Compliance Calendar for April 2018

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New York Modifies Provisions Regarding Reverse Mortgages

Effective: April 18, 2018
Industry: Mortgage Servicing
Source: New York  
Tags: Foreclosure, New York, HECM

The state of New York modified its Real Property Actions and Proceedings Law and Civil Practice Law and Rules relating to foreclosure upon a reverse mortgage. The provisions regarding reverse mortgage loans, including a new disclosure and defining a reverse mortgage as a home loan become effective immediately and deemed to have been in full force and effect (for compliance purposes) on and after April 20, 2017. In addition, certain sections under Part HH of this bill take effect on the 30th day after becoming law.

Fannie Mae Servicing Guide Announcement SVC-2018-03 Servicing Transfer Welcome Calls

Effective: April 11, 2018
Industry: Mortgage Servicing
Source: Fannie Mae   Announcement SVC-2018-03 →
Tag: Servicing Transfers

In an effort to simplify servicing, we have updated our Guide with regards to concurrent and post-delivery servicing transfers to remove the requirement that the transferee servicer

  •  Initiate welcome calls to borrowers within five days after transfer,
  •  Make at least three welcome call attempts by the end of the month following the file transfer (unless contact is made or a payment is received), and
  •  Use commercially reasonable efforts to maintain accurate contact information

This policy change will enable servicers to implement their own process so long as it remains in compliance with applicable law.

We have updated the requirement related to concurrent servicing transfers to align with the policy outlined in post-delivery servicing transfers, which requires transferor and transferee servicers to provide borrowers

  •  prompt and accurate information of a pending transfer of servicing,
  •  prompt and courteous responses to their inquiries about the transfer, and
  •  specific notices regarding the transfer of servicing.

Updated Servicing Guide Topics

  •  A2-7-01, Concurrent Servicing Transfers
  •  A2-7-03, Post-Delivery Servicing Transfers

Effective Date
These policy changes are effective immediately.

Construction/Permanent Home Loans

Effective: April 6, 2018
Industry: Mortgage Lending
Source: VA   Circular 26-18-7 →
Tag: Underwriting

Please see Circular 26-18-7 for complete details and the processes outlined by VA. Below is a summary:

  • Credit and Underwriting: Loans for construction/permanent are underwritten in accordance with Chapter 4 of the VA Lender’s Handbook. 
  • Property Eligibility and Appraisals: The property and appraisal requirements for proposed construction can be found throughout Chapter 10, and Chapter 16 of the VA Lender’s Handbook. All VA minimum property requirements (MPR), as outlined in Chapter 12 of the VA Lender’s Handbook, must be met prior to issuance of the Loan Guaranty Certificate, and the final inspection/certificate of occupancy. 
  • Eligible VA Loan Types: One-time close (or single close) construction loans and two-time close construction loans.
  • Transaction types in a Construction/Permanent Home Loan: Purchases, where the Veteran has a signed contract to build or where the Veteran acts as their own contractor and/or hires subcontractors.  Refinance, where construction was completed and at least 1 year has passed as evidence by a Certificate of Occupancy (CO), or other evidence by the taxing authority.

Loans for Alteration and Repair

Effective: April 5, 2018
Industry: Mortgage Lending
Source: VA   Circular 26-18-6 →
Tags: Underwriting, Property - Appraisal

VA may guarantee a loan for alteration and/or repair that allows improvements to be included in the value and completed after closing of the loan. The loan proceeds are paid out to the builder and/or contractor during the alteration/repair period. The lender must obtain written approval from the borrower before each disbursement or draw payment to the builder and/or contractor.

Please see Circular 26-18-6 for complete requirements, including general guideline processes defined by VA. Below is a summary:

  • Eligible VA Loan Types: VA purchase loans, and VA regular (aka Cash-Out)
    refinance loans.
  • Credit and Underwriting: Loans for alteration and repair are underwritten in accordance with the VA Lender’s Handbook, 26-7, Chapter 4. 
  • Property Eligibility and Appraisals: The property and appraisal requirements for alteration and repair can be found throughout the VA Lender’s Handbook, 26-7, Chapter 10 and 16. All VA minimum property requirements (MPR), outlined in the VA Lender’s Handbook, 26-7, Chapter 12, must be met prior to issuance of the Loan Guaranty Certificate (LGC) and the final inspection/certificate of occupancy. 
  • Eligible Alterations and Repairs: Eligible alterations and repairs must be those ordinarily found on similar properties of comparable value in the community. 
  • Acquisition Cost versus Value: Purchase, must use the lessor of the
    acquisition cost or the as-completed value determined by the VA fee panel appraiser.  Refinance, must use the lessor of the acquisition cost, or the as-completed value determined by the VA fee panel appraiser. 
  • Builder and Contractor Registration Requirements: The builder, or contractor must have a valid VA builder identification number prior to
    a VA NOV being issued. 
  • Change Orders: Borrowers are permitted to pay for change orders and upgrade out of pocket. Change orders/upgrades made after the appraisal cannot be mortgaged into the new loan, unless the appraisal is updated. Change orders must be approved, in advance, by the appraiser, to ensure there is no loss in value. 
  • Alteration and repair project management: The lender is responsible for all aspects of establishing the account containing the alteration and repair funds. The lender must ensure that funds are accounted for and disbursed according to the progress completed. The lender should have the specialized experience to process, underwrite, close, and set-up the loan in progress (LIP) account or draw account. 
  • Fees and Charges: Lender’s may charge the Veteran a construction fee of up to two percent of the amount of the loan for its services, provided that the majority portion (51 percent or more) of the loan proceeds are paid out by the lender during the actual progress of the construction, alteration, improvement, or repair. Such charges may be in addition to the one percent origination charge. If the portion of disbursed proceeds for services is less than 51 percent, a one percent or less construction fee is permissible in addition to the one percent origination charge. 
  • Inspections: Improvements must be completed according to local building codes. It is the lender's responsibility to negotiate an inspection schedule with the builder or contractor, and it is the lender's responsibility to ensure it is followed. 
  • Guaranty: The guaranty for alteration and repair loans will not be issued until a clear final inspection report has been completed by the VA fee appraiser. 

USDA Modified Interest Rate Waiver

Effective: April 2, 2018
Industry: Mortgage Servicing
Source: USDA  
Tag: Loss Mitigation

In response to the rising interest rate environment, the Single Family Housing Guaranteed Loan Program (SFHGLP) is issuing a waiver for all approved loan servicers to modify loans whereby the interest rate may exceed the original guaranteed note rate.  The current policy which limits the modified maximum interest rate to the original guaranteed note rate has hindered loan servicers in their ability to offer the full range of loss mitigation alternatives to borrowers.

Loan servicers must adhere to Chapter 18 of the SFHGLP Technical Handbook when conducting a financial analysis of the borrower’s capacity to support the modified mortgage payment. The result of the financial analysis must demonstrate the borrower’s ability to support the modified mortgage payment going forward.

Effective immediately, loan servicers may consider offering a modified interest rate which does not exceed the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS) rate for a 30 year fixed rate mortgage (US Average) rounded to the nearest one-eighth of one percent (0.125%) plus 50 basis points as of the date the modification is approved.  This may result in a modified interest rate which exceeds the original guaranteed note rate which is now permissible as a result of this waiver.

This waiver is in effect until rescinded by the SFHGLP.

Questions regarding this announcement may be directed to Richard Kane in the Rural Housing National Office at 202-720-0320 or Richard.Kane@wdc.usda.gov.

FDIC Deposit Insurance Assessments

Effective: April 5, 2018
Industry: Consumer Lending
Source: Other   12 CFR 327 →
Tag: Banking
  • Technical amendment makes clear that small bank assessment credits will be applied for assessment periods in which the reserve ratio of the Deposit Insurance Fund (DIF) is at least 1.38 percent instead of, as currently provided, just when the ratio exceeds 1.38 percent. 
  • Technical amendment removes a data item from the assessment regulations that most small banks can no longer report on the Consolidated Report of Income and Condition (Call Report). 
  • Technical amendment re-incorporates, for assessment purposes, the capital definitions and ratio thresholds used for prompt corrective action (PCA) that were inadvertently removed in a 2016 rulemaking.

Selling Guide Updates

Effective: April 3, 2018
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2018-03 →
Tags: Closing, Underwriting

Full Service Certification Custodians

  • Lenders will soon have the option to use full-service certification custodians (FCCs) for whole loans and for loans in MBS. 
  • This new option will be available after Fannie Mae has approved the document custodian to be an FCC and the applicable Master Custodial Agreement governing FCCs has been fully executed. 

Lender Contributions

Clarifies that lender-sourced contributions to fund closing costs and prepaid fees that are normally the responsibility of the borrower are permitted provided the following: 

  • A lender-sourced contribution may not be used to fund any portion of the down payment, subject to repayment requirements, or require financial obligation apart from the subject mortgage; or passed to the lender from a third party. 
  • The amount of the lender contribution should not exceed the amount of borrower-paid closing costs and prepaid fees. 
  • Otherwise, the amount of the contribution is not limited except when the lender is an interested party to a purchase transaction as defined in B3-4.1-02, Interested Party Contributions, and in that case, the interested party contribution (IPC) policy applies. 
  • Any excess lender credit required to be returned to the borrower in accordance with applicable regulatory requirements is considered an overpayment of fees and charges, and may be applied as a principal curtailment or returned in cash to the borrower.

Conversion of Construction-to-Permanent Financing: Single-Closing Transactions -- Must implement on or before August 1, 2018

  • Clarifies when a single-closing construction-to-permanent transaction is processed as a purchase or a refinance based on the timing of lot ownership. 
  • The transaction type will be based on lot ownership at the time of “the first advance of interim construction financing”

Payee Codes in the Loan Delivery Application

  • We will now make payee codes available in LD after the lender submits a Form 482, Seller’s Designation of Wire Transfer Instructions and the form is processed. 
  • Note that Form 482 has been updated. 

Retirement of the Out of Compliance Process for Housing Goals Data

  • In Loan Delivery Release Notes dated June 27, 2016, we communicated that housing goals data elements would become required data. 
  • Because this data is now required at delivery, lenders no longer receive the monthly Out of Compliance reports. 
  • The Selling Guide is updated to remove the related references. 

B3-4.4-01: Asset Verification

  • We removed a reference to principal residence conversions as a transaction that will require verification of additional assets above and beyond the amount required by DU. 
  • This policy was previously retired. 

Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z)

Effective: April 19, 2018
Industry: Mortgage Servicing
Source: CFPB   Final Rule →
Tags: Bankruptcy, Periodic Statements
  • § 1026.41(e)(5)(iv)(B) and (C) revised to provide a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise have to provide, regardless of when in the billing cycle the triggering event occurs. 
  • New comments 41(e)(5)(iv)(B)–1 through –3 to clarify the operation of the single-statement exemption. 
  •  § 1026.41(e)(5)(iv)(C) and its related commentary has been removed as they are no longer necessary in
    light of the changes to § 1026.41(e)(5)(iv)(B) and its related commentary. 

Amendments to Certain Mortgage Servicing Provisions

Effective: April 19, 2018
Industry: Mortgage Servicing
Source: CFPB   Title XIV Rules: Mortgage Servicing →
Tags: Bankruptcy, ​Successor in Interest, Periodic Statements

Successor in Interest provisions

Current rule only refers to successor of deceased borrower

New rule mirrors Garn-St. Germain Act (due-on-sale clauses)

  • A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; 
  • A transfer to a relative resulting from the death of a borrower; 
  • A transfer where the spouse or child of the borrower becomes an owner of the property; 
  • A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property; or 
  • A transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property

Confirming successor in interest status – Servicers must:

  • Respond to a written request from a putative successor by providing that person with a written description of the documents required to confirm the person’s identity and ownership interest in the property
  • Maintain procedures to promptly facilitate communication with potential or confirmed successors (but no need to affirmatively search)
  • Maintain procedures to promptly determine the documents needed and promptly inform the potential successor of those documents and how to submit a written request to be treated as a successor (but no need to provide legal advice)
  • Maintain procedures to promptly make a determination and notify the person of that determination

          (info) Servicer may request additional documentation if necessary

Servicing Rule requirements generally will apply to a confirmed successor in interest. Exceptions:

  • Except in response to an information request, no need to provide disclosures if the servicer is providing the same disclosure to another borrower or consumer
  • No need to comply with the loss mitigation live contact requirements if already complying with respect to another borrower on the account
  • May take steps to avoid sending disclosures which imply personal liability (e.g., revising text, including affirmative disclosure, explanatory notice and acknowledgement form)

          (info) CFPB clarifies that communicating with successor in interest will not violate GLBA or FDCPA 


Provide periodic statements and loss mitigation information to borrowers in active bankruptcy

Bankruptcy exemption – applicability

Now applies only if two criteria are met:

1. Must be a debtor in bankruptcy under Title 11 or must have discharged personal liability pursuant to 11 U.S.C. § § 727, 1141, 1228, or 1328; and

2. One of the following conditions must apply:

  • Consumer requests in writing that the servicer cease providing periodic statements;
  • Bankruptcy plan provides that the consumer will surrender the dwelling, provides for the avoidance of the lien securing the loan, or otherwise does not provide for payment of pre-bankruptcy arrearage or the maintenance of payments under the loan;
  • Bankruptcy court orders the lien avoided, lifts the automatic stay, or requires the servicer not to provide periodic statements; or
  • Consumer files statement of intention to surrender the dwelling and has not made partial or periodic statement since commencement of bankruptcy

Bankruptcy exemption - modified statements

If the exemption (as now modified) does not apply, servicer may alter periodic statement to account for bankrupt status

  • May omit certain delinquency information
  • Must include certain informational disclosures about bankruptcy
  • Special modification required for borrowers in bankruptcy under Chapter 12 or 13

UCD Implementation Update

Effective: April 1, 2018
Industry: Mortgage Lending
Source: Fannie Mae , Freddie Mac   Joint Announcement →
Tag: Loan Delivery
  • The requirement to embed the Closing Disclosure PDF in the UCD XML file will be fully enforced no earlier than April 2018

Revisions to the Texas Security Instrument

Effective: April 1, 2018
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2017-09 →
Tags: Texas, Closing, Loan Documents
  • Fannie Mae and Freddie Mac have revised the Texas Deed of Trust (Form 3044) to reflect recent changes to state law that affect the date of foreclosure sales. The revised Form 3044 (with a revision date of 10/17) is available on the Single Family Security Instruments page on our website.
  • Lenders are encouraged to use the updated document immediately, but must do so for mortgage loans with note dates on or after April 1, 2018.

Ginnie Mae Pooling Eligibility for Refinance Loans and Monitoring of Prepay Activity

Effective: April 1, 2018
Industry: Mortgage Lending
Source: Other   APM 17-06 →
Tag: Pools

APM 16-05 is superceded by APM 17-06 effective April 1, 2018.  Effective with pool issuances on or after April 1, 2018:

Streamlined refinance loans and cash-out refinance loans are eligible for Ginnie Mae I Single Issuer Pools and Ginnie Mae II Multiple Issuer Pools if and only if:

  • a) the borrower made at least six consecutive monthly payments on the loan being refinanced, referred to hereinafter as the Initial Loan, beginning with the payment made on the first payment due date; and 
  • b) the first payment due date of the refinance loan occurs no earlier than 210 days after the first payment due date of the Initial Loan.

Streamlined refinance or cash-out refinanced loans that do not meet these requirements may not be pooled into Ginnie Mae I Single Issuer Pools or Ginnie Mae II Multiple Issuer Pools, but are eligible for Ginnie Mae II Custom Pools if the loans otherwise comply with Ginnie Mae II Custom pooling parameters.

Fully underwritten rate/term refinance loans are acceptable collateral for any eligible Ginnie Mae security and are free from the pooling restrictions identified above so long as:

  • a) the corresponding housing agency (FHA, VA, RD, or PIH) has implemented a fully underwritten rate/term refinance loan program specifying any attendant seasoning, loan performance, maximum LTV, full documentation, and full appraisal requirements; and
  • b) the refinance loan in question meets all such housing agency requirements.

Policy Guidance for VA Interest Rate Reduction Refinance Loans (IRRRL)

Effective: April 1, 2018
Industry: Mortgage Lending
Source: VA   Circular 26-18-1 →
Tag: Credit - Initial Disclosures

Starting with loans closed on and after April 1, 2018, lenders should:

  • Provide the Veteran’s Statement and Lender Certification (note: lender certification only needed for payment increases of 20 percent or more), as outlined in VA Lender’s Handbook, Chapter 6 section 1d.  
  • Lenders should provide this information to the Veteran with the initial disclosure documents no later than the third business day after receiving the Veteran’s application.

Fair Debt Collection Practices Act

Effective: April 18, 2018
Industry: Consumer Lending, Mortgage Servicing
Source: Maine   S.P. 613 →
Tags: Maine, Licensing
  • Removes the licensing condition that requires a debt collector to be “face to face” when soliciting business from Maine creditors; and
  • Requires a debt collector to be licensed in the state before collecting a debt from a consumer in the state, regardless of the debt collector’s actual location.