In August of 2010, the Board of Governors of the Federal Reserve System issued the final rule on TILA and HOEPA reform which is goes into affect 4-1-2011.  (Board, 2010)  The purpose was to protect consumers in the mortgage market from unfair or abusive lending practices that can arise from mortgage loan originator (MLO) compensation practices.  It had long been the price of the loan (interest rate and yield spread premium) was determined in large part by the MLO.  When a MLO spent weeks or even months working with a borrower to package his situation into an approvable loan file, the MLO would price up the loan with premium pricing.  Premium pricing is the back-side pricing that is paid when a loan closes above the par rate (par is the market rate without any discount points or yield spread premium). 

This legislation has been put in place to deter originators from selling the premium price to unsuspecting consumers.  This is a huge change in that a MLO will no longer be able to price the loan to cover his time spent on the loan, or offer the borrower choices.  Time will tell if this new flat income pricing scenario the FRB is enforcing will cause consumers with financing impediments to not find a MLO willing to put the time in to work with them.  . 

The provisions change how the originator my price the loan to the consumer.  The intent is to protect consumers against the unfairness, deception, and abuse that arise with some loan origination compensation practices, while preserving responsible lending and sustainable homeownership.  (Board, 74 FR 43232, 2009)

Key points to the legislative changes:

•       Originator may not be paid based on the terms or conditions of the transaction
•       No one except the consumer may pay compensation to the MLO when the consumer pays the MLO directly
•       The MLO may not steer consumers to loans not in the borrowers best interest but for the purpose greater compensation for the MLO

Added provisions ensure a MLO will not be compensated by evading the legislation through secondary market.  Compensation based on the loan amount is not allowed since the legislation prohibits the MLO from being compensated based on the term or condition of the loan.  The Board clarified the rule will not limit the consumer from financing upfront costs, such as third-party settlement costs, by increasing or ‘buying up’ the interest rate regardless of whether the consumer pays the loan originator directly or the creditor pays the loan originator’s compensation.  It doesn’t prohibit the use of interest rate to cover upfront closing costs, as long as any creditor-paid compensation retained by the originator does not vary based on the transaction’s terms or conditions.  Lenders have turned to attorneys to try and determine how to compensate their MLOs in compliance with this legislation.  We at MTGTNA will leave interpretation for compensation compliance to the lenders for now.

This final rule applies to closed-end residential loan applications taken on or after April 1, 2011.  It is unlikely the enforcement will be delayed even though there are two law suits attempting to overturn the enactment.  Time will tell if this benefits the consumer with its intended goal.  It will certainly change every licensed MLO’s earnings and patience with a borrower’s problems.

Works Cited

Board, B. o. (2009, Aug 26). 74 FR 43232.

Board, B. o. (2010). Final rule;official staff commentary. In R. Z, & D. N. R-1366.

We invite you to view Linda Williams’ article in the Scotsman Guide article – Don’t Need No Education, Think Again. 

Having an education expert on your team could keep you on the right track.

Click here to read entire article.  http://www.sg-resdigital.com/resdigital/201010re#pg19

This Friday, Nevada Mortgage Professionals join the Nationwide Mortgage Licensing System.  Below is key information that may help answer some of your questions.  

Nationwide Mortgage Licensing System Registry

LOAN OFFICER WEBINAR

Topics to be addressed:

1. Getting Started with NMLS.

2. How to navigate the system to complete forms MU1, MU2, MU3, and MU4.

3. Suggested workflows for an efficient transition of your license information.

4. Overview of the tools that are provided on the NMLS website to help with the transition.

RSVP: CLICK HERE to RSVP by July 26. Walk-ins are Welcome.

Cost of Webinar:

 NAMP members get in for free

 Non-members pay $30

 If join NAMP before Tuesday, July 27th the cost is $50 and the webinar is free  (go to www.namp.us)

 If join NAMP the day of the Webinar the cost is $60

When: July 27, 2010 – 11:00am-12:30pm Registration starts at 10:30am

What: A Webinar Workshop on how to manage and enroll in the NMLS for

the Broker/Banker. The Webinar is broadcast directly from NMLS

and is brought to you by NAMP.

Where: Multiple Locations; See Below

Four available locations CLICK ADDRESSES BELOW FOR DIRECTIONS

Orange Financial Corp:  2580 Anthem Village Drive, Suite B-11; Henderson NV. 89052

Chevrolet Dealership-Rainbow & the 215: 6800 S. Torrey Pines Dr., Las Vegas, NV 89118

Downtown Location: Bank of America Plaza 300 South 4th Street, 2nd Floor Las Vegas, NV 89101

First American Title: 5310 Kietzke Lane, #100 Reno, NV 89511

There have been a lot of questions about, WHAT DO I NEED TO DO TO MEET THE NMLS SAFE ACT LICENSING REQUIREMENTS in Nevada?

This is what is required in Nevada.  Keep in mind that Nevada may vary from other states, so if you are licensed in multiple states, this information may be different for that state.

Nevada MLD is scheduled to join the NMLS system 10-1-2010.  Things will be different if you license or renew after this date.  MLD is suggesting everyone get what they can done before this date.

New licensees or those that let their license lapse for over 6 months:

                Complete 30 hours Nevada approved pre-licensing course

                                If Qualified Employee this must include a 4 hour management course in the 10 hours of elective hours

                Successfully pass the PSI exam (75% or better)

                Complete all the necessary paperwork and submit to MLD for licensing approval

Newer licensees with less than two years:

                Will need to complete at least TWO year renewals (10 hours of required education each)

Over two years licensees:

                Will need two years of renewals classes (10 hours each of required education)

What more do we need to do?

                You need to get your Unique Identifier number from the NMLS system.   Complete the MU4 form.  If you are a company there will be more forms to complete.

                MLD will guide us on CERTIFICATION of existing completion of education as stated above education must be complete.  Cost is estimated at $20.

                MLD will guide us on CERTIFICATION of existing State PSI test completion IF YOU HAVE COMPLETED.  Cost is estimated at $5.  If you have not taken this test in your past, you will need to complete the PSI test before October 1^st or on or after October 1^st, you will take the NMLS Nevada State Test.  One of these tests must be completed and submitted before December 31^st 2010.  You risk possible suspension of your license if you do not complete, which means NO PAY! 

Note:  Under the NMLS system, any license not renewed for more than 60 days will require the licensee to start over from the beginning as a new licensee.  That means 30 hours of education, background check, tests, etc…  So be mindful of your licensing dates.

                Successfully pass the National Test given by Prometric or Pearson Vue.  Cost is $92 per attempt and there is a 30 day wait to retake if you do not pass.  Make sure you study for this one, application test, not just right and wrong answer.

                Submit finger print cards, and other paperwork required by NMLS.  Keep in mind the background check is required for National licensing, but the review is done on a state level by MLD.  Make sure to explain any credit issues.  A foreclosure or bankruptcy does not immediately disqualify you, but will be viewed to determine if you are ‘Financially Responsible’ to become a licensee.

What should I do about license renewal?

This is a bit of a trick based on when you renew.  All NMLS licensee renew December 31^st. 

                If you renew between November 1^st and end of the year, you’ll be in the best position.  In 2010, you will take a SAFE Act approved course and you will then be fine to meet renewal requirements (of course pay your fees and paperwork as well), until next year.

                If you renew at any other time, you will renew twice next year.  Example, renew 9-15-2010.  You will complete your renewal with MLD approved courses in 2010 (because we have not joined the system yet on this date).  Then in 2011, you renew 9-15-2011 and renew again between 11-1 and 12-31-2011.  If you take SAFE Act courses, you’ll be able to use them for both education renewal requirements, but you will have to pay dual renewal fees and paperwork.  Then in 2012 and on going, you’ll renew between November 1^st and December 31^st.    

What happens October 1^st?

                You will be a member of the NMLS system once you complete all the requirements by December 31^st, 2010. 

                Your Unique Identifier Number must be on all loan files you work on, and will be tracked through the system.  Any complaints on your files from clients or agency investors will be passed through to you for explaination and comment.  Unacceptable files could cause you the loss of your license if fraud or misrepresentation is found.  The fact that it was the borrower that lied, may not be a defense to keep your license.   Not to mention legal actions may also be taken.

                MLD will need to guide us on the remaining requirements as they are just finishing their Nevada requirements.  There will be more changes next year after the legislative session.  Watch the legislative calendar.

We’ll post more as we find out more!  Stay in the club, and stay informed.

The US Department of Housing and Urban Development (HUD) announced their release of 2009 American Housing Survey (AHS).  This is the most comprehensive source of data on the Nation’s housing stock.  It traces characteristics of housing units and their occupants from as early as 1985.  The dataset also includes enhanced samples of five metropolitan areas:  Chicago, Detroit, Philadelphia, New York, and Northern New Jersey.  For the first time the data includes the disability status of household members.  The information may be downloaded at http://www.huduser.org/portal/datasets/ahs/ahsdata09.html

The American Housing Survey (AHS, formerly Annual Housing Survey) can answer many of your questions about U.S. people and homes.

NAMP is comprised of Mortgage Professionals like YOU.  Join NAMP today to ensure your continued awareness of the constant Industry changes that impact us all. Membership enrollment is open to Mortgage Bankers, Brokers, Loan Officers, Underwriters, Processors, Lenders, Title/Escrow, and Appraisers.  We must all come together and protect our combined interests in the Industry. 

The NAMP Executive Board holds bi-weekly board meetings to keep our members up to date with the changes taking place. Our Board members represent a broad spectrum of the Industry, including Brokers, Bankers, Title/Escrow, Processors, and Lenders.  We have also aligned ourselves with multiple National Associations in order to make sure that we are not only representing our members needs here in Nevada, but also back in Washington D.C.  

NAMP is currently organizing a function to discuss Nevada’s changing regulation in regards to the SAFE Act and how it is going to affect all Industry Professionals. We are working with CSBS and the NMLS to create a venue that will allow you to have your questions answered directly by one of their representatives.  We will post more about this on our website as soon as the information becomes available. 

As an added benefit to our members, once a month we host a Lender Scenario Breakfast.  It is open to all Mortgage Professionals and it is a great opportunity to discuss your specific loan scenario needs with multiple Lenders.  Our June event included six different Lenders that offer a wide range of products.  It is a great source of information all in one place.  Visit our website for a schedule.  

If you are interested in getting involved or if you would like to just stay informed and support your industry, Join NAMP Today!  Our Strength is in Numbers and your voice counts.  See the post from Senator Ensign in response to our communication with him.

This is an official communication from the Office of Senator John Ensign. Any tampering or alteration of this communication is prohibited and may result in criminal investigation or prosecution.

June 9, 2010

Thank you for contacting me about the Restoring American Financial Stability Act of 2010 (RAFSA). I value the opinions of every Nevadan and am always grateful to those who take the time to inform me of their views.

As you may be aware, RAFSA was recently passed in the Senate. After the financial meltdowns and taxpayer bailouts, I support financial reform that would protect taxpayers, strengthen our economy, and preserve the competitiveness of our financial markets. That said, I have some serious concerns that RAFSA would not accomplish those goals; therefore, I voted against the bill. For the reasons identified below, I believe that RAFSA would allow for continued taxpayer bailouts and institutionalize “Too Big to Fail.”

RAFSA would establish a Financial Stability Oversight Council, which would have the authority to require that nonbank financial companies fall under direct supervision of certain regulations of the Federal Reserve (Fed). Under the guise of providing extra regulation for the riskiest firms, this would essentially create an official “Too Big to Fail” club, allowing for backdoor bailouts and propping up by the Fed of any nonbank financial company that the Council deems to be a potential threat to systemic stability. Specifically, the Council could require a company (perhaps a politically favored one) to be supervised by the Fed, which also gives the company access to the Fed’s discount window for favorable lending treatment to bail out the firm or prop up a failing institution.

This is exactly what happened with the mortgage investment companies Fannie Mae and Freddie Mac, the government-sponsored enterprises that played a key role in the financial meltdown. The government selected Fannie and Freddie as “Too Big to Fail,” and as a result, smaller competitors withered, and Fannie and Freddie engaged in ever-riskier lending with the implicit backing of the federal government. The resulting fallout devastated our economy and left American taxpayers on the hook for hundreds of billions of dollars. RAFSA would do nothing to stop the ongoing, unlimited bailouts of Fannie Mae and Freddie Mac that, to date, have cost the American taxpayer $146 billion. Perhaps what is most alarming about the lack of attention to Fannie and Freddie is the fact that there is no end in sight.  Losses continue to mount and taxpayer exposure is unlimited. In fact, while the Senate was debating the RAFSA, Fannie and Freddie asked for another $19 billion in taxpayer money. Yet, there was not a single mention of reforming Fannie and Freddie in the legislation.

I offered an amendment to RAFSA that would have limited the size of Fannie and Freddie to less than 3% of the of the United States’ annual gross domestic product (GDP).  My amendment would have protected taxpayers from future bailouts of Fannie Mae and Freddie Mac by imposing meaningful restrictions on their size so that the federal government could no longer label them “Too Big to Fail.” Unfortunately, my amendment was defeated, largely along party lines.

Further, the bill does not end taxpayer-funded bailouts. Under RAFSA, the Federal Deposit Insurance Corporation (FDIC) would have expanded authority to take over, manage, and liquidate troubled financial companies.  The FDIC would take over the assets and operate the financial company with all the powers of the management, directors, and shareholders.  In that way the government, acting through the FDIC, would be able to continue to determine which financial companies survive and which do not.  RAFSA would essentially institutionalize the kinds of bailouts that have occurred in the recent crisis, which only incentivizes institutions to take on unnecessary risk.

As an alternative, I cosponsored an amendment which would have made failing companies utilize an enhanced bankruptcy process to ensure that the costs are covered by the financial institutions and their creditors, not the taxpayer. The amendment would have created a new pathway to limit the cascading spread of risk and panic through the financial system and assured the more orderly wind-down of financial institutions insulated from bailouts and political influence. Unfortunately, the Democrats decided to go in a different direction, one that moves away from protecting the taxpayers, and swiftly defeated this bankruptcy amendment.

Moreover, RAFSA would create a Consumer Financial Protection Bureau (CFPB), housed within the Fed, which would have autonomous rulemaking authority for banks and nonbanks that offer financial services or products. The CFPB would have a Director, appointed by the President, who would have sole discretion to determine the Bureau’s funding level. This new government bureaucracy would have broad jurisdictional reach and the authority to write and enforce rules that could ultimately tighten the availability of credit and discourage business investment at a time when we can least afford it. I introduced an amendment that would exempt from the CFPB businesses that give customers flexible repayment options, and fortunately, my amendment was adopted. However, my amendment fixes but one problem with the CFPB. This new bureaucracy, which will have almost no oversight and access to billions of dollars, will only grow and extend its reach and impose burdensome requirements on more and more businesses across this country.

RAFSA will cause serious damage to the economy, consumers, and the financial services industry. This bill will do nothing to address real reform of the financial industry, but it will ensure that the taxpayers guarantee the bad debt of Fannie and Freddie, just as these companies guaranteed bad debt that eventually brought them to their knees. This is not what the government should be doing. Government should not be picking winners or losers. The economy of the United States is rooted in free-market principles. These principles, coupled with our nation’s entrepreneurial spirit, have helped America become the richest and most innovative country in the world. Even though our economy is struggling right now, we cannot abandon those principles.

This bill now awaits action in conference committee, where members from both chambers of Congress will attempt to reconcile the differences between the House and Senate reform proposals. Though I have not been appointed as a conferee to the conference committee, I will continue to fight for financial reform that would strengthen the U.S. economy and put an end to taxpayer bailouts and “Too Big to Fail.”

Thank you again for sharing your thoughts with me. Rest assured that I will continue working closely with my colleagues as we deal with this difficult and important issue. Please feel free to contact me in the future on matters of importance to you. Should you have any other questions or comments or would like to sign up for my newsletter, please do not hesitate to either write or e-mail me via my website at http://ensign.senate.gov.

Sincerely,

JOHN ENSIGN

United States Senator

JE/u1

Your thoughts and opinions are important. Unfortunately, any replies to this e-mail will not be received and processed. If you want to contact Senator Ensign electronically again please visit:

 http://ensign.senate.gov/forms/email_form.cfm

Loan Modification Guidance for Loans Evaluated for HAMP

Beginning March 1, servicers must use the Imminent Default Indicator (IDI) statistical model when making imminent default evaluations.  Servicers are required to verify borrower’s income when they are 31 days or more delinquent.  Income documentation requirements for borrowers must first be evaluated for imminent default. 

Servicers must obtain the Borrower’s most recently filed signed federal income tax return or a tax transcript by processing the IRS Form 4506T to obtain a tax transcript that includes information from all schedules and forms.  If a Borrower submits an unsigned tax return, evidence of an electronically field tax return is considered acceptable, otherwise the borrower must sign the tax return. 

Servicers are reminded that they must review all borrower submitted documentation and compare them to the information in the tax return or tax transcript to identify any inconsistencies.  If there are inconsistencies, the Servicer must obtain from the borrower any other documentation necessary to reconcile the inconsistencies.

Verification of Assets

When evaluating a borrower for imminent default, the Servicer must determine that all the borrower’s cash reserves have been accounted for on the Form 1114 Making Home Affordable Program Request for Modification and Affidavit (RMA) (Note-Form 1126 Borrower Financial Information is obsolete after 3/1/10) .  Servicers must review the borrower’s federal income tax return or tax transcript, including information from applicable schedules and all other available information provided by the borrower to determine if the asset information stated on the RMA is reasonably consistent with information available from the tax return or tax transcript or other information. 

New HAMP Documents required 3-1-10

Form 1114, Making Home Affordable Program Request for Modification and Affidavit (RMA)

Form 1115, Making Home Affordable Program Hardship Affidavit (MHA Hardship Affidavit)

Form 1116, Home Affordable Modification Program Trail Period Plan Notice (Stated Income) (Trail Period Plan Notice – Stated)

Form 1117, Home Affordable Modification Program Trail Period Plan Notice (Verification Income) (Trail Period Plan Notice – Verified)

Spanish translations of documents are available.  However they may not be used to replace the English language documents, just for clarification to the consumer.

If you already have your Federal license and are looking to renew, here is the link for their procedures.  http://mortgage.nationwidelicensingsystem.org/slr/common/renewals/Pages/RenewalSteps.aspx 

Mortgage Trainers of North America offer SAFE Act approved continuing education course, which will meet NV MLD, many other states, and SAFE Act requirements.  We will have classroom and online offerings. 

You may only renew your NMLS license between November 1^st and December 31^st.  Since all licensees renew during this period, it is advised to not procrastinate on completing the renewal process.  Even if you are not going to renew, there is a procedure to complete and notify the system you are no longer a Mortgage Loan Originator (MLO).

List of Useful links

Background check information

http://mortgage.nationwidelicensingsystem.org/profreq/background/Pages/default.aspx

Education requirement information

http://mortgage.nationwidelicensingsystem.org/profreq/education/Pages/default.aspx

Testing requirement information

http://mortgage.nationwidelicensingsystem.org/profreq/testing/Pages/default.aspx

State Specific information

http://mortgage.nationwidelicensingsystem.org/slr/Pages/default.aspx

FFIEC Frequently Asked Questions

http://www.ffiec.gov/safeact.htm

Conference State Banking Supervisors

www.csbs.org

State Regulatory Registry

http://www.stateregulatoryregistry.org//AM/Template.cfm?Section=Home2

For questions relating to the Nationwide Mortgage Licensing System, please contact the NMLS Call Center at (240) 386-4444.