Recently I taught on the topics of HMDA & Flood Insurance at the ABA’s Compliance School in San Jose, CA (it’s a tough job, but someone has to do it). While there, I sat in on a few sessions taught by others. Here are a few notes I took that I thought I would share with you:
HMDA – Jane Gell (FRB Managing Counsel) indicated the FRB is considering adding 12 items to the LAR: FICO Score, APR, Debt to Income, Loan to Value, etc. The OCC has been testing “HMDA Plus” for the past couple of years & the FRB appears to like the results. Before you groan too much, I think this is beneficial for you. Currently, the HMDA data may make it look like your institution is discriminating against a protected class. This new data will help you defend your actions (“yes we have denied _____ more, but look at their FICO scores, DTI ratio and LTVs on these applicants.”)
Truth in Lending – Refinance vs. Renewal: Currently, Reg Z (as well as RESPA) allows you to avoid giving new disclosures when you renew a note rather than refinance it [refer to 226.20(a)]. The FRB is looking at changing the rules especially considering the “legal circumvention” this allows to avoid new requirements like Higher Priced Mortgage Loan requirements.
RESPA – Lucy Griffin (Consultant) taught this course and had the following notable comments:
- HUD doesn’t have any legal authority to enforce RESPA violations. Regulators do, however.
- Banking Regulatory Agencies (FRB, FDIC, etc.) have a job of keeping banks open. HUD doesn’t. HUD wants to enforce rules to restrict unfair settlement costs. Their focus is on the consumer, not the lender. Therefore, we get ambiguous answers and a lack of guidance. HUD doesn’t seem to care.
- What is “Settlement”? It’s not the “magic” moment when everyone signs. It is the “process of executing legally binding documents” [see 3500.2(b)]. Therefore, it includes all of the work from application to closing.
- Lucy indicated you can ask for ID, place of employment, etc. to establish the person is who they say they are (CIP, FACT Act ID Theft). Not so you can issue the Good Faith Estimate, but to stop fraud. We agree.