Real Estate Settlement Procedures Act (RESPA)

CFPB Rescinds Compliance Bulletin on Marketing Services Arrangements and Issues FAQs on RESPA Section 8

October 8, 2020 By Nanci Weissgold, Anoush Garakani

A&B ABstract:

On October 7, 2020, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) rescinded Compliance Bulletin 2015-05, RESPA Compliance and Marketing Services Agreements (“Bulletin 2015-05”). In addition, the Bureau published Frequently Asked Questions (“RESPA FAQs”) on the Real Estate Settlement Procedures Act (“RESPA”) Section 8 topics in an effort to “provide clearer rules of the road and to promote a culture of compliance.”

Background on Bulletin 2015-05

The Bureau issued the Bulletin 2015-05 on October 8, 2015, under then-Director Richard Cordray, in an effort to remind participants in the mortgage industry of the prohibition on kickbacks and referral fees under RESPA and to describe “the substantial risks posed by entering into marketing services agreements” (“MSAs”). At the time, the Bureau characterized Bulletin 2015-05 as a nonbinding general statement of policy that merely articulated considerations relevant to the Bureau’s exercise of its supervisory and enforcement authority. Consequently, Bulletin 2015-05 was not issued pursuant to the notice and comment rulemaking requirements under the Administrative Procedures Act (5 U.S.C. § 553(b)).

Through Bulletin 2015-05, however, the Bureau presented an ostensibly novel interpretation of RESPA Section 8 to caution against MSAs altogether.

For example, RESPA Section 8(c)(2) expressly provides that “[n]othing in this section shall be construed as prohibiting… the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.” Similarly, Regulation X, 12 CFR § 1024.14(g)(iv), provides that “Section 8 of RESPA permits . . . payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.” Moreover, HUD’s long-standing interpretation of Section 8(c)(2) provided that Section 8(c)(2) only allows “the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or services actually performed,” i.e., permitting only that compensation which is reasonably related to the goods or facilities provided or services performed” (HUD RESPA Statement of Policy 2001-1).

In contrast, the Bureau’s prior interpretive position was that the opportunity to enter into an MSA by contract was itself a thing of value, regardless of whether the resulting agreement provided for payment for bona fide services at fair market value. The Bureau relied on this interpretive theory in issuing Bulletin 2015-05, which effectively took the position that if a person is in a position to receive referrals from a third party, they could not otherwise do business with that party because the CFPB would attribute compensation paid to that party to be for referrals, even if the person paid fair market value for services actually rendered, because, the CFPB believed MSAs “are designed to evade” RESPA, such that engaging in MSAs poses a “substantial legal and regulatory risk of violating RESPA,” even where the MSA is “technically compliant with the provisions of RESPA.”

A three-judge panel of the D.C. Circuit Court, in PHH Corp. v. CFPB, rejected the Bureau’s theory, as it unanimously overturned then-Director Cordray’s interpretation of RESPA, holding that tying arrangements are ubiquitous and that Section 8 permits captive reinsurance arrangements so long as mortgage insurers pay no more than reasonable market value for reinsurance. The Court noted that the “CFPB’s interpretation of Regulation X is a facially nonsensical reading of Regulation X,” since Regulation X makes clear that, if a provider “makes a payment at reasonable market value for services actually provided, that payment is not a payment for a referral.” (emphasis in original).

The inconsistency between the Bureau’s apparent misinterpretation of Section 8, as espoused in Bulletin 2015-05, and longstanding HUD interpretations (and the D.C. Circuit’s decision in PHH Corp.), led to calls for rescission of Bulletin 2015-05.

Bureau’s Rescission of Bulletin 2015-05

In rescinding Bulletin 2015-05, the Bureau acknowledged that the bulletin “does not provide the regulatory clarity needed on how to comply with RESPA and Regulation X.” Consistent with the rescission, Bulletin 2015-05 no longer has any force or effect. The Bureau noted that its rescission of Bulletin 2015-05 does not mean that MSAs are per se or presumptively legal. Rather, whether a particular MSA violates RESPA Section 8 will depend on specific facts and circumstances, including the details of how the MSA is structured and implemented. The Bureau made clear that MSAs remain subject to scrutiny, and that the CFPB remains committed to vigorous enforcement of RESPA Section 8.

RESPA FAQS

Contemporaneous with its rescission of Bulletin 2015-05, the Bureau issued FAQs pertaining to compliance with RESPA Section 8. The FAQs provide an overview of the provisions of RESPA Section 8 and respective Regulation X sections, and address the application of certain provisions to common scenarios described in Bureau inquiries involving gifts and promotional activities, and MSAs.

With respect to MSAs, the FAQs provide guidance on the following questions:

What are MSAs?
What is the distinction between referrals and marketing services for purposes of analyzing MSAs under RESPA Section 8?
How do the provisions of RESPA Section 8 apply when analyzing whether an MSA is lawful?
What are some examples of MSAs prohibited by RESPA Section 8?

Notably, the FAQs provides that under RESPA Section 8(c)(2), if the MSA or conduct under the MSA reflects an agreement for the payment for bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed, the MSA or the conduct is not prohibited. Thus, RESPA Section 8 does not prohibit payments under MSAs if the purported marketing services are actually provided, and if the payments are reasonably related to the market value of the provided services only.

Takeaway

While rescission of Bulletin 2015-05 is likely to be welcomed by the industry and help to restore confidence in the viability of MSAs under the current legal landscape, it remains to be seen how the Bureau’s priorities on RESPA Section 8 enforcement will change. Companies should consider reviewing existing MSAs to ensure compliance with the Bureau’s new guidance. Moreover, it should be noted that the Bureau specifically designated its new FAQs as “compliance aids” as opposed to official interpretations. Under the Bureau’s policy statement on Compliance Aids issued earlier this year, the Bureau states only that it “does not intend to sanction, or ask a court to sanction, entities that reasonably rely on Compliance Aids.” An interpretive rule issued by the Bureau, to the contrary, affords market participants a clear legal safe harbor from liability under RESPA.

Massachusetts Enacts Emergency COVID-19 Measure Addressing Residential Mortgage Foreclosure Moratoria, Forbearance, Evictions, Reverse Mortgage Counseling

April 24, 2020 By Nanci Weissgold

A&B Abstract:

On April 20, 2020, Massachusetts Governor, Charlie Baker, signed into law HB 4647 (2020 Mass. Acts 65), an emergency measure, effective immediately, providing for mortgage forbearances and a moratorium on evictions and foreclosures during the COVID-19 emergency. This measure also waives the in-person counseling requirement for reverse mortgage loans. This law follows guidance issued by the Division of Banks on March 25, 2020, setting forth the Division’s expectations of mortgage servicers to provide relief to borrowers adversely impacted by the COVID-19 pandemic.

Forbearance

The emergency measure requires a creditor or mortgagee to grant a forbearance on a mortgage loan for residential property if the borrower submits a request to the servicer affirming that the borrower has experienced a COVID-19 hardship, subject to the following terms:

the forbearance shall not be for more than 180 days;
no fees, penalties or interest beyond the amounts scheduled and calculated as if the borrower made all contractual payments on time and in full under the mortgage contract shall accrue during the forbearance;
a payment subject to the forbearance shall be added to the end of the term of the loan, unless otherwise agreed to by the borrower and mortgagee;
a borrower and mortgagee are not prohibited from entering into an alternative payment agreement for the mortgage payments subject to forbearance;
the mortgagee must not furnish negative mortgage payment information to a consumer reporting agency related to forborne mortgage payments; and
a creditor or mortgagee is not required to grant this forbearance if the borrower’s request is made after the expiration of this provision of the emergency measure (the sooner of 120 days from its effective date or 45 days the Governor’s COVID-19 emergency declaration has been lifted).

For purposes of this section, “residential property” includes real property located in the commonwealth, on which there is a dwelling house with accommodations for 4 or fewer separate households that is the borrower’s principal residence; excluding investment property, property taken, in whole or in part, as collateral for a commercial loan, and property subject to condemnation or receivership.

This forbearance provision is similar to a federal Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) forbearance, with some notably differences. First, this provision is not limited to federally backed mortgage loans. Second, the forborne payments are to be tacked on to the end of the mortgage term unless otherwise agreed to by the parties. Last, the terms differ in two respects. First, unlike the CARES Act, Massachusetts does not require an additional 180 extension of the forbearance. Second, the requirement for a servicer to offer a forbearance will remain in effect until the Governor’s COVID-19 emergency declaration is lifted, which at this point is unknown.

Foreclosure

For purposes of foreclosure of “residential property,” as that term is defined above, the emergency measure imposes a foreclosure moratorium, meaning a mortgagee (or a person acting in the name of a mortgagee) is prohibited from:

causing a notice of foreclosure sale to be published;
exercising a power of sale;
initiating a judicial or nonjudicial foreclosure process; or
filing a complaint to determine the military status of the borrower under the federal Servicemembers Civil Relief Act.

Vacant or abandoned properties are expressly excluded from this foreclosure moratorium. The foreclosure moratorium became effective immediately and expires after the sooner of 120 days or 45 days after the COVID-19 emergency declaration has been lifted. This moratorium appears broader than the moratorium imposed under the CARES Act in that it likely will extend beyond the CARES Act’s moratorium of May 18, 2020 and that it is not limited to “federally backed” loans. Note, most residential mortgage foreclosures are nonjudicial in Massachusetts and begin by sending a delinquent borrower a notice of default and right to cure as required by Mass. General Laws chapter 244, Section 35A. It is likely that such notice could be viewed as initiating a foreclosure, and thus not allowed during this foreclosure moratorium.

Evictions

With respect to evictions, the emergency measure provides as follows:

notwithstanding any law, rule, regulation or order to the contrary, a landlord or owner of a property shall not, for purposes of a “non-essential eviction” for a residential dwelling unit, terminate a tenancy or send any notice requesting or demanding that a tenant vacate the premises;
a landlord shall not impose a late fee for non-payment of rent for a residential dwelling unit;
a landlord shall not furnish rental payment data to a consumer reporting agency related to the non-payment of rent if, not later than 30 days after the missed rent payment, the tenant provides notice and documentation to the landlord that the non-payment of rent was due to a COVID-19 financial impact;
subject to certain conditions, a lessor who received rent in advance for the last month of tenancy pursuant to Mass. Gen. Law chapter 186, § 15B, may access and utilize the funds received in advance for certain enumerated uses; and
nothing in the emergency measure shall be construed to relieve a tenant from the obligation to pay rent or restrict a landlord’s ability to recover rent.

Related to residential dwelling units, a “non-essential eviction” is an eviction: (i) for non-payment of rent, (ii) resulting from a foreclosure, (iii) for no fault or cause, or (iv) for cause that does not involve allegations of: (a) criminal activity that may impact the health and safety of other residents, health care workers, emergency personnel, persons lawfully on the property or general public, or (b) lease violations that may impact the health and safety of other residents, health care workers, emergency personal, persons lawfully on the subject property or the general public. The Massachusetts executive office of housing and economic development has authority to issue emergency regulations to implement this section and develop forms for notice and documentation to a landlord that the non-payment of rent was due to COVID. Also note that the measure contains similar restrictions for landlords of small business premises and limits the ability of a court, sheriff or others to process or enforce non-essential evictions.

Temporary waiver of In-Person Counseling for Reverse Mortgage

Massachusetts is temporarily waiving the in-person counseling requirement set forth in Mass. Gen. Law chapter 167E, § 7A and chapter 171, § 65C1/2 for reverse mortgage loans during the state-declared COVID-19 emergency and until such emergency has been lifted. In lieu of in-person counseling, the requirement is satisfied by a written certification from a counselor with a third-party organization indicating that a borrower has received counseling via a synchronous, real-time videoconferencing or telephone counseling, provided that the counselor is approved by the executive office of elder affairs for purposes of such counseling. The measure does not specifically address the reverse mortgage counseling regulation set forth in 209 CMR 55.04. However, given that the regulation is provided under the statutory authority cited above, there is reason to believe that it should also be covered by this temporary waiver.

Takeaway

In addition to ensuring compliance with the federal CARES Act, mortgage servicers need to monitor newly enacted state measures responding to the COVID-19 pandemic and develop policies and procedures to ensure compliance.

CFPB Issues Winter 2020 Supervisory Highlights

February 25, 2020 By Morey Barnes Yost, Nanci Weissgold

A&B ABstract:

The Winter 2020 Supervisory Highlights identifies the CFPB’s findings from recent examinations, noting violations that resulted in compliance management system weakness.

CFPB Issues New Edition of Supervisory Highlights:

The Winter 2020 edition of the Consumer Financial Protection Bureau (“CFPB”) Supervisory Highlights details recent examination findings relating to debt collection, mortgage servicing, and student loan servicing, among other topics.

Debt Collection

With respect to debt collection, the CFPB focused on:

Failure to disclose in communications subsequent to the initial written communication that the communication is from a debt collector, in violation of Section 807(11) of the FDCPA; and
Failure to send a written validation notice within five days after the initial communication with the consumer, in violation of Section 809(a) of the FDCPA.

As a result of these deficiencies, the CFPB reported that servicers revised their policies and procedures, and monitoring and training programs.

Mortgage Servicing and Loss Mitigation

With a focus on compliance with the loss mitigation provisions of Regulation X, the CFPB’s first finding was that servicers failed to notify borrowers in writing of the servicer’s determination that the loss mitigation application is complete or incomplete within five business days of receiving a loss mitigation application. Second, the CFPB found that servicers failed to provide borrowers with a written notice of available loss mitigation options within 30 days of receiving the complete loss mitigation application.

Finally, the CFPB cited servicers’ failure to comply with Regulation X’s requirements, including providing a written notice to borrowers, for offering a short term loss mitigation option to a borrower based on an evaluation of an incomplete loss mitigation application. In this instance, the servicers granted short-term forbearance if the borrower in a disaster area experienced home damage or loss of income from the disaster. The borrowers received such accommodation after speaking with the servicer over the phone and responding to certain questions.

In response to that finding, the CFPB reminded servicers that an application for loss mitigation can be oral or written. Because the servicer’s efforts to respond to a natural disaster were the partial cause of violations, the CFPB only required the servicer to develop plans to ensure staffing capacity in response to any future disaster-related increases in loss mitigation applications. The CFPB also reminded servicers of its September 2018 Statement on Supervisory Practices Regarding Financial Institutions and Consumers Affected by a Major Disaster or Emergency, which provides flexibility for servicers to assist borrowers during a major disaster or emergency but does not lift the Regulation X requirements.

Payday Lending

With a focus on Regulation Z, Regulation B, and unfair acts or practices, the CFPB found that lenders engaged in unfair acts or practices when they: (1) processed borrowers’ payments, but did not apply such payments to borrowers’ loan balances in lenders’ systems; (2) lacked systems to detect unapplied payments; and (3) incorrectly treated borrowers accounts as delinquent. The CFPB found that the injury was not reasonable avoidable by the borrowers because lenders conveyed incorrect information to them about their accounts and failed to follow up on borrower’s complaints. Furthermore, because the cost to lenders to implement appropriate accounting controls to reconcile payments would have been reasonable, countervailing benefits did not outweigh the injury.

Additionally, the CFPB found that a payday lender engaged in unfair acts or practices by assessing consumers a fee as a condition of paying or settling a delinquent loan when the underlying loan contract required the lender to pay that particular fee. The lender mischaracterized the fee as a court cost (which would have been paid by the borrower) or did not disclose it. According to the CFPB, a lack of monitoring and/or auditing of the lender’s collection practices caused the error. In response to this finding, the lender refunded the fee to affected consumers and made changes to its compliance management system.

Other Payday Lending Observations

Further, the CFPB found that payday lenders:

Violated Regulation Z by relying on employees to manually calculate APRs when the lender’s loan origination system was unavailable. The CFPB found that errors made in calculating the term of the loan, which resulted in misstated APRs, were caused by weaknesses in employee training.
Violated Regulation Z by charging a loan renewal fee to consumers who were refinancing delinquent loans and omitted such fee from the finance charge, resulting in inaccurate disclosure of the APR and finance charge. The CFPB found that a lack of detailed policies and procedures and training contributed to the Regulation Z violations. In response, the lender refunded the fee to the consumer explaining the reason for the refund and strengthened its policy and procedures and training program.
Violated record retention requirements of Regulation Z by failing to maintain evidence of compliance for two years. The CFPB found that the violation resulted in part from a lack of training and detailed policies and procedures on record retention.
Violated Regulation B by providing consumers with an adverse action notice that incorrectly stated the principal reason for taking an adverse action as a result of a coding error. In response, the lenders sent corrected adverse action notices to consumers and made changes to the system that generate the notices.

Student Loan Servicing

With a focus on unfair practices, the CFPB found that servicers engaged in an unfair act or practice caused by a data mapping errors during the transfer of private loans between servicing systems that resulted in inaccurate calculations of monthly payment amounts. As a result, borrowers may have made payments based on the inaccurate amounts, incurred late fees on such inaccurate amounts, or had inaccurate amounts debited from their account. In response to the examination findings, the CFPB required servicers to remediate affected consumers and implement new processes to eliminate data mapping errors.

Takeaways

Highlighting debt collection, mortgage servicing, payday lending and student loan servicing, the Supervisory Observations in the Winter 2020 Supervisory Highlights showcase the importance of adequate policies and procedures, training, monitoring and auditing and system controls to avoid consumer harm and violation of consumer financial laws. Although they cut across multiple industries, the CFPB’s findings highlight common themes – such as entities’ liability for violations that result from system errors or the assessment of unauthorized fees, and the need for careful monitoring in connection with servicing transfers.

CFPB Issues Its Fall 2019 Rulemaking Agenda

November 27, 2019 By Nanci Weissgold, Anoush Garakani

A&B Abstract:

On November 20, 2019, the Consumer Financial Protection Bureau (the “Bureau” or “CFPB”) published its Fall 2019 Rulemaking Agenda (the “Rulemaking Agenda”) as part of the Fall 2019 Unified Agenda of Federal Regulatory and Deregulatory Actions. The Rulemaking Agenda sets forth the matters that the Bureau reasonably anticipates having under consideration during the period from October 1, 2019 to September 30, 2020. The Rulemaking Agenda is the first Unified Agenda prepared by the CFPB since Director Kraninger embarked on her “listening tour” shortly after taking office in December 2018. Below we highlight some of the key agenda items discussed in the Rulemaking Agenda.

Implementing Statutory Directives

In the Rulemaking Agenda, the Bureau indicates that it is engaged in a number of rulemakings to implement directives mandated in the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), the Dodd-Frank Act and other statutes. For example:

Truth in Lending Act

In March 2019, the Bureau published an Advanced Notice of Proposed Rulemaking (“ANPR”) seeking public comment relating to the implementation of section 307 of the EGRRCPA, which amends the Truth in Lending Act (“TILA”) to mandate that the Bureau prescribe certain regulations relating to “Property Assessed Clean Energy” (“PACE”) financing. The Bureau indicated that it is reviewing the comments it has received in response to the ANPR as it considers next steps to facilitate the development of a Notice of Proposed Rulemaking (“NPRM”).

TRID Rule Guidance

The Bureau has also been engaged in several other activities to support its rulemaking to implement the EGRRCPA. For example, the Bureau noted that it has (i) updated its small entity compliance guides and other compliance aids to reflect the EGRRCPA’s statutory changes; and (ii) issued written guidance as encouraged by section 109 of the EGRRCPA, which provides that the Bureau “should endeavor to provide clearer, authoritative guidance” on the CFPB’s TILA/RESPA Integrated Disclosure rule.

Implementation of Section 1071 of Dodd-Frank

Additionally, the Bureau is undertaking certain activities to facilitate its mandate to prescribe rules implementing Section 1071 of the Dodd-Frank Act, which amended the Equal Credit Opportunity Act to require financial institutions to collect, report, and make public certain information concerning credit applications made by women-owned, minority-owned, and small businesses. For example, on November 6, 2019, the Bureau hosted a symposium on small business data collection in order to facilitate a discussion with outside experts on the issues implicated by creating such a data collection and reporting regime.

We have previously issued an advisory in which we discuss the key mortgage servicing takeaways from the EGRRCPA.

Continuation of the CFPB’s Spring 2019 Rulemaking Agenda

The Rulemaking Agenda notes that the Bureau will continue with certain other rulemakings that were described in its Spring 2019 Agenda that are intended to “articulate clear rules of the road for regulated entities that promote competition, increase transparency, and preserve fair markets for financial products and services.” Such rulemakings include:

HMDA and Regulation C

In May 2019, the Bureau issued a NPRM to (i) reconsider the thresholds for reporting data about closed-end mortgage loans and open-end lines of credit under the Bureau’s 2015 Home Mortgage Disclosure Act (“HMDA”) Rule and to incorporate into Regulation C an interpretive and procedural rule that the Bureau issued in August 2018 in order to implement certain partial HMDA exemptions created by the EGRRCPA. In summer 2020, the Bureau is expecting to issue an NPRM to follow-up on an ANPR issued in May 2019 related to data points and coverage of certain business- or commercial-purpose loans. The Bureau also anticipates issuing a NPRM addressing the public disclosure of HMDA data in light of consumer privacy interests to allow the Bureau to concurrently consider the collection and reporting of data points and the public disclosure of those data points.

Proposed Regulation F

In May 2019, the Bureau issued a NPRM which would, for the first time, prescribe substantive rules under Regulation F, which implements the Fair Debt Collection Practices Act, to govern the activities of debt collectors (the “Proposed Rule”). The Proposed Rule would address several issues related to debt collection, such as (i) addressing communications in connection with debt collection; (ii) interpreting and applying prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection; and (iii) clarifying requirements for certain consumer-facing debt collection disclosures. The Bureau noted that it is also engaged in testing of consumer disclosures relating to time time-barred debt disclosure issues that were not part of the Proposed Rule. The results of the CFPB’s testing will inform the Bureau’s assessment of whether to issue a supplemental NPRM seeking comments on any disclosure proposals related to the collection of time-barred debt.

We previously published a five-part blog series in which we discussed the provisions of the Proposed Rule that are under consideration. We will continue to monitor and report on any developments related to the Proposed Rule.

Payday, Vehicle Title, and Certain High-Cost Installment Loans (the “Payday Rule”)

The Bureau is expecting to take final action in April 2020 on the NPRM issued in February 2019 related to the reconsideration of the mandatory underwriting requirements of the 2017 Payday Rule. That said, we note that the U.S. District Court for the Western District of Texas has stayed the Payday Rule’s August 19, 2019 compliance date. The parties before the court have a status hearing on December 6, 2019 which could affect the stay and the effective date of the Payday Rule.

Remittance Rule

In addition, the Rulemaking Agenda notes that the Bureau is planning to issue a proposal this year to amend the CFPB’s Remittance Rule to address the effects of the expiration in July 2020 of the Rule’s temporary exception allowing institutions to estimate fees and exchange rates in certain circumstances.

New Rulemakings and Review of Existing Regulations

Expiration of the “GSE Patch”

In January 2019, the Bureau completed an assessment of certain rules that require mortgage lenders to make a reasonable and good faith determination that consumers have a reasonable ability to repay certain mortgage loans and that define certain “qualified mortgages” that a lender may presume comply with the statutory ability-to-repay requirement. The “GSE Patch” is set to expire in January 2021, meaning that loans eligible to be purchased or guaranteed by GSEs that are originated after that date would not be eligible for qualified mortgage status under its criteria. In July 2019, the Bureau issued an ANPR to amend Regulation Z, regarding the scheduled expiration of the GSE Patch, and is currently reviewing the comments it received since the comment period closed on September 2019.

As noted in a previous blog post, the CFPB announced in its ANPR, that the Bureau does not intend to extend the GSE patch permanently. It will be interesting to see whether the Bureau will allow the patch to expire in January 2021 as planned of if the Bureau will use this as an opportunity to possibly extend the expiration date.

Addition of New Regulatory Agenda Items

In response to feedback received in response to the Bureau’s 2018 Call for Evidence and other outreach efforts, the Bureau is adding two new items to its long-term regulatory agenda to address concerns related to (i) loan originator compensation; and (ii) the use of electronic channels of communication in the origination and servicing of credit card accounts.

Review of Existing Regulations

The Rulemaking Agenda also highlights the Bureau’s active review of existing regulations. For example, the CFPB will be assessing its so-called TRID Rule pursuant to Section 1022(d) of the Dodd-Frank Act, which requires the CFPB to publish a report assessing the effectiveness of each “significant rule or order” within five years of it taking effect. The Bureau must issue a report with the results of its assessment by October 2020.

The Rulemaking Agenda further notes that, in 2020, the Bureau expects to conduct a 610 RFA review of the Regulation Z rules that implemented the Credit Card Accountability Responsibility and Disclosure Act of 2009. Section 610 of the RFA requires federal agencies to review each rule that has or will have a significant economic impact on a substantial number of small entities within 10 years of publication of the final rule.

Takeaway

The Bureau’s Rulemaking Agenda gives industry an advanced look at what to expect from the CFPB in the coming months. We expect the Bureau to be active in working through their agenda and will provide further updates as they become available.

* We would like to thank Associate, David McGee, for his contributions to this blog post.

Appraisal Reform Act of 2019 Would Impact TRID

July 14, 2019 By Nanci Weissgold

A&B Abstract:

If enacted, the recently introduced Appraisal Reform Act of 2019 would amend RESPA to require the disclosure of the appraisal management fee separate from the appraisal fee on the loan estimate (LE) and closing disclosure (CD). This could impose an additional burden on lenders and appraisal management companies (AMCs).

Background

The LE provides disclosures intended to be helpful to consumers in understanding the mortgage loan transaction. By contrast, the CD must provide the actual costs of the transaction. As amended by the Dodd Frank Act, Section 4(c) of RESPA permits the optional disclosure of the appraisal management fee separate from the appraisal fee. However, it does not require separate itemization on the LE and CD. HR 3619, the Appraisal Reform Act of 2019, would make such disclosure mandatory. The measure, which Rep. William Lacy Clay (MO) is sponsoring, was introduced in the House on July 5, 2019 and referred to the House Financial Services Committee on the same date.

Impact on Current Law

AMCs facilitate more than two-thirds of all appraisals, according to estimates. For closed-end forward mortgage transactions, TRID requires a creditor to provide the consumer with a good faith estimate of the credit costs and transaction terms no later than the third business day after receiving the application. For certain unaffiliated charges for which the consumer is not allowed to shop (such as appraisal fees), the creditor must not charge the consumer more than the amount disclosed on the LE unless there is a valid changed circumstance. These are “zero tolerance” fees, meaning that the creditor must reimburse the consumer for the amount by which the actual charge exceeds the amount disclosed on the LE.

For purposes of providing a revised estimate and resetting the tolerance, a “changed circumstance” is:

an extraordinary event beyond the control of any interested party or other unexpected event specific to the consumer or transaction;
information specific to the consumer or transaction that the creditor relied upon when providing the disclosure and that was inaccurate or changed after the disclosures were provided; or
new information specific to the consumer or transaction that the creditor did not rely when providing the disclosure.

Absent a valid changed circumstance, a creditor cannot adjust the amount of the appraisal management fee three days after the application is provided even if it determines that additional work is required.

Takeaway

HR 3919 is worth watching as it would in effect lock in the appraisal management fee at time of application.