Its answer was that consumers need to make sure the
online website is licensed to do business in the consumer's state and whether
the lead generator follows the state's [payday] lending laws. Consider it a
warning to all residential loan originators!</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Therefore,
when the Bureau starts looking at online lead generation involving residential
mortgage loans, it is somewhat certain that it applies an even stricter
standard to the Lead Generation Company that solicits mortgage information or a
mortgage conversation from consumers and sells it or even passes it on to a loan
originator. Questions that the Bureau would resolve, either by promulgating
rules or through enforcement action, will likely be: (1) Is the Lead Generation
Company violating the SAFE Act if it is not licensed in the state it is
operating in?, and (2) If it is licensed under SAFE will it be violating the
broadly defined Loan Officer Compensation Rule?</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Lead
Generation as Advertising</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Depending
on the advertising used to find a consumer for a loan originator, the Bureau
may deem the communication to be an advertisement to generate a lead by using
certain phrases, such as “Let us help you find a mortgage! Call us! Or Click <u>Here</u>
for More Information!” If deemed an advertisement, the Bureau will move to the
view that such advertising is a solicitation for a mortgage conversation from a
consumer. The outcome of that position would likely lead to a violation of
SAFE, because most states consider such a solicitation a violation of SAFE even
if no payment is made by the lender or loan officer to the Lead Generation Company
- because this type of solicitation would trigger a license requirement.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Even
if the Lead Generation Company is properly licensed under a particular state's
SAFE Act, if it sells that lead to an unlicensed loan originator in that state
the Bureau could pursue an action against the Lead Generation Company because it
assisted or facilitated a consumer’s information to be sold to an unlicensed
entity, pursuant to various third party vendor management bulletins.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Some
states already require a Lead Generation Company collecting consumer information
to be licensed as "mortgage brokers" such as Arizona and Virginia. The
licensing requirement varies from state to state. Referencing Pay Day lenders,
most of the Pay Day lenders in Ohio, for example, have become Mortgage Brokers
under the SAFE Act as it takes them out of the state usury statute for Pay Day
lenders.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Three
Concerns</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">What
type of online Lead Generation Company could cause issues of concern?</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">(1)
Unlicensed Lead Generation Company that tells consumers, for instance, whether
they are "Qualified for a Loan or Not";</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">(2)
Online Lead Generation Company that collects any sort of non-public personal
information data (the definition of what is “NPI” may vary from state to state,
but is also federally settled in Gramm-Leach-Bliley, <i>et alia</i>) and fails to inform and obtain the consumers consent that
their information will be shared with a third party; and, </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">(3)
Online Lead Generation Company where it has spoken directly with the consumer
and then transfers the "Live Handoff" over to the loan originator
(especially if the Lead Generation Company is not licensed, where required by
state law). If the Lead Generation company acts as a special kind of mortgage
broker then it may be best to stay away because this could violate the standards
associated with the Loan Officer Qualifying Rule, mentioned above, which became
effective on January 1, 2014.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Additionally,
please note that the Bureau has broad authority to enforce Fair Lending Laws, the
Telemarketing Sales Rule, Mortgage Lending and Regulations, Mortgage Acts and
Practices Advertising Rule, and most certainly Unfair, Deceptive and Abusive
Acts or Practices (UDAAP).<span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[iii]</span></span></span></span><br />
<br />
</div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Scope
of Lead Generation Review</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
scope of review involved in managing the relationship with a Lead Generation
Company or administering an in-house lead generating campaign is complex. A
loan originator should retain competent risk management to ensure that the
entire campaign is fully vetted and is based on statutory and case review, as
well as clear and unambiguous regulatory compliance mandates.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">I
suggest that you consider adopting the following guidelines for lead generation
marketing.<span class="MsoEndnoteReference"><span class="MsoEndnoteReference"><span style="font-size: 12pt;">[iv]</span></span></span>
The list is not exhaustive, because each loan originator often has different
ways to generate leads, and the overall review should reflect a loan
originating company’s size, risk profile, and complexity.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Privacy
Policy Disclosures</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l6 level1 lfo2; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">A
privacy policy is essential to properly obtain permission and communicate the
intended use of the data collected from consumers.</span></li>
</ul>
</div>
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: .75in; mso-list: l6 level2 lfo2; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">The privacy policy should:</span></div>
</blockquote>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: 1.25in; mso-list: l6 level3 lfo2; text-align: justify; text-indent: -.25in;">
<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">§<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Disclose and outline the practice of
data collection, usage, and sharing. Data Practices should be easy to find,
easy to read and easy for consumers to act upon.</span></div>
</blockquote>
</blockquote>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: 1.25in; mso-list: l6 level3 lfo2; text-align: justify; text-indent: -.25in;">
<span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">§<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">The privacy policy should be posted in
a clear and conspicuous fashion when accepting the consumer’s information on
the Lead Generation Company’s and/or loan originator’s registration page and
online lead generation form.</span></div>
</blockquote>
</blockquote>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l6 level1 lfo2; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Consumers
should be given adequate notice of any privacy policy change.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l6 level1 lfo2; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Lead
Generation Company and/or a loan originator’s in-house campaign should have
notice on their home page(s) that their privacy policy has been updated.
Highlight the updates and list the dates of the revisions at the top of their
privacy policy. Strongly consider email notification to all consumers covered
by the original privacy policy.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l6 level1 lfo2; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Implement
technical and management controls to comply with the privacy policy.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l6 level1 lfo2; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Conduct
a regular, periodic evaluation of their privacy policy to ensure compliance.</span></li>
</ul>
</div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Data
Collection Disclosures</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Do
not hide fields without consumer disclosure.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">For
both simple and custom offer types, if the Lead Generation Company chooses not
to show one or more fields, it should either:</span></li>
</ul>
</div>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: .75in; mso-list: l0 level2 lfo3; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Include clear and conspicuous notice
prominently on the offer page or via a prominently displayed link indicating
which fields will be collected and shared with the loan originator(s), or</span></div>
</blockquote>
</blockquote>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: .75in; mso-list: l0 level2 lfo3; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Include text next to each offer on the
page that specifically lists each field that will be collected and shared with
the purchaser of the lead.</span></div>
</blockquote>
</blockquote>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company should include a clickable link to its privacy policy
within each offer.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company should not sell data that the consumer has provided
during registration or on an advertised offer form to other companies to use to
market itself to the consumer without the consumer’s knowledge or choice.</span></li>
</ul>
</div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Data
Licensing & List Management</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company should disclose if the data collected will be shared
with third parties. </span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">No
sharing of NPI with 3rd party marketers for the purpose of sending email,
without the consumer’s consent.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Loan
originators that use third parties to manage their email list should have a
formal data licensing agreement.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Loan
originators working with list management partners should also create a review process
to monitor their partners’ activity.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Loan
originators should appoint a compliance manager who is knowledgeable in Controlling
the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM) and
additional privacy law and standards to oversee the review process.</span></li>
</ul>
</div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Consumer
Experience</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l7 level1 lfo5; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company should allow consumers to easily skip offers if they do
not want to share the data being requested by the loan originator or if they
are no longer interested in the offer. </span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l7 level1 lfo5; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company should ensure that the skip function is clear and
conspicuous and is not hidden or difficult to locate on the offer. In addition,
the skip function should be displayed in equal prominence to the submit
function.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l7 level1 lfo5; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">In
a webpage set-up, a Lead Generation Company may pre-select loan originator
offers on a multi-listing page to present consumers with offers they believe
may best fit their needs. Pre-selected offers are acceptable for custom offers
where additional data is collected, but should be considered opt-out.
Importantly, offers made based on the Fair Credit Report Act (FCRA) require
very careful implementation and only after thorough review by a risk management
professional.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l7 level1 lfo5; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Simple
offers - usually not asking for additional information or custom form fields
and generally characterized by only a “yes/no” answer or opt-in box - should
not be pre-selected. Note: The practice of pre-selecting the “yes” or the
opt-in box - which, in effect, automatically signs up the consumer for that
offer without the consumer having to take any further affirmative action - is
considered to be an opt-out offer and therefore should not be used.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l7 level1 lfo5; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company should use clear language when using pre-selected
custom offers; and it should not insinuate that the consumer must select an
offer in order to continue through the registration process.</span></li>
</ul>
</div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Software
Applications (Internet)</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l4 level1 lfo6; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company and/or the loan originator may request that consumers
download software applications that can connect through the Internet to their
computer or mobile device. Any such download should only be initiated after
affirmative consent from the consumer.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l4 level1 lfo6; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">After
completion of the download, Internet-connected software applications should:</span></li>
</ul>
</div>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: .75in; mso-list: l4 level2 lfo6; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Only launch with the consumer’s
knowledge; that is, be visible to the consumer and not run invisibly in the
background, until such time as a consumer configures options to allow such behavior;</span></div>
</blockquote>
</blockquote>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: .75in; mso-list: l4 level2 lfo6; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Clearly indicate the name and contact
information of the loan originator and provide a reasonable method to obtain
further information about the loan originator; and</span></div>
</blockquote>
</blockquote>
<blockquote class="tr_bq">
<blockquote class="tr_bq">
<div class="MsoNormal" style="margin-left: .75in; mso-list: l4 level2 lfo6; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt; font-stretch: normal;"> </span></span><span style="font-family: "Calibri",sans-serif;">Provide functionality that enables an
average consumer to completely uninstall the application from his/her computer
or mobile device without any negative impact on the consumer’s device.</span></div>
</blockquote>
</blockquote>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Consumer
Data Sharing from Loan Originator</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l5 level1 lfo7; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">After
submission, the lead data should be transferred from the Lead Generation
Company in real-time or batch in a standard, secure format.</span></li>
</ul>
</div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Disclosure:
Offer Requirements and Obligations</span></u></div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l5 level1 lfo7; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Prior
to accepting any consumer information, the terms and conditions must be clearly
and conspicuously disclosed so that a reasonable consumer may understand the
essence of the proposed exchange. The terms and conditions should be compiled,
reviewed and updated by a risk management professional who is knowledgeable
about, among other things, consumer disclosure mandates.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l5 level1 lfo7; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Terms
and conditions should be accessible and prominent during the registration or
offer selection process.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l5 level1 lfo7; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">When
using the term “free” or “complimentary” or other similar terms, the loan
originator should ensure proper disclosures are made in proximity to the term,
if some form of obligation is needed by the consumer to receive the offer.
Note: such terms are considered “trigger terms” under the Truth in Lending Act.
Seek professional guidance prior to using any incentive language.</span></li>
</ul>
</div>
<div class="MsoNormal" style="margin-left: .25in; mso-list: l5 level1 lfo7; text-align: justify; text-indent: -.25in;">
<ul>
<li><span style="font-family: "Calibri",sans-serif;">Loan
originators should include a summary of consumer obligations and requirements.
Note: the summary of obligations and requirements is used to additionally
educate consumers and not to replace a detailed terms and conditions link that
should be prominently displayed for consumers.</span></li>
</ul>
</div>
<div class="MsoNormal" style="text-align: justify;">
<u><span style="font-family: "Calibri",sans-serif;">Promotional
Site Disclosures</span></u></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Promotional
sites offer consumers rewards such as a free gift, a free newsletter, a free
quote, or other reward items when registering. A subset of promotional sites
may include lead generation offers that are incentivized. Incentivized Offers
are offers that are required for the consumer to select in order to qualify for
the reward.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
Lead Generation Company may run a combination of incentivized and
non-incentivized offers throughout its registration process and website flow.
The offer type - either required or optional - should be clearly and
conspicuously articulated to the consumer on the offer pages. This disclosure
should be at the top of such page before the consumer engages in any loan
originator offers. If multiple pages are used with various offer requirements,
consumers should be able to navigate freely between the “offer pages” to better
understand the scope of the incentive requirements.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Promotional
sites that have incentivized offers should follow all disclosure points
outlined above and take the following additional steps:</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal" style="mso-list: l3 level1 lfo8; text-align: justify;"><span style="font-family: "Calibri",sans-serif;">The Lead Generation Company must
disclose directly on the registration page exactly what the consumer needs
to do in order to receive the reward.</span></li>
<li class="MsoNormal" style="mso-list: l3 level1 lfo8; text-align: justify;"><span style="font-family: "Calibri",sans-serif;">A summary of key requirements of
the consumer should be disclosed on the first registration page.</span></li>
<li class="MsoNormal" style="mso-list: l3 level1 lfo8; text-align: justify;"><span style="font-family: "Calibri",sans-serif;">If the consumer must sign up for
various offers to qualify for the reward, the Lead Generation Company
should disclose to the consumer the cost associated with each offer
presented.</span></li>
<li class="MsoNormal" style="mso-list: l3 level1 lfo8; text-align: justify;"><span style="font-family: "Calibri",sans-serif;">If there is some form of monetary
obligation needed to qualify for a gift, the Lead Generation Company
should, at a minimum, provide the consumer with a representative estimate
of such costs.</span></li>
</ul>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-family: "Calibri",sans-serif; text-transform: uppercase;">Planning
for the Bureau’s visit</span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
Bureau will surely look to the source and use of a loan originator’s leads from
a Lead Generation Company. It will hold the loan originator responsible for
leads obtained from a Lead Generation Company as seamlessly as if the lead was
generated by an in-house lead generation campaign. </span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Areas
subject to the Bureau’s and/or a federal or state regulator’s examination would
include determining if the relationship with the Lead Generation Company is
properly disclosed; whether a review was implemented for privacy and how the
consumers’ data was shared; that there is identification whether the party is a
third party provider or not; if there was a thorough, documented review of the
lead generation website or advertising portal itself; and whether the consumer
was appropriately notified of all fees, terms, and conditions throughout the
lead generation process.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">The
Bureau will investigate a Lead Generation Company involved in generating leads
on behalf of residential mortgage lenders and originators. Any company involved
in the lead generation business, and any loan originator using a Lead
Generation Company, should actively assess the compliance risks associated with
online lead generation.</span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Calibri",sans-serif;">Indeed,
each state where the Lead Generation Company is licensed (or ought to be
licensed) must be researched for statutory licensing requirements and
compliance therewith.</span></div>
<div>
<br clear="all" />
<hr align="left" size="1" width="33%" />
<br />
<div id="edn1">
<div class="MsoEndnoteText" style="text-align: left;">
<span class="MsoEndnoteReference"><span style="font-family: "Calibri",sans-serif;"><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[i]</span></span></span></span><span style="font-family: "Calibri",sans-serif;"> For instance, see United States of
America, Plaintiff, v. Intermundo Media, LLC, a limited liability company, also
doing business as Delta Prime Refinance, Delta Prime Mortgages, and American
Dream Quotes, Defendant. FTC Matter/File Number: 122 3225, Federal Court:
District of Colorado, September 12, 2014</span></div>
</div>
<div id="edn2">
<div class="MsoEndnoteText" style="text-align: left;">
<span class="MsoEndnoteReference"><span style="font-family: "Calibri",sans-serif;"><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[ii]</span></span></span></span><span style="font-family: "Calibri",sans-serif;"> <i>Is
applying for a payday loan online safe?</i>, 11/6/2013, <a href="http://www.consumerfinance.gov/askcfpb/1577/applying-payday-loan-online-safe.html">http://www.consumerfinance.gov/askcfpb/1577/applying-payday-loan-online-safe.html</a>
</span></div>
</div>
<div id="edn3">
<div class="MsoEndnoteText" style="text-align: left;">
<span class="MsoEndnoteReference"><span style="font-family: "Calibri",sans-serif;"><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[iii]</span></span></span></span><span style="font-family: "Calibri",sans-serif;"> Section 5(a) of the Federal Trade
Commission (FTC) Act prohibits “unfair or deceptive acts or practices in or
affecting commerce”. The FTC standards are broad and apply to any unfair or
deceptive practices affecting consumers or commercial businesses. The
Dodd-Frank Act introduced UDAAP and directed the Consumer Financial Protection
Bureau to issue regulations designed to prevent UDAAP.</span></div>
</div>
<div id="edn4">
<div class="MsoEndnoteText" style="text-align: left;">
<span class="MsoEndnoteReference"><span style="font-family: "Calibri",sans-serif;"><span class="MsoEndnoteReference"><span style="font-size: 10pt;">[iv]</span></span></span></span><span style="font-family: "Calibri",sans-serif;"> In preparing this section, I found
helpful and relied partly on <i>Online Lead
Generation: B2C and B2B Best Practices for U.S.-based Advertisers and
Publishers</i>, February 7, 2008</span></div>
</div>
</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-90050302257343108092014-06-23T06:00:00.000-04:002014-06-23T06:00:04.066-04:00The Bureau’s Pursuit of Fair Lending<div align="justify">
<span style="font-size: small;">By now it is a known fact that one of the most important features of an examination conducted by the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) is a rigorous review of fair lending compliance. So, given its importance, it behooves us to learn about what the CFPB has found out about fair lending and what actions are needed to ensure its compliance. In this article, I provide an analysis of the CFPB’s most recent findings in the mortgage space as well as practical actions to be taken that help to build a vibrant fair lending initiative, gleaned from both the Bureau’s own issuances and actions, as well as my firm’s experience in assisting institutions with their CFPB fair lending examinations.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">On April 30, 2014, the Bureau issued an Annual Report, entitled “Fair lending Report of the Consumer Financial Protection Bureau” (“Report”).[i] Richard Cordray, Director of the CFPB, stated in the Report’s preamble: </span></div>
<blockquote class="tr_bq">
<div align="justify">
<span style="font-size: small;">“Far too many consumers still must navigate a financial marketplace laden with deceptive marketing, debt traps, dead ends, and discrimination. At the Consumer Bureau, we are fierce advocates for a consumer financial marketplace that allows all Americans to pursue a path to greater opportunity. To that end, we are working to remove the unnecessary obstacles too many Americans face in the consumer financial marketplace. This includes ferreting out discrimination in credit markets, including the markets for home mortgages and auto lending.”[ii] </span></div>
</blockquote>
<div align="justify">
<span style="font-size: small;">The Report generally covers the period from July 21, 2012 through December 31, 2013. In addition, there is Interagency Reporting on ECOA and HMDA contained therein, which conveys information on the Bureau’s and other administrative agencies’ functions under ECOA and HMDA, as required by those statutes, for the period of January 1, 2012 to December 31, 2013.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Patrice Alexander Ficklin, the Bureau’s Director of Fair Lending and Equal Opportunity, offered this overview of the Report: </span></div>
<blockquote class="tr_bq">
<div align="justify">
<span style="font-size: small;">“In this report we describe our steady focus on ensuring that consumers have fair, equitable, and nondiscriminatory access to credit by using all of the tools at our disposal – including research, supervision, enforcement, consumer education and outreach, rulemaking, and interagency engagement.”[iii] </span></div>
</blockquote>
<div align="justify">
<span style="font-size: small;">The Bureau issued the Report to Congress “in fulfillment of its statutory obligation and continued commitment to accountability and transparency.”[iv] In this regard, the Bureau is relying on its claimed efforts to fulfill its fair lending monitoring mandate, and provides additional reporting required by the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA).[v]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Dodd-Frank established the Office of Fair Lending and Equal Opportunity (the “Office of Fair Lending”) within the CFPB, and charged it with “providing oversight and enforcement of Federal laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and communities that are enforced by the Bureau,” including ECOA and HMDA.[vi] The Office of Fair Lending is required to coordinate “fair lending efforts of the Bureau with other Federal agencies and State regulators, as appropriate, to promote consistent, efficient, and effective enforcement of federal fair lending laws,” and works “with private industry, fair lending, civil rights, consumer and community advocates on the promotion of fair lending compliance and education.”[vii]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Since the Bureau’s last report to Congress in December 2012, the Bureau has built fair lending tools and materials and engaged in public dialogue in order to educate, inform, and learn from consumers, advocates, and industry. It introduced a Home Mortgage Disclosure Act Database, which allows the public to study trends in the mortgage market across the nation and in their own communities. Additionally, the Bureau has published a bulletin on lending discrimination to help consumers and industry stakeholders recognize fair lending and access to credit risks in the home mortgage and auto lending markets.[viii]</span></div>
<div align="justify">
<br /></div>
<div style="text-align: center;">
<span style="font-size: small;"><b>REPORT’S CONCLUSIONS</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">We can derive certain salient observations about the Report’s findings.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">In the first place, the Bureau has noted increasing efficiencies in fair lending activity. Thus, they have “created, refined, and implemented a risk-based fair lending prioritization process” to ensure that their supervisory procedures focus on the “areas presenting the greatest fair lending risk to consumers.” The approach, dubbed “risk-based prioritization” by the Bureau, uses the collection of both quantitative and qualitative data to assess fair lending risk to consumers as well as assessments of risk in order to prioritize enforcement actions.[ix]</span></div>
<a name='more'></a><br />
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Importantly, with respect to providing guidance on its examinations, the Bureau publicly released information about the three methods its examiners use in fair lending supervisory reviews: (1) ECOA Baseline Reviews, (2) ECOA Targeted Reviews, and (3) HMDA Data Integrity Reviews. In the period subject to the Report, the CFPB has completed dozens of examinations on ECOA and HMDA compliance.[x] Through these examinations the Bureau detected some violations of ECOA and HMDA. However, it also found that many lenders have instituted and maintained strong fair lending Compliance Management Systems (“CMS”) and had no violations of ECOA or HMDA. With respect to self-assessments, the Bureau has issued guidance describing how to conduct them, so as to be in compliance with ECOA and HMDA. Guidance has been provided through the Bureau’s Supervisory Highlights and Bulletins discussing fair lending topics.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The Bureau has used the collection of data to analyze its supervision and enforcement priorities and determine two key priorities: mortgage lending and auto finance. With respect to mortgage lending, the CFPB conducted fair lending supervisory reviews of a number of mortgage lenders, finding that many lenders have strong fair lending compliance management systems and no violations of ECOA or HMDA. However, the Bureau did allege some instances of fair lending non-compliance. Consequently, it took enforcement action against two mortgage lenders for violating HMDA, which resulted in assessments of civil monetary penalties and other relief. It is important to note that, in addition to jointly investigating certain matters with the United States Department of Justice (DOJ), the CFPB also made several referrals to the Department of Justice for violations of ECOA, one of which actually resulted in a recent enforcement action.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The interagency coordination and collaboration is a critical feature of the Bureau’s pursuit of violations. The CFPB continues to coordinate with the Federal Financial Institutions Examination Council (FFIEC) agencies, as well as the DOJ, the Federal Trade Commission (FTC), and the Department of Housing and Urban Development (HUD), in enforcing fair lending statutes. In fact, in 2012, the CFPB formalized its fair lending enforcement relationship with the DOJ via a Memorandum of Understanding (MOU).[xi]<b> </b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;"><b>Complaints and Whistleblowers and Priorities</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The CFPB uses input from a variety of external and internal stakeholders to inform its fair lending prioritization process. Thus, it considers fair lending complaints received by its Office of Consumer Response or brought to the Office of Fair Lending’s attention by advocacy groups, whistleblowers, and other government agencies (at the local, state, and federal levels). As part of the prioritization process, the Office of Fair Lending also considers public and private litigation.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The Bureau uses risk-based prioritization to consider many qualitative and quantitative factors at the institution, product, and market levels to determine what, where, and how fair lending risks to consumers should be addressed.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">These are the factors constituting the risk-based prioritization:[xii]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">1. Complaints and tips from consumers, advocacy groups, whistleblowers, and other government agencies;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">2. Supervisory and enforcement history;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">3. Quality of lenders’ Compliance Management Systems;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">4. Data analysis; and,</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">5. Market insights.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The Office of Fair Lending integrates all of the forgoing information into the fair lending prioritization process, which is then incorporated into the Bureau’s larger risk-based prioritization process, and then the Bureau allocates its fair lending resources to the areas it considers of greater risk to consumers.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Furthermore, the Bureau utilizes information gathered from its own and other regulators’ prior fair lending work, including any supervisory or enforcement actions. At the institutional level, the Bureau considers results from past reviews, the extent and nature of any violations previously cited, and remediation efforts. Additionally, the Bureau considers self-identified issues and whether the institution took appropriate corrective action when it identified those issues. The CFPB also closely monitors institutions’ compliance with any administrative orders arising from previous enforcement actions pursued by the CFPB or, in some cases, by other federal government agencies.<b> </b></span></div>
<div align="justify">
<br /></div>
<div style="text-align: center;">
<span style="font-size: small;"><b>FAIR LENDING IN COMPLIANCE MANAGEMENT SYSTEMS</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">A Compliance Management System consists of many moving parts, one critical piece of which includes information the Bureau obtains through its examinations vis-à-vis the quality of an institution’s fair lending CMS. This is a key factor in the fair lending prioritization process. While the appropriate scope of an institution’s fair lending CMS will vary based on its size, complexity, and risk profile,[xiii] common features of a well-developed CMS include:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· An up-to-date fair lending policy statement;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Regular fair lending training for all employees involved with any aspect of the institution’s credit transactions, as well as all officers and board members;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Ongoing monitoring for compliance with fair lending policies and procedures, and appropriate corrective action if necessary;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Ongoing monitoring for compliance with other policies and procedures that are intended to reduce fair lending risk (such as controls on loan originator discretion), and appropriate corrective action if necessary;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Review of lending policies for potential fair lending violations, including potential disparate impact;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Depending on the size and complexity of the financial institution, regular statistical analysis, as appropriate, of loan-level data for potential disparities on a prohibited basis in pricing, underwriting, or other aspects of the credit transaction, to include both mortgage and non-mortgage products such as credit cards, auto lending, and student lending;</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Regular assessment of the marketing of loan products; and,</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Meaningful oversight of fair lending compliance by management and where appropriate, the financial institution’s board of directors.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Here is the Bureau’s rudimentary, but incisive point: “The key consideration is that the lower the quality of an institution’s fair lending CMS, the higher the institution’s fair lending risk.”[xiv]<b> </b></span></div>
<div align="justify">
<br /></div>
<div style="text-align: center;">
<span style="font-size: small;"><b>HMDA AND ECOA – NEW RULES</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">I have discussed above the importance of data analysis and the quantitative approach; indeed, the Bureau’s fair lending prioritization process is driven by quantitative data analyses that evaluate developments and trends at the institutional and market levels. The quintessential example, in the housing finance marketplace, is the Home Mortgage Disclosure Act (HMDA) data, which allow regulators to assess a specific institution’s risk as well as risk across the market in order to identify those institutions or segments that appear to present heightened fair lending risk to consumers.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The Dodd-Frank Act expanded the scope of the data that lenders are required to collect and submit under Regulation C, the implementing regulation of HMDA. Specifically, Section 1094 of Dodd-Frank amended HMDA to require the collection and submission of additional data fields, including:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· The age of the applicant or borrower</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Rate spread (for all loans)</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Collateral value</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Credit score</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Non-fully amortizing payment features</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Total points and fees</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Prepayment penalty term</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· The period after which a rate may change</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Loan term</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· Origination channel</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· As appropriate, identifiers for loan originators, loans, and parcels</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">· “[S]uch other information as the Bureau may require”[xv]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">At the time the Report was issued, the CFPB’s efforts to implement these changes were in the pre-rulemaking stage. However, the Bureau is going to continue to research, consider, and evaluate what changes it may propose to Regulation C.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Section 1071 of the Dodd-Frank Act amended Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report to the CFPB data on lending to small, minority-owned and women-owned businesses, in order to “facilitate the enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women owned, minority-owned, and small businesses.”[xvi] The Dodd-Frank Act also directed the Bureau to prescribe rules and guidance as necessary to “carry out, enforce, and compile” data pursuant to that section.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">So, in April 2011, the CFPB issued guidance stating that the data collection and submission obligations arising under these ECOA amendments do not arise until the CFPB actually promulgates implementing regulations.[xvii]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Nevertheless, the CFPB has begun to explore the issues that its rulemaking will need to address. In particular, the Bureau is looking to how the Bureau might work with other agencies to, in part, “gain insight into existing small business data collection efforts and possible ways to cooperate in future efforts.”[xviii]<b> </b></span></div>
<div align="justify">
<br /></div>
<div style="text-align: center;">
<span style="font-size: small;"><b>REVIEWS, REVIEWS, AND MORE REVIEWS</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Brief synopses of the types of reviews conducted by the Bureau are in order. Recall the three types of fair lending supervisory reviews: (1) ECOA Baseline Reviews, (2) ECOA Targeted Reviews, and (3) HMDA Data Integrity Reviews. Each of these has specific characteristics and goals. Let’s explore each of them.<b> </b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;"><b>ECOA Baseline Reviews</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">ECOA Baseline Reviews facilitate the identification of ECOA and Regulation B violations and impact the Bureau’s fair lending prioritization decisions. When an ECOA Baseline Review is scheduled, examiners work with the Office of Fair Lending and with CFPB regional management to determine the appropriate scope of the review, depending on the nature of the institution’s business model and the level of known fair lending risk at the institution.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">On July 19, 2013, the Bureau issued a set of ECOA Baseline Review Modules, which are used by CFPB examination teams when conducting ECOA Baseline Reviews.[xix] These modules are used to assess fair lending risks particular to three specific product lines – mortgage lending, mortgage servicing, and auto lending – but can generally be utilized to evaluate fair lending risk at any supervised institution and in any product line.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">When using the modules to conduct an ECOA Baseline Review, Bureau examiners review an institution’s fair lending supervisory history, including any history of fair lending risks or violations previously identified by the CFPB or any other federal or state regulator.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Then they collect and evaluate information about an entity’s fair lending compliance program, including board of director and management participation, policies and procedures, training materials, internal controls and monitoring and corrective action. In addition to responses obtained pursuant to information requests, the examiners may also review other sources of information, including any publicly available information about the entity as well as information obtained through interviews with institution staff or supervisory meetings with an institution.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The ECOA Baseline Review may produce administrative actions, since the review definitely can detect violations of ECOA. Targeted reviews may follow in the wake of adverse findings.<b> </b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;"><b>ECOA Targeted Reviews</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">If the Bureau’s risk-based prioritization process reveals that a particular institution’s business model, policies, or procedures present fair lending risks that warrant an in-depth review, the Bureau may conduct an ECOA Targeted Review of that institution. Generally, these reviews focus on a specific line of business, such as mortgages, credit cards, or auto finance. ECOA Targeted Reviews typically include statistical analyses and, in some cases, loan file reviews in order to evaluate an institution’s compliance with ECOA and Regulation B within the specific business line selected.[xx]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Statistics play a significant role in the ECOA Targeted Review, because the CFPB uses data analysis and testing to detect and assess disparities in an institution’s treatment of applicants and borrowers, by analyzing whether similarly-situated applicants and borrowers were treated differently because of a prohibited basis. If, during an ECOA Targeted Review, the Office of Fair Lending preliminarily determines that similarly-situated borrowers and applicants were treated differently or received different outcomes because of a prohibited basis, the Bureau will send a letter stating its preliminary findings and request the institution to provide additional information for consideration as the CFPB deliberates whether the institution has violated the ECOA.<b> </b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;"><b>HMDA Data Integrity Reviews</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Permit me to admonish you as strongly as possible: accurate HMDA data is critical to understanding fair lending risk at both the institutional level and across the home mortgage market. A CFPB examination team will call for the HMDA-LAR and carefully review its data. If there are data integrity concerns, the examiners will immediately have a problem with all manner of other aspects of the fair lending review, since they cannot rely on the HMDA data to conduct the review adequately.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The CFPB’s HMDA Data Integrity Reviews evaluate the accuracy of institutions’ HMDA data and assess whether institutions have adequate HMDA compliance management. Obviously, if there are substantive data integrity findings, the Bureau may determine not only that the examination has been unduly hampered but also that management is responsible for having caused the data integrity concerns. If management discovers that it had data integrity problems with the HMDA-LAR and did not correct them, perhaps through a refiling (if necessary), the Bureau will factor that lack of appropriate action into its overall findings.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The Bureau has conducted HMDA reviews at dozens of mortgage lenders, both bank and nonbank. Through these reviews, it detected some violations of HMDA. It also found that many lenders had instituted and maintained strong CMS procedures and had no violations of HMDA. To prepare for this type of review, the Bureau published its HMDA Resubmission Schedule and Guidelines, in early October 2013, which provides instruction and additional detail on the HMDA Data Integrity review process.<b> </b></span></div>
<div align="justify">
<br /></div>
<div style="text-align: center;">
<span style="font-size: small;"><b>ENFORCEMENT</b> </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">The Bureau has several tools at its disposal, as it has openly stated, to “promote fair, equitable, and nondiscriminatory access to credit,”[xxi] including its authority under ECOA, HMDA, and the Dodd-Frank Act to bring public enforcement actions.[xxii] For instance, as part of its enforcement authority, the CFPB may conduct investigations[xxiii] and issue civil investigative demands.[xxiv]</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="font-size: small;">Furthermore, the CFPB may conduct administrative hearings[xxv] or, through its independent litigating authority, commence a civil action in a federal or state court.[xxvi] In any such action, the CFPB may seek appropriate legal and equitable relief, such as restitution, payment of damages or other monetary relief, limits on the activities or functions of the person, and civil money penalties.[xxvii] When appropriate, the CFPB also refers “patterns or practices” of lending discrimination to the Department of Justice (DOJ).[xxviii]</span></div>
<div align="justify">
<br /></div>
<span style="font-size: x-small;"><span style="font-size: small;"> </span><div align="justify">
</div>
<span style="font-size: small;"> </span><div align="center">
*<u>Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</u><br />
Published in: <a href="http://nationalmortgageprofessional.com/">National Mortgage Professional Magazine (June 2014)</a></div>
<div align="justify">
<br />
</div>
<div align="justify">
<hr align="left" size="1" width="33%" />
</div>
</span> <div align="left">
<span style="font-size: x-small;">[i]</span><span style="font-size: x-small;"> Fair lending Report of the Consumer Financial Protection Bureau, issued April 30, 2014. </span><a href="http://www.consumerfinance.gov/reports/fair-lending-report/"><span style="font-size: x-small;">http://www.consumerfinance.gov/reports/fair-lending-report/</span></a> </div>
<div align="left">
<span style="font-size: x-small;">[ii]</span><span style="font-size: x-small;"> Idem, page 2</span> </div>
<div align="left">
<span style="font-size: x-small;">[iii]</span><span style="font-size: x-small;"> Op. cit. 1, page 4</span> </div>
<div align="left">
<span style="font-size: x-small;">[iv]</span><span style="font-size: x-small;"> Op. cit. 1, page 8</span> </div>
<div align="left">
<span style="font-size: x-small;">[v]</span><span style="font-size: x-small;"> 12 U.S.C. § 5493(c)(2)(D); 15 U.S.C. § 1691f; 12 U.S.C. § 2807</span> </div>
<div align="left">
<span style="font-size: x-small;">[vi]</span><span style="font-size: x-small;"> § 1013(c)(1)–(c)(2)(A), 124 Stat. at 1970</span> </div>
<div align="left">
<span style="font-size: x-small;">[vii]</span><span style="font-size: x-small;"> § 1013(c)(2)(B)–(C), 124 Stat. at 1970</span> </div>
<div align="left">
<span style="font-size: x-small;">[viii]</span><span style="font-size: x-small;"> <i>Lending Discrimination</i>, CFPB Bulletin 2012-04 (Fair Lending), April 18, 2012, </span> </div>
<div align="left">
<span style="font-size: x-small;">[ix]</span><span style="font-size: x-small;"> Op. cit. 1, page 6</span> </div>
<div align="left">
<span style="font-size: x-small;">[x]</span><span style="font-size: x-small;"> Op. cit. 1, page 9</span> </div>
<div align="left">
<span style="font-size: x-small;">[xi]</span><span style="font-size: x-small;"> <i>Memorandum of Understanding between The Consumer Financial Protection Bureau and The United States Department of Justice</i> <i>Regarding Fair Lending Coordination</i> (December 6, 2012). </span><a href="http://files.consumerfinance.gov/f/201212_cfpb_doj-fair-lending-mou.pdf"><span style="font-size: x-small;">http://files.consumerfinance.gov/f/201212_cfpb_doj-fair-lending-mou.pdf</span></a> </div>
<div align="left">
<span style="font-size: x-small;">[xii]</span><span style="font-size: x-small;"> Op. cit. 1, page 13</span> </div>
<div align="left">
<span style="font-size: x-small;">[xiii]</span><span style="font-size: x-small;"> Further information may be obtained from: Consumer Financial Protection Bureau, <i>Equal Credit Opportunity Act Baseline Review Modules</i> (July 19, 2013), </span><span style="font-size: x-small;"><a href="http://files.consumerfinance.gov/f/201307_cfpb_ecoa_baseline-review-module-fair-lending.pdf">http://files.consumerfinance.gov/f/201307_cfpb_ecoa_baseline-review-module-fair-lending.pdf</a></span><span style="font-size: x-small;">; Consumer Financial Protection Bureau, <i>Supervision and Examination Manual</i> (October 31, 2012), </span><span style="font-size: x-small;"><a href="http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf">http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf</a></span><span style="font-size: x-small;">; Consumer Financial Protection Bureau, <i>Supervisory Highlights: Fall 2012</i> (October 31, 2012), </span><a href="http://files.consumerfinance.gov/f/201210_cfpb_supervisory-highlights-fall-2012.pdf"><span style="font-size: x-small;">http://files.consumerfinance.gov/f/201210_cfpb_supervisory-highlights-fall-2012.pd</span></a> </div>
<div align="left">
<span style="font-size: x-small;">[xiv]</span><span style="font-size: x-small;"> Op. cit. 1, p 14</span> </div>
<div align="left">
<span style="font-size: x-small;">[xv]</span><span style="font-size: x-small;"> 12 U.S.C. § 2803(b)</span> </div>
<div align="left">
<span style="font-size: x-small;">[xvi]</span><span style="font-size: x-small;"> Dodd-Frank Act, § 1071(a)</span> </div>
<div align="left">
<span style="font-size: x-small;">[xvii]</span><span style="font-size: x-small;"> <i>Letter from Leonard Kennedy, CFPB General Counsel, to Chief Executive Officers of Financial Institutions under Section 1071 of the Dodd-Frank Act</i> (April 11, 2011), </span><a href="http://files.consumerfinance.gov/f/2011/04/GCletter-re-1071.pdf"><span style="font-size: x-small;">http://files.consumerfinance.gov/f/2011/04/GCletter-re-1071.pdf</span></a> </div>
<div align="left">
<span style="font-size: x-small;">[xviii]</span><span style="font-size: x-small;"> Op. cit. 1, p 16</span> </div>
<div align="left">
<span style="font-size: x-small;">[xix]</span><span style="font-size: x-small;"> Consumer Financial Protection Bureau, <i>ECOA Baseline Review Modules</i> (July 19, 2013), </span><span style="font-size: x-small;"><a href="http://www.consumerfinance.gov/f/201307_cfpb_ecoa_baseline-review-module-fair-lending.pdf">http://www.consumerfinance.gov/f/201307_cfpb_ecoa_baseline-review-module-fair-lending.pdf</a></span> </div>
<div align="left">
<span style="font-size: x-small;">[xx]</span><span style="font-size: x-small;"> Op. cit. 1, p 20</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxi]</span><span style="font-size: x-small;"> Op. cit. 1, p 20</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxii]</span><span style="font-size: x-small;"> 15 U.S.C. § 1691c(a)(9); 12 U.S.C. § 2804(b)(1)(B), (d); §§ 5563–5564</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxiii]</span><span style="font-size: x-small;"> 12 U.S.C. § 5562</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxiv]</span><span style="font-size: x-small;"> Idem, § 5562(c)</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxv]</span><span style="font-size: x-small;"> Op. cit. 20, § 5563</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxvi]</span><span style="font-size: x-small;"> Op. cit. 20, § 5564</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxvii]</span><span style="font-size: x-small;"> Op. cit. 20, § 5565</span> </div>
<div align="left">
<span style="font-size: x-small;">[xxviii]</span><span style="font-size: x-small;"> Op. cit. 9. Also see 15 U.S.C. § 1691e(g)</span></div>
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-56152231681030026222014-01-27T15:00:00.001-05:002014-01-27T15:00:47.592-05:00Diversity and InclusionIn January 2012, the Consumer Financial Protection Bureau (“Bureau”) launched the Office of Minority and Women Inclusion (“OMWI”).[i] Then, in March 2013, the OWMI published its <i>Annual Report to Congress</i> (“Report”) about the Bureau’s due diligence review of diversity and inclusion in certain work environments. The period subject to review was January 1, 2012 to December 31, 2012. The Report produced statistical diversity findings relating to the Bureau and other federal agencies and, importantly, indicated a mission to produce diversity findings for regulated entities.[ii]<br />
<br />
The Dodd-Frank Act (“Dodd-Frank”) created not only the Bureau’s OWMI but also similar offices at other federal financial regulatory agencies (collectively, the “Agencies”),[iii] tasking them with advising on the impact of the policies and regulations regarding minority-owned and women-owned businesses (collectively, the “OWMIs”).<br />
<br />
The follow-up to these studies was the goal of developing standards for (1) equal employment opportunity and the racial, ethnic, and gender diversity of the agency workforce and senior management; (2) increased participation of minority-owned and women-owned businesses in the programs and contracts of the agency; and (3) assessing the diversity policies and practices of entities regulated by the agency.[iv]<br />
<br />
The Report noted that in February 2013 the Bureau entered into a Memorandum of Understanding with the Equal Employment Opportunity Commission to access employment demographic survey data. That data will provide the analytical and statistically derived composition of regulated entities. The intent on the part of the Bureau and the OWMIs was to develop common standards for assessing the diversity policies and practices of regulated entities and publish a proposal of these standards for public comment sometime in 2013.[v]<br />
<br />
On October 23, 2013, the Federal Agencies announced their “common standards” proposal, entitled <i>Joint Standards for Assessing Diversity Policies and Practices of Regulated Entities</i> (“Proposal”).[vi] This is an Interagency Proposal that is meant to “promote transparency and awareness of diversity policies and practices within the institutions.”[vii]<br />
<br />
The Proposal sets forth four areas:<br />
<br />
1. Organizational commitment to diversity and inclusion; <br />
2. Workforce profile and employment practices; <br />
3. Procurement and business practices and supplier diversity; and <br />
4. Practices to promote transparency of organizational diversity and inclusion.<br />
<br />
In developing these proposed standards, the Agencies have expressed their view that there are operative variables, such as an institution’s asset size, number of employees, governance structure, income, number of members or customers, contract volume, location, and community characteristics.<br />
<br />
The Agencies notified the public that their respective OMWI Directors held roundtable discussions with a range of parties, including “representatives from depository institutions, holding companies, credit unions, and industry trade groups to solicit input on assessment standards and to learn about the challenges and successes of current diversity programs and policies.”[viii] Roundtable discussions also were held with financial professionals, consumer advocates, and community representatives to gain a greater understanding of issues facing minorities and women in employment and in business contracting in the financial sector.[ix]<br />
<br />
The Proposal was published in the Federal Register on October 25, 2013, entitled <i>Notice of Proposed Interagency Policy Statement with request for Public Comment</i>.[x] For a period of 60 days from its publication date, this policy statement was available for public comment.[xi] The comments were due by December 24, 2013. To allow the public more time to consider the proposed standards, the Agencies extended the comment period to February 7, 2014. Thus, comments must be received on or before February 7, 2014.[xii]<br />
<br />
It is important to institute a policy and procedures for implementing the requirements set forth in the Proposal. In anticipation of the Final Rule, the following provides an outline both of the diversity requirements and the recommended features of a policy statement for diversity and inclusion.<b> </b><br />
<br />
<b>Diversity: Policies, Practices, and Standards</b><br />
<br />
It should be noted that diversity policies, procedures, practices, and standards of the entities regulated by the Agencies would take into consideration an individual entity’s size and other characteristics, such as total assets, number of employees, governance structure, revenues, number of members and/or customers, contract volume, geographic location, and community characteristics. These characteristics are to be taken into account when establishing an individual entity’s standards.<b> </b><br />
<br />
<b>Organizational Commitment to Diversity and Inclusion</b><br />
<br />
The Agencies provide their philosophical position with respect to organizational commitment on the part of an entity’s management. According to the Proposal, “leadership of a successful organization demonstrates its commitment to diversity and inclusion. Leadership comes from the governing body such as a board of directors, senior officials, and those managing the organization on a day-to-day basis.”<br />
<br />
<b><u>Standards</u></b><br />
<br />
The Proposal offers a ‘high-level’ standard that is meant to promote diversity and inclusion both in employment and contracting. The corporate culture that embraces diversity and inclusion would adopt the following standards:<br />
<br />
· The regulated entity includes diversity and inclusion considerations in both employment and contracting as an important part of its strategic plan including hiring, recruiting, retention and promotion.<br />
<br />
· The entity has a diversity and inclusion policy that is approved and supported by senior leadership, including senior management and the board of directors.<br />
<br />
· The entity provides regular progress reports to the board and/or senior management.<br />
<br />
· The entity conducts equal employment opportunity and diversity and inclusion education and training on a regular and periodic basis.<br />
<a name='more'></a><br />
<br />
· The entity has a senior level official who oversees and directs the entity’s diversity efforts. For some institutions, these responsibilities are assigned to an executive-level Chief Diversity Officer (or equivalent position) with dedicated including women and minorities, in its hiring, recruiting, retention, and promotion, as well as in its selection of board members, senior management, and other senior leadership positions.<b> </b><br />
<br />
<b>Workforce Profile and Employment Practices</b><br />
<br />
In the Proposal, the Agencies state that “many entities promote the fair inclusion of minorities and women in their workforce by publicizing employment opportunities, creating relationships with minority and women professional organizations and educational institutions, creating a culture that values the contribution of all employees, and encouraging focus on these objectives when evaluating performance of managers.” It is expected that entities with diversity and inclusion programs will regularly evaluate their programs and identify areas that can be improved.<br />
<br />
The Agencies take the position that entities use various analytical tools to evaluate a wide range of business objectives, including metrics to track and measure the inclusiveness of their workforce (i.e., race, ethnicity, and gender). Regulated entities that are subject to the Equal Employment Opportunity Commission (“EEOC”) and the Office of Federal Contract Compliance Programs (“OFCCP”) reporting requirements currently provide data and supporting documentation that serve as analytical tools to evaluate diversity and inclusion programs.[xiii]<br />
<br />
For entities not subject to the EEOC and OFCCP reporting requirements, the following outline may serve as a model for data analysis in order to evaluate and assess diversity efforts.<br />
<br />
<b><u>Standards</u></b><br />
<br />
· An entity that files an annual EEO–1 Report as required by Title VII of the Civil Rights Act of 1964, or otherwise tracks their workforce data, uses the data to evaluate and assess workforce diversity and inclusion efforts.<br />
<br />
· An entity that prepares annual Affirmative Action Plans as required by Executive Order 11246 under the jurisdiction of the OFCCP uses those plans to evaluate and assess workforce diversity and inclusion efforts.<br />
<br />
· The entity utilizes metrics to evaluate and assess workforce diversity and inclusion efforts, such as recruitment, applicant tracking, hiring, promotions, separations (voluntary and involuntary), career development support, coaching, executive seminars and retention across all levels and occupations of the organization including executive and managerial ranks.<br />
<br />
· The entity holds management accountable for diversity and inclusion efforts.<br />
<br />
· The entity has policies and practices that create diverse applicant pools for both internal and external opportunities that may include: <br />
<blockquote class="tr_bq">
o Outreach to minority and women organizations; </blockquote>
<blockquote class="tr_bq">
o Outreach to educational institutions serving significant minority and women student populations; and </blockquote>
<blockquote class="tr_bq">
o Participation in conferences, workshops, and other events to attract minorities and women and inform them of employment and promotion opportunities. </blockquote>
<b>Procurement and Business Practices—Supplier Diversity</b><br />
<br />
According to the Proposal, the Agencies assert that they “recognize that there is limited public information available on supplier diversity at regulated entities and it may be more challenging to compare supplier diversity policies and practices among regulated entities. Some smaller institutions may also face greater challenges in gathering such information.” Nevertheless, the Proposal sets forth certain standards that place the responsibility on regulated entities to vet their vendors in light of their vendors’ diversity and inclusion practices.<br />
<br />
The Agencies take this view because they consider the challenge to be similar to workforce profile and employment practices. (Supra) Thus, as in the employment context, the Agencies contend that entities often use metrics to know the baseline of how much they spend on procuring goods and services and contracting for other business services, how much they spend with minority-owned and women-owned businesses, the availability of relevant minority- owned and women-owned businesses, and the growth in usage over time. It follows, then, in their view, that “entities can use outreach methods to inform minority-owned and women-owned businesses (and affinity groups representing these constituencies) of the availability of resources to support diversity strategies these opportunities and the mechanism and initiatives.”<br />
<br />
Methodologically, the Agencies believe that entities’ “prime contractors” often use subcontractors to fulfill the obligations of various contracts. Therefore, the use of minority-owned and women-owned businesses as subcontractors provides valuable opportunities for both the minority-owned and women-owned businesses as well as for the prime contractor. The view, apparently, is best expressed in the Proposal’s statement that “the prime contractor can use this opportunity to work with minority-owned and women-owned businesses, and can expand the prime contractor’s own capability under the contract.” Furthermore, the Proposal suggest that entities can encourage the use of minority-owned and women-owned subcontractors by incorporating this objective in their business contracts.<b> </b><br />
<br />
<b>Standards</b><br />
<br />
· The entity has a supplier diversity policy that provides for a fair opportunity for minority-owned and women-owned businesses to compete in procurements of business goods and services. This includes contracts of all types, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of assets of the entity, and the making of equity investments by the entity.<br />
<br />
· The entity has methods to evaluate and assess its supplier diversity, which may include metrics and analytics related to: <br />
<blockquote class="tr_bq">
o Annual contract spending by the entity; </blockquote>
<blockquote class="tr_bq">
o Percentage spent with minority-owned and women-owned business contractors by race, ethnicity, and gender; </blockquote>
<blockquote class="tr_bq">
o Percentage of contracts with minority-owned and women-owned business sub-contracts; and </blockquote>
<blockquote class="tr_bq">
o Demographics of the workforce for contractors and subcontractors. </blockquote>
· The entity has practices to promote a diverse supplier pool which may include: <br />
<blockquote class="tr_bq">
o Outreach to minority-owned and women-owned contractors and representative organizations; </blockquote>
<blockquote class="tr_bq">
o Participation in conferences, workshops and other events to attract minority-owned and women-owned firms and inform them of contracting opportunities; and </blockquote>
<blockquote class="tr_bq">
o An ongoing process to publicize its procurement opportunities. </blockquote>
<b>Practices to Promote Transparency of Organizational Diversity and Inclusion</b><br />
<br />
How an organization goes about promoting transparency and organizational diversity is a critical component that the Agencies will evaluate. It is their view that diversity policy statements should be evinced by providing public information that allows the public to assess those policies and practices.<br />
<br />
This view is predicated, philosophically, on the premise that making public an entity’s “commitment to diversity and inclusion, its plans for achieving diversity and inclusion, and its metrics used to measure success in both workplace and supplier diversity, informs a broad constituency – its investors, employees, potential employees and suppliers, customers, and the general community.”<br />
<br />
Entities can publicize information on their diversity and inclusion efforts through normal business methods, which can include, among other things, displaying information on their websites, in their promotional materials, and in their annual reports to shareholders (if applicable). Publication of this information can open new markets to new communities and can illustrate the progress that has been made toward an important business goal.<b> </b><br />
<br />
<b>Standards</b><br />
<br />
· A diversity and inclusion strategic plan;<br />
<br />
· Commitment to diversity and inclusion; and<br />
<br />
· Progress toward achieving diversity and inclusion in workforce and procurement activities, which may include: <br />
<blockquote class="tr_bq">
o Current workforce and supplier demographic profiles; </blockquote>
<blockquote class="tr_bq">
o Current employment and procurement opportunities; </blockquote>
<blockquote class="tr_bq">
o Forecasts of potential employment and procurement opportunities; and </blockquote>
<blockquote class="tr_bq">
o Availability and use of mentorship and developmental programs for employees and contractors.<b> </b></blockquote>
<b>Proposed Approach to Assessment</b><br />
<br />
An evaluation of an entity’s diversity and inclusion policy is a crucial element in determining compliance with the proposed standards. The term that the Agencies have adopted for this evaluation is “assessment,” because the term ‘‘assessment’’ contemplates both self-assessment and an opportunity for the Agencies and the public to understand the diversity policies and practices of regulated entities.<br />
<br />
The assessment envisioned by the Agencies is not one of a traditional examination or other supervisory assessment. Thus, the Agencies do not plan to use the examination or supervision process in connection with the proposed standards.[xiv]<br />
<br />
A model assessment would include:<br />
<br />
· A self-assessment utilizing the proposed standards to conduct a quantitative and qualitative evaluation of the diversity and inclusion policies and practices.<br />
<br />
· Voluntary disclosure to the appropriate Federal Agency of the self-assessment and other information the entity deems relevant. The Agencies will monitor the information submitted over time for use as a resource in carrying out their diversity and inclusion responsibilities.<br />
<br />
· The entity displays information on its public website and in its annual reports, and in other materials, regarding its efforts to comply with these proposed standards as an opportunity for more public awareness and understanding of its diversity policies and practices. The Agencies may periodically review information on regulated entities’ public websites to monitor diversity and inclusion practices.<b> </b><br />
<br />
<b>Diversity Questions</b><br />
<br />
Given the foregoing analysis, there are certain questions that should be considered in the promulgating of the Proposal. Each of the following six questions are relevant to the discussion, and management of regulated entities ought to give them due consideration.<br />
<br />
1. Are the proposed standards effective and appropriate to promote diversity and inclusion? Why or why not? If not, what standards would be appropriate and why? How would such standards support or hinder the objectives of section 342?<br />
<br />
2. Are the proposed standards sufficiently flexible but still effective to allow meaningful assessments of entities with a wide range of particular characteristics or circumstances (i.e., asset size; number of employees; contract volume; income stream; and number of members and/or customers)?<br />
<br />
3. Are there other ways to approach the standards for smaller entities, such as those with small contracting dollar volumes or those not required to file EEO–1 reports? What other approaches or characteristics would be appropriate for any such alternative, modified or scaled approach? How would such modification or scaling support or hinder the objectives of section 342?<br />
<br />
4. What other factors, if any, would be useful in assessing the diversity policies and practices of the regulated entities, and why should such factors be considered? How would such factors support or hinder the objectives of section 342?<br />
<br />
5. Is the proposed model approach to assessment effective and appropriate to promote diversity and inclusion? Why or why not? If not, what approach would be appropriate and why? How would such approach support or hinder the objectives of Section 342?<br />
<br />
6. Would there be potential advantages or disadvantages of the proposed model approach to assessment? If so, what would they be?<br />
<br />
<div style="text-align: center;">
__________________________________________________________</div>
<div style="text-align: center;">
<span style="font-size: x-small;">Jonathan Foxx is the President & Managing Director of Lenders Compliance Group <br />Published in: National Mortgage Professional Magazine [January 2014] </span> </div>
<br />
<hr align="left" size="1" width="33%" />
<span style="font-size: x-small;">[i] Consumer Financial Protection Bureau, Office of Minority and Women Inclusion, Annual Report to Congress, Calendar Year 2012 </span><br />
<span style="font-size: x-small;">[ii] Ibid. Section 5 </span><br />
<span style="font-size: x-small;">[iii] Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Securities and Exchange Commission </span><br />
<span style="font-size: x-small;">[iv] Section 342, <i>Dodd–Frank Wall Street Reform and Consumer Protection Act</i> (Public Law 111–203, H.R. 4173) </span><br />
<span style="font-size: x-small;">[v] Op. Cit. 1, Section 5 </span><br />
<span style="font-size: x-small;">[vi] <i>Federal Financial Regulators Proposing Joint Standards for Assessing Diversity Policies and Practices of Regulated Entities Pursuant to Section 342 of the Dodd- Frank Act</i>, Press Release </span><br />
<span style="font-size: x-small;">[vii] Ibid. </span><br />
<span style="font-size: x-small;">[viii] Ibid. </span><br />
<span style="font-size: x-small;">[ix] Ibid. </span><br />
<span style="font-size: x-small;">[x] <i>Proposed Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies and Request for Comment</i>, Federal Register / Vol. 78, No. 207 / Friday, October 25, 2013 / Notices. In my outline, I will draw heavily on the Proposal. </span><br />
<span style="font-size: x-small;">[xi] Ibid. </span><br />
<span style="font-size: x-small;">[xii] Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Notices, 77792 </span><br />
<span style="font-size: x-small;">[xiii] Ibid. Footnote 2. The Employer Information Report EEO–1 (EEO– 1 Report) is required to be filed annually with the EEOC by (a) private employers with 100 or more employees or (b) federal contractors who have 50 or more employees, and are prime contractors or first-tier subcontractors, with contracts of $50,000 or more. </span><br />
<span style="font-size: x-small;">[xiv] Entities that are required to file an EEO–1 Report are encouraged to use the proposed standards to develop and monitor diversity policies and practices. Entities that do not file EEO–1 Reports may also consider using the standards in a manner reflective of the individual entity’s size and other characteristics.</span><br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-69252122804227114802014-01-06T11:50:00.001-05:002014-01-06T11:50:39.773-05:00The Hedgehog and the Fox: A Regulatory Parable<div style="text-align: justify;">
The 7<sup>th</sup> century BCE Greek lyric poet, Archilochus, observed: "the fox knows many things, but the hedgehog knows one big thing.”[i] Twenty-two centuries later, Erasmus transliterated Archilochus’s dictum by precisely rendering it into the Latin aphorism: “multa novit vulpes, verum echinus unum magnum.”[ii] When it comes to these two ways of thinking and acting, things didn’t change much between the 7<sup>th</sup> century BCE and the 16<sup>th</sup> century CE, when Erasmus penned his elucidation.<br />
<br />
Isaiah Berlin, the British political philosopher, whose life span stretched nearly the whole 20<sup>th</sup> century,[iii] wrote a well-known essay in 1953, inspired by Archilochus’s apothegm. It was entitled “The Hedgehog and the Fox: An Essay on Tolstoy's View of History.”[iv]<br />
<br />
Of Berlin’s essay, Arnold Toynbee, one of the great historians of our time, wrote:<b> </b><br />
<br />
<b>“This fragment of verse by the Greek poet Archilochus describes the central thesis of Isaiah Berlin's masterly essay on Tolstoy, in which he underlines a fundamental distinction between those people (foxes) who are fascinated by the infinite variety of things and those (hedgehogs) who relate everything to a central, all embracing system.”</b>[v]<br />
<br />
Since its inception, it seemed clear to me that the Consumer Financial Protection Bureau (the “Bureau”) is a hedgehog. It tends to view the world through the lens of a single defining idea: consumer financial protection. In accordance with this idea, the Bureau exercises this vision through a single, predominant, and coherent framework of regulations. As a hedgehog, the Bureau stays focused on this one foundational principle and repeatedly, unvaryingly, and rigidly seeks to implement that overriding proposition by applying the same methods and solutions, usually to the exclusion of other possible remedies.<br />
<br />
This predilection is not simply a matter of judgment or style. Hedgehogs actually have one grand theory which they seek to extend into many domains, furthering their rule through a fervent belief in the guiding principle. They express their views with confidence; assurance; coolness; obstinacy; unrelenting drive; generally rigid adherence to an impliable mission; unwavering obedience and devotion to a regnant objective; a proclivity to roll results up into an aggregate value; and, a tendency to express themselves with such idiomatic phrases as “mission critical,” “the ends justify the means,” “by and large,” “ball-park figure,” “jack-of-all-trades,” “grand strategy,” “seeing the larger picture,” and “the system is the solution.” Usually, hedgehogs have a unique vision that gives rise to the ability to notice complex circumstances and discern the underlying patterns. In effect, their reach exceeds their grasp. Examples of hedgehogs are Plato, Dante, Proust and Nietzsche.<br />
<br />
Residential lenders and originators (the “RMLOs”) are, as a group, foxes - they draw on a wide variety of experiences and do not believe for a second that the world can be boiled down to a single idea, evinced through an all-embracing framework, howsoever cogent it appears to be.<br />
<br />
Foxes are skeptical about grand theories. They are constrained in their forecasts, and adaptive to actual events. They tend to be more accurate in their predictions than hedgehogs, since they are more agile in assigning probabilities to their expectations. While hedgehogs see the larger picture, thereby missing opportunities, foxes notice each and every pixel contributing to it, and thus quickly find opportunities. Because the fox is acutely aware of each part of the whole, it devises complex strategies to gain an advantage on the hedgehog. Often, it succeeds in its plans due to this advantage.<br />
<br />
The kinds of idiomatic expressions that foxes use are “zero in on something,” “devil's in the details,” “under construction,” “mixed feelings,” “barking up the wrong tree,” “at this stage,” “first in class”, “trying something new,” and “let’s get another pair of eyes on this matter.” Foxes are centrifugal: they pursue divergent ends and usually possess a sense of reality, which keeps them from designing a logistical framework that purports to contain all possibilities. They instinctively know that complexity does not conduce to a unitary structure. Although foxes may have a broad vision and much agility in complex interactions, often their grasp exceeds their reach. Examples of foxes are Montaigne, Balzac, Goethe and Shakespeare.<br />
<br />
Foxes pursue many ends at the same time, with much energy and cunning. They see the world in all its complexity. Hedgehogs simplify a complex world into a basic principle or concept that unifies and guides everything. Foxes tend to be scattered, diffused, and inconsistent. For hedgehogs, the world is reductive; that is, all challenges and dilemmas are reduced to simple hedgehog ideas, and anything that does not correlate to the hedgehog idea is without relevance. Hedgehogs see what is essential and ignore the rest.<br />
<br />
Generally, the fox’s style is often deprived of rigorous models, specific goals, and global metrics. Foxes learn incrementally, over many iterations of experience. The foxy RMLO has a succinct advantage in swaying the hedgehog Bureau, because it nimbly responds to new information, constantly reconfiguring its market knowledge in reaction to changing circumstances. Such vital information leads to greater performance and the ability to provide solutions that open up new ways for the Bureau to fine tune its single overarching vision.<br />
<br />
The Bureau has set compliance effective dates in January 2014 for many new rules that will affect RMLOs. As these rules go into effect, we enter the New Year noting a rather obvious example of the hedgehog’s vision and the fox’s hastening to fulfill it. Their relationship is bound by the unwavering path of the Bureau and the serpentine path of the RMLO. The Bureau’s grand vision presents a broad plan of action that must be implemented. In complying with the Bureau’s rules, the RMLO must bestir itself to be particularly attuned to working with the minutiae of details that are a part of the practical experience of actually originating and servicing residential mortgage loans.<br />
<br />
In 2014, here are three questions to keep in mind about the relationship between the Bureau and the RMLO:<b> </b><br />
<br />
<b>1) How prepared is your financial institution to comply with the Bureau’s expectations? </b></div>
<div style="text-align: justify;">
<b>2) Are you ready to implement the Bureau’s complex requirements? </b></div>
<div style="text-align: justify;">
<b>3) Does your company act like the visionary hedgehog or the nimble fox?</b><br />
<br />
Foxes are cunning and have the advantage of knowing how reality works, poking holes in the hedgehog’s grand scheme of things, even as the many spindled hedgehog rolls into a big bulky ball. But beware of that ball! The hedgehog and the fox have learned never to underestimate each other. Although the fox is clever, swift, skilled in action, and knows many tricks, the hedgehog knows one big decisive trick: it can roll itself into a ball of sharp and painful spikes! </div>
<div style="text-align: center;">
______________________________________________________ </div>
<div style="text-align: center;">
</div>
<div style="text-align: center;">
<span style="font-size: x-small;"><a href="http://lenderscompliancegroup.com/2.html">Jonathan Foxx</a></span></div>
<div style="text-align: center;">
<span style="font-size: x-small;"><b>President & Managing Director</b></span><br /><span style="font-size: x-small;"><b>Lenders Compliance Group</b></span><br /><span style="font-size: x-small;"><b>Brokers Compliance Group</b></span><b></b></div>
<div style="text-align: center;">
<span style="font-size: x-small;"><br /><a href="http://nationalmortgageprofessional.com/forms/lcgsubs">National Mortgage Professional Magazine - December 2013</a></span><br />
<br /></div>
<div style="text-align: justify;">
</div>
<hr size="1" style="margin-left: 0px; margin-right: 0px;" width="33%" />
<div style="text-align: justify;">
<br />
[i] Archilochos (c. 680–c. 645 BC) was a Greek lyric poet from the island of Paros in the Archaic period. </div>
<div style="text-align: justify;">
[ii] <i>Adagia</i>, ("Erasmus") Desiderius Erasmus Roterodamus (October 27, 1466-July 12, 1536), Paris, 1500, from Robert Bland, <i>Proverbs, Chiefly Taken from the Adagia of Erasmus, with Explanations; and Further Illustrated by Corresponding Examples from the Spanish, Italian, French & English Languages</i>, Volumes 1-2, London, 1814 </div>
<div style="text-align: justify;">
[iii] Sir Isaiah Berlin, (June 6, 1909-November 5, 1997), British social and political theorist, philosopher and historian of ideas. </div>
<div style="text-align: justify;">
[iv] Berlin, Isaiah, <i>The Hedgehog and the Fox: An Essay on Tolstoy's View of History</i>, Weidenfeld & Nicolson, London, 1953. </div>
<div style="text-align: justify;">
[v] Idem</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-62791677481055291542013-12-13T16:35:00.001-05:002013-12-13T16:37:45.546-05:00Social Media: Consumer Compliance Risk Management GuidanceOn December 11, 2013, the Federal Financial Institutions Examination Council (FFIEC) released final guidance (“Guidance”) on the applicability of consumer protection and compliance laws, regulations, and policies to activities conducted via social media by banks, savings associations, and credit unions, as well as nonbank entities supervised by the Consumer Financial Protection Bureau (collectively, “financial institutions”). The Guidance was issued final on behalf of the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve (Board), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), the Consumer Financial Protection Bureau (CFPB) (collectively, the “Agencies”), and the State Liaison Committee (SLC).<br />
<br />
The Guidance is intended to help financial institutions understand potential consumer compliance and legal risks, as well as related risks, such as reputation and operational risks associated with the use of social media, along with expectations for managing those risks. It also provides considerations that financial institutions may find useful in conducting risk assessments and crafting and evaluating policies and procedures regarding social media. Although this Guidance does not impose any new requirements on financial institutions, as with any process or product channel, financial institutions are expected to manage potential risks associated with social media usage and access.<br />
<br />
The Final Rule is meant to highlight and manage potential risks to financial institutions and consumers; however, financial institutions should ensure their risk management programs provide oversight and controls commensurate with the risks presented by the types of social media in which the financial institution is engaged, including, but not limited to, the risks outlined within the Guidance.<br />
<br />
In this article, I will set forth an outline of the Guidance along with suggestions to manage the risks associated with the use of social media.* I have also published a helpful article on this topic, entitled <a href="http://lenderscompliancegroup.com/20.html">Social Media and Networking Compliance</a>, which may be downloaded from our Library.<b> </b><br />
<br />
<b>WHAT IS SOCIAL MEDIA?</b><br />
<br />
For purposes of the Guidance, messages sent via traditional email or text message, standing alone, do not constitute social media, although such communications may be subject to a number of laws and regulations discussed in the Guidance. However, messages sent through social media channels are social media. According to the Guidance, social media is considered to be a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video. Social media can take many forms, including, but not limited to, micro-blogging sites; forums, blogs, customer review web sites and bulletin boards; photo and video sites; sites that enable professional networking; virtual worlds; and social games. Social media can be distinguished from other online media in that the communication tends to be more interactive.<b> </b><br />
<br />
<b>RISK MANAGEMENT PROGRAM</b><br />
<br />
The Guidance suggests that a financial institution should have a risk management program that allows it to identify, measure, monitor, and control the risks related to social media. The size and complexity of the risk management program should be commensurate with the breadth of the financial institution’s involvement in this medium.<br />
<br />
For instance, a financial institution that relies heavily on social media to attract and acquire new customers should have a more detailed program than one using social media only to a very limited extent. An observation made in the Guidance, and worth noting, is though a financial institution’s own risk assessment indicates that it has chosen not to use social media, nevertheless, it should “still consider the potential for negative comments or complaints that may arise within the many social media platforms”, and, when appropriate, evaluate what, if any, action it will take to monitor for such comments and determine if a response is needed.<b> </b><br />
<br />
<b>FEATURES OF A RISK MANAGEMENT PROGRAM</b><br />
<br />
The risk management program should be designed with participation from specialists in compliance, technology, information security, legal, human resources, and marketing. Financial institutions should also provide guidance and training for employee official use of social media.<br />
<br />
The Guidance stipulates at least seven components of a risk management program. These include, but are not limited to:<br />
<br />
1. A governance structure with clear roles and responsibilities whereby the board of directors or senior management direct how using social media contributes to the strategic goals of the institution (for instance, through increasing brand awareness, product advertising, or researching new customer bases) and establishes controls and ongoing assessment of risk in social media activities;<br />
<br />
2. Policies and procedures (either stand-alone or incorporated into other policies and procedures) regarding the use and monitoring of social media and compliance with all applicable consumer protection laws and regulations, and incorporation of guidance as appropriate. Further, policies and procedures should incorporate methodologies to address risks from online postings, edits, replies, and retention;<br />
<br />
3. A risk management process for selecting and managing third-party relationships in connection with social media;<br />
<br />
4. An employee training program that incorporates the institution’s policies and procedures for official, work-related use of social media, and potentially for other uses of social media, including defining impermissible activities;<br />
<br />
5. An oversight process for monitoring information posted to proprietary social media sites administered by the financial institution or a contracted third party;<br />
<br />
6. Audit and compliance functions to ensure ongoing compliance with internal policies and all applicable laws and regulations, and incorporation of guidance as appropriate; and<br />
<br />
7. Parameters for providing appropriate reporting to the financial institution’s board of directors or senior management that enable periodic evaluation of the effectiveness of the social media program and whether the program is achieving its stated objectives.<b> </b><br />
<br />
<b>WHAT ARE THE RISKS?</b><br />
<br />
The use of social media to attract and interact with customers can impact a financial institution’s risk profile, including:<br />
<br />
· Risk of harm to consumers<br />
· Compliance and legal risks<br />
· Operational risks, and<br />
· Reputation risks.<br />
<br />
In our own reviews on behalf of our clients, we have found that the foregoing risks are increased due to poor due diligence, oversight, or control on the part of the financial institution.<br />
<br />
Let us now give consideration to each of the Risk Areas, with respect to the risks posed by Social Media. Suggestions are emboldened in each synopsis.<br />
<br />
<a name='more'></a><br />
<b>COMPLIANCE AND LEGAL RISKS</b><br />
<br />
Compliance and legal is best defined as the risk arising from the potential for violations of, or non-conformance with, laws, rules, regulations, prescribed practices, internal policies and procedures, or ethical standards.<br />
<br />
These risks also arise in situations where the financial institution’s policies and procedures governing certain products or activities may not have kept pace with changes in the marketplace and technology. The potential for defamation or libel risk exists where there is broad distribution of information exchanges. Failure to adequately address these risks can expose an institution to enforcement actions and/or civil lawsuits.<br />
<br />
The laws and regulations discussed in the Guidance do not contain exceptions regarding the use of social media. Therefore,<b> to the extent that a financial institution uses social media to engage in lending, deposit services, or payment activities, it must comply with applicable laws and regulations just as when it engages in these activities through other media.</b> Financial institutions should remain aware of developments involving such laws and regulations.<br />
<br />
The following laws and regulations are stated in the Guidance and may be relevant to a financial institution’s social media activities. This list is not meant to be all-inclusive. Each financial institution should ensure that it periodically evaluates and controls its use of social media to ensure compliance with all applicable federal, state, and local laws and regulations, and incorporation of guidance, as appropriate.<b> </b><br />
<br />
<b>DEPOSIT AND LENDING PRODUCTS</b><br />
<br />
Social media may be used to market products and originate new accounts. When used to do either, a financial institution is expected to take steps to ensure that advertising, account origination, and document retention are performed in compliance with applicable consumer protection and compliance laws and regulations.<br />
<br />
These measures may include, but are not limited to:<br />
<br />
<b><u>Truth in Savings Act/Regulation DD and Part 707</u></b><br />
<br />
The Truth in Savings Act (TISA), as implemented by Regulation DD, and, for credit unions, by Part 707 of the NCUA Rules and Regulations, imposes disclosure requirements designed to enable consumers to make informed decisions about deposit accounts. Regulation DD and Part 707 require disclosures about fees, annual percentage yield (APY), interest rate, and other terms. Under Regulation DD and Part 707, a depository institution may not advertise deposit accounts in a way that is misleading or inaccurate or misrepresents the depository institution’s deposit contract.<b> </b><br />
<br />
<b>If an electronic advertisement displays a triggering term, such as “bonus” or “APY,” then Regulation DD and Part 707 require the advertisement to clearly state certain information, such as the minimum balance required to obtain the advertised APY or bonus.</b> For example, an electronic advertisement can provide the required information via a link that directly takes the consumer to the additional information.<b><u></u></b><br />
<br />
<b><u>Fair Lending Laws: Equal Credit Opportunity Act/Regulation B and Fair Housing Act</u></b><br />
<br />
A financial institution should ensure that its use of social media does not violate fair lending laws and regulations.<br />
<br />
The Equal Credit Opportunity Act (ECOA), as implemented by Regulation B, prohibits creditors from making any oral or written statement, in advertising or other marketing techniques, to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application. However, a creditor may affirmatively solicit or encourage members of traditionally disadvantaged groups to apply for credit, especially groups that might not normally seek credit from that creditor.<br />
<br />
Creditors must <b>observe the time frames outlined under Regulation B for notifying applicants of the outcome of their applications or requesting additional information for incomplete applications, whether those applications are received via social media or through other channels.</b> As with all prescreened solicitations, a creditor must preserve prescreened solicitations disseminated through social media, as well as the prescreening criteria, in accordance with Regulation B.<br />
<br />
The Fair Housing Act (FHA), among other things, prohibits discrimination based on race, color, national origin, religion, sex, familial status, or handicap in the sale and rental of housing, in mortgage lending, and in appraisals of residential real property. In addition, the FHA makes it unlawful to advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition applies to all advertising media, including social media sites. For example, <b>if a financial institution engages in residential mortgage lending and maintains a presence on Facebook, the Equal Housing Opportunity logo must be displayed on its Facebook page, as applicable.<u></u></b><br />
<br />
<b><u>Truth in Lending Act/Regulation Z</u></b><br />
<br />
Any social media communication in which a creditor advertises credit products must comply with Regulation Z’s advertising provisions. Regulation Z broadly defines advertisements as any commercial messages that promote consumer credit, and the official commentary to Regulation Z states that the regulation’s advertising rules apply to advertisements delivered electronically. In addition, Regulation Z is designed to promote the informed use of consumer credit by requiring disclosures about loan terms and costs. The disclosure requirements vary based on whether the credit is open-end or closed-end. Further, within those two broad categories, additional specific requirements apply to certain types of loans such as private education loans, home secured loans, and credit card accounts.<br />
<br />
Regulation Z requires that advertisements relating to credit present certain information in a clear and conspicuous manner. It includes requirements regarding the proper disclosure of the annual percentage rate and other loan features. If an advertisement for credit states specific credit terms, it must state only those terms that actually are or will be arranged or offered by the creditor.<br />
<br />
For electronic advertisements, such as those delivered via social media, Regulation Z permits providing the required information on a table or schedule that is located on a different page from the main advertisement if that table or schedule is clear and conspicuous and the advertisement clearly refers to the page or location.<br />
<br />
Regulation Z requires that, for consumer loan applications taken electronically<b> the financial institution must provide the consumer with all Regulation Z disclosures within the required time frames. Regulation Z does not exempt applications taken via social media.</b><br />
<br />
<b><u>Real Estate Settlement Procedures Act</u></b><br />
<br />
Section 8 of the Real Estate Settlement Procedures Act (RESPA) prohibits certain activities in connection with federally related mortgage loans. These prohibitions include fee splitting, as well as giving or accepting a fee, kickback, or thing of value in exchange for referrals of settlement service business. <b>RESPA also has specific timing requirements for certain disclosures. These requirements apply to applications taken electronically, including via social media.<u></u></b><br />
<br />
<b><u>Fair Debt Collection Practices Act</u></b><br />
<br />
The Fair Debt Collection Practices Act (FDCPA) restricts how debt collectors (generally defined as third parties collecting others’ debts and entities collecting debts on their own behalf if they use a different name) may collect debts. The FDCPA generally prohibits debt collectors from publicly disclosing that a consumer owes a debt. Using social media to inappropriately contact consumers, or their families and friends, may violate the restrictions on contacting consumers imposed by the FDCPA. <b>Communicating via social media in a manner that discloses the existence of a debt or to harass or embarrass consumers about their debts (i.e., a debt collector writing about a debt on a Facebook wall) or making false or misleading representations may violate the FDCPA.<u> </u></b><br />
<br />
<b><u>Unfair, Deceptive, or Abusive Acts or Practices</u></b><br />
<br />
Section 5 of the Federal Trade Commission (FTC) Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” Sections 1031 and 1036 of the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibit unfair, deceptive, or abusive acts or practices. An act or practice can be unfair, deceptive, or abusive despite technical compliance with other laws. A financial institution should not engage in any advertising or other practice via social media that could be deemed “unfair,” “deceptive,” or “abusive.” Of course, any determination as to whether an act or practice engaged through social media is unfair, deceptive, or abusive, will necessarily be fact-specific. As with other forms of communication, <b>a financial institution should ensure that information it communicates on social media sites is accurate, consistent with other information delivered through electronic media, and not misleading.</b><br />
<br />
<b>DEPOSIT INSURANCE AND SHARE INSURANCE</b><br />
<br />
A number of requirements regarding FDIC or NCUA membership and deposit insurance or share insurance apply equally to advertising and other activities conducted via social media as they do in other contexts.<i> </i><br />
<br />
<i>Advertising and Notice of FDIC Membership.</i><br />
<br />
Whenever a depository institution advertises FDIC-insured products, regardless of delivery channel, the institution must include the official advertising statement of FDIC membership, usually worded, “Member FDIC.” An advertisement is defined as “a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business.” The official advertisement statement must appear, even in a message that “promotes nonspecific banking products and services, if it includes the name of the insured depository institution but does not list or describe particular products or services.” Conversely, the advertising statement is <i>not permitted </i>if the advertisement relates solely to nondeposit products or hybrid products (products with both deposit and nondeposit features, such as sweep accounts).<i> </i><br />
<br />
<i>Advertising and Notice of NCUA Share Insurance</i>.<br />
<br />
Each insured credit union must include the official advertising statement of NCUA membership, usually worded, “Federally insured by NCUA” in advertisements regardless of delivery channel, unless specifically exempted. An advertisement is defined as “a commercial message, in any medium, that is designed to<u><b> </b></u>attract public attention or patronage to a product or business.” The official advertising statement must be in a size and print that is clearly legible and may be no smaller than the smallest font size used in other portions of the advertisement intended to convey information to the consumer. If the official sign is used as the official advertising statement, an insured credit union may alter the font size to ensure its legibility. Each insured credit union must display the official NCUA sign on its Internet page, if any, where it accepts deposits or opens accounts.<i> </i><br />
<br />
<i>Nondeposit Investment Products</i><br />
<br />
As described in the “Interagency Statement on Retail Sales of Nondeposit Investment Products<i>,</i>” when a depository institution recommends or sells nondeposit investment products to retail customers, it should ensure that customers are fully informed that the products are not insured by the FDIC or NCUA; are not deposits or other obligations of the institution and are not guaranteed by the institution; and are subject to investment risks, including possible loss of the principal invested.<b> </b><br />
<br />
<b>PAYMENT SYSTEMS</b><br />
<br />
If social media is used to facilitate a consumer’s use of payment systems, a financial institution should keep in mind the laws, regulations, and industry rules regarding payments that may apply, including those providing disclosure and other rights to consumers. <b>Under existing law, no <i>additional </i>disclosure requirements apply simply because social media is involved (for instance, providing a portal through which consumers access their accounts at a financial institution).</b> Rather, the financial institution should continue to be aware of the existing laws, regulations, guidance, and industry rules that apply to payment systems and evaluate which will apply. These may include the following:<br />
<br />
<b><u>Electronic Fund Transfer Act/Regulation E</u></b><br />
<br />
The Electronic Fund Transfer Act (EFTA) and its implementing Regulation E provide specific protections, including required disclosures and error resolution procedures, to individual consumers who engage in “electronic fund transfers” and “remittance transfers.”<br />
<br />
<b><u>Rules Applicable to Check Transactions</u></b><br />
<br />
When a payment occurs via a check-based transaction rather than an EFT, the transaction will be governed by applicable industry rules and/or Article 4 of the Uniform Commercial Code of the relevant state, as well as the Expedited Funds Availability Act, as implemented by Regulation CC (regarding the availability of funds and collection of checks).<b> </b><br />
<br />
<b>BANK SECRECY ACT/ANTI-MONEY LAUNDERING PROGRAMS (BSA/AML)</b><br />
<br />
As required by the Bank Secrecy Act (BSA) and applicable regulations, depository institutions and certain other entities must have a compliance program that incorporates training from operational staff to the board of directors. Among other elements, the compliance program must include appropriate internal controls to ensure effective risk management and compliance with recordkeeping and reporting requirements under the BSA.<br />
<br />
Internal controls are the financial institution’s policies, procedures, and processes designed to limit and control risks and to achieve compliance with the BSA. The level of sophistication of the internal controls should be commensurate with the size, structure, risks, and complexity of the financial institution. At a minimum, internal controls include but are not limited to: implementing an effective customer identification program; implementing risk-based customer due diligence policies, procedures, and processes; understanding expected customer activity; monitoring for unusual or suspicious transactions; and maintaining records of electronic funds transfers.<br />
<br />
An institution’s BSA/AML program must provide for the following minimum components: a system of internal controls to ensure ongoing compliance; independent testing of BSA/AML compliance, a designated BSA compliance officer responsible for managing compliance, and training for appropriate personnel. These <b>controls should apply to all customers, products and services, including customers engaging in electronic banking (e-banking) through the use of social media, and e-banking products and services offered in the context of social media.</b><br />
<br />
Financial institutions should also be aware of emerging areas of BSA/AML risk in the virtual world. For example, illicit actors are increasingly using Internet games involving virtual economies, allowing gamers to cash out, as a way to launder money. <b>Virtual world Internet games and digital currencies present a higher risk for money laundering and terrorist financing and should be monitored accordingly.</b><br />
<br />
<b>COMMUNITY REINVESTMENT ACT (CRA)</b><br />
<br />
Under the regulations implementing the Community Reinvestment Act (CRA), a depository institution subject to the CRA must maintain a public file that includes, among other items, all written comments received from the public for the current year and each of the prior two calendar years that specifically relate to the institution’s performance in helping to meet community credit needs. The institution must also include any response to those comments, as long as neither the comments nor the responses reflect adversely on the good name or reputation of any persons other than the institution, or publication of which would violate specific provisions of law.<b> </b><br />
<br />
<b>A depository institution subject to the CRA should ensure that its policies and procedures addressing public comments take into account such comments when they are received through social media sites run by or on behalf of the institution. </b>However, under the CRA, comments about the institution made on the Internet through sites that are not run by or on behalf of the institution are not necessarily deemed to have been received by the depository institution and would not be required to be retained. Rather, the institution should retain comments made on sites run by or on behalf of the institution that specifically relate to the institution’s performance in helping to meet community credit needs.<b> </b><br />
<br />
<b>PRIVACY</b><br />
<br />
Privacy rules have particular relevance to social media when, for instance, a financial institution collects, or otherwise has access to, information from or about consumers. A financial institution should take into consideration the following laws and regulations regarding the privacy of consumer information:<br />
<br />
<b><u>Gramm-Leach-Bliley Act Privacy Rules and Data Security Guidelines</u></b><br />
<br />
Title V of the Gramm-Leach-Bliley Act (GLBA) establishes requirements relating to the privacy and security of consumer information. Whenever a financial institution collects, or otherwise has access to, information from or about consumers, it should evaluate whether these rules will apply. The rules have <b>particular relevance to social media when, for instance, a financial institution integrates social media components into customers’ online account experience or takes applications via social media portals.</b><br />
<br />
· <b>A financial institution using social media should clearly disclose its privacy policies as required under GLBA.</b><br />
<br />
· Even when there is no “consumer” or “customer” relationship triggering GLBA requirements, <b>a financial institution will likely face reputation risk if it appears to be treating any consumer information carelessly or if it appears to be less than transparent regarding the privacy policies that apply on one or more social media sites that the financial institution uses.</b><br />
<br />
<b><u>CAN-SPAM Act and Telephone Consumer Protection Act</u></b><br />
<br />
The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act) and Telephone Consumer Protection Act (TCPA) may be relevant if a financial institution sends unsolicited communications to consumers via social media. The CAN-SPAM Act and TCPA, and their implementing rules, establish requirements for sending unsolicited commercial messages (“spam”) and unsolicited communications by telephone or short message service (SMS) text message, respectively. <b>Financial institutions should be familiar with the provisions of the CAN-SPAM Act and TCPA to evaluate whether social media activities trigger the application of either or both laws.</b><br />
<br />
<b><u>Children’s Online Privacy Protection Act</u></b><br />
<br />
The Children’s Online Privacy Protection Act (COPPA) and the Federal Trade Commission’s implementing regulation impose obligations on operators of commercial websites and online services directed to children younger than thirteen that collect, use, or disclose personal information from children, as well as on operators of general audience websites or online services with actual knowledge that they are collecting, using, or disclosing personal information from children under thirteen. A financial institution should evaluate whether it, through its social media activities, could be covered by COPPA.<br />
<br />
· Certain social media platforms require users to attest that they are at least 13, and a financial institution using those sites may consider relying on such policies. However, <b>the financial institution should still take care to monitor whether it is actually collecting any personal information of a person under 13, such as when a child under 13 manages to post such information on the financial institution’s site.</b><br />
<br />
· <b>A financial institution maintaining its <i>own </i>social media site (such as a virtual world) should be especially careful to establish, post, and follow policies restricting access to the site to users 13 or older, especially when those sites could attract children under 13. This may be true, for instance, in the case of virtual worlds and any other features that resemble video games.</b><br />
<br />
<b><u>Fair Credit Reporting Act</u></b><br />
<br />
The Fair Credit Reporting Act (FCRA) and its implementing regulations contain <b>restrictions and requirements concerning making solicitations using eligibility information, responding to direct disputes, and collecting medical information in connection with loan eligibility. The FCRA applies when social media is used for these activities. </b><br />
<br />
<b>REPUTATION RISK</b><br />
<br />
Reputation risk is the risk arising from negative public opinion. Activities that result in dissatisfied consumers and/or negative publicity could harm the reputation and standing of the financial institution, even if the financial institution has not violated any law. Privacy and transparency issues, as well as other consumer protection concerns, arise in social media environments. Therefore, a financial institution engaged in social media activities is expected to be sensitive to, and properly manage, the reputation risks that arise from those activities. Reputation risk can arise in areas including the following:<br />
<br />
<i><u>Fraud and Brand Identity</u></i><br />
<br />
Financial institutions should be aware that protecting their brand identity in a social media context can be challenging. Risk may arise in many ways, such as through comments made by social media users, spoofs of institution communications, and activities in which fraudsters masquerade as the institution.<b> Financial institutions should consider the use of social media monitoring tools and techniques to identify heightened risk, and respond appropriately.</b> Financial institutions should have appropriate policies in place to monitor and address in a timely manner the fraudulent use of the financial institution’s brand, such as through phishing or spoofing attacks.<br />
<br />
<i><u>Third Party Concerns</u></i><b> </b><br />
<br />
<b>Working with third parties to provide social media services can expose financial institutions to substantial reputation risk.</b> A financial institution should regularly monitor the information it places on social media sites. This monitoring is the direct responsibility of the financial institution, as part of a sound compliance management system, even when such functions may be delegated to third parties. Even if a social media site is owned and maintained by a third party, consumers using the financial institution’s part of that site may blame the financial institution for problems that occur on that site, such as uses of their personal information they did not expect or changes to policies that are unclear.<br />
<br />
The financial institution’s ability to control content on a site owned or administered by a third party and to change policies regarding information provided through the site may vary depending on the particular site and the contractual arrangement with the third party. A financial institution should thus weigh these issues against the benefits of using a third party to conduct social media activities.<b> </b><br />
<br />
<b>A financial institution should conduct an evaluation and perform due diligence appropriate to the risks posed by the prospective service provider prior to engaging with the provider.</b> To understand the risks that may arise from a relationship with a given third party, the institution should be aware of matters such as the third party’s reputation in the marketplace; the third party’s policies, including policies on collection and handling of consumer information, including the information of the institution’s customers; the process and frequency by which the third party’s policies may change; and what, if any, control the institution may have over the third party’s policies or actions.<br />
<br />
<i><u>Privacy Concerns</u></i><br />
<br />
Even when a financial institution complies with applicable privacy laws in its social media activities, it should consider the potential reaction by the public to any use of consumer information via social media. <b>The financial institution should have procedures to address risks from occurrences such as members of the public posting confidential or sensitive information – for example, account numbers – on the financial institution’s social media page or site.</b><br />
<br />
<i><u>Consumer Complaints and Inquiries</u></i><br />
<br />
Although a financial institution can take advantage of the public nature of social media to address customer complaints and questions, reputation risks exist when the financial institution does not address consumer questions or complaints in a timely or appropriate manner. Further, the participatory nature of <b>social media can expose a financial institution to reputation risks that may arise when users post critical or inaccurate statements.</b><br />
<br />
Compliance risk can also arise when a customer uses social media to communicate issues or concerns directly with a financial institution, such as an error dispute under Regulation E, a billing error under Regulation Z, or a direct dispute about information furnished to a consumer reporting agency under FCRA and its implementing regulations.<br />
<br />
The Guidance does not require financial institutions to monitor and respond to all Internet communications; however, a financial institution is expected to take into account the results of its own risk assessments in determining the appropriate approach to take regarding monitoring of, and responding to, such communications. <b>Appropriate steps may include, for example, establishing one or more specific channels consumers must use when submitting complaints or disputes directly to the institution for further investigation, to the extent consistent with other applicable legal requirements.</b><br />
<br />
The institution should also consider the risks, particularly the reputation risk, inherent in not responding to complaints and disputes received through other channels and tailor its policies and procedures accordingly, in a manner appropriate to the institution’s size and risk profile.<br />
<br />
Based on its own risk assessment processes, a financial institution should also consider whether and how to respond to communications disparaging the financial institution on other parties’ social media sites. One approach to managing these risks would be to monitor question and complaint forums on social media sites to ensure that such inquiries, complaints, or comments are reviewed, and when appropriate, addressed in a timely manner.<br />
<br />
<i><u>Employee Use of Social Media Sites</u></i><br />
<br />
Financial institutions should be aware that <b>employees’ communications via social media may be viewed by the public as reflecting the financial institution’s official policies or may otherwise reflect poorly on the financial institution, depending on the form and content of the communications. </b>Employee communications can also subject the financial institution to compliance risk, operational risk as well as reputation risk.<br />
<br />
Therefore, as appropriate, f<b>inancial institutions should take steps to address these risks, such as establishing policies and training to address employee participation in social media representing the financial institution.</b> For example, if an employee is communicating with a customer regarding a loan product through an approved social media channel, policies should include steps to ensure the customer is receiving all of the required disclosures.<br />
<br />
The Guidance does not address any employment law principles that may be relevant to employee use of social media. In addition, the Guidance “is not intended to impose any specific requirements for policies or procedures regarding employee personal use of social media.” Each financial institution should evaluate the risks for itself and determine appropriate policies to adopt in light of those risks.<b> </b><br />
<br />
<b>OPERATIONAL RISK</b><br />
<br />
Operational risk is the risk of loss resulting from inadequate or failed processes, people, or systems. The root cause can be either internal or external events. Operational risk includes the risks posed by a financial institution’s use of information technology (IT), which encompasses social media.<b> </b><br />
<br />
<b>The identification, monitoring, and management of IT-related risks are addressed in the <i>FFIEC Information Technology Examination Handbook,</i> as well as other supervisory guidance issued by the FFIEC or individual agencies. A financial institution should pay particular attention to the booklets “Outsourcing Technology Services” and “Information Security” when using social media, and include social media in existing risk assessment and management programs.</b><br />
<br />
Social media is one of several platforms vulnerable to account takeover and the distribution of malware. <b>A financial institution should ensure that the controls it implements to protect its systems and safeguard customer information from malicious software adequately address social media usage.</b> Financial institutions’ incident response protocol regarding a security event, such as a data breach or account takeover, should include social media, as appropriate.<b> </b><br />
<br />
<b>CONCLUSION</b><br />
<br />
The Guidance concludes by noting the fact that financial institutions are using social media as a tool to generate new business and provide a dynamic environment to interact with consumers. In that regard, then, it urges financial institutions to manage potential risks to themselves and consumers by ensuring that the appropriate risk management programs provide appropriate oversight and control to address the risk areas discussed set forth in the Guidance.<br />
<br />
<div align="center">
<b>LIBRARY</b></div>
<div align="center">
<a href="http://lenderscompliancegroup.com/135.html"><b><img alt="Law Library-7" border="0" src="http://lh5.ggpht.com/-SImMXpgiArE/Uqt856-aYYI/AAAAAAAACaI/gO92MW2Kmw0/Law-Library-721.jpg?imgmax=800" height="189" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library-7" width="404" /></b></a></div>
<div align="center">
<br />
<b>Social Media: Consumer Compliance Risk Management Guidance <br />Final Rule – 12/11/13 <br />Federal Financial Institutions Examination Council (FFIEC) </b>___________________________________________________________________</div>
<div align="center">
<span style="font-size: x-small;">* Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-79609213627484652222013-10-29T09:52:00.000-04:002013-10-29T09:52:09.087-04:00CFPB Toolbox - Update<div style="text-align: justify;">
On October 9, 2013, we notified you about our new CFPB Toolbox that we maintain in our Library. </div>
<div style="text-align: justify;">
We have added this new CFPB issuance:</div>
<br />
<div style="text-align: center;">
<span style="color: blue;"><span style="background-color: white;"><a href="http://lenderscompliancegroup.com/136.html"><span style="font-size: large;"><b>eRegulations</b></span></a></span></span></div>
<div style="text-align: center;">
(CFPB's Search Tool)</div>
<br />
<div style="text-align: justify;">
According to the CFPB (announced on October 22, 2013), the <u>eRegulations</u> search tool will provide the following: </div>
<ul style="text-align: justify;">
<li>Easy to search and navigate. </li>
</ul>
<ul style="text-align: justify;">
<li>Key terms are defined throughout.Official interpretations are available throughout. </li>
</ul>
<ul style="text-align: justify;">
<li>Include certain sections of the "Federal Register preambles" to help explain the background to any particular paragraph. </li>
</ul>
<ul style="text-align: justify;">
<li>Ability to see previous, current, and future versions.</li>
</ul>
<div style="text-align: justify;">
The CFPB timed the eRegulations announcement to coincide with the new remittance transfers examination procedures (Regulation E), so that is the first regulation linked into the tool.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Please use our CFPB Toolbox as a facilitating resource, while in many cases still visiting the CFPB's website for more information.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Best wishes,</div>
<div style="text-align: justify;">
<a href="http://lenderscompliancegroup.com/2.html">Jonathan Foxx</a></div>
<div style="text-align: justify;">
<span style="font-size: x-small;">President & Managing Director </span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-89596005157961811012013-10-03T08:41:00.000-04:002013-10-03T08:42:20.499-04:00HUD’s Safe and Rebuttable Qualified MortgagesThe anxiously awaited Proposed Rule (“Rule”) outlining the Qualified Mortgage for FHA loans was published in the Federal Register on September 30, 2013. Given the bland, bureaucratic title <b>Qualified Mortgage Definition for HUD Insured and Guaranteed Single Family Mortgages (“Issuance”)</b>, HUD is submitting for public comment its definition of a “qualified mortgage” for the types of loans that HUD insures, guarantees, or administers that align with the statutory ability-to-repay (“ATR”) criteria of the Truth-in-Lending Act (“TILA”) and the regulatory criteria of the definition given by the Consumer Financial Protection Bureau (“CFPB”), without departing from HUD’s statutory requirements. The expiration of the comment period is<i> </i>October 30, 2013.<br />
<br />
A copy of the <a href="http://lenderscompliancegroup.com/135.html">Proposed Rule is available in our Library</a>.<br />
<br />
In this article, I will provide an overview of the Rule with respect to Title II mortgages of the National Housing Act. I shall offer some practical insights relating to the potential consequences and implementation of the Rule for residential mortgage lenders and originators.<b>*</b><br />
<br />
<b>Birthing HUD’s Proposed Rule</b><br />
<br />
The Rule has its genesis in a foundational document, the <i>Dodd-Frank Wall Street Reform and Consumer Protection Act</i> (“Dodd-Frank”), which created the new section 129C in TILA, establishing minimum standards for considering a consumer’s repayment ability for creditors originating certain closed-end, dwelling-secured mortgages, and generally prohibiting a creditor from originating a residential mortgage loan unless the creditor makes a reasonable and good faith determination of a consumer’s ability to repay the loan according to its terms.<br />
<br />
Briefly, Section 129C is meant to provide lenders a specific format to meet the ATR requirements when lenders make “qualified mortgages” (“QMs”). A new section 129C(b), added by section 1412 of Dodd-Frank, establishes the presumption that the ATR requirements of section 129C(a) are satisfied if a mortgage is a “qualified mortgage,’’ and authorizes the CFPB, to prescribe regulations that revise, add to, or subtract from the criteria in TILA that define a “qualified mortgage.’’ (Section 129C also provides for a reverse mortgage to be a qualified mortgage if the mortgage meets the CFPB’s standards for a qualified mortgage, except to the extent that reverse mortgages are statutorily exempted altogether from the ATR requirements. The CFPB’s regulations provide that the ATR requirements of section 129C(a) do not apply to reverse mortgages. Section 129C(a)(8) excludes reverse mortgages from the repayment ability requirements.)<br />
<br />
As you may know, I have published and presented extensively on QMs and have dubbed the non-qualified mortgage with the acronym “NQM.” For some of my work on this subject, please visit <a href="http://lenderscompliancegroup.com/20.html">HERE</a>, and <a href="http://publications.lenderscompliancegroup.com/index.html">HERE</a>, and <a href="http://authors.lenderscompliancegroup.com/index.html">HERE</a>.<br />
<br />
Section 129C authorizes the agency with responsibility for compliance with TILA, that is, the CFPB, to issue a rule implementing these requirements. The CFPB already set forth its Final Rule on ATR, QMs, and NQMs, as issued in the Federal Register on January 30, 2013. Along with certain other agencies, HUD was also later on charged by the CFPB, pursuant to Dodd-Frank, with prescribing regulations defining the types of loans that it would insure, guarantee, or administer, as applicable, that are qualified mortgages. In the Rule, HUD now proposes that any forward single family mortgage insured or guaranteed by HUD must meet the criteria of a qualified mortgage, as defined in the Rule.<br />
<br />
HUD reviewed its mortgage insurance and loan guarantee programs and, in the Issuance, stated that all of the single family residential mortgage and loan products offered under HUD programs are qualified mortgages; that is, they “exclude risky features and are designed so that the borrower can repay the loan.” However, for certain of its mortgage products, HUD proposes its Rule for qualified mortgage standards similar to those established by the CFPB in its definition of “qualified mortgage.”<b> </b><br />
<br />
<b>Safe Harbor and Rebuttable Presumption of Compliance</b><br />
<br />
Through its “qualified mortgage” rulemaking, the CFPB established both a “safe harbor” and a “rebuttable presumption of compliance” for transactions that are qualified mortgages. CFPB's label of <i>safe harbor</i> is applied to those mortgages that are not higher-priced covered transactions (i.e., the annual percentage rate (“APR”) does not exceed the average prime offer rate (“APOR”) by 1.5 percent). These are considered to be the least risky loans and presumed to have conclusively met the ATR requirements of TILA. The label of <i>rebuttable presumption of compliance</i> is applied to those mortgages that are higher-priced transactions.<br />
<br />
TILA Section 129C(b)(2)(ix) provides that the term “qualified mortgage” may include a “residential mortgage loan” that is “a reverse mortgage which meets the standards for a qualified mortgage, as set by the Bureau in rules that are consistent with the purposes of this subsection.” But the Federal Reserve Board’s proposal, adopted by the CFPB, does not include reverse mortgages in the definition of a “qualified mortgage.” Indeed, the CFPB’s Final Rule does not define a “qualified” reverse mortgage.<br />
<br />
HUD proposes to designate Title I (home improvement loans), Section 184 (Indian housing loans), and Section 184A (Native Hawaiian housing loans) insured mortgages and guaranteed loans covered by the Rule to be safe harbor qualified mortgages and HUD proposes no changes to the underwriting requirements of these mortgage and loan products.<br />
<br />
The largest volume of HUD mortgage products - those insured under Title II of the National Housing Act – would be bifurcated into qualified mortgages similar to the two categories created in the CFPB final rule: a safe harbor qualified mortgage and a rebuttable presumption qualified mortgage.<br />
<br />
Specifically, the Rule would define the safe harbor qualified mortgage as a mortgage insured under Title II of the National Housing Act (excepting reverse mortgages insured under section 255 of this act) that meets the points and fees limit adopted by the CFPB in its regulation at 12 CFR 1026.43(e)(3), and that has an APR for a first-lien mortgage relative to the APOR that is less than the sum of the annual mortgage insurance premium (“MIP”) and 1.15 percentage points. HUD would define a rebuttable presumption qualified mortgage as a single family mortgage insured under Title II of the National Housing Act (excepting reverse mortgages insured under section 255 of this act) that meets the points and fees limit adopted by the CFPB in its regulation at 12 CFR 1026.43(e)(3), but has an APR that exceeds the APOR for a comparable mortgage, as of the date the interest rate is set, by more than the sum of the annual MIP and 1.15 percentage points for a first-lien mortgage.<br />
<a name='more'></a><br />
<br />
Therefore, under the Rule, HUD would require that all loans insured under Title II of the National Housing Act to be either a rebuttable presumption or safe harbor qualified mortgage, and, importantly, that they meet the CFPB’s points and fees limit at 12 CFR 1026.43(e)(3). The CFPB set a three (3%) percentage points and fees limit for its definition of qualified mortgage and allowed for adjustments of this limit to facilitate the presumption of compliance for smaller loans.<b> </b><br />
<br />
<b>Qualified Mortgage</b><br />
<br />
There are eight criteria applied toward defining a QM. Section 129C(b)(2)(A) defines a “qualified mortgage” as a mortgage that meets the following requirements:<br />
<br />
1. The transaction must have regular periodic payments;<br />
<br />
2. The terms of the mortgage must not result in a balloon payment;<br />
<br />
3. The income and financial resources of the mortgagor are verified and documented;<br />
<br />
4. For a fixed rate loan, the underwriting process fully amortizes the loan over the loan term;<br />
<br />
5. For an adjustable rate loan, the underwriting is based on the maximum rate permitted under the loan during the first 5 years and includes a payment schedule that fully amortizes the loan over the loan term;<br />
<br />
6. The transaction must comply with any regulations established by the CFPB relating to ratios of total monthly debt to total monthly income;<br />
<br />
7. The total points and fees payable in connection with the loan must not exceed 3 percent of the total loan amount; and<br />
<br />
8. The mortgage must not exceed 30 years, except in specific areas.<br />
<br />
The CFPB’s regulations at 12 CFR 1026.43(e)(2) adopt, in part, the statutory qualified mortgage definition, and require that a mortgage meet 6 general requirements:<br />
<br />
1. The transaction must have regular periodic payments;<br />
<br />
2. The mortgage must not exceed 30 years;<br />
<br />
3. The points and fees paid in connection with a loan greater than or equal to $100,000 does not exceed 3 percent of the total loan amount, with a higher amount allowed for loans under $100,000;<br />
<br />
4. The creditor must underwrite the loan taking into account the monthly payment for mortgage-related obligations;<br />
<br />
5. The creditor must consider and verify income and debt; and,<br />
<br />
6. The ratio of the consumer’s monthly debt to total monthly income must not exceed 43 percent.<br />
<br />
The total amount of points and fees are ‘capped” as follows:<br />
<br />
· For loans greater than or equal to $100,000 (indexed for inflation), points and fees must not exceed 3 percent of the total loan amount.<br />
<br />
· For a loan amount greater than or equal to $60,000 but less than $100,000, the points and fees must not exceed $3,000.<br />
<br />
· For a loan amount greater than or equal to $20,000 but less than $60,000, the points and fees must not exceed 5 percent of the total loan amount.<br />
<br />
· For a loan amount greater than or equal to $12,500 but less than $20,000, the points and fees must not exceed $1,000.<br />
<br />
· For a loan amount less than $12,500, the points and fees must not exceed 8 percent of the total loan amount.<br />
<br />
A QM falls into the safe harbor category and is conclusively presumed to have met the ATR requirements if it is not a “higher-priced covered transaction.” The safe harbor presumption was established to limit ATR challenges on mortgages that are considered to be the least risky. Consumers can only challenge loans in this category by showing that the loans do not meet the definition of a “qualified mortgage.”<br />
<br />
A “qualified mortgage” that is a higher-priced covered transaction has only a rebuttable presumption of compliance with the ATR requirement, even though each element of the “qualified mortgage” definition is met. [12 CFR 1026.43(e)(1)(ii)(B)] A “higher-priced covered transaction” is a transaction that has an APR that exceeds the APOR for a comparable transaction as of the date the interest rate is set by 1.5 or more percentage points for a first-lien covered transaction or by 3.5 or more percentage points for a subordinate-lien covered transaction.<br />
<br />
Under the Rule, HUD proposes to define all FHA-insured single family mortgages to be qualified mortgages, except for reverse mortgages insured under HUD’s Home Equity Conversion Mortgage (HECM) program (section 255 of the National Housing Act (12 U.S.C. 1715z–20)), which are exempt from the ATR criteria.<br />
<br />
Finally, the CFPB’s Final Rule temporarily grants “qualified mortgage” status to loans that satisfy certain underwriting standards. [12 CFR 1026.43(e)(4)] Loans in this category must satisfy the underwriting requirements of, and are therefore eligible to be purchased, guaranteed or insured by, one of the following:<br />
<br />
· The government-sponsored enterprises (GSEs) (i.e., Fannie Mae and Freddie Mac) while they operate under Federal conservatorship or receivership; and,<br />
<br />
· HUD (but only loans eligible to be insured under the National Housing Act), VA, USDA, and RHS.<br />
<br />
This temporary definition requires a qualified mortgage to satisfy only the first 3 requirements of the general definition of a qualified mortgage (i.e., regular periodic payments, term not to exceed 30 years, points and fees not exceeding those specified in 1026.43(e)(3)), and excludes the underwriting, credit and income verification, and 43 percent total monthly debt-to-income ratio requirements for a “qualified mortgage.”<br />
<br />
These applicable provisions of the temporary definition have sunset provisions, such as:<br />
<br />
· When each of the four Federal agencies issue their own “qualified mortgage” rule;<br />
<br />
· When conservatorship ends for the GSEs; or<br />
<br />
· For all four of the Federal agencies and the GSEs, no later than January 10, 2021, which is 7 years after the effective date of the CFPB final rule.<b> </b><br />
<br />
<b>Streamline Refinances</b><br />
<br />
The Rule would require FHA streamlined refinances to comply with HUD’s qualified mortgage rule. Section 129C(a)(5) of TILA grants HUD the authority to exempt streamlined refinancing from the income verification requirements of section 129C(a)(4) as long as such refinances meet certain requirements, including that the consumer is not 30 days or more past due on the prior existing residential mortgage loan, the loan does not increase the principal balance, the points and fees do not exceed 3 percent, and the new interest rate on the refinanced loan is lower than the current rate.<br />
<br />
Specifically, HUD’s qualified mortgage rule would require streamlined refinances to meet the points and fees requirements and the HUD guidelines for FHA-streamlined refinances. HUD requirements only exempt lenders from verifying income if the loan is originated consistent with the FHA-streamlined refinancing requirements (i.e., the mortgage must be current, the loan is designed to lower the monthly principal and interest payment, and the loan involves no cash back to the borrower except for minor adjustments).<br />
<br />
Requiring streamlined refinances to be “qualified mortgages” will also subject them to the APR threshold requirement for being either a rebuttable presumption or safe harbor qualified mortgage.<br />
<br />
Given the unique nature of streamlined refinances, this proposed rule would modify the CFPB’s rebuttable presumption standard to clarify that a presumption is rebutted if the lender does not meet the underwriting requirements applicable to the transaction. Therefore, if a streamlined refinance was a “rebuttable presumption qualified mortgage” the presumption could only be rebutted by showing that the lender did not meet the applicable HUD requirements for originating streamlined refinances, including the points and fees limit.<b> </b><br />
<br />
<b>Safe Harbor Qualified Mortgage</b><br />
<br />
The terminology “Safe Harbor Qualified Mortgage” – which I shall call the “Safe QM” – is really an FHA semantic convention. The Safe QM would be defined as one that:<br />
<br />
1. Either is a mortgage insured under the National Housing Act (excepting a mortgage insured under Title I or a HECM) that <br />
<blockquote class="tr_bq">
a. Meets the requirements of the National Housing Act, including the cap on points and fees, </blockquote>
<blockquote class="tr_bq">
b. And has an APR for a first-lien mortgage relative to the APOR that is less than the combined annual mortgage insurance premium and 1.15 percentage points; </blockquote>
2. Or is a mortgage insured under Title I.<br />
<br />
A mortgagee that meets the requirements for a SAFE QM is deemed to meet the ATR guidelines.<b> </b><br />
<br />
<b>Rebuttable Presumption Qualified Mortgage</b><br />
<br />
The terminology “Rebuttable Presumption Qualified Mortgage” – which I shall call the “Rebuttable QM” – is really yet another FHA semantic convention. The Rebuttable QM would be defined as a single family mortgage that is insured under the National Housing Act(excepting a mortgage insured under Title I or a HECM) that<br />
<br />
1. Includes the requirement that it does not exceed the CFPB’s cap on points and fees, and<br />
<br />
2. Has an APR that exceeds the APOR for a comparable mortgage, as of the date the interest rate is set, by <br />
<blockquote class="tr_bq">
a. More than the combined APR,</blockquote>
<blockquote class="tr_bq">
b. And 1.15 percentage points for a first-lien mortgage. </blockquote>
The Rule provides that a mortgage which meets the requirements for a Rebuttable QM would be presumed to comply with the ability to repay requirements.<br />
<br />
It should be noted that any rebuttal of such presumption of compliance must show that, despite meeting the “rebuttable presumption qualified mortgage” requirements, the mortgagee did not make a reasonable and good faith determination of the mortgagor’s repayment ability at the time of consummation, as applicable to the type of mortgage, when underwriting the mortgage in accordance with HUD requirements, or that the cap on points and fees was exceeded.<b> </b><br />
<br />
<b>Comparing the HUD QM to the CFPB QM</b><br />
<br />
HUD’s safe harbor and rebuttable presumption definitions are similar, but not identical to, those of the CFPB. For instance, the CFPB does not establish a “safe harbor qualified mortgage” or a “rebuttable presumption qualified mortgage.” Rather, the CFPB provides separate definitions of “higher-priced covered transaction” and “qualified mortgage” and then states that (1) a qualified mortgage which is not a higher-priced transaction complies with the ability-to-repay requirements; and (2) a qualified mortgage that is a higher-priced transaction is presumed to comply with the ability-to-repay requirements.<br />
<br />
Even though the CFPB’s Final Rule is structured in this way to provide only a single definition of a “qualified mortgage,” CFPB’s Final Rule acknowledges that “the final rule distinguishes between two types of qualified mortgages based on the mortgage’s APR relative to the APOR.” The CFPB’s Final Rule also acknowledges that the definition of “qualified mortgage” may be structured in different ways, and the two alternative definitions of a qualified mortgage were proposed, one that would have operated as a legal safe harbor, and one that would have provided a rebuttable presumption of compliance. [78 FR 6417, 6508.]<br />
<br />
Furthermore, the APR relative to APOR for the HUD QM is similar to the CFPB QM in its Final Rule, in that HUD’s Rule would distinguish between the two types of qualified mortgages based on the mortgage’s APR relative to the APOR for the great majority of FHA-insured single family mortgages. Using the APR relative to APOR to distinguish between safe harbor and rebuttable presumption for most loans provides consistency with a significant feature of the CFPB’s Final Rule. The APOR does not include private mortgage insurance (PMI).<br />
<br />
Thus, HUD’s purpose in establishing two categories of qualified mortgages for the bulk of loans it insures is to “maintain consistency with the TILA statutory criteria defining qualified mortgage, as well as the CFPB’s definition, to the extent consistent with the National Housing Act.” The difference in structure from the CFPB’s Final Rule is that HUD proposes to incorporate the APR as an internal element of HUD’s definition of qualified mortgages that would distinguish the Safe QM from the Rebuttable QM. The CFPB’s “higher-priced covered transaction” is an external element that is applied to a single definition of “qualified mortgage.”<br />
<br />
HUD’s Safe QM would provide a different APR relative to APOR threshold than the CFPB’s requirement that a first-lien covered transaction have an APR of less than 1.5 percentage points above the APOR. Under HUD’s Rule, for a non-Title I single family mortgage to meet the “safe harbor qualified mortgage” definition, the mortgage would be required to have an APR that does not exceed the APOR for a comparable mortgage by more than the combined annual mortgage insurance premium (MIP) and 1.15 percentage points. Because all FHA-insured mortgages include a MIP that may vary from time to time, including the MIP as an element of the threshold that distinguishes safe harbor from rebuttable presumption, this calculation methodology presumably allows the threshold to “float” in a manner that permits HUD to adjust the MIP if HUD adopted a threshold based only on the amount that APR exceeds APOR. If a straight APR over APOR threshold were adopted by HUD, every time HUD would change the MIP, HUD would also have to consider changing the threshold APR limit.<b> </b><br />
<br />
<b>Liability Protection</b><br />
<br />
FHA-approved lenders that originate a safe harbor mortgage operate with greater legal protections than those that issue rebuttable presumption mortgages, but the latter group is not without legal protections.<br />
<br />
For an FHA-approved lender that originates a Safe QM, the mortgage is conclusively presumed to comply with the ATR requirements. According to HUD, meeting the qualified mortgage criteria and underwriting requirements and pricing of the loan at a prime rate are sufficient to ensure that the lender made a reasonable and good faith determination that the borrower will be able to repay the loan. If a borrower brings a claim that the FHA-approved lender did not make a reasonable and good faith determination of the borrower’s ATR in the FHA-insured mortgage, and the court finds that the originated mortgage was a Safe QM, as defined by HUD, then that finding by the court conclusively establishes that the lender complied with the ATR requirements and the consumer’s claim is denied.<br />
<br />
For an FHA-approved lender that originates a Rebuttable QM, the mortgage is presumed to comply with the ATR criteria. If a borrower brings a claim that the FHA-approved lender did not make a reasonable and good faith determination of the borrower’s ATR in the FHA-insured mortgage, and the court finds that the originated mortgage was a Rebuttable QM, as defined by HUD, then the borrower may rebut the presumption. Therefore, according to HUD, “the lender should exert greater care in underwriting the loan than would be true in the absence of any liability for extending a loan which the borrower cannot afford to repay.” For the borrower to prevail on its claim against a lender that originates a Rebuttable QM, the borrower must prove that the lender did not make a reasonable and good faith effort in evaluating the borrower’s ability to repay the FHA-insured mortgage in accordance with HUD requirements.<br />
<br />
For either type of mortgage, however, documentation of the borrower’s ATR will be important in demonstrating compliance with the ATR criteria. Referencing the CFPBs Final Rule, HUD states: “As enacted by the Dodd-Frank Act, TILA section 129C(a)(1) provides that no creditor may make a residential mortgage loan unless the creditor makes a reasonable and good-faith determination, based on verified and documented information, that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan according to its terms and all applicable taxes, insurance, and assessments.” [See 78 FR 6460]<b> </b><br />
<br />
<b>Ratios: HUD and the CFPB</b><br />
<br />
There are also provisions among HUD’s requirements that already apply to mortgages insured under the National Housing Act and are consistent with section 129C(b)(2)(B) of TILA and the CFPB’s own requirements, including that a mortgage must have regular periodic payments, that the mortgage does not exceed 30 years, and that lenders apply specific underwriting requirements. HUD’s Rule continues to use its existing underwriting and income verification requirements, which means that HUD is not adopting CFPB’s 43 percent total monthly debt-to-income ratio requirement.<b> </b><br />
<br />
<b>Higher-Priced Covered Transactions</b><br />
<br />
The fact that the CFPB’s Final Rule provides a separate definition of “higher-priced covered transaction” may potentially create issues in that some of HUD’s Safe QMs would also be higher-priced covered transactions, as defined by the CFPB. To the extent that there are requirements not related to qualified mortgages that apply to higher-priced covered transactions, according to HUD, such requirements would apply to mortgages that meet the higher-priced covered transaction definition regardless of whether they are safe harbor or rebuttable presumption. As an example, HUD states that the calculation of certain maximum payments with respect to loans with balloon payments [under 12 CFR 1026.43(c)(5)(ii)(A)] is not expected to have any impact on mortgages insured under the National Housing Act. Apart from this requirement, HUD has stated that it is “currently not aware of other possible overlaps of CFPB requirements.”<b> </b><br />
<br />
<b>Effective Date</b><br />
<br />
HUD’s Rule is expected to be finalized and effective by January 10, 2014. If the Rule is not effective by this date, its mortgages will be subject to the CFPB’s definition of qualified mortgage, which, for instance, would result in a lower share of Safe QMs for FHA and would negatively affect borrowers with greater than 43 percent total monthly debt-to-income ratios.<br />
<div align="center">
<span style="color: #a5a5a5;">_____________________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-39236541338240090012013-08-06T12:43:00.000-04:002013-08-06T12:43:01.145-04:00Revolving Door RegulatorsSenator yesterday. Lobbyist today.<br />
<br />
Representative yesterday. CEO today.<br />
<br />
Cabinet level appointee yesterday. Bank Chairperson today.<br />
<br />
Government Agency Director yesterday. Law firm senior partner today.<br />
<br />
CFPB Regulator yesterday. Competitor today.<br />
<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">The Inside-Outside Gambit</span></div>
<div align="center">
<span style="color: #c0504d;">The Four Horsemen</span></div>
<div align="center">
<span style="color: #c0504d;">A Business Model for Former Regulators</span></div>
<div align="center">
<span style="color: #c0504d;">Partners in Business</span></div>
<div align="center">
<span style="color: #c0504d;">Making a Market in Non-QM</span></div>
<div align="center">
<span style="color: #c0504d;">Timeline</span></div>
<div align="center">
<span style="color: #c0504d;">What did they know, and when did they know it?</span></div>
<div align="center">
<span style="color: #c0504d;">Extinguishing the Fire</span></div>
<div align="center">
<span style="color: #c0504d;">Library</span></div>
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>The Inside-Outside Gambit</b></span></div>
<div align="center">
</div>
There are many forms of corruption. Perhaps the most pernicious is where an elected or duly appointed representative of the citizenry leaves office to use the sloughed off position for financial gain in the private sector.<br />
<br />
Let's set up a definition for such (mostly unregulated) behavior. I will give it a phrase: "inside-outside gambits."<br />
<br />
What is an inside-outside gambit? It is the use of information obtained in the course of a former governmental position by an official for financial gain, directly or indirectly, soon or immediately after leaving government employment in that position. Such information includes contacts with decision-makers in the government; providing information about proprietary conversations leading up to the promulgating of laws, rules, and regulations; access to insiders and knowledge of their views; navigating the systemic and organizational structure; non-public facts regarding the governmental plans or condition that could provide a financial advantage. Note that I use the phrase "inside-outside," not "insider trading."<br />
<br />
I am not talking about a situation where there is the illegal trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the subject company (such trading being illegal). <br />
<br />
However, the effect of “inside-outside gambit” and “insider trading” is practically the same: these strategies lead to an unfair, usually economic, advantage.<br />
<br />
A basic concept of law is that an injury must be sustained by a plaintiff. Broadly speaking, no injury, no case.<br />
<br />
So who is harmed when an equity trader uses inside information for personal financial benefit? The public, of course. Certainly, that part of the public that invests in the stock market, relying on rules, regulations, and laws to be impartially applied, with equal access to all. And who is harmed when a former government official uses inside information for personal financial benefit almost immediately after being employed in the government position. Of course, the public. Certainly, that part of the public that relies on rules, regulations, and laws to be impartially applied, with equal access to all.<br />
<br />
How about when regulators in the most powerful agency that regulates the origination of residential mortgage loans, the Consumer Financial Protection Bureau (CFPB), leave that agency and start a mortgage company soon after leaving the CFPB, to compete or partner with mortgage companies?<br />
<br />
When Thomas Jefferson advocated that legislators should have term limits in order to prompt the return to private life in order to live under the rules they promulgated, somehow I don't think this is what he had in mind.<br />
<br />
In a letter of 1776, Jefferson wrote:<br />
<blockquote>
[His] "reason for fixing them [elected representatives] in office for a term of years rather than for life was that they might have an idea that they were at a certain period to return into the mass of the people and become the governed instead of the governor, which might still keep alive that regard to the public good that otherwise they might perhaps be induced by their independence to forget."</blockquote>
In other words, Jefferson viewed public service as a privilege. He fully expected government officials to return to private life and live under the laws they passed. I quite doubt that he viewed such a return to be a means for an ex-official’s self-enrichment, by utilizing public service to exploit – or even appear to exploit - the very laws promulgated by the ex-official.<br />
<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
<span style="color: #c0504d;"><b>The Four Horsemen</b></span></div>
<div align="center">
</div>
On July 31, 2013, the <u>House Committee on Oversight and Government Reform</u> and the <u>House Committee on Financial Services</u> sent an eight page Congressional letter (Letter) to Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB). Signed by a bi-partisan group of Representatives, it expressed concern about the recent departure from the CFPB of four high level officials. The Letter forms the basis of further inquiries by the Committees. Noting a news report, the Representatives indicated it appears that certain officials "have left the CFPB in order to profit from rules they helped create."<br />
<br />
Who are these individuals? What were their former CFPB positions?<br />
<br />
<br />
<a name='more'></a><br />
<br />
First, there is Raj Date, former Deputy Director of the CFPB, who left the CFPB on January 31, 2013, shortly after a whole set of Final Rules were issued. (Of course, he gave the unimaginatively standard reason: to spend more time with this family.) Yet a month and a half later he incorporated an "advisory and investment firm,"Fenway Summer LLC" (Fenway), which focuses "on those borrowers who do not meet the standards for 'qualified mortgages' as set by the CFPB under rules." If you would like to know more about this new firm, you can visit its website at <a href="http://www.fenwaysummer.com/">http://www.fenwaysummer.com</a>. (Website)<br />
<br />
Promoting himself now as the "first-ever Deputy Director" and the Bureau's "second-ranking official," Mr. Date describes his responsibilities as helping to "steward the CFPB’s strategy, its operations, and its policy agenda."<br />
<br />
Next in line are the recruits to the new firm. Mr. Date was joined by three other former CFPB big shots: Garry Reeder, Chris Haspel, and Mitch Hochburg.<br />
<br />
Mr. Reeder was the Chief of Staff of the Bureau, where, among other things, he was "directly involved with the creation and establishment of the Research, Markets & Regulations division." (Website)<br />
<br />
Mr. Haspel served on the Bureau's Mortgage Markets team as its "senior expert in residential mortgage servicing and securitization;" indeed, he "managed many of the CFPB’s efforts in developing and executing mortgage policy and led Mortgage Markets’ efforts in developing the CFPB’s mortgage servicing rules." (Website)<br />
<br />
And then there is Mr. Hochburg, who served on the Mortgage Markets team as another "senior expert in residential mortgage servicing and securitization", in which position he "managed many of the CFPB’s efforts in developing and executing mortgage policy and led Mortgage Markets’ efforts in developing the CFPB’s mortgage servicing rules." (Website)<br />
<br />
Their positions now at Fenway?<br />
<br />
Raj Date: Managing Partner <br />
<br />
Garry Reeder: Partner and Head of the Advisory Practice <br />
<br />
Chris Haspel: Partner and the Head of Capital Markets <br />
<br />
Mitch Hochburg: Partner and General Counsel<br />
<br />
Other people Mr. Date and his cohort picked away from the CFPB are Alison Miller, former Deputy Executive Secretary for the Bureau, now a Director at Fenway; and Sean O’Mealia, former Project Manager in the Card and Payment Markets group in the Office of Research, Markets, and Regulations, now a Director at Fenway. (Website)<br />
<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>A Business Model for Former Regulators</b></span></div>
<div align="center">
</div>
Before us we see emerging a business model that, if it works for these former regulators, just might work for others similarly situated.<br />
<br />
What might that model look like? Let's speculate.<br />
<br />
Some basic steps must be deployed.<br />
<br />
Step One: You become employed by the government as a regulator. <br />
Step Two: If and when possible, you rise up in the ranks of regulators. <br />
Step Three: You gain decisive authority over regulatory rules and regulations. <br />
Step Four: You give speeches and publicly opine to build your credibility and prestige. <br />
Step Five: You develop rapport with superior, lateral, and subordinate regulators and also politicians. <br />
Step Six: You plan a private, commercial enterprise that advises on the regulatory rules you promulgated. <br />
Step Seven: You approach certain other regulators to join you in your plan. (Steps Six and Seven are interchangeable.) <br />
Step Eight: When the time is right, you resign to spend more time with your family. <br />
Step Nine: Shortly thereafter, you start a company to compete with and/or advise and/or partner with firms that must abide by the regulatory rules you promulgated. <br />
Step Ten: You become the Regulatory Oracle, the Guy-with-the-Roller-Deck, the Man with the Connections, the Mister Know-It-All, the Guide to the Perplexed, the awesome Business Leader.<br />
<br />
(And still, now more than ever, you get to make speeches and publicly opine!)<br />
<br />
Voila! The whole process can be completed in just a few years or even sooner!<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>Partners in Business</b></span></div>
<div align="center">
</div>
<span style="color: black;">What does Fenway do?</span><br />
<br />
It appears that Fenway has two services at this time.<br />
<br />
In the first place, it is an advisory service, specializing in helping its "partners <b>design and launch responsibly designed consumer finance offerings</b>," with the intention "to reshape consumer finance into a trusted industry by supporting products that solve problems for people." But it doesn't seem to stop at acting in a “design and launch” advisory capacity. Specifically, Fenway's website states that "such products can be both profitable and sustainable, which is why <b>we co-invest with our partners</b>, sharing in the risk and success of new offerings." (Emphases added.) (Website)<br />
<br />
The second service is associated with investments; in particular, co-investing "in products developed with advisory partners, sharing the risk and success of these new offerings," including a claimed specialty "in building new consumer financial institutions from the ground up." (Website)<br />
<br />
Interestingly, Fenway has a <b>"signature investment,"</b> which is investment "in new business that will <b>originate non-Qualified Mortgages</b>." (Emphases added.) (Website)<br />
<br />
Ironically, Fenway's motto is: "Rebuilding Consumer Finance on a Foundation of Trust." (Website)<br />
As Jefferson would say, to "become the governed instead of the governor." Got it!<br />
<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>Making a Market in Non-QM</b></span></div>
<div align="center">
</div>
In ancient Greece, the market place was called an Agorá. The word itself derives from the notion of a place for people to assemble. Much of economic and political life of a Greek town or city took place in the Agorá. The Agorá was a cultural feature of the Greeks’ way of doing business. Market value, you might say, had its roots in such and similar market places. But are the QM and Non-QM markets an Agorá?<br />
<br />
One of my concerns with the Ability-to-Repay, QM, and Non-QM rules set forth by the CFPB - a requirement necessitated by Sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act - has been that a market is not organically forming to price QM and Non-QM loans (which I shall call “NQM”). Practically speaking, these markets are being manufactured by the CFPB.<br />
<br />
Obviously, the risk associated with the NQM loan is much higher than the QM loan. So a new market must emerge for the NQM. However, it is not a market that comes into being as a result of market action itself; rather, the NQM market comes into being because certain regulators and politicians manufactured it. Very few markets begin this way. And historically speaking, they are not stable. <br />
Yet here comes Fenway to help companies to navigate this new market's regulations. Ready to “design and launch” offerings in which it takes equity interests. And the former regulators who manufactured the market’s rules? Now Partners and Directors of Fenway. This is the nascence of a new kind of market maker, literally.<br />
<blockquote>
"Although the CFPB is now two years old, it remains 'something of a mystery to many market participants as it ramps up operations.' (see Nick Timiraos & Alan Zibel, "Rides Set for Home Lenders," WSJ, 1/10/13) This lack of transparency has apparently incentivized Mr. Date and other CFPB alumni to create a <b>cottage industry</b> unique to the Bureau's regulatory agenda. Simply put, it appears that former CFPB employees are now offering financial products in a market sector created by the very rules they were in a position to influence while working in senior leadership positions at the CFPB." (Letter) (Emphasis added.)</blockquote>
<blockquote>
"Richard Painter, a former White House ethics officer, characterized Fenway as <b>'an extortion racket'</b> that 'hire[s] alumni of the agency and they'll call up their buddies in the agency to call off the dogs.'" (Letter) (Emphasis added.)</blockquote>
<blockquote>
"According to Mr. Date's own estimates, non-qualified mortgages may make up as much as $1.5 trillion of the $10 trillion home-loan market, a market that Fenway is uniquely positioned to serve." (Letter)</blockquote>
Keep in mind that the QM rules began in drafting on or about February 17, 2011. The aforementioned, former CFPB senior leadership, now Partners of Fenway, were certainly involved in the drafting of these rules, directly or indirectly.<br />
<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>Timeline </b></span></div>
<div align="center">
</div>
The following is the ostensible timeline for certain salient facts in this matter, since the issuance of the Final Rule:<br />
<br />
-January 10, 2013: CFPB issues the Final Rule on Ability-to-Repay and Qualified Mortgages. <br />
-January 30, 2013: The Office of the Federal Register publishes the Final Rule. <br />
-January 31, 2013: Mr. Date leaves his Deputy Director position at the Bureau with "no current plans for his career after the CFPB, other than to spend more time with his family." <br />
-March 11, 2013: Mr. Date incorporated Fenway, a firm that focuses "on those borrowers who do not meet the standards for 'qualified mortgages' as set by the CFPB under the Final Rule.<br />
<br />
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>What did they know, and when did they know it?</b></span></div>
<div align="center">
</div>
In the last twelve months or so, the CFPB's employee attrition rate has skyrocketed. Many CFPB personnel, including individuals in senior leadership positions, have left the Bureau to get into the commercial space. At a recent conference, a former, senior CFPB employee who now holds a senior position in a consulting firm, began his presentation with the remark that, among other things, the pay is much better! Considering that the CFPB is paying exceedingly high salaries, in some instances far above the salaries available in private businesses, that must be a considerable sum! Why did that consulting firm pay so much to this former CFPB regulator? <br />
<br />
After Mr. Date's incorporation of Fenway, few regulators or politicians seemed to take much notice.<br />
<br />
Indeed, it was only after the revelations brought forth by the investigative journalism of several fine reporters that anybody ventured an opinion on this matter. And it is just very recently that considerable coverage and Congressional scrutiny has commenced.<br />
<br />
Is it possible that the Director, the Acting Director, the senior leadership, and other personnel of the CFPB, did not see the appearance of impropriety or potential for conflict of interest?<br />
<br />
I have a few questions.<br />
<ul>
<li>What documents and communications were exchanged between Mr. Date, Mr. Reeder, Mr. Haspel or Mr. Hochburg and any other official at the CFPB referring or relating to Fenway between February 17, 2011 and the present? </li>
</ul>
<ul>
<li>When did Mr. Date communicate with any CFPB employee or agent, referring or relating to the conception, design, or mission of Fenway, at least as far back as February 17, 2011? </li>
</ul>
<ul>
<li>What documents and communications were exchanged between any partner or employee of Fenway and any CFPB employee or agent between March 11, 2013 and the present? </li>
</ul>
<ul>
<li>What documents and communications were exchanged between Mr. Date, Mr. Reeder, Mr. Haspel or Mr. Hochburg and any other official at the CFPB referring or relating to the drafting of the qualified mortgage rule between February 17, 2011 and the present? </li>
</ul>
<ul>
<li>Precisely what is the full description of the business model of Fenway? </li>
</ul>
<ul>
<li>When was the Fenway business model conceived and drafted? </li>
</ul>
<ul>
<li>In addition to the Partners, who are the other investors in or advisors to Fenway? </li>
</ul>
<ul>
<li>What companies, subject to the QM and NQM rules, are being solicited by Fenway to form advisory and investment relationships? </li>
</ul>
<ul>
<li>What companies, subject to the QM and NQM rules, are Fenway's current clients or relationship partners? </li>
</ul>
<ul>
<li>What procedures are currently in place at the Bureau to mitigate or prevent conflict of interest and appearance of impropriety, with respect to prospective and existing employees of the CFPB, before, during, and after employment by the CFPB?</li>
</ul>
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>Extinguishing the Fire</b></span></div>
<div align="center">
</div>
Whether the appearance of impropriety or conflict of interest dominates the disputations of this matter, it is somewhat predictable that all the pertinent questions will not be resolved satisfactorily. In my view, damage has been done to the Bureau's reputation, prestige, and credibility. This damage has been done by members of its own senior leadership. The damage has been done by other senior leaders of the CFPB, allowing this unseemly debacle to happen in the first place. The QM and NQM rules have been controversial even from their inception in legislation, and this untenable situation makes them even more controversial.<br />
<br />
It will take more than a Congressional hearing to overcome the distrust that now unduly compromises the relationship between those governed by the CFPB's rules and the CFPB itself.<br />
<br />
But this fire, however caused, must be extinguished quickly, completely, and with full accountability.<br />
<br />
I shall let Thomas Jefferson’s words be the best guide:<br />
<br />
<div align="left">
<b>“If our house be on fire, without inquiring whether it was fired from within or without, we must try to extinguish it.” </b> </div>
<div align="left">
(Letter to James Lewis, Jr., May 9, 1798)</div>
<div align="left">
</div>
<div align="center">
<span style="color: #666666;">_______________________________________________________________________</span></div>
<div align="center">
</div>
<div align="center">
<span style="color: #c0504d;"><b>Library</b></span></div>
<div align="center">
</div>
<div align="center">
<a href="http://lenderscompliancegroup.com/135.html"><img alt="Law Library Image" border="0" height="139" src="http://lh4.ggpht.com/-Wl23UpQXE54/UgEmzjt4UjI/AAAAAAAACNA/JrFXo1b8qrk/Law-Library-Image5.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="139" /></a></div>
<div align="center">
</div>
<div align="center">
Letter to Richard Cordray, Director, Consumer Financial Protection Bureau, <br />
from Committee on Oversight and Government Reform <br />
and the Committee on Financial Services <br />
July 31, 2013</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-53527891426855232272013-07-22T08:00:00.000-04:002013-07-22T08:58:15.149-04:00CFPB: Spying to Protect the ConsumerIt all began with a Bloomberg article. Although the CFPB spying on the financial habits of at least 10 million consumers seems to be a far cry from NSA's spying on the telephone calls, emails, snail mails, website usage, and many other communication media used by hundreds of millions of US citizens, the timing of the Bloomberg article comes at, shall we say, a rather sensitive time - given its publication just shortly prior to the recent revelations regarding the NSA's rather unique way of interpreting the Fourth Amendment of the US Constitution regarding search and seizure.<br />
<br />
<div align="center">
<b>Probable Cause Conundrum</b></div>
<div align="center">
<b> </b> </div>
I call it the "probable cause conundrum," because (1) the Fourth Amendment expressly states that "the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized," yet (2) a warrant to spy on Americans these days, at least with respect to probable cause and the requirement that a warrant to spy must be limited in scope according to specific information, has been hugely expanded. At least one of the Supremes has interpreted "probable cause" to mean "reasonable." For some reason, I really don't think that point of view was ever the way the Framers considered it, based on the law extant at the time the Constitution was actually drafted. But I digress.<br />
<br />
As a result of Tennessee v. Garner [471 U.S. 1 (1985)], <i>inter alia</i>, we all learned that the "reasonableness requirement" applies not just to a search in combination with a seizure, but also to a search without a seizure, as well as to a seizure without a search. But, again, I digress. So not to go too far afield, let us return to that Bloomberg article which, by the way, was published back in April of this year.<br />
<br />
<a href="http://www.bloomberg.com/news/2013-04-17/u-s-amasses-data-on-10-million-consumers-as-banks-object.html">To quote the very first paragraph of the article</a>, its author, Carter Dougherty, writes that "the new U.S. consumer finance watchdog is gearing up to monitor how millions of Americans use credit cards, take out mortgages and overdraw their checking accounts. Their bankers aren’t happy about it." And Mr. Dougherty later on states that "Director Richard Cordray has said that the consumer bureau needs raw material to make 'data-driven', decisions based on how financial products and services are used or abused. Research will improve regulation as well as the marketplace."<br />
<br />
We don't like to think that our federal agencies are spying on us, watching our communications, perhaps especially our financial habits, determining therefrom how best to "serve" the public interest. Sure, we know that Google and other web giants are constantly monitoring our financial habits - presumably with our permission to do so. Somehow, it's acceptable if private corporations do it, but when the government does it - not so much!<br />
<br />
It all becomes rather weird when the NSA (backed by, say, the DOJ) orders private corporations to spy on us, but the latter are not permitted to admit that the former ordered them to do so - with or without our permission - on the basis of what appears to be a new meaning of "probable cause."<br />
<br />
What I find interesting is the similarity between the NSA's and the CFPB's reasons for the need to collect, respectively, virtually all communication data on American citizens and also the financial data on millions of American consumers. It seems that spying has an underlying positive cause, one that apparently we citizens simply don't fully appreciate. For if we did appreciate the workings of these agencies that are just trying to protect us, watch over us to make sure we are safe, and do what they can to mitigate our worst fears, we would overwhelmingly and clearly express our gratitude to the NSA and CFPB for their commitment to our protection - and some Americans certainly seem very grateful.<br />
<br />
The Fourth Amendment - how quaint it has become!<br />
<br />
<div align="center">
<b>Justifying Spying</b> </div>
<div align="center">
<b>NSA and CFPB – Two Peas in a Pod</b></div>
<div align="center">
<b> </b> </div>
But let's look at some of these justifications that both the NSA and the CFPB have in common for spying on us. Or, if you find that phrase to be nettlesome, perhaps the phrase ‘conducting surveillance on us’ is easier to accept.<br />
<br />
<b>First Justification:</b> We need a bogeyman, whom we shall call El Coco, its Spanish version, as when a Spanish-speaking parent tells a child 'si no te portas bien vendrá el coco' ("if you're not good the bogeyman will come and get you"). Almost every civilization has had some version of the bogeyman, that amorphous, unpredictable, malevolent being whose primary role is to scare the living daylights out of us and make us willingly compliant and malleable victims.<br />
<br />
So, in the case of the NSA, El Coco comes in the form of terrorists and other malcontents; and, in the case of the CFPB, El Coco seems to be residential mortgage lenders and originators (RMLOs) and other members of the financial markets and sometimes even consumers themselves. In both instances, we can thank the government for protecting us from the mischievous schemes of El Coco.<br />
<br />
Fortunately, these federal agencies keep guard against El Coco and make sure that nothing physically or financially bad will happen to Americans. If you take the position, as did President Franklin Roosevelt, that "there is nothing to fear but fear itself," then you're really not showing much appreciation for the many protective efforts being done on your behalf, to protect you from the wrathful and heinous acts of El Coco.<br />
<a name='more'></a><br />
<b>Second Justification:</b> The euphemisms "data collection" and "data mining" have become virtually the same meaning, one giving way to the other, as surely as night follows the day. After all, what good is getting all that data about us if you can't mine it for something practical? And what could be more practical than mining data on Americans to catch terrorists hiding among them or non-Americans trying to harm Americans or demolishing supposedly deceptive RMLOs preying on the financial well-being of Americans?<br />
<br />
But there are those who resist such sound reasoning, using case law and the Constitution to argue that putting everybody into one massive group lacks the very specificity that the Fourth Amendment requires, with the hope of finding a few bad actors - like casting out large metal nets dragged along by trawling ships, hauling for a large plunder of fish, hoping for a big catch.<br />
<br />
As it has been recently reported, the NSA's perception of probable cause - <i>excuse me</i>, 'reasonable' cause - is that 51% passes, but 49% fails, when determining which ‘fish’ shall live and which 'fish' shall die; or, put otherwise, which Americans are bad, deserving of full-court press investigations and the impoverishment caused by litigation defending themselves, and which Americans are good, spared the invasiveness and poverty, but deserving to remain permanently ensconced in the Pool (that is, the deep and dark pool of collected data).<br />
<br />
So, a cover story is needed to push back on these recalcitrant, defiant extremists who do not accept the new <i>status quo</i>. And in the case of the NSA, the cover story has been that the purpose of the immense electronic dragnet is this: information is power against El Coco, giving the US a policing and enforcement edge over its adversaries outside of the United States and, as we now know, even within it, by and between American citizens.<br />
<br />
The CFPB's cover story is a bit more nuanced, but essentially similar, using the American sense of commitment to a free enterprise system and expectations of market stability. Here's Director Cordray's statement, offered to explain the CFPB’s own dragnet: “The more information there is, the more innovation there can be and the more competition there is among the institutions around customer service. ... It’s something we want to encourage.”<br />
<br />
It's a good thing, too, that the CFPB is so concerned about encouraging innovation and competition, otherwise we might think it was not complying with the Dodd-Frank Act's restrictions that prohibit it from data collection "for purposes of gathering or analyzing the personally identifiable financial information of consumers.”<br />
<br />
I'm sure that the CFPB believes that the cost of $15 million for the outsourced data extraction and analytical work regarding credit cards will be well worth it. Whatever the expense for collecting data on other financial products under the CFPB's purview will surely also be worth the cost. After all, any information on consumers that the CFPB cannot get by the foregoing extraction process will hopefully be obtained by paying $8.4 million to Experian for data on 5 to 10 million Americans. And that is why the CFPB really must pay $443,260 to Clarity Services, Inc. for providing data on payday loans. And also why it is coordinating with the Federal Housing Finance Agency (FHFA) in building a database of mortgage originations that integrates consumer credit information with loan and property records, for which Core Logic will be paid $796,000 to provide loan-level data on mortgages.<br />
<br />
Given the selfless spirit in which these agencies seek to deploy data collection, it seems only fair that we give them the chance to use it in order to protect us not only from the nefarious, outsider El Coco (viz., non-Americans) but also from the nefarious insider El Coco in our midst and among ourselves (viz., Americans). Really, how else to ensure that more innovation and competition is made available to American consumers? Protecting us from others and even from ourselves surely must be a full time job and certainly costs a lot of money, but it's worth it!<br />
<br />
<b>Third Justification:</b> It may seem 'invasive' to take such liberties with our liberties, but by what other means might the NSA and CFPB execute their responsibilities, well, responsibly? One distinct difference between data mined by the NSA and that mined by the CFPB is that we do not get to know anything about the former, virtually forever, but we do get to know about the latter, eventually. Or, at least that is how it is supposed to happen.<br />
<br />
Director Cordray has opined that the research developed from the data collection will be made available to the public. Maybe. But to what benefit? I translate the proposition that the developed research will be made public, as follows: 'based on our selection criteria, we will make available the results of our selection criteria." This kind of circular reasoning is endemic and pervasive among the bureaucratic wonks that torment data into a statistically useless condition. It is the same kind of reasoning that evoked the confirmation bias leading up to the great market meltdown a few years ago.<br />
<br />
I see virtually no difference between being deprived of mined data on Americans by the NSA and useless data being mined and then provided by the CFPB. My concern is that people are falling into the same kind of conceptual trap that caused the last combustible financial disaster: everybody becomes conditioned to looking at and for a concocted El Coco in one area, thereby confirming one another's biases, while the authentic El Coco is getting ready to launch its new brand of terror.<br />
<br />
<div align="center">
<b>Congress Takes Notice</b></div>
<div align="center">
<b> </b> </div>
And now, just a few days ago, on Tuesday, July 9th, we were treated to a sequel to that first Bloomberg article. This second report, published by Housing Wire, is provided by reporter Megan Hopkins. <a href="http://www.housingwire.com/news/2013/07/09/cfpb-official-grilled-over-consumer-data-collection-practices">According to the news report</a>, Mike Crapo (R-ID) "recently asked the Government Accountability Office to investigate the 'big data' collection efforts underway on consumer habits at the CFPB."<br />
<br />
On that Tuesday, the House Financial Services Committee expressed considerable concern about the CFPB's data collection initiative. Ms. Hopkins editorially surmises: "The bureau is in a Catch-22: it collects data to inform opinions on how to help borrowers, but this data also remains a privacy concern for government officials and the general public."<br />
<br />
One member of the Committee (David Scott, D-GA) said this: "The CFPB was put in with Dodd-Frank to protect consumers. You cannot protect consumers without the capacity of gathering information" ... "If you limit that capacity of the CFPB, it’s like cutting the legs out from under them and then condemning them for being a cripple." (<b>See Second Justification</b>)<br />
<br />
To the CFPB’s defense at this hearing came its Acting Director Steven Antonakes, who offered some creative, bureaucratic newspeak by saying that the collected data will be "desensitized." As reported, he said: "We're looking at individual loan-level account information, but we’re not seeking to determine who that particular consumer is. ... We have no interest whatsoever in trying to determine who that specific individual is."<br />
<br />
Sure you do! It's El Coco - if you can catch him!<br />
<div style="text-align: center;">
_______________________________________________________________</div>
<div style="text-align: center;">
<span style="font-size: x-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group </span></div>
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-68406096545670978682013-07-10T19:44:00.000-04:002013-07-10T19:44:18.340-04:00CFPB’s Mortgage Rules for ReadinessThe just released <span style="color: #c0504d;">2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide</span> (Guide) from the Consumer Financial Protection Bureau (CFPB) provides, finally, a set of criteria and preparation procedures for residential mortgage lenders and originators. It is Version 1.0 and, like previously issued guides and manuals, the CFPB will update the Guide periodically, using the results from its field examinations to further enhance the audit methodologies.<br />
<br />
Note that it is called a “Readiness Guide.” Such documents are not meant to be, and are not, conclusive. Such guides are expected to be sign posts leading the way, a means by which a company may learn of the priorities and exigencies of a regulator’s oversight functions. In other words, as the Guide itself declaims: “The Guide summarizes the mortgage rules finalized by the CFPB in January 2013, but it is not a substitute for the rules.”<br />
<br />
To put a finer point on the use of the Guide, please always remember that only the rules and their official interpretations can provide complete and definitive information regarding their requirements.<span style="font-size: xx-small;">*</span><br />
<span style="font-size: xx-small;"> </span> <br />
These rules can be found at <a href="http://www.consumerfinance.gov/regulatory-implementation/">http://www.consumerfinance.gov/regulatory-implementation/</a>.<br />
<br />
Each rule in the Guide also includes a hyperlink with additional information, which includes Small Entity Compliance Guides that may make the rule easier to digest. There are links to videos outlining the main elements of the rule. Furthermore, a convenient hyperlink compendium structure is embedded in the Guide, so that the rule headings are themselves hyperlinks directing the reader to the rule-specific CFPB website page.<br />
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________________________</span></div>
<div align="center">
<span style="color: #c0504d;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">Sections of the Guide</span></div>
<div align="center">
<span style="color: #c0504d;">Summary of the Rules</span></div>
<div align="center">
<span style="color: #c0504d;">Questionnaire</span></div>
<div align="center">
<span style="color: #c0504d;">Library</span></div>
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________________________</span></div>
<div align="center">
<br />
<b><span style="color: #c0504d;">SECTIONS OF THE GUIDE</span></b></div>
<br />
<b>The Guide consists of the following sections:</b><br />
<br />
Part I: Summary of the Rules<br />
Part II: Readiness Questionnaire<br />
Part III: Frequently Asked Questions<br />
Part IV: Tools<br />
<br />
<b>Part I (Summary of the Rules)</b> contains an outline of the eight final rules issued in January 2013 concerning mortgage markets in the United States pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) Public Law 111-203, 124 Stat. 1376 (2010) (2013 Title XIV Final Rules).<br />
<br />
The rules amend several existing regulations, including Regulation Z, X, and B. Throughout the year, CFPB expects to provide updates to the rules where necessary. Updates will be posted, along with summaries of the changes, on the regulatory implementation CFPB webpage.<br />
<br />
<div align="left">
The questionnaire in <b>Part II (Readiness Questionnaire)</b> is '”not intended” to encompass all details of a comprehensive compliance program. This should not be interpreted to mean that the questionnaire is a replacement for the examination procedures or regulations. It is intended to serve as a guide in preparing for implementation of the mortgage rules and in performing a self-assessment. Thus, the questionnaire should be used as a self-assessment in determining a company’s progress towards compliance with the new mortgage rules. The questionnaire contains twenty-nine self-assessment questions and numerous subsections. Do not confuse the questionnaire with a proxy examination tool: it will not be added to the Examination Manual. The CFPB views the questionnaire as a “voluntary guide” for preparation. I have no doubt that it will be used by management in their discussions with examiners. The extent of those discussions may be determined by the institution’s size, products offered, risk mitigation, risk profiles, and other factors, such as the overall strength of the compliance management system.<br />
<br /></div>
<b>Part III (Frequently Asked Questions)</b> consist of only a two-page set of questions and answers, most of them quite obvious, both in the asking and the answering. Perhaps the most interesting ‘question and answer’ set is this one:<br />
<blockquote>
<u>Question</u>: Will the CFPB coordinate and communicate supervisory activities with other regulatory agencies?</blockquote>
<blockquote>
<u>Answer</u>: In accordance with the Dodd-Frank Act and its routine practice, the CFPB will coordinate with other regulators. Regulators will communicate examination plans and findings with each other. When appropriate, the regulators will coordinate examination efforts in order to reduce regulatory burden.</blockquote>
Although the CFPB gave a vaguely worded answer, let’s put it this way: the integration of information between the state banking departments and the CFPB and, where applicable, other state and federal agencies, has become (or is becoming) seamless.<br />
<br />
Finally, <b>Part IV (Tools)</b> is a resource directly, commonly used on many websites to direct the reader to other website locations of interest. This section hosts many hyperlinks, seventeen in total, that cover most of the rules and regulations that the CFPB has promulgated relating to mortgage compliance.<br />
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________________________</span><br />
<a name='more'></a></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>SUMMARY OF THE RULES</b></span></div>
<br />
<span style="color: #c0504d;">Ability-to-Repay and Qualified Mortgage Standards (Regulation Z)</span><br />
Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements Sections 1411 and 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establish certain protections from liability under this requirement for “Qualified Mortgages.” The final rule also implements Section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retains evidence of compliance with the rule for three years after a covered loan is consummated.<br />
<span style="color: #333333;"><a href="http://www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-the-truth-in-lending-act-regulation-z/">This rule is effective January 10, 2014.</a></span><br />
<br />
<span style="color: #c0504d;">Escrow Requirements under the Truth in Lending Act (Regulation Z)</span><br />
Regulation Z currently requires creditors to establish escrow accounts for higher-priced mortgage loans secured by a first lien on a principal dwelling. The rule implements statutory changes made by the DFA that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. The rule also exempts certain transactions from the statute’s escrow requirement. The primary exemption applies to mortgage transactions extended by creditors that operate predominantly in rural or underserved areas, together with their affiliates originate a limited number of first-lien covered transactions, have assets below a certain threshold, and together with their affiliates do not maintain escrow accounts on<span style="color: #a5a5a5;"> </span>extensions of consumer credit secured by real property or a dwelling that are currently serviced by the creditors or their affiliates (subject to certain exceptions).<br />
<a href="http://www.consumerfinance.gov/regulations/escrow-requirements-under-the-truth-in-lending-act-regulation-z/">This rule is effective June 1, 2013</a>.<br />
<br />
<span style="color: #c0504d;">High-Cost Mortgage and Homeownership Counseling (Regulation Z) (Regulation X)</span><br />
The final rule amends Regulation Z (Truth in Lending Act) by expanding the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 (HOEPA), revising and expanding the tests for coverage under HOEPA, and imposing additional restrictions on mortgages that are covered by HOEPA, including a pre-loan counseling requirement.<br />
<br />
The final rule also amends Regulation Z and Regulation X (Real Estate Settlement Procedures Act) by imposing certain other requirements related to homeownership counseling, including a requirement that consumers receive information about homeownership counseling providers.<br />
<a href="http://www.consumerfinance.gov/regulations/high-cost-mortgage-and-homeownership-counseling-amendments-to-regulation-z-and-homeownership-counseling-amendments-to-regulation-x/">This rule is effective January 10, 2014.</a><br />
<br />
<span style="color: #c0504d;">Mortgage Servicing Rules (RESPA) (Regulation X) (TILA) (Regulation Z)</span><br />
The CFPB amended Regulation X (RESPA) and implemented a commentary that sets forth an official interpretation to the regulation. The CFPB also amended Regulation Z (TILA) and the official interpretation to the regulation, which interprets the requirements of Regulation Z. These final rules implement provisions of the DFA regarding mortgage loan servicing.<br />
<br />
Under Regulation X, the final rule implements DFA sections addressing servicers’ obligations to correct errors asserted by mortgage loan borrowers; to provide certain information requested by such borrowers; and to provide protections to such borrowers in connection with force-placed insurance. Additionally, this final rule addresses servicers’ obligations to establish reasonable policies and procedures to achieve certain delineated objectives; to provide information about mortgage loss mitigation options to delinquent borrowers; to establish policies and procedures for providing delinquent borrowers with continuity of contact with servicer personnel capable of performing certain functions; and to evaluate borrowers’ applications for available loss mitigation options. Further, this final rule modifies and streamlines certain existing servicing-related provisions of Regulation X.<br />
<br />
Under Regulation Z, the final rule implements DFA sections addressing initial rate adjustment notices for adjustable-rate mortgages, periodic statements for residential mortgage loans, prompt crediting of mortgage payments, and responses to requests for payoff amounts. This final rule also amends current rules governing the scope, timing, content, and format of disclosures to consumers regarding the interest rate adjustments of their variable-rate transactions.<br />
<a href="http://www.consumerfinance.gov/regulations/2013-real-estate-settlement-procedures-act-regulation-x-and-truth-in-lending-act-regulation-z-mortgage-servicing-final-rules/">These rules are effective January 10, 2014.</a><br />
<br />
<span style="color: #c0504d;">ECOA Appraisals for Higher-Priced Mortgage Loans (Regulation B)</span><br />
The final rule revises Regulation B to implement an ECOA amendment concerning appraisals and other valuations that were enacted as part of the DFA. In general, the revisions to Regulation B require creditors to provide to applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling, and require creditors to notify applicants in writing that copies of appraisals will be provided to them promptly.<br />
<a href="http://www.consumerfinance.gov/regulations/disclosure-and-delivery-requirements-for-copies-of-appraisals-and-other-written-valuations-under-the-equal-credit-opportunity-act-regulation-b/">This rule is effective January 18, 2014.</a><br />
<br />
<span style="color: #c0504d;">TILA Appraisals for Higher-Priced Mortgage Loans (Regulation Z)</span><br />
The revisions to Regulation Z implement a new provision requiring appraisals for “higher-risk mortgages” that was added to TILA by the DFA. For mortgages with an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) by a specified percentage, the final rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used.<br />
<a href="http://www.consumerfinance.gov/regulations/appraisals-for-higher-priced-mortgage-loans/">This rule is effective January 18, 2014</a>.<br />
<br />
<span style="color: #c0504d;">Loan Originator Compensation Requirements (Regulation Z)</span><br />
The final rule implements requirements and restrictions imposed by the DFA concerning loan originator compensation; qualifications of, and registration or licensing of, loan originators; compliance procedures for depository institutions; mandatory arbitration; and the financing of single-premium credit insurance.<br />
<br />
The final rule also revises or provides additional commentary on Regulation Z’s restrictions on loan originator compensation, including application of these restrictions to prohibitions on dual compensation and compensation based on a term of a transaction or a proxy for a term of a transaction, and to record keeping requirements. The final rule also establishes tests for when loan originators can be compensated through certain profits-based compensation arrangements.<br />
<br />
At this time, the CFPB is not prohibiting payments to and receipt of payments by loan originators when a consumer pays upfront points or fees in the mortgage transaction. Instead the CFPB is now studying “how points and fees function in the market and the impact of this and other mortgage-related rulemakings on consumers’ understanding of and choices with respect to points and fees.”<br />
<br />
The amendments to § 1026.36(h) were effective on June 1, 2013. This is the provision that prohibits mandatory arbitration clauses and waivers of certain consumer rights.<br />
<br />
<a href="http://www.consumerfinance.gov/regulations/loan-originator-compensation-requirements-under-the-truth-in-lending-act-regulation-z/">All other provisions of the rule will be effective on January 10, 2014</a>, unless the CFPB changes the effective date.<br />
<div style="text-align: center;">
<span style="color: #a5a5a5;">___________________________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>QUESTIONNAIRE</b></span></div>
<br />
The questionnaire consists of six sections, as follows:<br />
<br />
<b>Developing an Implementation Plan:</b> Three self-assessment questions and subsection criteria.<br />
<br />
<b>Policies and Procedures:</b> Nine self-assessment questions and subsection criteria.<br />
<br />
<b>Training: </b>Six self-assessment questions and subsection criteria.<br />
<br />
<b>Audit, Compliance Review, Internal Control:</b> Two self-assessment questions and subsection criteria.<br />
<br />
<b>Complaints:</b> Four self-assessment questions and subsection criteria.<br />
<br />
<b>Third Party and Vendor Management: </b>Five self-assessment questions and subsection criteria.<br />
<br />
Some suggestions<b> </b>that I suggest as a method to implement a viable self-assessment.<br />
<br />
1. Management should use a “all hands on deck” approach, a ‘tone at the top’ attitude of cooperation and commitment to compliance. This must be consider a required project.<br />
<br />
2. Be sure to weigh each section equally in any evaluation. The number of self-assessment questions and subsection criteria are not an indication of importance or priority.<br />
<br />
3. A team of department managers should be established and given the priority to obtain and detail all aspects of the questionnaire.<br />
<br />
4. Follow the “4 P’s” review strategy of areas critical to examination preparation – these are the areas to review which we ourselves advocate for risk such engagements: Policy, Processes, Procedures, and Personnel.<br />
<br />
5. Produce a self-assessment report to management, at twice each calendar year, that contains the following information: <br />
<ul>
<li>CFPB Questionnaire (latest version) </li>
</ul>
<ul>
<li>Ability to process and managing risk, including the adequacy of policies and procedures. </li>
</ul>
<ul>
<li>Appropriateness of strategic and business plans in light of their impact on CFPB exam preparation. </li>
</ul>
<ul>
<li>Responsiveness of strategic and business plans to test results that identify risks that materially affect risk exposure. </li>
</ul>
<ul>
<li>Accuracy and timeliness of management information systems and the entirety of data captured. </li>
</ul>
<ul>
<li>Quality of staffing, and management’s capability to manage internal control functions. </li>
</ul>
<ul>
<li>Recommendation of corrective actions for deficient policies, procedures, practices, or other concerns, which include, but are not limited to: </li>
</ul>
<blockquote class="tr_bq">
<ul>
<li>Adequacy of adherence to policy, processes, procedures, personnel, and credit parameters (i.e., fair lending). </li>
</ul>
</blockquote>
<blockquote class="tr_bq">
<ul>
<li>The Who, What, When, Where, Why – and How! – approach to identifying and mitigating deficiencies. </li>
</ul>
</blockquote>
<blockquote class="tr_bq">
<ul>
<li>Adequacy of audit and examination functions. </li>
</ul>
</blockquote>
<blockquote class="tr_bq">
<ul>
<li>Other matters of significance arising from this review. </li>
</ul>
</blockquote>
<blockquote class="tr_bq">
<ul>
<li>Impact on identified concerns, along with causes and remedies. </li>
</ul>
</blockquote>
<blockquote class="tr_bq">
<ul>
<li>Corrective actions set forth clearly and concisely, with time frame implementation and back-testing. </li>
</ul>
</blockquote>
<ul>
<li>Executive Summary of the actions that management and all relevant staff have taken in the past or will take in the future in order to monitor for CFPB readiness and be prepared for compliance with the CFPB’s stated guidelines.</li>
</ul>
<div style="text-align: center;">
<span style="color: #a5a5a5;">___________________________________________________________________</span> </div>
<br />
<div align="center">
<span style="color: #c0504d;"><b>LIBRARY</b></span></div>
<div align="center">
<a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="176" src="http://lh3.ggpht.com/-zAoRaCxjpPU/Ud3sFujvaNI/AAAAAAAACJc/IU0RIQTklkY/Law%252520Library%252520Image%25255B1%25255D%25255B1%25255D.jpg?imgmax=800" style="background-image: none; border-bottom: 0px; border-left: 0px; border-right: 0px; border-top: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="175" /></a></div>
<div align="center">
<br />
<b>2013 CFPB Dodd-Frank Mortgage Rules Readiness Guide</b> </div>
<div align="center">
<br />
Version 1.0<br />
July 1, 2013</div>
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">* Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-73165212106467689022013-04-22T08:00:00.000-04:002013-04-22T08:00:18.194-04:00The Enforcement Powers of the Consumer Financial Protection Bureau<div align="justify">
For several months, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) has implemented a spate of enforcement actions against banks and nonbanks. My interest in this article is neither to re-litigate those cases nor single out any particular financial institution for further scrutiny.* Sometimes we must learn our lessons at somebody else’s expense, rather than to castigate another for unseemly conduct. None of us, however, is absolved of the responsibilities, the violations of which could lead to enforcement actions against us or the financial institution where we are employed.</div>
<div align="justify">
<br />
It is important, therefore, to have some sense of what is meant by the term “enforcement,” especially with respect to the CFPB’s authorities. The CFPB received a host of enumerated laws and related authorities on July 21, 2011[i], and, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), a concomitant set of defined rules were established[ii] that gave the Bureau numerous enforcement powers, including the powers to conduct investigations and implement enforcement actions to enforce federal consumer financial law.[iii]</div>
<div align="justify">
<br />
For instance, Section 1052 of the Dodd-Frank authorizes the CFPB to engage in joint, interagency investigations and requests for information, including matters relating to fair lending. Though the statute specifically provides that, “where appropriate,” the Bureau may conduct “joint investigations” with the Secretary of Housing and Urban Development, the Attorney General of the United States, or both, it also sets forth lengthy provisions governing subpoena powers and civil investigative demands.<br />
</div>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span></div>
<div align="center">
<br />
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">Hearings and Adjudications</span></div>
<div align="center">
<span style="color: #c0504d;">Scope of Legal Remedies</span></div>
<div align="center">
<span style="color: #c0504d;">Blowing the Whistle on Violations</span></div>
<div align="center">
<span style="color: #c0504d;">Policy Statement and Whistleblower Protection</span></div>
<div align="center">
<span style="color: #c0504d;">Locking Horns with the Department of Labor</span><br />
</div>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;">Hearings and Adjudications</span></div>
<div align="justify">
<br />
On November 7, 2011, the Bureau issued CFPB Bulletin 2011-04 (entitled “Enforcement”),[iv] the first in a series of bulletins relating to policies and priorities of the Bureau’s Office of Enforcement. The Bulletin announced that before the CFPB commences an enforcement proceeding, it may (or may not) give the subject of the proceeding notice of the nature of the potential violations and may (or may not) offer the subject the opportunity to submit a written statement in response. The Bulletin also gave specific instructions regarding the submission requirements of the written statement, such as the paper size, spacing, font size, and length, while also mandating that the response had to be received by the CFPB by no more than 14 calendar days after the notice.[v]</div>
<div align="justify">
<br />
Almost a year after the CFPB received its authorities, it adopted rules, on June 29, 2012, regarding the procedures it expected to follow when investigating whether a “person” (a legal term for an individual or entity) is or has been engaged in conduct that would constitute a violation of any provision of federal consumer financial law.[vi]</div>
<div align="justify">
<br />
Indeed, Dodd-Frank authorizes[vii] the Bureau to conduct hearings and adjudication proceedings to ensure or enforce compliance with the following applicable items: <br />
<blockquote class="tr_bq">
Title X, which established the Consumer Financial Protection Bureau as an independent agency within the Board of Governors of the Federal Reserve System, including any rules prescribed by the CFPB under Title X; and </blockquote>
<blockquote class="tr_bq">
“… any other Federal law that the Bureau is authorized to enforce, including an enumerated consumer law, and any regulations or order prescribed thereunder, unless such Federal law specifically limits the Bureau from conducting a hearing or adjudication proceeding and only to the extent of such limitation.” </blockquote>
</div>
<div align="justify">
Furthermore, Section 1053 of Dodd-Frank sets forth the rules for Cease-and-Desist proceedings and enforcement orders. </div>
<div align="justify">
<br />
Statutorily, Dodd-Frank authorizes the CFPB to apply to the United States district court within the jurisdiction of which the principal office or place of business of the person is located, for the purposes of enforcing any effective bulletin or notice, outstanding notice, or order.</div>
<div align="justify">
<br />
Thus it was that, soon after the Bureau announced its rules for investigating violations, in July 2012 the CFPB announced its first enforcement action. That action consisted of a consent order in which Capital One agreed to refund $140 million to 2 million customers and pay a $25 million penalty. The enforcement was the consequence of alleged deceptive marketing tactics used by Capital One’s vendors to coax consumers into paying for add-on products when they activated their credit cards.[viii]</div>
<div align="justify">
<br />
Dodd-Frank authorizes the CFPB to commence a civil action against any person who violates a federal consumer financial law and to impose a civil penalty or to seek all appropriate legal and equitable relief including a permanent or temporary injunction. </div>
<div align="justify">
<br />
When commencing a civil action, the Bureau must notify the Attorney General and, with respect to a civil action against an insured depository institution or insured credit union, the appropriate prudential regulator. Except as otherwise permitted by law or equity, no action may be brought under Title X more than three years after the date of discovery of the violation. </div>
<div align="justify">
Indeed, the CFPB published an interim rule regarding its awarding of attorney fees and other litigation expenses in certain situations, as required by the Equal Access to Justice Act.[ix]</div>
<div>
</div>
<div align="center">
<span style="color: #c0504d;">Scope of Legal Remedies</span></div>
<div align="justify">
<br />
The CFPB has extensive authorities to not only investigate violations of federal consumer protection laws but also implement broad enforcement relief.</div>
<div align="justify">
<br />
Consider this list, which I do not assert to be comprehensive. These legal remedies are held to be “without limitation:”<br />
</div>
<ul>
<li> <div align="justify">
Rescission or reformation of contracts </div>
</li>
<li> <div align="justify">
Refund of money </div>
</li>
<li> <div align="justify">
Disgorgement and refund of various types of assets </div>
</li>
<li> <div align="justify">
Return of real property </div>
</li>
<li> <div align="justify">
Restitution </div>
</li>
<li> <div align="justify">
Disgorgement or compensation for unjust enrichment </div>
</li>
<li> <div align="justify">
Payment of damages or other monetary relief </div>
</li>
<li> <div align="justify">
Public notification regarding the violation (including the costs of notification) </div>
</li>
<li> <div align="justify">
Limits on the activities or functions of the person </div>
</li>
<li> <div align="justify">
Civil monetary penalties </div>
</li>
</ul>
<div align="justify">
<br />
Indeed, Dodd-Frank authorizes the court in a court action, or the CFPB in an administrative proceeding, to grant “any appropriate legal or equitable relief with respect to a violation of federal consumer financial law, including a violation of a rule or order prescribed under a federal consumer financial law.”[x]</div>
<div align="justify">
<br />
The relevant statute provides that there may not be an imposition of exemplary or punitive damages; however, in an action to enforce any federal consumer financial law, the CFPB, the states Attorneys General, or state regulators may recover their costs, if they prevail.</div>
<div align="justify">
<br />
Notwithstanding the foregoing exclusion of exemplary or punitive damages, for any violation of a law, rule, or final order, or condition imposed in writing by the CFPB, a civil penalty may not exceed <i>$5,000</i> <i>for each day during which the violation or failure to pay continues</i>. However, take note: that penalty amount jumps to <i>$25,000 for each day for any person that recklessly engages in a violation of a federal consumer financial law</i>, and to <i>$1,000,000 for each day for any person that knowingly violates a federal consumer financial law</i>.</div>
<div align="justify">
<br />
And if the CFPB obtains evidence that any person has engaged in conduct that may constitute a violation of federal criminal law, the Bureau will immediately refer the case to the Attorney General of the United States.</div>
<div align="center">
<br />
<span style="color: #c0504d;">Blowing the Whistle on Violations</span></div>
<div align="justify">
<br />
The Bureau has distinguished whistleblower information from consumer complaints. Section 1057 of Dodd-Frank protects certain employees from retaliation who submit information about their employers' potential violations of the consumer financial protection laws now enforced by the CFPB. On December 15, 2011, the CFPB issued Bulletin 2011-05 (Enforcement and Fair Lending) to solicit information about potential violations of federal consumer financial laws.[xi] The Bulletin notes that Dodd-Frank § 1057 protects certain employees and their representatives who provide information against retaliation by their employers.[xii]</div>
<div align="justify">
<br />
Dodd-Frank provides broad whistleblower protections to employees of <i>covered persons</i> and their subsidiaries (viz., “covered persons” being defined in Sections 1024, 1025, and 1026 of Dodd-Frank). </div>
<div align="justify">
<br />
A covered person or service provider is defined in the foregoing sections as:</div>
<div align="justify">
<br />
Being one that: </div>
<ul>
<li> <div align="justify">
Offers or provides origination, brokerage, or servicing of loans secured by real estate for use by consumers primarily for personal, family, or household purposes, or loan modification or foreclosure relief services in connection with such loans; </div>
</li>
<li> <div align="justify">
Is a larger participant of a market for other consumer financial products or services, as defined by the applicable section of Dodd-Frank; </div>
</li>
<li> <div align="justify">
The Bureau has reasonable cause to determine, by order, after notice to the covered person and a reasonable opportunity for such covered person to respond, based on complaints collected through the CFPB’s complaint system under or information from other sources, that such covered person is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services; [xiii] </div>
</li>
<li> <div align="justify">
Offers or provides to a consumer any private education loan;[xiv] or </div>
</li>
<li> <div align="justify">
Offers or provides to a consumer a payday loan. </div>
</li>
</ul>
<div align="justify">
Being an: </div>
<ul>
<li> <div align="justify">
Insured depository institution with total assets of more than $10,000,000,000 and any affiliate thereof; or </div>
</li>
<li> <div align="justify">
Insured credit union with total assets of more than $10,000,000,000 and any affiliate thereof. </div>
</li>
</ul>
<div align="justify">
Being an: </div>
<ul>
<li> <div align="justify">
Insured depository institution with total assets of $10,000,000,000 or less; or </div>
</li>
<li> <div align="justify">
Insured credit union with total assets of $10,000,000,000 or less. </div>
</li>
</ul>
<div align="justify">
<br />
A covered person may not terminate or in any other way discriminate against any covered employee or any authorized representative of covered employees. </div>
<div align="center">
<br />
<span style="color: #c0504d;">Policy Statement and Whistleblower Protection</span></div>
<div align="justify">
<br />
The protections afforded the whistleblower and the Bureau’s procedures relating to whistleblower protection should invoke a response from all affected financial institutions to draft and ratify a policy statement relating to preventing retaliation toward a whistleblower.</div>
<div align="justify">
<br />
Such a policy should include various statements of principle, practice, policy, and procedures – what I call the “Four Ps” – to ensure that all employees understand the importance of internally reporting to a company’s chain of command any suspicious practices or potential violations. When the internal route fails, whistleblowers may go to a government entity, such as the CFPB, to report their concerns. As part of the policy statement, there should be a clear and unambiguous provision to protect the whistleblower from any harassment by the employer or any employees.</div>
<div align="justify">
<br />
Therefore, the aforementioned policy should specifically state that whistleblowers will be protected from retaliation if they:<br />
</div>
<ul>
<li> <div align="justify">
Provided, caused to be provided, or are about to provide or cause to be provided, information to the employer, the CFPB, or any other state, local, or federal, government authority or law enforcement agency relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of any other provision of law that is subject to the jurisdiction of the CFPB, or any rule, order, standard, or prohibition promulgated by the CFPB. </div>
</li>
<li> <div align="justify">
Testified or will testify in any proceeding resulting from the administration or enforcement of any provision of law that is subject to the jurisdiction of the CFPB, or any rule, order, standard, or prohibition prescribed by the CFPB; </div>
</li>
<li> <div align="justify">
Filed, instituted, or caused to be filed or instituted any proceeding under any federal consumer financial law; or </div>
</li>
<li> <div align="justify">
Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the covered employee (or other such person) reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of, or enforceable by, the CFPB. </div>
</li>
</ul>
<div align="justify">
<br />
The Bureau established an email address and phone number for submitting whistleblower tips. Additionally, the CFBP has built a web space for whistleblower communications.</div>
<div align="center">
<br />
<span style="color: #c0504d;">Locking Horns with the Department of Labor</span></div>
<div align="justify">
<br />
Dodd-Frank gives an employee who believes that he or she has been discharged or otherwise discriminated against 180 days after the date on which the alleged violation occurs to file a complaint with the Secretary of Labor. Furthermore, Dodd-Frank sets forth certain rules for Department of Labor investigations, such that if the Department concludes that there is reasonable cause to believe that a violation has occurred, it may issue a preliminary order providing relief. However, the Department must dismiss a complaint unless the complainant makes a <i>prima facie</i> showing that the action in question was a contributing factor in the unfavorable personnel action. No investigation is permitted if the employer demonstrates, “by clear and convincing evidence,” that the employer would have taken the same unfavorable personnel action in the absence of that behavior.</div>
<div align="justify">
<br />
The Department of Labor has vast authorities to redress the grievances of covered employees. If it determines that a violation has occurred, the Department may order the person who committed the violation to, among other things, take affirmative action to abate the violation; reinstate the complainant to his or her former position, together with compensation (including back pay) and restore the terms, conditions, and privileges associated with his or her employment; and provide compensatory damages to the complainant.</div>
<div align="justify">
<br />
At the request of the covered employee who has been retaliated against, the Department may assess a sum equal to the aggregate amount of all costs and expenses (including attorney fees and expert witness fees) reasonably incurred by the complainant. But, if the Department finds that the complaint is frivolous or has been brought in bad faith, it may award to the prevailing covered employer a reasonable attorney fee, not exceeding $1,000, to be paid by the complainant.</div>
<div align="justify">
<hr align="left" size="1" width="33%" />
</div>
<div align="justify">
<span style="font-size: x-small;">[i] The Designated Transfer Date, <i>Dodd–Frank Wall Street Reform and Consumer Protection Act</i>, (Pub. L. 111–203, H.R. 4173), signed into law on July 21, 2010</span></div>
<div align="justify">
<span style="font-size: x-small;">[ii] Ibid. Subtitle E of Title X</span></div>
<div align="justify">
<span style="font-size: x-small;">[iii] Op. cit. 1 Title X</span></div>
<div align="justify">
<span style="font-size: x-small;">[iv] <i>Enforcement, Early Warning Notice</i>, CFPB Bulletin 2011-04, November 7, 2011</span></div>
<div align="justify">
<span style="font-size: x-small;">[v] 77 Federal Register 27446 (May 10, 2012)</span></div>
<div align="justify">
<span style="font-size: x-small;">[vi] Specifically, on June 29, 2012, the CFPB revised the interim rules it had adopted on July 28, 2011 regarding these procedures. See: 76 Federal Register 45168 (July 28, 2011); 77 Federal Register 39101 (June 29, 2012)</span></div>
<div align="justify">
<span style="font-size: x-small;">[vii] Op. cit. 1, § 1052(d)</span></div>
<div align="justify">
<span style="font-size: x-small;">[viii] The Consent Order was issued pursuant to 12 U.S.C. § 5563 (<i>Hearings and Adjudication Proceedings</i>, Dodd-Frank § 1053) and § 5565 (Relief Available, Dodd-Frank § 1055).The consent order stated that the CFPB found – though the bank had not admitted or denied - violations of Dodd-Frank §1031 regarding unfair, deceptive or abusive acts or practices.</span></div>
<div align="justify">
<span style="font-size: x-small;">[ix] Op. cit. 6, 77 Federal Register 39117</span></div>
<div align="justify">
<span style="font-size: x-small;">[x] Op. cit. 1, §1055, codified at 12 USC § 5565</span></div>
<div align="justify">
<span style="font-size: x-small;">[xi] <i>Enforcement and Fair Lending,</i> <i>Bureau Invites Whistleblower Information and Law Enforcement Tips, and Highlights Anti-Retaliation Protections</i>, CFPB Bulletin 2011-05, December 15, 2011</span></div>
<div align="justify">
<span style="font-size: x-small;">[xii] Ibid. The bulletin encourages “knowledgeable sources” with information about potential violations to email their information to whistleblower@cfpb.gov or to call toll-free (855) 695-7974. On February 2, 2012, the CFPB published its own whistleblower protection notice for its employees.</span></div>
<div align="justify">
<span style="font-size: x-small;">[xiii] Op. cit. 1, § 1013(b)(3)</span></div>
<div align="justify">
<span style="font-size: x-small;">[xiv] As defined in § 140 of the Truth in Lending Act (15 USC 1650), notwithstanding § 1027(a)(2)(A) and subject to § 1027(a)(2)(C) of Dodd-Frank</span></div>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span></div>
<div align="center">
<span style="font-size: x-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
<div align="center">
<span style="font-size: x-small;">National Mortgage Professional Magazine [April 2013, Volume 5, Issue 4, pp. 8-32]</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-33594212761582034262013-04-03T14:14:00.000-04:002013-04-03T14:14:58.952-04:00Loan Originator Compensation: New Rules<div align="justify">
On January 24, 2013, as the last of the Final Rules of the Consumer Financial Protection Bureau (CFPB) rolled out, I offered an outline of all of them, entitled "<a href="http://lenderscompliance.blogspot.com/2013/01/cfpb-gang-of-seven-final-rules.html">CFPB's Gang of Seven (Final Rules)</a>".</div>
<div align="justify">
<br /></div>
<div align="justify">
I listed them in order of issuance, as follows:</div>
<div align="justify">
<br /></div>
<div align="justify">
1. Ability-to-Repay (ATR)<br />
2. High-Cost Mortgage (HCM)<br />
3. Escrow<br />
4. Servicing<br />
5. Appraisals for High-Risk Mortgages<br />
6. Copies of Appraisals<br />
7. Mortgage Loan Originator Compensation</div>
<div align="justify">
<br /></div>
<div align="justify">
Having come through the last two months responding to numerous questions about these Final Rules, I have been able to cobble together some of the most salient questions, regulatory features, and concerns that our clients have expressed about them. And when I have spoken to the media types, it seems that they also have a set of questions and interests that are not being fully addressed in the current dialogue. Of abiding interest is the change relating to loan originator compensation.</div>
<div align="justify">
<br /></div>
<div align="justify">
With that in mind, I want to provide a brief outline of some loan originator compensation issues, offering additional details garnered from two months in the trenches working through these regulatory issues on behalf of our clients. From time to time, I will have more to discuss about many regulatory changes anticipated in 2013 and 2014. I am going to conduct this review topic by topic, rather than just as specific regulations subject to a final rulemaking. </div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">Terms and Conditions<br />Retirement Plans<br />Factors and Proxies<br />Dual Compensation<br />Non-loan Originations Services<br />Points and Fees<br />Loan Originator Qualifications<br />Mandatory Arbitration Clause <br />Single Premium Insurance<br />Record Retention Requirements</span></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Terms and Conditions</span></div>
<div align="center">
<br /></div>
<div align="justify">
By now, there is nary a residential mortgage lender or originator that does not know that, under Regulation Z, loan originator compensation is prohibited from being based upon the terms and conditions of a mortgage loan transaction.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB has provided new nomenclature for the terminology "transaction terms and conditions," without much changing the prohibition and certain exceptions to the standing rule. The new terminology is "term of a transaction," but now with the clarified meaning that <i><span style="color: #c0504d;">term of a transaction</span></i> means to include "any right or obligation of the parties to a credit transaction."</div>
<div align="justify">
<br /></div>
<div align="justify">
The usual cast of regulatory prohibitions continue in force. For instance, loan originator compensation is still prohibited from being based on such things as the interest rate of a loan, or upon the inclusion of additional fees or charges for products or services provided by other parties to the transaction. </div>
<div align="justify">
<br /></div>
<div align="justify">
And the usual cast of regulatory identifiers of a term of a transaction continue in force. Thus, fees or charges are a term of the transaction if they must be disclosed in the Good Faith Estimate (GFE) or HUD-1 or HUD-1A Settlement Statement (HUD-1). That obviously means to include loan originator or creditor fees or charges for the credit transaction or for a product or service provided by the loan originator or creditor that is related to the extension of credit; and it also means those fees or charges of other parties for any product or service required by the lender as a condition of the extension of credit. Keep in mind, however, that just because a fee or charge is stated on the HUD-1 does not in itself make the fee or charge a term of the transaction.</div>
<div align="justify">
<br /></div>
<div align="justify">
One rather controversial area involves the off-setting of compensation due to increased costs. The standing rule has provided that loan originator compensation is prohibited from being reduced in response to a change in the transaction terms. This has caused lenders all manner of frustration, not to mention loss of revenues and diminished profits. Yet, the new rule would allow compensation to be reduced in order to offset unexpected increases to estimated settlement costs, otherwise known as "unforeseen circumstances." What is a circumstance that is <i><span style="color: #c0504d;">unforeseen</span></i>? The imagination reels! But since the CFPB has offered no formal guidance to delineate very specifically what may or may not be an unexpected event, the lender must be extremely careful not to enter these dark waters too briskly.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Retirement Plans</span></div>
<div align="center">
<br /></div>
<div align="justify">
Profits may be used toward contributions to tax advantaged retirement plans. The important feature is to ensure that such contributions are not be based on the terms of the individual loan originator’s transactions. Non-deferred, profit based compensation plans - such as bonus pools and profit-sharing plans - is permissible. However, any such payments (1) must ensure that compensation is not directly or indirectly based on the terms of the individual loan originator’s transactions, and (2) either the compensation under the plan does not exceed 10 percent of the loan originator’s total compensation for the applicable period or the loan originator was an originator for no more than 10 transactions during the preceding 12 months. </div>
<div align="justify">
<br /></div>
<div align="justify">
Whatever the choice, the entity involved must ensure that payments do not include bonuses, awards, trips, or other 'incentive' products or services.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Factors and Proxies</span></div>
<div align="center">
<br /></div>
<div align="justify">
Although the standing rule provides that loan originator compensation may not be dependent upon a factor that is a “proxy” for what would otherwise be considered a term of a loan transaction, there is clarification now that a factor is a term of a loan transaction “proxy” if it meets these two criteria: (1) the factor varies with a transaction term over a significant number of transactions, and (2) the loan originator, directly or indirectly, has the ability to add, reduce, or change the factor when originating the loan or credit.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span><br />
<a name='more'></a></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Dual Compensation</span></div>
<div align="center">
<br /></div>
<div align="justify">
There is no change to the prohibition against dual compensation. As by now everyone knows, a loan originator may not be compensated by both the creditor and the consumer. However, mortgage brokers are permitted to pay commissions to their employees and contract agents, provided that these commissions are not based upon the term of a transaction.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Non-loan Originations Services</span></div>
<div align="center">
<br /></div>
<div align="justify">
Any amounts received by an origination entity or mortgage broker entity - that is, a lender or brokerage - or its affiliates for activities that are not related to loan originations are not deemed to be compensation. This means that compensation does not include a payment received by such an entity (or its affiliate) for <i>bona fide</i> and reasonable charges for services it performs that are not related to loan originations, and by a lender or brokerage for <i>bona fide</i> and reasonable charges for services that are not loan origination activities when those amounts are not retained by the loan originator but are paid to the lender or its affiliate, or the brokerage or its affiliate.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Points and Fees</span></div>
<div align="center">
<br /></div>
<div align="justify">
The CFPB initially proposed a rule in August 2012 that set forth an exemption for the upfront points and fees prohibition. This weird creature of a loan product was called the "zero-zero alternative." If the borrower qualified for it, the lender had to offer it as an alternative loan product.</div>
<div align="justify">
<br /></div>
<div align="justify">
Lenders opposed the zero-zero and the CFPB then provided a complete exemption, under which a lender may impose points and fees on a consumer where the lender pays compensation to a loan originator - as long as the consumer does not also pay a loan originator.</div>
<div align="justify">
<br /></div>
<div align="justify">
But is this exemption the unequivocal law of the land? Not really! The CFPB actually reserved to itself the right to amend the exemption after it has conducted additional research on this matter.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Loan Originator Qualifications</span></div>
<div align="center">
<br /></div>
<div align="justify">
The SAFE Act, Dodd-Frank, and applicable state law govern all mortgage loan originating entities to make certain that their loan originator employees and agents are either appropriately licensed or registered. Banks and certain nonprofit entities are required to ensure that their registered loan originators meet character and background standards essentially similar to those established under the SAFE Act for licensed loan originators. </div>
<div align="justify">
<br /></div>
<div align="justify">
Therefore, registered loan originators are subject to the same rules regarding criminal background checks, credit reporting, and Nationwide Mortgage Licensing System and Registry (NMLS) checks as licensed loan originators. Registered loan originators must receive training on federal and state law requirements that apply to loan origination activities.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB provides more parameters for the thresholds pertaining to background checks, such as when a criminal conviction will disqualify an individual from being a loan originator and when a criminal background or credit check is mandatory.</div>
<div align="justify">
<br /></div>
<div align="justify">
There is a clarification to where the loan originator's NMLS unique identifier is to be included on loan documents, such as the requirement for it to be placed on the credit application, note, or loan contract, and security instrument. The unique identifier, however, does not have to be stated on the HUD-1 or Truth in Lending Act (TILA) disclosures.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Mandatory Arbitration Clause</span></div>
<div align="center">
<span style="color: red;"> </span> </div>
<div align="justify">
Effective June 1, 2013, there is a prohibition against any loan contract or other agreement related to a consumer residential mortgage or home equity transaction from including or requiring mandatory arbitration of disputes. This prohibition does permit the parties to agree to arbitration once a dispute commences. </div>
<div align="justify">
<br /></div>
<div align="justify">
Specifically prohibited are contract or loan agreement provisions that would bar or limit a consumer from seeking relief in court for any claimed violation of federal law, and interpretations of provisions of loan documents which would bar a consumer from bringing a claim in court in connection with any alleged violation of federal law.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Single Premium Insurance</span></div>
<div align="center">
<br /></div>
<div align="justify">
Premiums or fees for credit life insurance and similar products may not be financed in connection with a consumer credit transaction secured by a dwelling. Credit insurance may only be paid on a monthly basis.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Record Retention Requirements</span></div>
<div align="center">
<br /></div>
<div align="justify">
As with nearly all regulatory mandates, it is important to retain records. Given the ability to keep documents in an electronic format, many (but not all) records can be kept permanently in that format. Nevertheless, the CFPB has directed residential mortgage lenders and originators to maintain records related to loan originator compensation for a period of at least three years after the date of the compensation payment. Documents to retain would surely include, but not be limited to, compensation agreements with loan originators as well as all payments made to the loan originators.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">Library</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;"><a href="http://lenderscompliancegroup.com/113.html"><img alt="Law Library Image" border="0" height="129" src="http://lh4.ggpht.com/-JuZWYSvsDpI/UVxwDjcFvYI/AAAAAAAAB3Y/jhdNAkuuGtc/Law%252520Library%252520Image%25255B5%25255D.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="129" /></a></span></div>
<div align="center">
<br /></div>
<div align="center">
Loan Originator Compensation</div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-39471069675911297462013-01-11T08:38:00.000-05:002013-01-11T08:38:48.347-05:00CFPB’s Final Rule: Ability-to-Repay and Qualified Mortgages<div align="justify">
On Wednesday, I provided an outline of the Consumer Financial Protection Bureau's (CFPB's) <a href="http://lenderscompliance.blogspot.com/2013/01/cfpbs-regulatory-agenda-2013.html"><span style="color: blue;">Regulatory Agenda for 2013</span></a>. As if on cue, the CFPB accommodated us on Thursday with the first of its forthcoming issuances.* This pertains to the Final Rule regarding Ability-to-Repay, which leaves the Final Rule issuances this month for Loan Originator Compensation, Mortgage Servicing, and Requirements for Escrow Accounts.<br />
<br />
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) required that, for residential mortgages, creditors must make a reasonable and good faith determination based on verified and documented information that the consumer has a reasonable ability to repay the loan according to its terms. It also established a "presumption" of compliance for a certain category of mortgages, which was called “qualified mortgages” or "QMs." These provisions are similar, but not identical to, the Federal Reserve Board's (FRB's) 2008 rule and cover the entire mortgage market rather than simply higher-priced mortgages. The FRB proposed a rule to implement the new statutory requirements before authority passed to the CFPB to finalize the rule. The compliance effective date is January 10, 2014.<span style="color: blue;"> </span><br />
</div>
<div align="justify">
<br />
<a href="http://blog.lenderscompliancegroup.com/"><span style="color: blue;">I have written extensively about Ability-to-Repay and the Qualified Mortgage</span></a>. </div>
<div align="justify">
Please feel free to review these articles.<br />
<br />
In this article, I would like to mention the premises used as the reasons for an Ability-to-Repay rule (ATR). Then I will outline the essential features of ATR, followed by a review of the "Qualified Mortgage." Finally, I will provide a general summation in order to provide some context with respect to the Final Rule's implementation.<br />
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<span style="color: red;">IN THIS ARTICLE</span><br />
</div>
<div align="center">
<span style="color: #c0504d;">Premises for Ability-to-Repay <br />What is Ability-to-Repay? <br />What is the Qualified Mortgage? <br />Types of Qualified Mortgages <br />Summation</span></div>
<div align="center">
<span style="color: #c0504d;">Library</span><br />
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>Premises for Ability-to-Repay</b></span></div>
<div align="justify">
<br />
The CFPB believes that when consumers apply for a mortgage they "often struggle to understand how much of a monthly payment they can afford to take on." Thus, according to the CFPB, the consumer may reasonably assume that lenders and mortgage brokers would not make loans to people who cannot afford them. But in the years leading up to the financial crisis, the CFPB asserts that lenders too often made mortgages that could not be paid back.<br />
</div>
<div align="justify">
<br />
Therefore, the purpose of ATR is to require lenders to obtain and verify information to determine whether a consumer can afford to repay the mortgage and, per the CFPB, thereby help to restore trust in the mortgage market.</div>
<div align="justify">
<br />
These are the premises upon which the CFPB has established the need for Ability-to-Repay:</div>
<div align="justify">
<br />
-In the lead up to the financial crisis, certain lending practices set consumers up to fail with mortgages they could not afford.</div>
<div align="justify">
<br />
-The deterioration in underwriting standards contributed to dramatic increases in mortgage delinquencies and rates of foreclosures.</div>
<div align="justify">
<br />
-The Dodd-Frank Act recognizes the need to mandate that lenders ensure consumers have the ability to pay back their mortgages.</div>
<div align="justify">
<br />
-The Ability-to-Repay rule protects consumers from risky practices that helped cause the crisis.</div>
<div align="justify">
<br />
In its review of the above-mentioned premises, the CFPB had taken the position that lenders sold no-doc and low-doc loans where consumers were “qualifying” for loans beyond their means. Lenders also "sold risky and complicated mortgages like interest-only loans, negative-amortization loans where the principal and eventually the monthly payment increases, hybrid adjustable-rate mortgages where the rate was set artificially low for years and then adjusted upwards, and option adjustable-rate mortgages where the consumer could 'pick a payment' which might result in negative amortization and eventually higher monthly payments." </div>
<div align="justify">
<br />
In plain English, the CFPB asserts that lenders should not be able to offer no-doc, low-doc loans, otherwise known as “Alt-A” loans, where some lenders made quick sales by not requiring specific, qualifying documentation, yet then offloaded these risky mortgages by selling them to investors.</div>
<div align="justify">
<br />
As it was contended, these actions precipitated the collapse of the housing market in 2008 and the subsequent financial crisis.</div>
<div align="justify">
<br />
Dodd-Frank provides the authority to the CFPB to define criteria for certain loans called “Qualified Mortgages” that are presumed to meet the Ability-to-Repay rule requirements.</div>
<div align="justify">
<br />
The salient observation about ATR is that the CFPB is issuing this rule in order "to ensure that responsible consumers get responsible loans," as well as ensuring that "lenders can extend credit responsibly - without worrying about competition from unscrupulous lenders."</div>
<div>
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>What is Ability-to-Repay?</b></span></div>
<div align="justify">
<br />
There are <u>four (4) ATR components</u>, each in its own way requiring the lender to obtain financial information from the loan applicant and verify them. <br />
<a name='more'></a></div>
<div align="justify">
<br />
<b>Component 1: Underwriting Standards</b></div>
<div align="justify">
<br />
The procedure must follow, at a minimum, eight (8) specific underwriting standards:</div>
<div align="justify">
<br />
1. Current income or assets; <br />
2. Current employment status; <br />
3. Credit history; <br />
4. The monthly payment for the mortgage; <br />
5. The monthly payments on any other loans associated with the property; <br />
6. The monthly payment for other mortgage related obligations (i.e., property taxes); <br />
7. Other debt obligations; and <br />
8. The monthly debt-to-income ratio or residual income the borrower would be taking on with the mortgage.</div>
<div align="justify">
<br />
<b>Component 2: Sufficient Assets or Income</b></div>
<div align="justify">
<br />
The borrower must have "sufficient assets or income" to pay back the mortgage. Lenders are charged with the duty to determine whether a borrower can repay the loan, by means of looking at the borrower’s income and any assets.</div>
<div align="justify">
<br />
<b>Component 3: Qualifying without Teaser Rates</b></div>
<div align="justify">
<br />
So-called "teaser rates" can "no longer mask" the true cost of a mortgage. This means that the lender cannot evaluate a consumer’s ability to repay the loan based on a teaser rate. Put otherwise, lenders will have to determine the consumer’s ability to repay both the principal and the interest "over the long term."</div>
<div align="justify">
<br />
<b>Component 4: Risky Loan Exemption</b></div>
<div align="justify">
<br />
If a consumer wants to refinance a risky loan - such as an adjustable-rate mortgage, an interest-only loan, or a negative-amortization loan - an exemption applies whereby such a refinance is permitted if the lender that refinances a borrower from a risky mortgage provides refinancing to "a more stable, standard loan," in which case the lender may do so without undertaking the full underwriting process required by the new ATR rule.<br />
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>What is a Qualified Mortgage?</b></span></div>
<div align="justify">
<br />
Essentially, the hypothesis that the CPFB asserts is that a Qualified Mortgage (QM) prohibits or limits the "risky features that harmed consumers in the recent mortgage crisis." Therefore, lenders will be presumed to have complied with the Ability-to-Repay rule if they issue Qualified Mortgages. </div>
<div align="justify">
<br />
There are <u>four (4) component features</u> to the QM. </div>
<div align="justify">
<br />
<b>Component 1: No Excess Upfront Points and Fees.</b></div>
<div align="justify">
<br />
The QM limits points and fees, including those used to compensate loan originators (i.e., loan officers and brokers). </div>
<div align="justify">
<br />
<b>Component 2: No Toxic Loan Features.</b></div>
<div align="justify">
<br />
A QM cannot have the loan features that were previously "associated with risky mortgages in the lead up to the crisis." So, in the CFPB's view, certain loans cannot be QMs, such as:</div>
<div align="justify">
<br />
-Interest-only loans (viz., consumer only pays the interest for a specified amount of time, does not decrease with payments); <br />
<br />
-Loans where the principal amount increases (viz., negative-amortization loans); and <br />
<br />
-Loans where the term is longer than 30 years.</div>
<div align="justify">
<br />
<b>Component 3: Cap on How Much Income may go toward Debt.</b></div>
<div align="justify">
<br />
QMs are "generally" provided to people who have debt-to-income (DTI) ratios less than or equal to forty-three (43%) percent. This is obviously a cap on debt which, according to the CFPB, ensures consumers are only getting what they can likely afford. Most importantly, the general rule requires that monthly payments be calculated based on the highest payment that will apply in the first five years of the loan and that the consumer have a total (or “back-end”) debt-to-income ratio that is less than or equal to 43 percent.</div>
<div align="justify">
<br />
Note: for a temporary, transitional period, loans that do not have a 43 DTI but meet government affordability or other standards will be considered QMs. [Examples of such other standards are loans eligible for purchase by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac)]</div>
<div align="justify">
<br />
<b>Component 4: Balloon Loans in Rural or Underserved Areas</b></div>
<div align="justify">
<br />
In the first place, QMs may not be loans with balloon payments. However, a "small creditor" that originates loans in rural or underserved areas is permitted to originate such loans as QMs, though the circumstances under which such loans are permitted, even in that instance, are subject to certain defined circumstances<br />
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<b><span style="color: #c0504d;">Types of Qualified Mortgages</span></b></div>
<div align="justify">
<br />
There are <u>two (2) types of QMs</u>, each of which differ with respect to legal and regulatory consequences.</div>
<div align="justify">
<br />
<b>Type 1: Qualified Mortgages with Rebuttable Presumption</b></div>
<div align="justify">
<br />
These are higher-priced loans typically for consumers with insufficient or weak credit history. If the loan does not perform, the consumer can rebut the presumption that the creditor properly took into account their ability to repay the loan. In other words, the borrowers would have to prove that the lender did not consider their living expenses after their mortgage and other debts. But, it should be noted that this action does not affect the rights of a consumer to challenge a lender for violating any other federal consumer protection laws.</div>
<div align="justify">
<br />
<b>Type 2: Qualified Mortgages with Safe Harbor</b></div>
<div align="justify">
<br />
These are lower-priced loans that are typically made to borrowers who pose fewer risks. If the loan does not perform, the lender will be considered to have legally satisfied the ability-to-repay requirements. That said, the consumers can still legally challenge their lender under this rule if they believe that the loan does not meet the definition of a Qualified Mortgage. And, as I've indicated above, this action does not affect the rights of a consumer to challenge a lender for violating any other federal consumer protection laws.<br />
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>Summation</b></span></div>
<div align="justify">
<br />
The Dodd-Frank Act did not specify whether the presumption of compliance is conclusive (i.e., creates a safe harbor) or is rebuttable. </div>
<div align="justify">
<br />
The Final Rule, however, does provide a safe harbor for loans that satisfy the definition of a qualified mortgage and are also not "higher-priced." The Final Rule provides a rebuttable presumption for higher-priced mortgage loans.</div>
<div align="justify">
<br />
The CFPB clearly has drawn a distinction between prime loans and subprime loans. Under the existing regulations that were adopted by the FRB in 2008, only higher-priced mortgage loans (viz., HPMLs) are subject to an ATR rule and a rebuttable presumption of compliance if lenders follow certain requirements. The Final Rule further strengthens the requirements needed to qualify for a rebuttable presumption for subprime loans and further defines with more particularity the grounds for rebutting the presumption. </div>
<div align="justify">
<br />
Specifically, the Final Rule provides that consumers may show a violation with regard to a subprime qualified mortgage by showing that, at the time the loan was originated, the consumer’s income and debt obligations left insufficient residual income or assets to meet living expenses. </div>
<div align="justify">
<br />
In litigation, I am sure that an analysis would include consideration of the consumer’s monthly payments on the loan, loan-related obligations, and any simultaneous loans of which the lender was aware, as well as any recurring, material living expenses of which the lender was aware. It is worth noting that guidance accompanying the Final Rule holds that the longer the period of time that the consumer has demonstrated an actual ability to repay the loan by making timely payments, without modification or accommodation, after consummation or, for an adjustable-rate mortgage, after recast, the less likely the consumer will be able to rebut the presumption based on insufficient residual income. But such performance criteria are, as they have always been and will continue to be, the very substance of such litigation.</div>
<div align="justify">
<br />
With respect to prime loans – which were not covered by the FRB's ATR rule - the Final Rule applies the new ATR requirement, but it also creates a strong presumption for those prime loans that constitute QMs. Thus, if a prime loan satisfies the QM criteria, it will be conclusively presumed that the lender made a good faith and reasonable determination of the consumer’s ability to repay. Hence, the Safe Harbor.</div>
<div align="justify">
<br />
Regarding the cap at 43 DTI, obviously the CFPB believes that there are many instances in which individual consumers can afford a debt-to-income ratio above 43 percent based on their particular circumstances, but that such loans are better evaluated on an individual basis under the ATR criteria rather than with a blanket presumption. Straying away from the Safe Harbor to the Rebuttable Presumption will be a challenge for lenders to consider during the underwriting stage in the loan flow process.</div>
<div align="justify">
<br />
The CFPB seems to maintain the view that lenders may initially be reluctant to make loans that are not QMs, even though they are responsibly underwritten. So, the Final Rule provides for a second, temporary category of QMs that have more flexible underwriting requirements, so long as they satisfy "the general product feature prerequisites for a qualified mortgage" and also "satisfy the underwriting requirements" of, and are therefore eligible to be purchased, guaranteed or insured by either (1) the GSEs while they operate under Federal conservatorship or receivership, or (2) the U.S. Department of Housing and Urban Development, Department of Veterans Affairs, or Department of Agriculture or Rural Housing Service. As I've noted above, this temporary provision will phase out over time as the various Federal agencies issue their own QM rules and if GSE conservatorship ends, and in any event after seven years.</div>
<div align="justify">
<br />
The Final Rule also implements Dodd-Frank Act provisions that generally prohibit prepayment penalties except for certain fixed-rate QMs where the penalties satisfy certain restrictions and the lender has offered the consumer an alternative loan without such penalties. To match with certain statutory changes, the Final Rule also lengthens to three (3) years the time lenders must retain records that evidence compliance with ATR and prepayment penalty provisions and prohibits evasion of the Final Rule by structuring a closed-end extension of credit which does not meet the definition of open-end credit as an open-end plan.<br />
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>Library</b></span><br />
<br />
</div>
<div align="center">
</div>
<div align="center">
<a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="129" src="http://lh6.ggpht.com/-k2meJ1QkIOo/UPATtOrFAFI/AAAAAAAAB0Y/iXL808KEC5Y/Law-Library-Image5.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="129" /></a></div>
<div align="center">
</div>
<div align="center">
<br />
Consumer Financial Protection Bureau</div>
<div align="center">
</div>
<div align="center">
<br />
<b>Summary of the Ability-to-Repay and Qualified Mortgage Rule <br />and the Concurrent Proposal</b></div>
<div align="center">
<b> </b>January 10, 2013</div>
<div align="center">
</div>
<div align="center">
<br />
<b>Protecting Consumers from Irresponsible Mortgage Lending - Fact Sheet</b></div>
<div align="center">
<b> </b>January 10, 2013</div>
<div align="center">
</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-89259279438155926682013-01-09T12:38:00.000-05:002013-01-09T12:38:57.462-05:00CFPB’s Regulatory Agenda - 2013<div align="justify">
As we begin a new year and prepare ourselves for the blizzard of new and revised regulations coming our way, I think it is important for us to consider the regulatory agenda that the Consumer Financial Protection Bureau (CFPB) has set for itself.* As you've heard me say so many times, preparation is protection. So, please undertake a review of the agenda that the CFPB has promised to pursue in the coming months, especially with the view of how best to prepare for the changes that are sure to follow.</div>
<div align="justify">
<br /></div>
<div align="justify">
It is worth noting that the CFPB reasonably anticipates having certain regulatory matters under consideration during the period from October 1, 2012 to October 1, 2013. And the CFPB will publish updates to its agenda periodically through October 1, 2013. These matters will be under consideration by the CFPB, primarily including various rulemakings mandated by the Dodd-Frank Act, such as several mortgage-related rulemakings and rulemakings to implement the CFPB's supervisory program for nondepository covered persons by, among other things, defining "larger participants" in certain consumer financial product and service markets. </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB is completing several mortgage-related rulemakings in January 2013, even as it continues to assess the need and resources available for additional rulemakings. For instance, the Dodd-Frank Act mandates rulemakings to implement amendments to the Home Mortgage Disclosure Act, and to the Equal Credit Opportunity Act to create a data reporting regime concerning small, women-owned, or minority-owned business lending. Also, the CFPB has inherited proposed rules concerning mortgage loans, home equity lines of credit, and other topics from other agencies as part of the transfer of authorities under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). All of these regulatory changes will require careful planning and clear guidance with respect to implementation.</div>
<div align="justify">
<br /></div>
<div align="justify">
In this article, I am going to highlight the regulatory changes that the CFPB has moved into their final stages. I offer a brief outline of the regulatory issues and the CFPB's likely resolution. Each of these regulations, now approaching the status of Final Rule, is extraordinarily significant and, in some instances, constitutes formidable challenges. </div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><u>Chart</u></span></div>
<div align="center">
<span style="color: #c0504d;">Consumer Financial Protection Bureau - <br />Final Rule Stage (Selected Rules)</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><u><span style="color: #c0504d;">Final Rule Stages</span></u></span></div>
<div align="center">
<span style="color: #c0504d;">Loan Originator Compensation (Regulation Z) <br />Mortgage Servicing (Regulation X, Regulation Z) <br />Requirements for Escrow Accounts (Regulation Z)<br />TILA Ability To Repay (Regulation Z)<br />TILA/RESPA Mortgage Disclosure Integration<br />(Regulation X, Regulation Z)</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><u>Library</u></span></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Chart: Consumer Financial Protection Bureau </b></span></div>
<div align="center">
<span style="color: #c0504d;"><b>Final Rule Stage (Selected Rules)</b></span></div>
<div align="center">
<br /></div>
<a href="http://lh6.ggpht.com/-ljYQKjmSbqQ/UO2phm3KF_I/AAAAAAAABzk/OpJFU8HKtJ0/s1600-h/Regulatory%252520Agenda%2525202013%252520-%252520CFPB%252520-%252520Chart%25255B18%25255D.jpg"><img alt="Regulatory Agenda 2013 - CFPB - Chart" border="0" height="490" src="http://lh6.ggpht.com/-omg0eCTHfS0/UO2piTkjCII/AAAAAAAABzs/r3qqcdF35as/Regulatory%252520Agenda%2525202013%252520-%252520CFPB%252520-%252520Chart_thumb%25255B14%25255D.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: block; float: none; margin-left: auto; margin-right: auto; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Regulatory Agenda 2013 - CFPB - Chart" width="504" /></a><br />
<div align="center">
<br /></div>
<div style="text-align: justify;">
This chart provides a quick overview of certain regulatory changes that the CFPB will promulgate this year. The chart also provides the anticipated Final Rule dates.</div>
<a name='more'></a><br />
<div style="text-align: justify;">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Loan Originator Compensation (Regulation Z)</b></span></div>
<div align="center">
<br /></div>
<div align="justify">
The CFPB published for public comment in August 2012 a proposed rule amending Regulation Z to implement amendments to the Truth in Lending Act (TILA) made by the Dodd-Frank Act.</div>
<div align="justify">
<br /></div>
<div align="justify">
The proposal would:</div>
<div align="justify">
<br /></div>
<div align="justify">
1) Implement statutory changes made by the Dodd-Frank Act to Regulation Z's current loan originator compensation provisions, including a new additional restriction on the imposition of any upfront discount points, origination points, or fees on consumers under certain circumstances. </div>
<div align="justify">
<br /></div>
<div align="justify">
2) Mandate additional requirements imposed by the Dodd-Frank Act concerning proper qualification and registration or licensing for loan originators. </div>
<div align="justify">
<br /></div>
<div align="justify">
3) Place restrictions on mandatory arbitration and the financing of certain credit insurance premiums, in accordance with the requirements of the Dodd-Frank Act.</div>
<div align="justify">
<br /></div>
<div align="justify">
4) Provide additional guidance and clarification under the existing regulation's provisions restricting loan originator compensation practices, including guidance on the application of those provisions to certain profit-sharing plans and the appropriate analysis of payments to loan originators based on factors that are not terms but that may act as proxies for a transaction's terms. </div>
<div align="justify">
<br /></div>
<div align="justify">
The comment period for the proposed rule ended on October 16, 2012. </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>Note</u>: the CFPB will issue at a later time proposed regulations on anti-steering provisions that TILA section 129B(c)(3) requires the CFPB to adopt.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Mortgage Servicing (Regulation X, Regulation Z)</b></span> </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB has proposed to amend Regulation Z and the official interpretation of the regulation. The proposed amendments would implement the Dodd-Frank Act provisions regarding mortgage loan servicing. </div>
<div align="justify">
<br /></div>
<div align="justify">
Specifically, the CFPB's Regulation Z proposal implements Dodd Frank Act sections addressing initial rate adjustment notices for adjustable-rate mortgages (ARMs), periodic statements for residential mortgage loans, and prompt crediting of mortgage payments and response to requests for payoff amounts. The proposed revisions would also amend current rules governing the scope, timing, content, and format of current disclosures to consumers occasioned by interest rate adjustments of their variable-rate transactions.<br /> <br />The CFPB also has proposed to amend Regulation X, which implements the Real Estate Settlement Procedures Act of 1974 (RESPA) and add a supplement setting forth an official interpretation of the regulation. The proposed amendments implement the Dodd-Frank Act provisions regarding mortgage loan servicing. </div>
<div align="justify">
<br /></div>
<div align="justify">
Specifically, the proposal requests comment regarding proposed additions to Regulation X to address six servicer obligations: </div>
<div align="left">
<br /></div>
<div align="left">
(1) Correct errors asserted, and provide information requested, by mortgage loan borrowers; <br /> </div>
<div align="left">
(2) Alert consumers to possible servicer imposition of force-placed insurance and ensure that a reasonable basis exists to charge for it; <br /> </div>
<div align="left">
(3) Establish reasonable information management policies and procedures; <br /> </div>
<div align="left">
(4) Provide information about mortgage loss mitigation options and foreclosure to delinquent borrowers; <br /> </div>
<div align="left">
(5) Provide delinquent borrowers access to servicer personnel with continuity of contact about the borrower's mortgage loan account; and, <br /> </div>
<div align="left">
(6) Evaluate borrowers' complete applications for available loss mitigation options. </div>
<div align="justify">
<br /></div>
<div align="justify">
The Regulation X proposal would also modify and streamline certain existing general and servicing-related provisions of Regulation X. For instance, the proposal would revise provisions relating to a mortgage servicer's obligation to provide disclosures to borrowers in connection with a transfer of mortgage servicing, and a mortgage servicer's obligation to manage escrow accounts, including the obligation to advance funds to an escrow account to maintain insurance coverage and to return amounts in an escrow account to a borrower upon payment in full of a mortgage loan. </div>
<div align="justify">
<br /></div>
<div align="justify">
The comment period for the proposed rules ended on October 9, 2012. </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>Note</u>: the CFPB is also participating in an interagency process among Federal financial services regulators to consider broader issues regarding national servicing standards.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Requirements for Escrow Accounts (Regulation Z)</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
The Board of Governors of the Federal Reserve System (Board) published in the Federal Register on March 2, 2011, a proposed rule to implement certain amendments to the Truth in Lending Act made by the Dodd-Frank Act that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. </div>
<div align="justify">
<br /></div>
<div align="justify">
In addition, the Board's proposal would implement the Dodd-Frank Act's disclosure requirements regarding escrow accounts. </div>
<div align="justify">
<br /></div>
<div align="justify">
The Board's proposal also would exempt certain loans from the statute's escrow requirement, pursuant to authority in the Dodd-Frank Act. The primary exemption would apply to mortgage loans extended by creditors that operate predominantly in rural or underserved areas and meet certain other prerequisites. </div>
<div align="justify">
<br /></div>
<div align="justify">
Pursuant to the Dodd-Frank Act, the rulemaking authority for the TILA generally transferred from the Board to the CFPB on July 21, 2011. </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>Note</u>: the CFPB, in a separate rulemaking, issued a final rule postponing the implementation of the disclosures included in the Board's proposal.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>TILA Ability To Repay (Regulation Z)</b></span></div>
<div align="center">
<br /></div>
<div align="justify">
The Board of Governors of the Federal Reserve System (Board) published for public comment on May 11, 2011, a proposed rule amending Regulation Z to implement amendments to the Truth in Lending Act made by the Dodd-Frank Act. </div>
<div align="justify">
<br /></div>
<div align="justify">
Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer's ability to repay the loan. The proposal would implement statutory changes made by the Dodd-Frank Act that expand the scope of the ability-to-repay requirement to cover any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan). </div>
<div align="justify">
<br /></div>
<div align="justify">
In addition, the proposal would establish standards for complying with the ability-to-repay requirement, including by making a "qualified mortgage." </div>
<div align="justify">
<br /></div>
<div align="justify">
The proposal also implements the Dodd-Frank Act's limits on prepayment penalties. </div>
<div align="justify">
<br /></div>
<div align="justify">
Finally, the proposal would require creditors to retain evidence of compliance with this rule for three years after a loan is consummated. </div>
<div align="justify">
<br /></div>
<div align="justify">
Pursuant to the Dodd-Frank Act, the rulemaking authority for the TILA generally transferred from the Board to the CFPB on July 21, 2011. On June 5, 2012, the CFPB issued a notice to reopen the comment period until July 9, 2012, to seek comment on certain new data and information submitted during or obtained after the close of the original comment period. </div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>TILA/RESPA Mortgage Disclosure Integration<br />(Regulation X, Regulation Z)</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
Sections 1032(f), 1098, and 1100A of the Dodd-Frank Act direct the CFPB to issue proposed rules and forms that combine certain disclosures that consumers receive in connection with a mortgage loan under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). </div>
<div align="justify">
<br /></div>
<div align="justify">
Consistent with this requirement, the CFPB has proposed to amend Regulation X (the implementing regulation of RESPA) and Regulation Z (the implementing regulation of TILA) to establish new disclosure requirements and forms in Regulation Z for most closed-end consumer credit transactions secured by real property. </div>
<div align="justify">
<br /></div>
<div align="justify">
In addition to combining the existing disclosure requirements and implementing new requirements in the Dodd-Frank Act, the CFPB's proposed rule provides extensive guidance regarding compliance with those requirements. </div>
<div align="justify">
<br /></div>
<div align="justify">
The proposal had two comment periods. Comments on the proposed revisions to the definition of the finance charge and the proposed compliance date for the new Dodd-Frank Act disclosures were due September 7, 2012. Comments on all other aspects of the proposal were due November 6, 2012. On September 6, 2012, the CFPB issued a notice extending the comment period to November 6, 2012, for the proposed revisions to the definition of the finance charge.</div>
<div align="justify">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Library</b></span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #a5a5a5;"><a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="129" src="http://lh3.ggpht.com/-oZ2jzjp6Tko/UO2pisMjZKI/AAAAAAAABz0/ucdVg0CAOko/Law%252520Library%252520Image%25255B5%25255D.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="129" /></a></span></div>
<div align="center">
<br /></div>
<div align="center">
Consumer Financial Protection Bureau</div>
<div align="center">
<br /></div>
<div align="center">
<b>Semiannual Regulatory Agenda</b></div>
<div align="center">
<br /></div>
<div align="center">
Federal Register: 78/05<br />January 8, 2013</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-73409682159008164012012-12-07T16:46:00.001-05:002012-12-07T16:48:12.153-05:00CFPB's Company Portal for Consumer Complaints<div align="justify">
In September 2011, the Consumer Financial Protection Bureau (CFPB) issued its Company Portal Manual (Manual). The Manual gave instructions on the use of the special access portal, known as the Company Portal (Portal). The Portal allows financial institutions to view and respond to complaints in the CFPB consumer complaint database. At that time, the Portal was enabled to take consumer complaints about credit cards and provider resources for distressed homeowners.*</div>
<div align="justify">
<br /></div>
<div align="justify">
Since the inception of the Portal, my firm has responded to numerous requests from clients to help them navigate its rather labyrinthine pathways. Thus, we have obtained considerable experience in guiding our clients from point of contact with the CFPB to point of resolution. In most instances, resolution of the complaint was achieved. While the CFPB continues to acquire statistics about the nature of the complaints, we also have become familiar with how best to respond to the complaints and have kept our own database.</div>
<div align="justify">
<br /></div>
<div align="justify">
When I cite statistics in this article, the time frame that I am writing about is July 21, 2011 to June 1, 2012. More recent statistics have not yet been officially announced by the CFPB. However, it is known that this database is updated on a daily basis. Retroactive data is expected shortly.</div>
<div align="justify">
<br /></div>
<div align="justify">
I would like you to become more familiar with the Portal and learn how to set up your access to it. Of course, in a magazine column, I can only offer a generic (rather than a detailed) description. I encourage you to explore the Portal, download the most recent Manual – I give the hyperlinks below - and, most importantly, draft and implement complaint management procedures for using it. Regulators will surely expect as much! </div>
<div align="justify">
<br /></div>
<div align="justify">
<b></b> </div>
<div align="justify">
<b></b> </div>
<div align="center">
<b><span style="color: #c0504d;">Statistics</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
By this point, the CFPB has staffed a Consumer Response team. The Consumer Response team, or “Consumer Response” as it has become known, began taking consumer complaints about credit cards on July 21, 2011; it began handling mortgage complaints on December 1, 2011; and it began accepting complaints about bank products and services, private student loans, and other consumer loans on March 1, 2012. Over the next year, the CFPB expects to handle consumer complaints on all products and services under its authority.</div>
<div align="justify">
<br /></div>
<div align="justify">
According to the CFPB, between July 21, 2011, and June 1, 2012, the CFPB received approximately 45,630 consumer complaints, including approximately: </div>
<ul>
<li> <div align="justify">
16,840 credit card complaints,</div>
</li>
<li> <div align="justify">
19,250 mortgage complaints,</div>
</li>
<li> <div align="justify">
6,490 bank products and services complaints, and</div>
</li>
<li> <div align="justify">
1,270 private student loan complaints.</div>
</li>
</ul>
<div align="justify">
Approximately 44 percent of all complaints were submitted through the CFPB’s website and 11 percent via telephone calls. In the same period, referrals from other regulators and agencies accounted for 39 percent of all complaints received. (The rest were submitted by mail, email, and fax.)</div>
<div align="justify">
<br /></div>
<div align="justify">
Furthermore, the CFPB has notified the public that more than 37,120 complaints (81 percent) of complaints received as of June 1, 2012, have been sent by Consumer Response to companies for review and response. The remaining complaints have been referred to other regulatory agencies (9 percent), found to be incomplete (4 percent), or are pending with the consumer or the CFPB (6 percent).</div>
<div align="justify">
<br /></div>
<div align="justify">
Companies have already responded to approximately 33,000 complaints or 89 percent of the complaints sent to them for response. </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Common Complaints</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
In a June 2012 report, the CFPB stated that the most common type of mortgage complaint is about problems consumers have when they are unable to pay, such as issues related to loan modifications, collection, or foreclosure. The example given was where a "consumer confusion persists around the process and requirements for obtaining loan modifications and refinancing, especially regarding document submission timeframes, payment trial periods, allocation of payments, treatment of income in eligibility calculations, and credit bureau reporting during the evaluation period."</div>
<div align="justify">
<br /></div>
<div align="justify">
The "shelf life" of documents provided as part of the loan modification process was cited as of particular concern to consumers. The CFPB asserts: "though consumers must provide documents within short time periods and income documentation generally remains valid for up to 60 days, lengthy evaluation periods can result in consumers having to resubmit documentation - sometimes more than once. This seems to contribute to consumer fatigue and frustration with these processes."</div>
<div align="justify">
<br /></div>
<div align="justify">
Other common types of mortgage complaints are those about making payments, such as issues related to loan servicing, payments, or escrow accounts. Here, the example given is where "consumers express confusion about whether making timely trial period payments will guarantee placement into a permanent modification. Issues related to applying for the loan, such as the application, the originator, or the mortgage broker, are also amongst the most common type of mortgage complaints."</div>
<div align="justify">
<br /></div>
<div align="justify">
In the CFPB's view, "consumers filing complaints about problems when they are unable to pay generally appear to be driven by a desire to seek agreement with their companies on foreclosure alternatives." </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Screening Process</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
This is a generic outline of the Consumer Response process:</div>
<div align="justify">
<br /></div>
<div align="justify">
1) Consumer Response screens all complaints submitted by consumers based on several criteria, such as whether the criteria include the complaint falling within the CFPB’s primary enforcement authority, whether the complaint is complete, or whether it is a duplicate of a prior submission by the same consumer.</div>
<div align="justify">
<br /></div>
<div align="justify">
2) Screened complaints are then sent via a secure web portal to the appropriate company. If appropriate, the complaint is posted to the Portal within approximately three days of receipt, along with a request for a response within 15 calendar days.<br />
<br /></div>
<a name='more'></a><br />
<div align="justify">
</div>
<div align="justify">
3) The company reviews the information, communicates with the consumer (as needed), and determines what action to take in response. If additional communications are required between the consumer, the company and/or the CFPB, these can occur offline or through the Portal.</div>
<div align="justify">
<br /></div>
<div align="justify">
4) The company reports back to the consumer and the CFPB via the Portal. In addition to the 15-day response deadline, the CFPB provides companies 60 calendar days from when the complaint is forwarded for the company to resolve the complaint.</div>
<div align="justify">
<br /></div>
<div align="justify">
5) The CFPB then invites the consumer to review the response.</div>
<div align="justify">
<br /></div>
<div align="justify">
Throughout the complaint process, consumers can log onto the Portal or call a toll-free number to receive status updates, provide additional information, and review responses provided to the consumer by the company.</div>
<div align="justify">
<br /></div>
<div align="justify">
The Portal allows companies to select one of four resolutions to complaints:</div>
<div align="justify">
<br /></div>
<div align="justify">
1. closed with a monetary payment to the consumer, </div>
<div align="justify">
2. closed without a monetary payment, </div>
<div align="justify">
3. closed with an explanation, or </div>
<div align="justify">
4. closed without further explanation.</div>
<div align="justify">
<br /></div>
<div align="justify">
Resolving a complaint is important and may lead to further review and action by the CFPB. Consumer Response will prioritize for review and investigation complaints in which the consumer disputes the response or where companies fail to provide a timely response.</div>
<div align="justify">
<br /></div>
<div align="justify">
If the consumer disputes a company’s response, Consumer Response will investigate the complaint further, evaluate the jurisdiction, attempt to reconcile the positions of the consumer and the company, identify potential consumer violations and/or opportunities to provide consumer education, and communicate the results of the investigation to the consumer.</div>
<div align="justify">
<br /></div>
<div align="justify">
If a company fails to respond to a complaint on a timely basis or if Consumer Response suspects a possible violation, the complaint may be referred to the CFPB’s supervision and enforcement units for further action. </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Flow Chart</span></b></div>
<div align="center">
<b><span style="color: #c0504d;"> </span></b> </div>
<div align="justify">
<a href="http://lh4.ggpht.com/-Fa-GyTbmOck/UMJhKlmDwRI/AAAAAAAAByg/VTCgRjH7NhU/s1600-h/clip_image004%25255B8%25255D.jpg"><img alt="clip_image004" border="0" height="102" src="http://lh5.ggpht.com/-_ozBHPKJ2P0/UMJhLKb2RrI/AAAAAAAAByo/VN90eLgFKqU/clip_image004_thumb%25255B5%25255D.jpg?imgmax=800" style="background-image: none; border-bottom: 0px; border-left: 0px; border-right: 0px; border-top: 0px; display: block; float: none; margin-left: auto; margin-right: auto; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="clip_image004" width="454" /></a></div>
<div align="center">
<span style="font-size: xx-small;"><b>CFPB's visual depiction of the complaint process.</b></span> </div>
<div align="justify">
<b></b> </div>
<div align="justify">
<b></b> </div>
<div align="justify">
<b></b> </div>
<div align="justify">
<b></b> </div>
<div align="justify">
<b></b> </div>
<div align="justify">
<b></b> </div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Step-by-Step Procedures</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
The following is a brief, step-by-step outline of the way the Portal’s functions for the CFPB. (The brackets contain the entity responsible for each step's actions.)</div>
<div align="justify">
<br /></div>
<div align="justify">
Step 1: Complaint is filed with the CFPB. [Consumer] </div>
<div align="justify">
Step 2: Complaint sent to the company. [CFPB] </div>
<div align="justify">
Step 3: Company attempts to resolve the complaint. [Financial Institution] </div>
<div align="justify">
Step 4: Company reports resolution to CFPB for review. [Financial Institution] </div>
<div align="justify">
Step 5: Complaint status emailed to consumer, Portal updated. [CFPB] </div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">CFPB Response</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
Consumer Response has sent approximately 16,250 (84 percent) of mortgage complaints to companies for review and response. </div>
<div align="justify">
<br /></div>
<div align="justify">
The remaining mortgage complaints have been referred to other regulatory agencies (7 percent), found to be incomplete (2 percent), or are pending with the consumer or the CFPB (6 percent). </div>
<div align="justify">
Companies have already responded to approximately 13,930 complaints or 86 percent of the complaints sent to them for response. </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Company Response</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
The response to a complaint is obviously a critical concern and should be handled promptly, diligently, and comprehensively. This is not only a procedural matter because, beginning in December 2011 and consistent with section 1034(b), 12 U.S.C. 5534(b) of the Dodd-Frank Act, the CFPB must require a company to provide, at a minimum, a response with the following elements within 15 calendar days of the complaint being forwarded to the portal. </div>
<div align="justify">
<br /></div>
<div align="justify">
1) Steps taken to respond to the complaint. Detail the substance of the response, including a description of communications with the consumer, and attach copies of all responsive written communications to the consumer. The Company response should be to provide a detailed description, outlining the substance of its response. The description should include - and be able to document - a description of the Company's communications with the consumer. (It is possible to attach copies of all responsive written communications to the consumer.) </div>
<div align="justify">
<br /></div>
<div align="justify">
2) Communication(s) from the consumer. Describe communications received from the consumer in response to the steps taken and attach copies of all written communications received from the consumer in response. </div>
<div align="justify">
<br /></div>
<div align="justify">
3) Follow-up actions or planned follow-up actions. Describe any follow-up actions that are being taken or plan to be taken in a continuing response to the complaint. </div>
<div align="justify">
<br /></div>
<div align="justify">
4) Category that captures your response. Select the category that summarizes your response. Options include: Closed with relief, Closed without relief, In progress, Incorrect company, Misdirected, and Alerted CFPB. </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Monetary Relief</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
As defined by the CFPB, “relief” is the objective, measurable, and verifiable monetary value to the consumer as a direct result of the steps a company has taken or will take in response to a complaint.</div>
<div align="justify">
<br /></div>
<div align="justify">
Based on the CFPB's own announcements, the median amount - not the average amount - of monetary relief reported was approximately $410 for the nearly 600 mortgage complaints where companies reported such relief. </div>
<div align="justify">
<br /></div>
<div align="justify">
Consumers have disputed approximately 3,020 company responses (23 percent) to mortgage complaints. </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Specifying Relief and Status</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
These are the primary levels of relief: </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>Closed with Relief</u> </div>
<div align="justify">
<br /></div>
<div align="justify">
The final responsive explanation to the consumer, indicating that the steps taken or to be taken to provide objective, measurable, and verifiable monetary value to the consumer. If relief has been or will be provided, the relief should be described and the dollar amount of that relief should be entered. </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>Closed without Relief</u> </div>
<div align="justify">
<br /></div>
<div align="justify">
The final responsive explanation to the consumer, indicating that the steps a company has taken or will take do not have objective, measurable, and verifiable monetary value to the consumer. For purposes of categorizing the response, this choice is selected if the steps taken or to be taken do not include relief as defined by the CFPB (as I've indicated above). </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>In Progress</u> </div>
<div align="justify">
<br /></div>
<div align="justify">
The interim responsive explanation to the consumer and the CFPB, indicating that the complaint could not be closed within 15 calendar days and that a final responsive explanation to the consumer will be provided through the Portal at a later date.</div>
<div align="justify">
<br /></div>
<div align="justify">
This option is only available for complaints on the Active tab within 15 calendar days after the complaint was sent to a company. If the Company selects In Progress, the complaint will remain on the Active tab awaiting a response until 60 calendar days from the date the complaint was sent to the company in order to allow it the opportunity to close the complaint with an accompanying explanation to the consumer of Closed with Relief, Closed without Relief, Alerted CFPB, Incorrect Company, or Misdirected.</div>
<div align="justify">
<br /></div>
<div align="justify">
If no response is provided within 60 calendar days from the date the complaint was sent to a company after selecting In Progress, the status of the complaint will become No Response, resulting in prioritizing that complaint for investigation by the Consumer Response team, which concomitantly moves the complaint to the Under Review tab. </div>
<div align="justify">
<br /></div>
<div align="justify">
<u>Alerted CFPB</u> </div>
<div align="justify">
<br /></div>
<div align="justify">
Action cannot be taken for reasons such as suspected fraud, a pending legal matter, or a complaint filed by an unauthorized third party. This response is reviewed by a Consumer Response Specialist and appears in the Review history section of the Case details. However, neither the response nor the category selection is forwarded to the consumer or displayed in the consumer Portal. </div>
<div align="justify">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Government Portal</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB gave a webinar in September 2012. The purpose of the webinar was to review the features of the database compiled by the CFPB. </div>
<div align="justify">
<br /></div>
<div align="justify">
During the course of the webinar, the CFPB announced its plan to launch a "government portal" which will permit the CFPB to exchange all of the consumer complaints information within the CFPB’s jurisdiction with the Federal Trade Commission (FTC), Department of Justice (DOJ), state Attorneys General, federal regulators, state regulators, and others. Actually, this has been expected for some time. </div>
<div align="justify">
<br /></div>
<div align="justify">
I like to think of the CFPB and its relationship with state regulators and Attorneys General, and others, by visualizing a mnemonic image. Imagine a capital "H" and turn it on its side. The bottom axis is the opportunity for state regulators to share consumer complaints (and other information) between one another and Attorneys General. The vertical axis is the CFPB's ability to sit in on and/or obtain information gathered in the bottom horizontal axis. And the top horizontal axis is the information sharing (subject to specific constraints of privilege and confidentiality) with federal regulatory agencies and regulators. The image isn't perfect, but it comes close to the range of capacity now available to the CFPB, federal and state agencies and regulators, and Attorneys General. </div>
<div align="center">
<b><span style="color: #c0504d;">Requesting Access</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
To request access to the portal, email <a href="mailto:CFPB_FIassistance@cfpb.gov">CFPB_FIassistance@cfpb.gov</a> with the following information: </div>
<div align="justify">
<br /></div>
<div align="justify">
Company Name </div>
<div align="justify">
Name </div>
<div align="justify">
Telephone </div>
<div align="justify">
Email address of the company’s "point of contact.” </div>
<div align="justify">
<br /></div>
<div align="justify">
Consumer Response will review your request and follow-up with your company’s point of contact. </div>
<div align="justify">
<br /></div>
<div align="justify">
<b>Login</b> </div>
<div align="justify">
<br /></div>
<div align="justify">
After Consumer Response has set up a company's access, the point of contact may login to the Portal. </div>
<div align="justify">
<br /></div>
<div align="justify">
[Go to: <a href="https://secure.consumerfinance.gov/">https://secure.consumerfinance.gov</a>. Use the initial email address, when access was requested, as the username.] </div>
<div align="justify">
<br /></div>
<div align="justify">
<b>Viewing Complaints</b> </div>
<div align="justify">
<br /></div>
<div align="justify">
Once the point of contact has logged into the Portal, it is possible to view all of the company’s complaints. The list of complaints displays the following information about each complaint: </div>
<ul>
<li> <div align="justify">
Case Number</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
The unique 12-digit number assigned to the complaint. </div>
</blockquote>
<ul>
<li> <div align="justify">
Name on Account</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
The name on the account as listed in the complaint. </div>
</blockquote>
<ul>
<li> <div align="justify">
Account Number</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
The account number provided in the complaint, if available. </div>
</blockquote>
<ul>
<li> <div align="justify">
Issue</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
The issue that is the subject of the complaint as reported by the consumer. </div>
</blockquote>
<ul>
<li> <div align="justify">
Status</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
The status of the complaint. </div>
</blockquote>
<ul>
<li> <div align="justify">
Sent to Company </div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
Date and time the complaint was forwarded to your company via the portal. </div>
</blockquote>
<ul>
<li> <div align="justify">
Respond By</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
Date by which a response is requested. </div>
</blockquote>
<ul>
<li> <div align="justify">
Product</div>
</li>
</ul>
<blockquote class="tr_bq">
<div align="justify">
The product that is the subject of the complaint as reported by the consumer.</div>
</blockquote>
<div align="justify">
</div>
<div align="justify">
NOTE: To view the details of a complaint, click on the case number. Once it is clicked, the link will no longer appear in bold in the list.</div>
<div align="justify">
<br /></div>
<div align="justify">
Complaints that have not yet been viewed appear in bold. Updates to the Portal are in Eastern Standard Time. </div>
<div align="center">
<b><span style="color: #c0504d;">Technical Assistance</span></b> </div>
<div align="justify">
<br /></div>
<div align="justify">
If technical assistance is needed, email <a href="mailto:CFPB_FIassistance@cfpb.gov">CFPB_FIassistance@cfpb.gov</a>. </div>
<div align="justify">
<br /></div>
<div align="justify">
Provide the following information: </div>
<ul>
<li> <div align="justify">
Browser type (including the version number).</div>
</li>
<li> <div align="justify">
Operating system screenshots relevant to technical problem.</div>
</li>
<li> <div align="justify">
Associated complaint case numbers (if applicable).</div>
</li>
<li> <div align="justify">
Contact information.</div>
</li>
</ul>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span> </div>
<div align="center">
<span style="font-size: xx-small;">* Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-29911893525825429912012-11-21T13:36:00.000-05:002012-11-21T13:45:48.692-05:00CFPB and FTC: Warning Letters - Misleading Advertisements<div align="justify">
The Consumer Financial Protection Bureau (CFPB), in coordination with the Federal Trade Commission (FTC), has issued <u>warning letters</u> to twelve mortgage lenders and mortgage brokers advising them to remove or revise misleading advertisements. The warnings concern advertisements that target veterans, seniors, and other consumers.*<br />
<br />
Additionally, the CFPB announced that it has begun formal investigations of six companies believed to have committed more serious violations of the law.<br />
<br />
After reviewing hundreds of mortgage advertisements, the FTC staff has also sent warning letters to twenty companies, warning them that their ads may be deceptive. The FTC sent its warning letters to real estate agents, home builders, and lead generators, urging them to review their advertisements for compliance with the Mortgage Acts and Practices Advertising Rule and the FTC Act.<br />
<br />
The collaboration between the CFPB and the FTC are characterized as a "sweep" - a review conducted by these agencies of about 800 "randomly selected mortgage-related ads across the country, including ads for mortgage loans, refinancing, and reverse mortgages." The agencies looked at ads in newspapers, on the Internet, and from mail solicitations, and advertisements that were the subject of consumer complaints.<br />
<br />
I really can't emphasize enough how important it is to control all the advertising your firm publishes - and I mean advertisements in any media. Just adopting a policy and procedure is insufficient.<br />
<br />
In my view, <span style="color: #c0504d;">several components must be included in advertising compliance</span>:</div>
<div align="justify">
<br />
a formally adopted <b>policy and procedure</b>; </div>
<div align="justify">
an <b>advertising manual</b> that is signed for and attested to by the employee; </div>
<div align="justify">
<b>checklists</b>, <b>model forms</b>, <b>ad formats</b>, and <b>authorizations</b>; </div>
<div align="justify">
an <b>easy reference guide</b> for employees; </div>
<div align="justify">
periodic <b>training</b>; </div>
<div align="justify">
and <b>auditing</b>.<br />
<br />
If you are not implementing at least these risk management practices, you are certainly falling short of the controls you need to manage the regulatory challenges posed in advertising of mortgage loan products.</div>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span></div>
<div align="center">
<br />
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">The Sweep<br />The Rule<br />The Warning<br />The Remedy</span></div>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>The Sweep</b></span></div>
<div align="justify">
<br />
The following problems were identified by the sweep:</div>
<div align="justify">
<br />
<span style="color: #c0504d;">Potential misrepresentations about government affiliation.</span><br />
For example, some of the ads for mortgage products contained official-looking seals or logos, or have other characteristics that may be interpreted by consumers as indicating a government affiliation (i.e., advertisements containing statements, images, symbols, and abbreviations suggesting that an advertiser is affiliated with a government agency). </div>
<div align="justify">
<br />
<span style="color: #c0504d;">Potentially inaccurate information about interest rates.</span>For example, some ads promoted low rates that may have misled consumers about the terms of the product actually offered. These are advertisements offering a very low “fixed” mortgage rate, without discussing significant loan terms (i.e., advertisements “guaranteeing” approval and offering very low monthly payments, without discussing significant conditions on these offers).</div>
<div align="justify">
<br />
<span style="color: #c0504d;">Potentially misleading statements concerning the costs of reverse mortgages.</span>For example, some ads for reverse mortgage products claimed that a consumer will have no payments in connection with the product, even though consumers with a reverse mortgage are commonly required to continue to make monthly or other periodic tax or insurance payments, and may risk default if the payments aren’t made.</div>
<div align="justify">
<br />
<span style="color: #c0504d;">Potential misrepresentations about the amount of cash or credit available to a consumer.</span>For example, some ads contained a mock check and/or suggested that a consumer has been pre-approved to receive a certain amount of money in connection with refinancing their mortgage or taking out a reverse mortgage, when a number of additional steps would customarily need to be completed before the consumer would qualify for the loan.</div>
<div align="center">
<br />
<span style="color: #a5a5a5;">____________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>The Rule</b></span></div>
<div align="justify">
<br />
The <span style="color: #c0504d;">Mortgage Acts and Practices Advertising Rule</span> ("<b>MAP-AD Rule</b>" or "<b>MAP Rule</b>"), known as <b>Regulation N</b> since rulemaking authority for it transferred from the FTC to the CFPB, is applied to advertising compliance relating to mortgage loan products. (We have discussed the MAP Rule previously. See, for instance, our <u>September 2, 2011</u> newsletter, <a href="http://publications.lenderscompliancegroup.com/11.html">FTC: Adopts Mortgage Advertising Rule</a>.) </div>
<div align="justify">
<br />
The MAP Rule prohibits material misrepresentations in advertising or any other commercial communication regarding consumer mortgages. The FTC and the CFPB share enforcement authority over non-bank mortgage advertisers such as mortgage lenders, brokers, servicers, and advertising agencies. Mortgage advertisers that violate the MAP Rule may be required to pay civil penalties. HUD mortgagees may be subject to additional sanctions by the Mortgagee Review Board.</div>
<div align="justify">
<br />
The MAP Rule was issued as a <u>Final Rule</u> by the FTC on July 22, 2011 (the day after the CFPB received its enumerated authorities) and given the <span style="color: #c0504d;">compliance effective date of August 19, 2011</span>. On July 21, 2011, the Commission’s rulemaking authority for the MAP Rule transferred to the CFPB, but the FTC, the CFPB, and the states all have authority to enforce the MAP Rule.</div>
<div align="justify">
<br />
It applies to all entities within the FTC’s jurisdiction that advertise mortgages - mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; and others. The MAP Rule, however, does not cover banks, thrifts, federal credit unions, and other entities that are outside the Commission’s jurisdiction.</div>
<div align="justify">
<br />
The <span style="color: #c0504d;">MAP Rule lists 19 examples of prohibited deceptive claims</span>, including misrepresentations about the: </div>
<blockquote>
<div align="justify">
- existence, nature, or amount of fees or costs to the consumer associated with the mortgage;</div>
<div align="justify">
- terms, amounts, payments, or other requirements relating to taxes or insurance associated with the mortgage;</div>
<div align="justify">
- variability of interest, payments, or other terms of the mortgage;</div>
<div align="justify">
- type of mortgage offered;</div>
<div align="justify">
- source of an advertisement or other commercial communication; and</div>
<div align="justify">
- consumer’s ability or likelihood of obtaining a refinancing or modification of a mortgage or any of its terms.</div>
</blockquote>
<div align="justify">
<a name='more'></a><br />
<br />
Section 5 of the FTC Act generally prohibits advertisers from making false or misleading claims. The MAP Rule parallels this legal principle and further allows the FTC to seek appropriate relief (including civil penalties) against those who engage in deceptive mortgage advertising. </div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>The Warning</b></span></div>
<div align="justify">
<br />
The CFPB's generic warning letter and the FTC's generic warning letter do not substantively differ, although the CFPB has issued an additional warning letter regarding misleading advertising that targets veterans. In general, the agencies state in their warning letters that determinations have not yet been made regarding whether the advertisements violate the law, and that by sending the warning letter neither the CFPB nor the FTC waive their right to take any action based on past or future violations of federal law, including violations contained in, or relating to, the advertisement(s) that may be the subject of the warning letter.</div>
<div align="justify">
<br />
<span style="color: #c0504d;">Targeting Consumers (CFPB)</span></div>
<div align="justify">
<br />
Here's the salient text of the CFPB's generic warning letter regarding misleading advertising that targets consumers:</div>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">This letter is to advise you that you may have advertised a mortgage credit product or service in a misleading manner in violation of federal law.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">The CFPB enforces federal consumer financial laws, including laws that prohibit material misrepresentations in advertisements for mortgage credit products. The Mortgage Acts and Practices – Advertising rule, or “MAP Rule,” provides that it is a violation of federal law for any person to make a “material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product.” A mortgage credit product is “any form of credit that is secured by real property or a dwelling and that is offered or extended to a consumer primarily for personal, family, or household purposes.” The CFPB also enforces 12 U.S.C. § 5536(a)(1), which prohibits unfair, deceptive, or abusive acts or practices in connection with consumer financial products or services, including in the marketing or sale of mortgage credit products.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">We have reviewed one or more of your mortgage advertisements and it appears that they may violate federal law to the extent that they: (1) suggest, through the incorporation of “Government Loan Department” in your company’s return address at the top of the advertisement, the use of a logo very similar to that of the United States Department of Housing and Urban Development, and the prominent display of a website address that includes the initials of the Federal Housing Administration, that your company is affiliated with a government agency or government-sponsored program; (2) suggest that consumers who enter into a reverse mortgage will have “no payments,” notwithstanding that such consumers may continue to be responsible for tax and insurance payments; (3) indicate that a consumer is pre-approved for, or guaranteed, specific loan rates or terms; and (4) indicate that a consumer entering into a reverse mortgage will have the opportunity to receive a discount on existing credit card debt in connection with the loan. Copies of the advertisements referred to in this letter are attached hereto for your reference. While this letter refers specifically only to the attached advertisements, you should also consider whether other advertising you disseminate in any form, including internet advertisements, may require modification in order to comply with federal laws.</span></div>
<div align="justify">
<span style="color: #666666; font-size: xx-small;"></span></div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;"></span></div>
</blockquote>
<div align="justify">
<span style="color: #c0504d;">Targeting Consumers (FTC)</span></div>
<div align="justify">
<br />
Here's the salient text of the FTC's generic warning letter regarding misleading advertising that targets consumers:</div>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">This letter is to advise you that you may have advertised a mortgage financing product or service in a misleading manner.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces Section 5 of the FTC Act, 15 U.S.C. § 45, which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC Act requires that advertising, including claims about mortgage financing, be truthful and non-misleading. The FTC also enforces the Mortgage Acts and Practices-Advertising Rule, Regulation N (MAP-AD Rule), 12 C.F.R. Part 1014, which specifically prohibits material misrepresentations in any commercial communication regarding the terms of any mortgage financing.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">FTC staff attorneys have evaluated your advertisements or other commercial communications for mortgage financing. They have reviewed your [website at www.xyz.com; your ads in XYZ paper; or your email solicitations] and think the ad may include claims that violate Section 5 of the FTC Act or the MAP-AD Rule.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">We have attached a copy of one of your ads, and direct your attention to [statements and images; or statements] in the ad [that may suggest your Company is affiliated with a government agency or government-sponsored loan program; that may offer unqualified low rates; that may offer unqualified low monthly payments; that may suggest no fees or costs are associated with the mortgage financing offered; or that may suggest guaranteed approval for the mortgage financing offered].</span></div>
</blockquote>
<div align="justify">
<span style="color: #c0504d;">Targeting Veterans (CFPB)</span></div>
<div align="justify">
<br />
Here's the salient text of the CFPB's warning letter regarding misleading advertising that targets veterans:</div>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">This letter is to advise you that you may have advertised a mortgage credit product or service in a misleading manner in violation of federal law.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">The CFPB enforces federal consumer financial laws, including laws that prohibit material misrepresentations in advertisements for mortgage credit products. The Mortgage Acts and Practices – Advertising rule, or “MAP Rule,” provides that it is a violation of federal law for any person to make a “material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product.” A mortgage credit product is “any form of credit that is secured by real property or a dwelling and that is offered or extended to a consumer primarily for personal, family, or household purposes.” The CFPB also enforces 12 U.S.C. § 5536(a)(1), which prohibits unfair, deceptive, or abusive acts or practices in connection with consumer financial products or services, including in the marketing or sale of mortgage credit products.</span> </div>
</blockquote>
<blockquote>
<div align="justify">
<span style="color: #666666; font-size: xx-small;">We have reviewed one or more of your mortgage advertisements and it appears that they may violate federal law to the extent that they: (1) suggest, through the use of a logo very similar to that of the United States Department of Veterans Affairs, the prominent display of a website address that includes the acronym “VA,” and the use of language stating “the VA is offering you” the advertised product, that your company is affiliated with a government agency or government-sponsored program; (2) indicate that a specific “fixed” rate is available for a “30 year” loan when, in fact, the stated rate is for an adjustable rate loan; and (3) suggest that the rate being offered is part of an “economic stimulus plan” that will expire shortly, notwithstanding that the Department of Veterans Affairs’ loan guarantee programs do not have an expiration date. Copies of the advertisements referred to in this letter are attached hereto for your reference. While this letter refers specifically only to the attached advertisements, you should also consider whether other advertising you disseminate in any form, including internet advertisements, may require modification in order to comply with federal laws.</span></div>
</blockquote>
<div align="center">
<span style="color: #a5a5a5;">____________________________________</span></div>
<div align="center">
<br />
<span style="color: #c0504d;"><b>The Remedy</b></span></div>
<div align="justify">
<br />
The CFPB urges you to review your marketing materials to ensure that you comply with the applicable laws and the FTC recommends that you review your ads and other commercial communications for mortgage financing, on your website, or in newspapers and in any other medium, to ensure they comply with the FTC Act and the MAP Rule. </div>
<div align="center">
<span style="color: #a5a5a5;">____________________________________</span></div>
<div align="center">
<br />
<b><span style="color: #990000;">Library</span></b><br />
</div>
<div align="center">
<a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="139" src="http://lh5.ggpht.com/-9E-nZIUQGVU/UK0dHq095nI/AAAAAAAABxA/RyU8dvziujI/Law%252520Library%252520Image%25255B5%25255D.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="139" /></a></div>
<div align="center">
<br />
Warning Letter - Misleading Advertising - Target: Consumers (CFPB)<br />
Warning Letter - Misleading Advertising - Target: Veterans (CFPB)<br />
Warning Letter - Misleading Advertising - Target: Consumers (FTC)</div>
<div align="center">
<br />
Consumer Financial Protection Bureau warn Companies against <br />
Misleading Consumers with False Mortgage Advertisements<br />
Press Release (11/19/12)</div>
<div align="center">
<br />
FTC Warns Mortgage Advertisers that Their Ads May Violate Federal Law<br />
Press Release (11/19/12)</div>
<div align="center">
<span style="color: #a5a5a5;">______________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-60839144427426760572012-11-07T15:16:00.000-05:002012-11-07T15:16:37.628-05:00CFPB: Mortgage Originator Violations<div align="justify">
Yesterday, I outlined for you the features of the CFPB's requisites of a <a href="http://cfpbforum.blogspot.com/2012/11/cfpb-compliance-management-system.html">Compliance Management System</a> (CMS). My observations were based on the CFPB's newsletter, entitled <span style="color: #c0504d;">Supervisory Highlights: Fall 2012</span>, an issuance to the public and the financial services industry about its examination program, including the concerns that it finds during the course of its completed work, and the remedies that it has obtained for consumers who have suffered financial or other harm.</div>
<div align="justify">
<br /></div>
<div align="justify">
There are other important areas covered in the newsletter that I would now like to briefly discuss:<b> </b></div>
<div align="justify">
<br /></div>
<div align="justify">
<b>Violations relating to Credit Reporting, and</b></div>
<div align="justify">
<br /></div>
<div align="justify">
<b>Violations by Mortgage Originators</b></div>
<div align="justify">
<br /></div>
<div align="justify">
<b>Fair Lending Compliance</b> </div>
<div align="justify">
<br /></div>
<div align="justify">
These subjects are very nuanced and complex, involving many aspects of regulatory compliance mandates. Necessarily, my remarks will be limited to the kinds of observations that the CFPB has indicated as principal concerns with respect to these matters.</div>
<div align="center">
<span style="color: #a5a5a5;">_____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;">Violations relating to Credit Reporting</span></div>
<div align="center">
<span style="color: #c0504d;">Violations by Mortgage Originators</span></div>
<div align="center">
<span style="color: #c0504d;">Fair Lending Compliance</span></div>
<div align="center">
<span style="color: #c0504d;">Library</span></div>
<div align="center">
<span style="color: #a5a5a5;">_____________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Violations relating to Credit Reporting</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
The Fair Credit Reporting Act (the FCRA) regulates the collection, use, and dissemination of consumer report information, and promotes the accuracy, fairness, and privacy of information held by the nation’s credit bureaus. </div>
<div align="justify">
<br /></div>
<div align="justify">
As you many know, the CFPB examines financial institutions for their compliance with the FCRA’s requirements for handling consumers’ credit information. Among other things, the FCRA and its implementing regulation, Regulation V, generally require entities that provide consumer information to credit bureaus to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the consumer information they furnish to these entities.</div>
<div align="justify">
<br /></div>
<div align="justify">
A party’s failure to comply with the FCRA may cause significant consumer harm.</div>
<div align="justify">
<br /></div>
<div align="justify">
According to the CFPB's most recent announcement on its examination findings, its examiners have discovered one or more instances in which a financial institution’s employees did not have sufficient training or familiarity with the requirements of the FCRA to implement it properly. </div>
<div align="justify">
<br /></div>
<div align="justify">
Such deficiencies resulted in a failure implement the following actions:</div>
<div align="justify">
<br /></div>
<div align="justify">
- Communicate appropriate and accurate account information to the credit bureaus.</div>
<div align="justify">
<br /></div>
<div align="justify">
- Indicate when account information had been disputed by consumers.</div>
<div align="justify">
<br /></div>
<div align="justify">
- Determine whether disputes had been fully investigated. </div>
<div align="justify">
<br /></div>
<div align="justify">
Findings by the CFPB noted that companies were unaware of the potential and actual violations of the FCRA, and, therefore, they repeatedly failed to respond to communications from consumers about their accounts. </div>
<div align="justify">
<br /></div>
<div align="justify">
The remedial actions mandated by the CFPB included (1) implementing procedures for properly reporting consumer credit disputes to all credit bureaus, (2) taking action on all disputes reported directly to the financial institution and correcting errors where appropriate, and (3) deleting information regarding customers, as appropriate, upon completion of their credit dispute investigations.</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Violations by Mortgage Originators</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
CFPB examiners have found significant violations of Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA). </div>
<div align="justify">
<br /></div>
<div align="justify">
Violations under RESPA have included failures to make proper and complete disclosures to consumers of costs and other terms of a transaction due to inadequate or improper completion of the Good Faith Estimate and the HUD-1 settlement statement. </div>
<div align="justify">
<br /></div>
<div align="justify">
Violations under TILA have included failures to provide accurate interest rate disclosures, and payment amounts and schedules, as well as disclosures regarding late payments, security interests, and assumption policies. </div>
<div align="justify">
<br /></div>
<div align="justify">
One aspect of the CFPB's examination, it should be mentioned, is to review a company's policies and procedures with respect to RESPA and TILA. Those financial institutions that do not maintain an accurate and current set of such policy statements should expect to receive an adverse finding.</div>
<div align="justify">
<br /></div>
<div align="justify">
Specifically, where financial institutions have violated RESPA and/or TILA, they have been directed to implement appropriate policies, procedures, and monitoring to prevent recurrence of the violations, and to ensure that any third-party vendors, including mortgage brokers, are identified and included in the company’s oversight program. The relevant policies and procedures should provide guidelines to ensure that proper Good Faith Estimate and HUD-1 disclosures are provided to consumers, and that consumers are not improperly charged. In fact, where appropriate, the CFPB has actually directed that consumers receive a corrected HUD-1, and, just as in state banking examinations, where customers are improperly charged, a financial institution will be directed to provide reimbursement to the consumer.</div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Fair Lending Compliance</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
Another area of concern is compliance with the Home Mortgage Disclosure Act (HMDA), and its implementing regulation, Regulation C.</div>
<div align="justify">
<br /></div>
<div align="justify">
<a href="http://cfpbforum.blogspot.com/2012/11/cfpb-compliance-management-system.html">In our newsletter yesterday, I discussed deficiencies of fair lending compliance programs and some "common features" of well developed programs.</a> The CFPB utilizes HMDA data in the course of its review of such programs, and it may seek corrective action or relief, as appropriate, in cases that demonstrate fair lending violations.</div>
<a name='more'></a><br />
<div align="justify">
<br /></div>
<div align="justify">
HMDA requires certain lenders to report specific information about their mortgage lending activity to regulators and the public. Importantly, HMDA data plays a key role in the work of the CFPB’s examination teams. </div>
<div align="justify">
<br /></div>
<div align="justify">
Indeed, the CFPB has an <i>Office of Fair Lending and Equal Opportunity</i> and monitors closely the results of examinations. HMDA data is a foundational feature of the CFPB examination and is used to ensure that "credit is provided fairly and without illegal discrimination." </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB unequivocally states that "lenders that do not accurately report data as HMDA requires hinder regulators’ and the public’s ability to compare mortgage data across the industry in a meaningful way."</div>
<div align="justify">
<br /></div>
<div align="justify">
Therefore, financial institutions must have strong systems in place to ensure HMDA compliance, which should ensure improving their HMDA data collection and reporting systems, and, where needed, modifying policies and procedures to provide proper guidance to employees who prepare and submit HMDA data. </div>
<div align="justify">
<br /></div>
<div align="justify">
Based on CFPB examination findings thus far, examiners have issued findings that show instances of systemic failure to capture and accurately report HMDA data as well as being an "indicator of a weak CMS." </div>
<div align="justify">
<br /></div>
<div align="justify">
Adverse findings include significant deficiencies, requiring the financial institution to resubmit HMDA data to correct errors. </div>
<div align="center">
<span style="color: #a5a5a5;">_________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Library</b></span></div>
<div align="center">
<br /></div>
<div align="center">
<a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="139" src="http://lh3.ggpht.com/-z-n0OMdoIek/UJq-_bU7jwI/AAAAAAAABws/B10rdkbKWCE/Law%252520Library%252520Image%25255B5%25255D.jpg?imgmax=800" style="background-image: none; border-bottom: 0px; border-left: 0px; border-right: 0px; border-top: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="139" /></a></div>
<div align="center">
<br /></div>
<div align="center">
Consumer Financial Protection Bureau</div>
<div align="center">
<br /></div>
<div align="center">
<b>Supervisory Highlights: Fall 2012</b><br />Executive Summary<br />10/31/12</div>
<div align="center">
<span style="color: #a5a5a5;">_____________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-60616114322196841132012-11-06T11:41:00.000-05:002012-11-06T12:17:43.791-05:00CFPB: Compliance Management System<div align="justify">
On October 31, 2012, the CFPB issued its first issue of <span style="color: #c0504d;">Supervisory Highlights: Fall 2012</span>, a newsletter to the public and the financial services industry about its examination program, including the concerns that it finds during the course of its completed work, and the remedies that it has obtained for consumers who have suffered financial or other harm.</div>
<div align="justify">
<br /></div>
<div align="justify">
It is written as an Executive Summary, and it will not refer to any specific institution. But it will "signal to all institutions the kinds of activities that should be carefully scrutinized for compliance with the law."</div>
<div align="justify">
<br /></div>
<div align="justify">
According to the CFPB, it has already taken non-public supervisory actions against financial institutions participating in the credit card, credit reporting, and mortgage markets, confirming "remedial relief" to 1.4 million consumers, and causing the affected financial institutions to correct illegal practices. Importantly, and in consequence to the CFPB's examinations and actions, financial institutions were required to adopt effective policies and procedures to ensure that violations do not recur and, especially, mandating that they implement a robust <b>Compliance Management System (CMS).</b> </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB maintains that an effective CMS is a "critical component of a well-run financial institution."</div>
<div align="justify">
<br /></div>
<div align="justify">
After a brief discussion about the CMS concept, I should like to outline these three significant findings derived from the CFPB's examinations:</div>
<blockquote>
<div align="left">
<span style="font-size: xx-small;"><b>- Comprehensive CMS Deficiencies Found Through CFPB Supervisory Activities</b></span></div>
</blockquote>
<blockquote>
<div align="left">
<span style="font-size: xx-small;"><b>- Deficiencies Related to Failure to Oversee Affiliate and Third-party Service Providers</b></span></div>
</blockquote>
<blockquote>
<div align="left">
<span style="font-size: xx-small;"><b>- Deficient Fair Lending Compliance Programs</b></span></div>
</blockquote>
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">Compliance Management System</span></div>
<div align="center">
<span style="color: #c0504d;">Comprehensive CMS Deficiencies</span></div>
<div align="center">
<span style="color: #c0504d;">Failure to Oversee Affiliate and Third-party Service Providers</span></div>
<div align="center">
<span style="color: #c0504d;">Deficient Fair Lending Compliance Programs</span></div>
<div align="center">
<span style="color: #c0504d;">Library</span></div>
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Compliance Management Systems</span></b></div>
<div align="justify">
<br /></div>
<div align="justify">
I consider the term <b>Compliance Management System</b> to be a proxy for the term <b>mortgage risk management</b>. Our firm was founded on the premise that such risk management was the best way to ensure a financial institution's safety and soundness with respect to mortgage banking. At the time, there was only the term "risk management", a catch-all term that was overly broad. So I coined the term "mortgage risk management" to bring mortgage compliance into greater focus, expertise, and application. </div>
<div align="justify">
<br /></div>
<div align="justify">
Over the years, the prudential regulators and state banking departments have included much guidance in preparedness for their mortgage banking examinations. And now the CFPB has further elaborated the crucial and central importance of managing risk and examination readiness. As recently as July 2012, I published a magazine article about <a href="http://lenderscompliancegroup.com/20.html">The Rules of Operational Risk</a>, in order to bring into strong relief the practical matters and unique circumstances of mortgage risk management. </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB's conception of a well-conceived CMS is certainly consistent with the foundational features of mortgage risk management. </div>
<div align="justify">
<br /></div>
<div align="justify">
Both the CFPB and mortgage risk management require effective internal controls and oversight, training, internal monitoring, consumer complaint response, independent testing and audit, third-party service provider oversight, recordkeeping, product development and business acquisition, and marketing practices. </div>
<div align="justify">
<br /></div>
<div align="justify">
Mortgage risk management and the CMS both expect the development, maintenance, and integration of mortgage compliance practices across a financial institution's framework and applied to its entire loan product and service lifecycle. </div>
<div align="justify">
<br /></div>
<div align="justify">
As the CFPB states: </div>
<blockquote>
<div align="justify">
"Without such a system, serious and systemic violations of Federal consumer financial law are likely to occur. Further, a financial institution with a deficient CMS may be unable to detect its own violations. As a result, it will be unaware of resulting harm to consumers, and will be unable to adequately address consumer complaints."</div>
</blockquote>
<div align="center">
<span style="color: #a5a5a5;">__________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Comprehensive CMS Deficiencies</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB has issued findings for financial institutions lacking an effective CMS across the entire consumer financial portfolio, or in which the company failed to adopt and follow comprehensive internal policies and procedures. In these instances, the finding held that this condition resulted in "a significant breakdown in compliance and numerous violations of Federal consumer financial law."</div>
<div align="justify">
<br /></div>
<div align="justify">
The corrective action required an adopting of appropriate policies and procedures, and establishing an effective CMS to ensure legal compliance, which had to include the "enhancement" of financial institutional regulatory knowledge and expertise to help ensure proper monitoring of business activities and prompt identification of potential risks to consumers.</div>
<div align="justify">
<br /></div>
<div align="justify">
In this regards, educating about and training employees in a company's policies and procedures should be fully implemented and routinely followed. I suggest a schedule of on-going education and training modules, given to both new hires and all active, affected personnel.</div>
<a name='more'></a><br />
<div align="justify">
<br /></div>
<div align="justify">
Keep in mind that the CFPB will exam not only the policies and procedures and their communication to employees but also management's inclination to be proactive or passive, preemptive or complacent, knowledgeable or disinterested. According to the CFPB, a financial institution’s CMS is “inadequate” where appropriate policies have been adopted, but management fails to take measures to ensure compliance with those policies. </div>
<div align="justify">
<br /></div>
<div align="justify">
In a typical CMS examination, the CFPB evaluates both the understanding and application of the financial institutions’ compliance management program by its managers and employees. The CFPB has stated that it has found "one or more situations in which the financial institution had articulated many elements of an appropriate compliance policy, but the policy was not followed."</div>
<div align="justify">
<br /></div>
<div align="justify">
I find such absence of follow-through simply inexcusable. What good are policies and procedures if they are not followed? Policies that lack enforcement are no more than the pabulum of confirmation bias and denial. In the CFPB's view, it is axiomatic that a failed CMS will occur "where the necessity of an effective CMS is not fully appreciated by management or employees of the financial institution, or where a compliance department is not given access to the information, resources, and personnel necessary to carry out its compliance duties."</div>
<div align="center">
<span style="color: #a5a5a5;">__________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Failure to Oversee Affiliate and Third-party Service Providers</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB places oversight of service providers as a key component of an effective CMS, and expects companies to have an effective process for managing the risks of those relationships to ensure compliance with applicable Federal consumer financial law.</div>
<div align="justify">
<br /></div>
<div align="justify">
This means that the responsibility of the company reaches to the management of its service provider relationships. "The mere fact that a financial institution enters into a business relationship with a service provider does not absolve the financial institution of responsibility for complying with Federal consumer financial law and does not give it license to 'turn a blind eye' to violations of Federal consumer financial laws and regulations by the entity that is acting on its behalf," states the CFPB.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB has noted instances in which a financial institution has not established a "comprehensive service provider management program" or failed to effectively manage service providers acting on its behalf to ensure compliance with Federal consumer financial law. During a CFPB examination, we have found that the trail to this finding tracks through the lack of coordination between the company and its service provider in such intrinsic areas as how they handle their correspondence with consumers and contact with the public.</div>
<div align="justify">
<br /></div>
<div align="justify">
Instead of waiting for the CFPB to direct a company to develop and implement a comprehensive program that ensures the service providers’ compliance with Federal consumer financial law, such programs should be developed now, including risk-based procedures governing the retention and monitoring of service provider relationships, as well as policies and procedures to monitor and test for compliance with Federal consumer financial law by service providers acting on behalf of the financial institution.</div>
<div align="center">
<span style="color: #a5a5a5;">__________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Deficient Fair Lending Compliance Programs</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
In order to avoid potential fair lending compliance issues, the CFPB expects every financial institution to establish fair lending policies, procedures and internal controls to ensure that it is operating in compliance with the Equal Credit Opportunity Act (ECOA), and its implementing Regulation B, in all of the company’s relevant lines of business. </div>
<div align="justify">
<br /></div>
<div align="justify">
In conducting CFPB readiness and actual examinations, my firm has found that the appropriate, fair lending program will vary from company, depending on the firm's size, complexity, and risk profile. We do know that the CFPB’s examiners have derived the common features of well developed fair lending compliance programs. Here are a few, as also noted in the Supervisory Highlights.</div>
<blockquote>
<div align="left">
- An up-to-date fair lending policy statement.</div>
</blockquote>
<blockquote>
<div align="left">
- Regular fair lending training for all employees involved with any aspect of the financial institution’s credit transactions, as well as all company officers, Board of Directors, and members of management.</div>
</blockquote>
<blockquote>
<div align="left">
- On-going monitoring for compliance with fair lending policies and procedures.</div>
</blockquote>
<blockquote>
<div align="left">
- On-going monitoring for compliance with other policies and procedures that are intended to reduce fair lending risk (such as controls on loan originator discretion).</div>
</blockquote>
<blockquote>
<div align="left">
- Review of lending policies for potential fair lending violations, including potential disparate impact.</div>
</blockquote>
<blockquote>
<div align="left">
- Depending on the size and complexity of the financial institution, regular statistical analysis of loan data for potential disparities on a prohibited class basis in pricing, underwriting, or other aspects of the credit transaction.</div>
</blockquote>
<blockquote>
<div align="left">
- Regular assessment of the marketing of loan products.</div>
</blockquote>
<blockquote>
<div align="left">
- Meaningful oversight of fair lending compliance by management and, where appropriate, the company’s Board of Directors.</div>
</blockquote>
<div align="justify">
The CFPB has found instances in which financial institutions lack any formal fair lending compliance system or in which they have implemented fair lending compliance systems that are sufficient with respect to some product lines, but exclude compliance oversight for other major lending products. </div>
<div align="justify">
<br /></div>
<div align="justify">
In such situations, the CFPB has directed the company to establish fair lending compliance programs commensurate with the size and complexity of the financial institution and its lines of business. </div>
<div align="justify">
<br /></div>
<div align="justify">
If fair lending violations have occurred, the CFPB has directed remediation that included (1) adoption of comprehensive policies and procedures, (2) allocation of sufficient resources to employee training and oversight, and (3) review of adverse action letters to ensure they provide applicants with the required information. </div>
<div align="justify">
<br /></div>
<div align="justify">
According to the CFPB, in some cases financial institutions have been directed to expand their internal fair lending regression analysis, monitor compliance through special reports and certifications, or take other steps to address the potential existence of discrimination against applicants on a prohibited basis and to verify full compliance with the ECOA.</div>
<div align="center">
<span style="color: #a5a5a5;">__________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Library</span></b></div>
<div align="center">
<br /></div>
<div align="center">
<a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="139" src="http://lh3.ggpht.com/-qRsee7mUJZs/UJk8Rugv7uI/AAAAAAAABwY/kqqxPEV7-7w/Law-Library-Image5.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="139" /></a></div>
<div align="center">
<br /></div>
<div align="center">
Consumer Financial Protection Bureau</div>
<div align="center">
<b>Supervisory Highlights: Fall 2012 </b>Executive Summary <br />
10/31/12</div>
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________</span></div>
<div align="center">
<span style="font-size: xx-small;">*Jonathan Foxx is the President & Managing Director of Lenders Compliance Group</span></div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0tag:blogger.com,1999:blog-8011453588442645384.post-77300689438869995752012-10-23T10:53:00.000-04:002012-10-23T10:53:35.416-04:00CFPB's Five Year Strategic Plan<div align="justify">
Recently, the Consumer Financial Protection Bureau (CFPB) published for comment on its website its draft <span style="color: #c0504d;">Strategic Plan for 2013 - 2018</span> (Plan). </div>
<div align="justify">
<br /></div>
<div align="justify">
According to the CFPB, the plan includes the following four goals: </div>
<div align="justify">
<br /></div>
<div align="justify">
(1) Prevent financial harm to consumers while promoting good practices that benefit them.</div>
<div align="justify">
<br /></div>
<div align="justify">
(2) Empower consumers to live better financial lives.</div>
<div align="justify">
<br /></div>
<div align="justify">
(3) Inform the public, policymakers, and the CFPB’s own policymaking with data-driven analysis of consumer finance markets and consumer behavior.</div>
<div align="justify">
<br /></div>
<div align="justify">
(4) Advance the CFPB’s performance by maximizing resource productivity and enhancing impact. For each goal, the plan identifies outcomes to be achieved and how progress will be measured.</div>
<div align="justify">
<br /></div>
<div align="justify">
Submit comments to <a href="http://www.blogger.com/StrategyPlanComments@cfpb.gov">StrategyPlanComments@cfpb.gov</a> before October 25, 2012. </div>
<div align="justify">
<br /></div>
<div style="text-align: center;">
<span style="background-color: #eeeeee;"><span style="color: white;">__________________________________________________</span></span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: red;">IN THIS ARTICLE</span></div>
<div align="center">
<span style="color: #c0504d;">Goals, Strategies, and Metrics</span></div>
<div align="center">
<span style="color: #c0504d;">Goal 1: Prevent Financial Harm to Consumers </span></div>
<div align="center">
<span style="color: #c0504d;">Goal 2: Empower Consumers to Live Better Financial Lives</span></div>
<div align="center">
<span style="color: #c0504d;">Goal 3: Inform The Public</span></div>
<div align="center">
<span style="color: #c0504d;">Chart: Data Sources and Data Outputs</span></div>
<div align="center">
<span style="color: #c0504d;">Goal 4: Maximizing Resources and Impact</span></div>
<div align="center">
<span style="color: #c0504d;">Library</span></div>
<div align="center">
<span style="color: #a5a5a5;">___________________________________________________</span></div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Goals, Strategies, and Metrics</span></b></div>
<div align="justify">
<br /></div>
<div align="justify">
The Plan outlines these goals, strategies, and metrics:</div>
<div align="justify">
<br /></div>
<div align="justify">
- Four strategic goals that outline what the CFPB aims to achieve.</div>
<div align="justify">
<br /></div>
<div align="justify">
- Desired outcomes in support of its goals.</div>
<div align="justify">
<br /></div>
<div align="justify">
- Strategies that state the actions the CFPB will take to accomplish our outcomes.</div>
<div align="justify">
<br /></div>
<div align="justify">
- Performance measures that CFPB will track against specific targets in order to assess its progress toward achieving its outcomes.</div>
<div align="justify">
<br /></div>
<div align="justify">
- Indicators that the CFPB will track and use to assess progress toward achieving our outcomes. </div>
<div align="justify">
<br /></div>
<div align="justify">
(Unlike performance measures, indicators do not reflect targets.)</div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Goal 1</span></b></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Prevent Financial Harm to Consumers while Promoting Good Practices</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB stated that, prior to Congress enacting the Consumer Financial Protection Act (CFPA) as Title X of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203, dated July 21, 2010), consumer financial protection had not been the primary focus of any one Federal agency, and no agency had effective tools to set the rules for and oversee the whole market. </div>
<div align="justify">
<br /></div>
<div align="justify">
Per the CFPB, the result was a system without sufficiently effective rules or consistent enforcement of the law. The CFPB believes that the consequences can be seen both in the 2008 financial crisis and in its aftermath.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB increased accountability in government by consolidating consumer financial protection authorities that had existed across seven different federal agencies into one, the Consumer Financial Protection Bureau. In addition to establishing the CFPB's enforcement powers, the CFPA gives the CFPB the authority to supervise and examine many financial institutions that were not previously subject to Federal oversight, such as nonbank mortgage companies, payday lenders, and private education lenders. </div>
<div align="justify">
<br /></div>
<div align="justify">
With the consolidation of existing and new federal authorities under one roof, the CFPB seeks to be properly focused and equipped to prevent financial harm to consumers while promoting practices that benefit consumers across financial institutions. </div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Goal 2</b></span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Empower Consumers to Live Better Financial Lives</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
This second goal of the CFPB is "to arm consumers with the knowledge, tools, and capabilities they need in order to make better informed financial decisions by engaging them in the right moments of their financial lives, in moments when the consumer is most receptive to seeking out and acting on assistance." </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB plans to develop and maintain a variety of tools, programs, and initiatives that provide targeted, meaningful, and accessible assistance and information to consumers at the moment they need it. </div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">To reify this goal, the CFPB has predicated two outcomes.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 1:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
The first outcome will collect, monitor, respond to, and share data associated with consumer complaints and inquiries about consumer financial products or services.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB has asserted that the consumer response function is central to its mission. The CFPB would provide direct assistance to consumers, in real-time, through its <u>Consumer Response</u> team. (<a href="http://publications.lenderscompliancegroup.com/16.html">See our October 4, 2012 article on Consumer Complaints and the Consumer Response team.</a>) This team hears directly from consumers about the challenges they face in the marketplace and brings their concerns to the attention of the financial institutions that the CFPB regulates for investigation and resolution.</div>
<div align="justify">
<br /></div>
<div align="justify">
The Consumer Response team is tasked also to learn from the experiences of already operating complaint centers, for instance, by using the historical data from the FTC's <u>Consumer Sentinel</u> network, which is a collection of consumer complaint data from a variety of contributors, to inform its approach to handling complaints.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> deriving data from complaint volume, the percentage of complaints routed through the dedicated company portal, and the complaint cycle time (i.e., intake cycle time, from receipt to company referral; company cycle time, from referral to company response; consumer cycle time, from company closure response to dispute; investigations cycle time, from investigations queue to closure).</div>
<a name='more'></a><br />
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 2:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
The second outcome helps consumers understand the costs, risks, and tradeoffs of financial decisions; build trusted relationships that are interactive and informative to help consumers take control of their financial choices to meet their own goals; and raise effectiveness of those who provide financial education services to increase financial literacy.</div>
<div align="justify">
<br /></div>
<div align="justify">
In this outcome, the CFPB aims to provide consumers with the information, knowledge, and financial education needed in order to make well-informed decisions to enhance the financial knowledge and capability of the country as a whole. In addition to improving overall financial literacy, the CFPB plans to focus on addressing the unique financial challenges faced by four specific populations: students, older Americans, servicemembers, and the economically vulnerable and underserved.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> deriving data from targeted populations or organizations directly servicing targeted populations reached by digital content, decision tools, educational materials and resources, and outreach work; the number of outreach activities on fair lending and access to credit; and, mechanism in place to identify key success factors in financial education.</div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Goal 3</b></span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Inform The Public</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
This goal is designed to inform the public, policy makers, and the CFPB's own policy-making with data-driven analysis of consumer finance markets and consumer behavior.</div>
<div align="justify">
<br /></div>
<div align="justify">
According to the CFPB, this goal offers an understanding of how consumer financial markets work, the avenues for innovation in financial products and services, and the potential for risk to consumers is a core component of the CFPB's mission. As the CFOB states: "the CFPB’s aim is to ground all of its work - from writing rules and litigating enforcement actions to its outreach and financial literacy efforts - in the realities of the marketplace and the complexities of consumer behavior."</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">To reify this goal, the CFPB has predicated two outcomes.</span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 1:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
Evidence based analysis obtained by monitoring markets and conducting research to bring to the surface financial trends and emergent risks relevant to consumers.</div>
<div align="justify">
<br /></div>
<div align="justify">
The following chart provides the CFPB's approach to building and maintaining the technological infrastructure required to support market intelligence through the integration of diverse internal and external data.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> measuring the percentage of the credit card market monitored through data percentage of mortgage market monitored, and the percentage of the mortgage originations and servicing market monitored through data.</div>
<div align="justify">
<br /></div>
<div align="center">
<a href="http://lh5.ggpht.com/-7zrxR2bx_OM/UIatSWHJkzI/AAAAAAAABts/hVo2Qiv-IKE/s1600-h/CFPB-Data-Sources-and-Outputs-Strate%25255B1%25255D.jpg"><img alt="CFPB-Data Sources and Outputs (Strategic Plan)" border="0" height="250" src="http://lh6.ggpht.com/-Ab30cTGV8k4/UIatS_Q42gI/AAAAAAAABt0/nmZ98KJA7mA/CFPB-Data-Sources-and-Outputs-Strate%25255B2%25255D.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="CFPB-Data Sources and Outputs (Strategic Plan)" width="454" /></a></div>
<div align="center">
<span style="color: #c0504d; font-size: xx-small;">Data Sources and Data Outputs</span></div>
<div align="center">
<br /></div>
<div align="center">
<b><span style="color: #c0504d;">Outcome # 2:</span></b></div>
<div align="justify">
<br /></div>
<div align="justify">
This goal requires a research-driven, evidence-based perspective on consumer financial markets, consumer behavior, and regulations to inform the public discourse, inform CFPB thinking on priority areas, identify areas where CFPB intervention may improve market outcomes, and support efforts to reduce outdated, unnecessary, or unduly burdensome regulations.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> reports produced about specific consumer financial products, markets, or regulations research reports produced, and reports or research projects produced on consumer decision-making.</div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Goal 4</b></span></div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Maximizing Resources and Impact</b></span></div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB's Plan expects to advance its performance by "maximizing resource productivity and enhance impact."</div>
<div align="justify">
<br /></div>
<div align="justify">
In order to maximize the effectiveness the consumer protections established by Federal consumer financial law, the CFPB wants to acquire, maintain, support, and direct its resources in a way that enables it to operate efficiently, effectively, and transparently. This means developing, maintaining, and continuously, improving the policies and controls in place to ensure the CFPB has the resources it needs and puts those resources to the best use possible.</div>
<div align="justify">
<br /></div>
<div align="justify">
A "key mission" of the CFPB is to make financial products and services more transparent in the consumer marketplace. Accordingly, the CFPB will strive to achieve the same level of transparency in its own activities, subject to consumer privacy and other confidentiality interests. </div>
<div align="justify">
<br /></div>
<div align="justify">
To accomplish this, the CFPB plans to "develop and implement mechanisms and provide channels to maintain an open, collaborative dialogue with the public."</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">To reify this goal, the CFPB has predicated four outcomes. </span></div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 1:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
Attract, engage, and deploy a workforce that meets dynamic challenges and provides effective oversight of the consumer financial marketplace.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB will continue to identify and adopt 'best practices' from the private and public sectors to hire, train, develop, and retain a “world-class workforce with the knowledge, skills, and abilities required to effectively execute against our mission." </div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB is working to develop a sustainable pipeline of diverse candidates and will continue to engage and develop its staff through education and training programs. </div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> achievement of workforce profile goals, assessing the level of employee engagement, evaluating the effectiveness of learning and development program, and the determining the effectiveness of performance management program.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 2:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
Enable the innovative use of technology for the benefit of efficient internal communications and effective public engagement.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB will deploy "cutting edge" technology and leverage its technological resources to provide significant business value with lower costs. The Plan states that "technology will be core to the CFPB accomplishing its mission."</div>
<div align="justify">
<br /></div>
<div align="justify">
Performance metrics are applied by reviewing the efficiency of internal processes and procedures as well as the external use of and public contributions to the CFPB's software.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 3:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
Enable the operation of a high-performing organization by ensuring effective and efficient management, protection of CFPB resources, rigorous internal controls, and full compliance with the law.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB will monitor its operations and conduct periodic evaluations to ensure it maintains good financial practices and robust internal controls.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> providing unqualified "clean" audit opinion on financial statements, and a procurement process that continually evaluates the percentage of contracts competitively awarded.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Outcome # 4:</span></div>
<div align="justify">
<br /></div>
<div align="justify">
Increase public confidence in consumer financial markets by maintaining the CFPB's transparency, accountability, and meaningful channels for feedback.</div>
<div align="justify">
<br /></div>
<div align="justify">
The CFPB expects to maintain transparency as the core of how it operates; therefore, the CFPB will provide clear information both on the use of resources and on its performance by communicating substantively and frequently across a wide range of industry and consumer group sectors. </div>
<div align="justify">
<br /></div>
<div align="justify">
Accordingly, the Plan calls for the CFPB to actively engage all stakeholders that could potentially be affected by the agency, with the understanding that there is much insight to be gained from varied perspectives that represent many distinct points of view.</div>
<div align="justify">
<br /></div>
<div align="justify">
<span style="color: #c0504d;">Performance metrics are applied by</span> engaging in public field hearings, town hall meetings, Congressional testimonies, open press events, meetings with stakeholders, and providing "CFPB-administered redress" through announcing the percentage of funds collected that are distributed to victims within 24 months.</div>
<div align="center">
<br /></div>
<div align="center">
<span style="color: #c0504d;"><b>Library</b></span></div>
<div align="center">
<br /></div>
<div align="center">
<a href="http://lenderscompliancegroup.com/109.html"><img alt="Law Library Image" border="0" height="134" src="http://lh6.ggpht.com/-uW32z4CQprM/UIatTHOf9-I/AAAAAAAABt8/q3LI_EBKP5c/Law%252520Library%252520Image.jpg?imgmax=800" style="background-image: none; border-bottom-width: 0px; border-left-width: 0px; border-right-width: 0px; border-top-width: 0px; display: inline; padding-left: 0px; padding-right: 0px; padding-top: 0px;" title="Law Library Image" width="134" /></a></div>
<div align="center">
<br /></div>
<div align="center">
<b>Strategic Plan 2013 - 2018</b></div>
<div align="center">
<b>Draft for Public Comment</b></div>
<div align="center">
Consumer Financial Protection Bureau</div>
<div align="center">
September 25, 2012</div>
Jonathan Foxxhttp://www.blogger.com/profile/11176318536334393246noreply@blogger.com0