friday november 22, 2013 - mibor · implementation date january 10, 2014. high cost: issued january...

Friday November 22, 2013

Welcome

Due to Terri Buhner by December 3rd, 2013 terribuhner@mibor.com

Call for Action: Flood Insurance Issues Could Sink Your Sales

Homeowner Flood Insurance Affordability Act

Materials for today!

Meeting presentation will be on the MIBOR website today.

A podcast will be available on the

MIBOR website within a week. www.MIBORPodcast.com

.REALTOR

Domain Registration Open

Updates

“The goal here is to make realtor.com not only the most accurate source of information, but also the most comprehensive. Whether it’s for sale or for rent, to give an entire view of the market” Move Chief Strategy Officer Errol Samuelson

Added Rental / Lease Inventory

Catch buyers early in home ownership cycle

Only verified sources

New Construction Inventory

Needed for a comprehensive website

Something no other major website has

A u g u s t 1 9 t h : - 5 0 , 0 0 0 + p l a n s - 6 , 5 0 0 +

c o m m u n i t i e s

R e a l t o r. c o m n o w # 1 i n “ f o r s a l e ” p r o p e r t i e s

Non-REALTORS® Listings

Some States required non REALTORS® to participate.

A Broker owned listing service may not require REALTOR® membership.

Policy allows listing services to send all broker’s listings regardless of membership.

TV and radio ad campaign promotes realtor.com “Every market’s different, call a REALTOR® today

and visit realtor.com”

Unique users are up 22 percent year over year in the third quarter of 2013, compared with an 18 percent year-over-year increase in the second quarter and a 10 percent increase in the first quarter

Listing Syndication

• Publishing of listings by the listing broker on third party internet websites such as Zillow or Trulia.

• REALTOR.com, MIBOR.com and the IDX policy were the original form of syndication.

How do Listings get Syndicated? • A syndication service provider:

• ListHub • Point2

• Sent by your IDX provider

• Through some other service provider • Your franchise • Virtual tour provider • Printed magazine such as Homes & Land

• Agents or brokers enters them directly

Listing Syndication

Advantages

• Increased exposure of the listing

• Lead generation via click through to your website

• Fulfills requirements of both buyers and sellers to find it wherever they are looking

Advantages

Listing Syndication

Concerns • The terms of use on many sites often contain

statements that may give up copyright protection such as:

“perpetual, non-exclusive, royalty-free licensee to use, retain, transmit, modify, copy, create derivative work of, and sell or distribute…”

• Ideally the terms of use would state that the broker’s listing content remains the intellectual property of the contributor.

Listing Syndication

Concerns

• Keeping data updated across multiple websites with accurate data

• Re-syndication, some sites send data to additional websites. For example, Zillow claims to be the “exclusive provider of For Sale data to Yahoo! Real Estate”

Listing Syndication

Publisher Listings Consumer Traffic

Total Property Views

Zillow 13,337 1,442,505

MIBOR Service Corp 20,629 713,070

Trulia 10,763 223,079

Homes.com 14,682 161,605

LandWatch 11,362 22,527

Keller Williams 1,588 6,766

Homes & Land 11,630 5,189

Lake Homes USA 11,407 4,618

Chase My New Home 10,526 4,501

Realty Store 11,415 3,901

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MIBOR.COM

REALTOR.COM

• Photos help to produce accurate appraisals • Within 14 days from entry date • 2 required photos to report a listing Sold • Primary must be of the exterior • Both may be of the exterior • Up to 24 may be entered • Vacant land properties excluded • Must have permission to use a photo

President of the Greater Indianapolis Chapter of IMBA

Executive Director Indiana Mortgage Bankers Association and Greater Indianapolis Chapter of IMBA

55 years old 128 current members; lenders, title

companies, PMI companies, law firms, appraisers, credit companies, industry education firms, not-for-profits, and, Realtors

Six chapters state-wide: GIMBA, Northeast, Northwest, Michiana, SCIMBA and Wabash

Approximately ½ of our members in the Indianapolis Metropolitan Area!

Loan Originator Compensation: Issued January 20, 2013

Implementation date January 1, 2014. ATR/QM Standards: Issued January 10, 2013

Implementation date January 10, 2014. High Cost: Issued January 10, 2013

Implementation date January 10, 2014. Mortgage Servicing: Issued January 17, 2013

Implementation date January 10, 2014. ECOA - Appraisal Disclosure: Issued January 18, 2013

Implementation date on January 18, 2014 Appraisals - Higher Priced Mortgages: Issued January 15, 2013

Implementation date January 18, 2014

CFPB Background Qualified Mortgage (Ability to Repay) Qualified Res. Mortgage (Risk Retention) Mortgage Servicing Standards High Cost Mortgages and Appraisals HUD/FHA/Other Current Federal Legislation Resources for Regulatory

Updates/Engagement

IMBA is not representing legal positions for or using this presentation to inform attendees how to address the regulations/issues discussed. Rather, this is an informational presentation to the attendees of certain aspects of the regulations presented and to promote thoughtful and constructive discussion.

Washington, D.C. impacting mortgage business in three ways:

Regulations: access to credit & consumer protections (1992 ‘GSE Act’)

Enforcement: loan level, systemic and the CFPB

Determining the role of government in housing going forward

Created through Dodd-Frank Act in 2010 (House Fin. Svcs. Cmte. estimate of 24M hours/year to comply with!)

Mission: Make markets work for consumers Conducts rule-making, supervision and

enforcement Restrict unfair, deceptive or abusive practices Take consumer complaints Monitor financial markets Enforce laws that outlaw discrimination and other

unfair treatment

Issued 1/10/13 and effective with applications as of 1/10/14 (804 pages)

Qualified Mortgage – ‘Safe Harbor’ and presumption of compliance with lower priced loans [LT 1.5% above Average Prime Offer Rate (4.41% 11/14/13)] and ‘Rebuttable Presumption’ if higher

Max. 43% DTI and fully documented (Nike!) No; balloon, interest only, or, GT 30 years

Max. lender fees of 3% (includes affiliated co’s, private MI above FHA’s 1.75%, and, lender payments to brokers) if $100,000 +, $3,000 if $60,000 - $99,999, and, 5% if $20,000 - $59,999

Seller paid charges currently included in 3% (MBA letter 7/13)

Seller financing excluded if LT 6/yr. Borrower qualified at max rate in 1st 5 years

Temporary provision (7 years) for loans that qualify for; FNMA, FHLMC, FHA, VA and Rural

FHFA limiting Fannie/Freddie purchases to QM loans (5/6/13)

Exempt; housing finance agencies (IHCDA) and not-for-profit creditors focused on low/mod. income hsg. (Habitat for Humanity)

HELOCs, bridge financing (LT 12 months), CP loans (LT 12 months), loans for vacant land and multi-family over 4 units exempt

Legal costs estimated by MBA for a non QM loan lawsuit are in excess of $70,000/loan, limiting loan options in future!

National Association of Federal Credit Unions – Survey indicating 44% of members stopping to originate non QM loans

MBA/AllRegs Credit Availability Index

HUD’s QM definition will take effect at the same time as and thereby replace the CFPB’s definition for FHA loans on January 10, 2014.

FHA will no longer insure loans that do not meet HUD’s QM definitions.

None of HUD’s proposed QM standards incorporate the restriction on the DTI ratio associated with underwriting under the ATR/QM Rule.

A QM must satisfy the ATR/QM Rule’s “points and fees” limitations.

• The loan’s points and fees must not exceed 3% of the loan amount for loans of $100,000 or more (with different thresholds applying to lower loan amounts).

FDIC, FHFA, Federal Reserve, HUD, OCC and SEC proposed August 28th (505 pages)

Requires lenders to retain 5% of the risk for securitized loans for non-QRM loans

FNMA, FHLMC, FHA, VA and Rural Housing loans exempt

Aligns with QM for risk retention purposes Regulators considering alternative proposal

with 30% down payment/equity requirement

Issued 7/9/12, Amended 1/10/13 and Effective 1/10/14 (295 pages)

APR 6.5% or more higher than APOR (4.41% 11/14/13)

Lender notification to borrower in advance with terms and fees identified

Borrowers must receive homeownership counseling

Banned features include; pre-payment penalties, and, late charges over 4%

Issued 1/18/13 and Effective 1/18/14 (311 pages and excludes QM loans)

FDIC, Federal Reserve, FHFA, NCUA and OCC Borrower must receive copy 3 days before

closing A 2nd appraisal required if home sold in within

180 days and SP 10% higher, or, if sold in LT 91 days and 20% higher (QM loans excluded)

2nd appraisal at no cost to borrower

Issued 1/17/13 and Effective 1/10/14 (753 pages)

Impacts all servicers with GT 5,000 loans Servicer must provide accurate payoff to

consumer in LT 8 business days after written request

Restricts ‘dual tracking’ of both modification and foreclosure

Servicer must respond to written notices of errors in 5 days and resolve in LT 46 days

Will increase costs associated with servicing Also: Single Point of Contact (SPOC) – $25B

national mortgage settlement with state AG’s early 2012 in 49 states with 5 largest servicers

FHA settlements approaching $1B

MMI fund current negative economic value of -$13.48B (heavy reliance on home prices)

4/1/13 loans with credit scores LT 620 manually underwritten

MIP raised multiple times recently and again including 2013

MIP will be for life of loan for many borrowers Recent ruling on ‘disparate impact’ (Effective

3/18/13 and focuses on results vs intent!)

H.R. 1077 Consumer Mortgage Choice Act S. 1217 Housing Finance Reform and Taxpayer

Protection Act of 2013 Protecting American Taxpayers and

Homeowners Act (PATH) S. 1376 FHA Solvency Act of 2013 Likelihood of any passing in short term small

due to other national issues!

FNMA/FHLMC buybacks estimated at $84B since 2007, impacting lenders financially as well as underwriting of current loans

U/W productivity/loan slowed dramatically New guideline allowing lender protection

after 36 payments on time LO Compensation and CFPB Enforcement –

Unforeseen costs and Castle & Cooke Mortgage

CFPB ‘Hot Buttons’: steering, fair lending, 3rd party providers, and, marketing/advertising

CFPB Complaint Database: ~58,000 mortgage related with 75% servicing-related and only 2% related to credit/underwriting

NAR Web site (http://www.realtor.org/) CFPB (http://www.consumerfinance.gov/) MBA (http://www.mbaa.org) IMBA (http://www.indianamba.org/) ILTA(https://netforum.avectra.com/eWeb/StartPag

e.aspx?Site=ILTA&WebCode=HomePage) Local lender/title business partners

Vice President/Director of Corporate Escrow Operations/Meridian Title Corporation

CFPB Loan and Closing Disclosures

July 2010

Congress passed the Dodd-Frank Wall Street

Reform and Consumer Protection Act.

Title X of the Act

▪ Creation of the Consumer Financial Protection

Bureau (CFPB)

▪ Transferred the authority to regulate RESPA from

HUD to the CFPB

▪ Mandated the integration of RESPA and TILA

disclosure forms

May 2011

The CFPB released its first prototype of the RESPA/TILA integrated mortgage disclosure.

The release was the 5th prototype formulated after meetings with consumers and the industry to determine its usefulness to both sides.

Prototypes were developed for the Loan Estimate form (to take place of the initial TIL and RESPA’s GFE) and Closing Disclosure (taking place of final TIL and HUD-1)

November 20, 2013

Loan Estimate given three business days after application

Closing Disclosure given three business days before closing

Required to be given to consumers for mortgage applications received on or after August 1, 2015

The CFPB’s proposed disclosures do not

apply to certain loan types.

Home Equity lines of credit

Reverse Mortgages

Mortgages secured by mobile homes or by

dwellings not attached to the property

Creditors that make five or fewer loans in one

year

Cash and Land Contract

The final rule applies to most closed-end consumer mortgage loans.

It does not apply to Home equity lines of credit Reverse mortgages Mortgage loans secured by a mobile home or

by a dwelling that is not attached to real property

A creditor who makes five or fewer mortgages in a year

CFPB’s definition of Application

Contains 6 pieces of information that the lender

can collect

▪ Consumer’s name

▪ Consumer’s income

▪ Property Address

▪ Estimate value of the property or sales price on a

purchase transaction

▪ Mortgage loan amount sought

▪ Social Security Number

3 pages long

Must be delivered to the borrower at least

seven days prior to the loan closing and at

least one day prior to the delivery of the

Closing Disclosure.

The Lender must attach a provider list of service which the borrower may need for the overall transaction (not just service providers for the loan

The CFPB– like the RESPA rules – places a

tolerance level on charges that increase at closing.

• Unlike the RESPA rules, the lender is NOT required to

provide a NEW Loan Estimate.

• Instead, the re-disclosure of any increases is provided in

the Closing Disclosure.

As with the RESPA rules, the cost of certain

items may not change from the time of the initial

disclosure

• However, the CFPB rules expand the charges that cannot

increase at closing: lender fees, transfer tax, lender-

affiliate fees, and lender selected provider charges.

Like the RESPA rules, some costs – including charges by borrower-selected providers from lender’s list and recording fees -- cannot, in the aggregate, increase by more than 10%

Other charges from provider not shown on the lender’s list can

go up at closing with no penalty to the lender

The accuracy of our fee quotes will be more important than ever!

Direct your lender customers to contact their title and escrow

provider to make sure they are getting accurate escrow or

closing fees, title premiums, endorsement fees transfer tax and

recording charges needed to complete the Loan Estimates

Unlike with the GFE, when the lender is completing the Loan Estimate, they must show all the charges in each category in alphabetical order.

If the owner’s premium is to be paid by borrower, the charge must

be shown as “(optional)” in the description.

Unlike the current RESPA rule, the owner’s policy is not required to

be shown as a borrower charge if the seller is paying the premium.

The instructions for completing the form

require the lender group the title related

charges together by using the word “Title”

before each charge and then alphabetizing the

list thereafter.

Loan policy premiums are to be quoted as full premiums without applicable discounts (such as simultaneous issue)

Just like the GFE, the consumer is

encouraged to shop the loan

program against other loan

programs.

The final rule and the Official Interpretations (on which creditors and other persons can rely) contain detailed instructions as to how each line on the Loan Estimate form should be completed

There are sample forms for different types of loan products

The Loan Estimate form also incorporates new disclosures required by Congress under the Dodd-Frank Act

Either a mortgage broker or creditor is required to provide the Loan Estimate form upon receipt of an application by a mortgage broker

If the mortgage broker provides the Loan Estimate, the creditor remains responsible for complying with the all requirements concerning provision of the form

Consistent with current law, the creditor generally cannot charge consumers any fees until after the consumers have been given the Loan Estimate form and the consumers have communicated their intent to proceed with the transaction

There is an exception that allows creditors to charge fees to obtain consumers’ credit reports

. Unless an exception applies, charges for the following services cannot increase:

▪ The creditor’s or mortgage broker’s charges for its own services

▪ Charges for services provided by an affiliate of the creditor or mortgage broker

▪ Charges for services for which the creditor or mortgage broker does not permit the consumer to shop

Charges for other services can increase, but generally not by more than 10%, unless an exception applies

• The consumer asks for a change

• The consumer chooses a service provider that was not identified by the creditor

• The information provided at application was inaccurate or becomes inaccurate

• The Loan Estimate expires.

When an exception applies, the creditor generally must provide an updated Loan Estimate form within three business days.

The rule allows lenders or brokers to provide consumers with written estimates before application if they choose to, as long as a pre-application estimate includes a clear disclaimer to prevent confusion with the official “Loan Estimate”

This disclaimer is also required for

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Page 1

Provides the loan terms

Page 2

Analyses loan fees and gives estimated Cash to

Close

Page 3

Additional information about the loan and the

information originally found on initial TIL.

Page 1 Loan Terms: Loan Amount, Interest Rate, Monthly P&I, Prepayment

Penalty or Balloon Payment

Projected Payments: P&I, Mortgage Insurance, Escrow Account

Cash to Close: Estimated Cash to Close

Page 2 Loan Costs: Origination Charges, Costs You Cannot Shop for & Costs You

Can Shop For

Other Costs: Taxes & Government Fees, Prepaids, Escrow Account, Other

Calculating Cash to Close

Page 3 Comparisons: In 5 Years, APR, TIP

Other Considerations: Appraisal, Assumption, HOI, Late Payment, Refinance, Servicing

Confirm Receipt

The final rule and the Official Interpretations (on which creditors and other persons can rely) contain detailed instructions as to how each line on the Closing Disclosure form should be completed

There are sample forms for different types of

loan products

The creditor must give the Closing Disclosure form to consumers so that they receive it at least three business days before the consumer closes on the loan.

• If the creditor makes certain significant changes between the time the Closing Disclosure form is given and the closing the consumer must be provided a new form and an additional three-business-day waiting period after receipt of the new form

▪ changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods)

▪ changes the loan product

▪ adds a prepayment penalty to the loan

Can be disclosed on a revised Closing Disclosure form provided to the consumer at or before closing, without delaying the closing

Will not cause closing delays for less significant

costs that may frequently change

The Consumer has the right to examine the Closing Disclosure on request on the day before closing even without substantial changes

Page 1

Provides details of transaction & loan terms

Page 2

Breaks up loan fees, gives cash to close & all additional costs including costs paid by seller

Page 3

Breakdown of cash to close and summary of buyer’s and seller’s transaction

Page 4

Variety of loan disclosures

Page 5

Traditional TIL disclosures, total interest percentage, contact information, signature lines

Page 1 Closing information: Closing Information, Transaction Information, Loan Information

Loan Terms: Loan Amount, Interest Rate, Monthly P&I, Prepayment Penalty or Balloon Payment

Projected Payments: P&I, Mortgage Insurance, Escrow Account

Cash to Close: Amount needed for Closing

Page 2 Loan Costs: Origination Charges, Costs You Cannot Shop for & Costs You Can Shop For

Other Costs: Taxes & Government Fees, Prepaids, Escrow Account, Other

Total Closing Costs: Calculating Borrower Paid Closing Costs

Page 3 Calculating Cash to Close: Table compares estimate to final costs

Summaries of Transactions: Summary of Borrower’s and Seller’s transactions, similar to page 1

of current HUD-1

Page 4 Loan Disclosures: Assumption, Demand Feature, Late Payment, Negative Amortization, Partial

Payment and Security Interest. Also additional gives additional Escrow Account information

Page 5 Traditional TIL: Finance Charge, APR & total interest percentage

Other Disclosures: Appraisal, Contract Details, Liability after Foreclosure, Refinance & Tax Deduction

Contact Information: Contact information for professional parties involved with transaction

Confirm Receipt: Signature lines for Borrower(s)

In proposal, the CFPB left open the

questions of who should prepare the closing

disclosure. The bureau has indicated it

plans to make the lender liable for accuracy.

The choices are:

The creditor provides the closing disclosure; or

The settlement agent provides the closing

disclosure but the creditor has liability.

The creditor is responsible for delivering the Closing Disclosure form to the consumer

Creditors may use settlement agents to

provide the Closing Disclosure, provided that the settlement agents comply with the final rule’s requirements for the Closing Disclosure

The current HUD-1 process

The lender prepares the TILA final disclosure and delivers it to the consumer 3 business days before closing.

Settlement agent prepares and delivers the HUD-1 to the consumer on or before closing.

The proposed 3 day rule

Requires the consumer to receive the Closing Disclosure 3 days prior to closing.

If changes are made, with some exception, another 3 day waiting period must be tacked on.

Closing Disclosure can be delivered in 3

ways

Hand Delivery – you know the consumer

received the form the same day you delivered it

Mail – if no receipt of when consumer received

the disclosure, a presumption exists that

consumer received it 3 days after it was mailed

Email – if no evidence exists that the consumer

received the email, the same presumption is

made as if you mailed the disclosure, 3 business

days

Seller-buyer negotiation Goes into effect only after buyer has received the disclosure

When buyer has received disclosure and buyer & seller agree to change the transaction in a way that affects the cost, a new 3 day waiting period does not have to begin

Minor cost increase If the amount increased is $100, no new 3 day waiting period

This exception does not apply to 0 tolerance fees Post-closing change to government fees

If the disclosure becomes inaccurate because of changes in government fees after closing, the creditor must deliver a revised disclosure within 3 business days but does not have to re-close the loan

Correction of non-numerical clerical errors Tolerance refunds

If there is a tolerance violation, the refund can be handled as it is now - at or within 30 days of closing.

HUD bundled the title and closing costs together CFPB unbundles the charges so they will be listed separately HUD utilized various series to organize information

The 700 series for Real Estate Broker fees

The 1100 series for title charges CFPB proposed rule puts an end to that

In Closing Disclosure the CFPB removed the series numbers and inserted lettered sections

The Closing Disclosure begins with Section A on page 2 and ends with Section N on page 3.

When itemizing fees, the CFPB wants them to be in alphabetical order Although the fees will be in alphabetical order; CFPB wants all title

fees to be preceded by the word “title” so all the fees will be grouped together.

Page 1

Summary of Transaction

▪ Column 1 ▪ Due To Seller At Closing

▪ Adjustments For Items Paid By Seller In Advance

▪ Due From Seller At Closing

▪ Adjustments To Items Unpaid By Seller

▪ Column 2 ▪ Contact Information

Real Estate Broker (B)

Real Estate Broker (S)

Settlement Agent

Page 2

Closing Cost Details – Seller Paid

▪ Loan Costs

▪ Origination Charges

▪ Services Borrower Did Not Shop For

▪ Services Borrower Did Shop For

▪ Other Costs

▪ Taxes And Other Government Fees

▪ Prepaids

▪ Initial Escrow Payment At Closing

▪ Other

The proposed regulations will cost businesses money, costs which some small businesses won’t be able to handle

Updating technology to drop the current series numbers in favor of the lettered categories is a cost settlement companies will absorb

Employee training will be another cost associated with the proposed changes

In addition to these costs is the cost small businesses spent 3 years ago when the new HUD-1 went into effect

The Closing Disclosure is substantially

different from the HUD-1

It will take agents time to get used to the changes

It is also a much longer form so it will take

agents longer to go over the form with

consumers

The closings will take longer to complete which

will result in longer closings

“Top 10 in 10 Minutes”

Top 10 in 10 Minutes

Materials for today!

Meeting presentation will be on the MIBOR website today.

A podcast will be available on the

MIBOR website within a week. www.MIBORPodcast.com