Financial Services Bulletin: Agencies Issue New Mortgage Rules

by Perkins Coie
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Agencies Issue Final Rule on Appraisals for Higher-Priced Mortgages

On Friday, January 18, 2013, the Board of Governors of the Federal Reserve System (the “Fed”), the Consumer Financial Protection Bureau (the "CFPB"), the Federal Deposit Insurance Corporation (the “FDIC”), the Federal Housing Finance Agency (the “FHFA”), the National Credit Union Administration (the “NCUA”), and the Office of the Comptroller of the Currency (the “OCC”) issued a final rule that establishes new appraisal requirements for "higher-priced mortgage loans."  The rule amends Regulation Z implementing the changes to the Truth in Lending Act made by Section 1471 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act").  Under Section 1471, mortgage loans are considered higher-priced if they are secured by a consumer's home and have interest rates above certain thresholds.

For higher-priced mortgage loans, the rule requires creditors to use a licensed or certified appraiser who prepares a written appraisal report based on a physical visit of the interior of the property.  The rule also requires creditors to disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report.

If the seller acquired the property for a lower price during the prior six months and the price difference exceeds certain thresholds, creditors will have to obtain a second appraisal at no cost to the consumer.  This requirement for higher-priced home-purchase mortgage loans is intended to address fraudulent property flipping by seeking to ensure that the value of the property legitimately increased.

The rule exempts several types of loans, such as qualified mortgages, temporary bridge loans and construction loans, loans for new manufactured homes, and loans for mobile homes, trailers and boats that are dwellings.  The rule also has exemptions from the second appraisal requirement to facilitate loans in rural areas and other transactions.

Read the Fed press release

Read the CFPB press release

Read the FDIC press release

Read the FHFA press release

Read the NCUA press release

Read the OCC press release

CFPB Issue Mortgages Servicing Final Rules

On Thursday, January 17, 2013, the CFPB issued a final rule amending Regulation X, which implements the Real Estate Settlement Procedures Act of 1974, and including a commentary that sets forth an official interpretation to the regulation.  The CFPB also amended Regulation Z, which implements the Truth in Lending Act, and the official interpretation to the regulation, which interprets the requirements of Regulation Z.  These final rules implement provisions of the Dodd-Frank Act regarding mortgage loan servicing.

The rule amending Regulation X implements provisions of the Dodd-Frank Act that address mortgage loan servicers’ obligations to correct errors asserted by borrowers; to provide certain information requested by such borrowers; and to provide protections to such borrowers in connection with force-placed insurance.  Additionally, the 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.  The rule also modifies and streamlines certain existing servicing-related provisions of Regulation X.

The rule amending Regulation Z implements provisions of the Dodd-Frank that address 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 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.

Read the CFPB press release

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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