Compliance Calendar for May 2018

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VA Circular 26-18-10 Special Relief Following Hawaii Volcanic Eruptions and Earthquakes

Effective: May 16, 2018
Industry: Mortgage Servicing
Source: VA   Circular 26-18-10 →

1. Purpose. This Circular expresses concern about the Department of Veterans Affairs

(VA) home loan borrowers affected by volcanic eruptions and earthquakes in the State of Hawaii, and describes measures mortgagees may employ to provide relief. Mortgage servicers and borrowers alike should review VA’s Guidance on Natural Disasters to ensure Veterans receive the assistance they need. (https://www.benefits.va.gov/homeloans/documents/docs/va_policy_regarding_natural_disasters.pdf)

2. Forbearance Request. VA encourages holders of guaranteed loans to extend forbearance to borrowers in distress as a result of the disaster. Careful counseling with borrowers should help determine whether their difficulties are related to this disaster, or whether they stem from other sources that must be addressed. The proper use of authorities granted in VA regulations may be of assistance in appropriate cases. For example, Title 38, Code of Federal Regulations (C.F.R.), section 36.4311 allows the reapplication of prepayments to cure or prevent a default. Also, 38 C.F.R. 36.4315 allows the terms of any guaranteed loan to be modified without the prior approval of VA, provided conditions in the regulation are satisfied.

3. Moratorium on Foreclosure. Although the loan holder is ultimately responsible for determining when to initiate foreclosure, and for completing termination action, VA has requested on its website (https://www.benefits.va.gov/homeloans) that holders establish a 90-day moratorium from the date of a disaster on initiating new foreclosures on loans affected by major disasters. VA regulation 38 C.F.R. 36.4324(a)(3)(ii) allows additional interest on a guaranty claim when eventual termination has been delayed due to circumstances beyond the control of the holder, such as VA-requested forbearance. Due to the widespread impact of the disaster, holders should review all foreclosure referrals to ensure that borrowers have not been affected significantly enough to justify delay in referral. Any questions about impact should be discussed with the VA Regional Loan Center (RLC) of jurisdiction.

4. Late Charge Waivers. VA believes that many servicers plan to waive late charges on affected loans, and encourages all servicers to adopt such a policy for any loans that may have been affected.

5. Credit and VA Reporting. In order to avoid damaging credit records of Veteran borrowers, servicers are encouraged to suspend credit bureau reporting on affected loans. VA will not penalize affected servicers for any late default reporting to VA as a result. Please contact the appropriate RLC with any questions.  

6. Activation of the National Guard. Members of the National Guard may be called to active duty to assist in recovery efforts. VA encourages servicers to extend special forbearance to National Guard members who experience financial difficulties as a result of their service.

7. Rescission: This Circular is rescinded July 1, 2019.

FHA Mortgagee Letter 2018-03 Extension of Disaster Foreclosure Moratoriums for Specified Areas Impacted by Hurricane Maria in Puerto Rico and the U.S. Virgin Islands

Effective: May 16, 2018
Industry: Mortgage Servicing
Source: FHA   ML 2018-03 →
Tags: Disaster, Loss Mitigation

On March 1, 2018, HUD issued Mortgagee Letter 2018-02 extending foreclosure moratoriums through May 18, 2018 for Hurricane Maria impacted areas that the U.S. Department of Homeland Security’s Federal Emergency Management Agency (FEMA) has declared to be eligible for Individual Assistance (Affected Counties). 

This Mortgagee Letter communicates guidance that further extends the Foreclosure Moratorium for Borrowers with FHA-insured mortgaged properties in Affected Counties in Puerto Rico and the U.S. Virgin Islands if the Conditional Extension of the Foreclosure Moratorium requirements set forth in this Mortgagee Letter have been satisfied.

This guidance applies to FHA Title II forward mortgages secured by properties in Affected Counties due to Puerto Rico’s Hurricane Maria DR-4339 and U.S. Virgin Islands’ Hurricane Maria DR-4340.

This Mortgagee Letter is effective immediately.

Please see the Mortgagee Letter for complete details.

FHA Mortgagee Letter 2018-01 Loss Mitigation for borrowers with FHA-insured mortgages whose property and/or place of employment is located in Presidentially-Declared Major Disaster Areas

Effective: May 1, 2018
Industry: Mortgage Servicing
Source: FHA   ML 2018-01 →
Tags: Disaster, Loss Mitigation

This Mortgagee Letter amends the Loss Mitigation policies for Disaster Affected Borrowers referenced in Section III.A.3.c.iv of FHA Single Family Housing Policy Handbook 4000.1 for borrowers with FHA-insured mortgages whose mortgage and/or employment is located in the Presidentially-Declared Major Disaster Areas (PDMDAs) of 

  • Louisiana Hurricane Harvey DR-4345, 
  • Texas Hurricane Harvey DR-4332, 
  • Florida Hurricane Irma DR-4337, 
  • Georgia Hurricane Irma DR-4338, 
  • Puerto Rico Hurricane Irma DR-4336, 
  • South Carolina Hurricane Irma DR-4346, 
  • Virgin Islands Hurricane Irma DR-4335, 
  • Puerto Rico Hurricane Maria DR-4339, 
  • Virgin Islands Hurricane Maria DR4340, 
  • California Wildfires DR-4344, or 
  • California Wildfires, Flooding, Mudflows, and Debris Flows (FEMA-DR-4353). 

Mortgagees must implement the amended policies set forth in this Mortgagee Letter no later than May 1, 2018, but may begin using the new policies immediately. Mortgagees may no longer offer the policies in this Mortgagee Letter to borrowers on or after May 1, 2019, which is the Sunset Date for the Mortgagee Letter.

Please see the ML for additional information.

Montana Adopts Provisions Regarding Renewal Fees

Effective: May 10, 2018
Industry: Consumer Lending, Mortgage Lending
Source: Montana   Montana Adopts Provisions Regarding Renewal Fees →
Tag: Licensing

The Montana Department of Administration amended multiple provisions that include reducing its licensing renewal fees for 2019. These provisions are effective immediately.

The amendment approved and adopted the following standardized NMLS forms relating to consumer loan licensing:

  1. ”The NMLS company form dated September 12, 2015;”
  2. “The NMLS individual form dated September 12, 2016.”

The amendment also approved and adopted the following state-specific forms on the NMLS:

  1. “The Montana consumer loan license new application checklist dated October 7, 2016;”
  2. “The Montana consumer loan license surrender checklist dated September 8, 2016.”

As per the amendment, “an entity holding a consumer loan license for any period during a calendar year reporting period shall complete and file by February 15 of the following calendar year an annual report.”

The amendment further states that “the annual report must be filed whether any loans were originated during the reporting period and whether the licensee renewed its license at the end of the reporting period or held a license when the report came due the following February 15.”

The amendment stipulates that “a completed annual report must be emailed to mortgagelicensing@mt.gov and that the January 25, 2018, edition, of the annual report is available on the division’s website at banking.mt.gov.”

The amendment approved and adopted the following standardized NMLS forms relating to escrow business licensing:

  1. “The NMLS company form dated September 12, 2015;”
  2. “The NMLS individual form dated September 12, 2016.”

Additionally, the amendment also approved and adopted the following state-specific forms on the NMLS:

  1. “The Montana escrow business company new application checklist dated January 23, 2017;”
  2. “The Montana escrow business company amendment checklist dated January 23, 2017.”

The amendment included definitions for “breach of trust” and “dishonesty.”

“Breach of trust” is defined as:

  1. “A wrongful act, use, misappropriation, or omission with respect to any property or fund that has been committed to a person in a fiduciary or official capacity” or
  2. “The misuse of a person’s official or fiduciary position to engage in a wrongful act, use, misappropriation, or omission.”

“Dishonesty” means:

  1. “To cheat or defraud directly or indirectly;”
  2. “To cheat or defraud for monetary gain or its equivalent;” or
  3. “To wrongfully take property belonging to another in violation of any criminal statute.”
  4. “Dishonesty includes acts involving want of integrity, lack of probity, or a disposition to distort, cheat, or act deceitfully or fraudulently, and may include crimes which federal, state, or local laws define as dishonest.”

The amendment reduced the licensing renewal fees for 2019 by 75 percent. This section of amendment expires in March 2019 and pertains to a mortgage broker who is both an individual mortgage loan originator licensee and the owner of a mortgage broker entity.

VA Circular 26-17-39, Change 1, Updated Disaster Modification Guidance

Effective: May 9, 2018
Industry: Mortgage Servicing
Source: VA   Updated Disaster Modification Guidance →
Tag: Disaster

1. Purpose. The purpose of this Circular is to clarify VA’s position on re-amortization when required through investor guidelines and to correct the numbering of section titled “Rescission.”

2. Therefore, Circular 26-17-39 is changed as follows:  Page 1, paragraph 3: add at the end of: “The servicer may re-amortize the loan, if necessary, to meet any investor restrictions, as long as the new monthly payment is the same as or less than the current monthly installment.”

Page 2, section titled “Rescission”: at the beginning of the line, change “5” to “4.

Fannie Mae Multifamily Mortgage Business Guide Update

Effective: May 14, 2018
Industry: Mortgage Lending
Source: Fannie Mae   Multifamily Mortgage Business Guide Update 18-03 →
Tag: Multifamily

Fannie Mae is updating Part V, Chapter 6 – Watchlist Management, of the Multifamily Selling and Servicing Guide (“Guide”) to:

  • clarify that Mortgage Loans that would otherwise by identified as Pass Watch Mortgage Loans are not eligible for identification as Special Mention; and
  • remove from the definition of a Mortgage Loan identified as Special Mention the existence of unanticipated deferred maintenance at the Property requiring attention by the Borrower.

Selling Guide Announcement SEL-2018-04, Property Inspection Waivers Offered After a Disaster

Effective: May 1, 2018
Industry: Mortgage Lending
Source: Fannie Mae   Property Inspection Waivers Offered After a Disaster →
Tags: Underwriting, Property - Appraisal

Currently, the Selling Guide describes the policies that apply to the use of a property inspection waiver (PIW) for loans in

process (not closed or closed, but not delivered) where the property is located in a disaster area. 

With this update, we are providing additional clarity regarding PIW offers on a property after a disaster has occurred. After a disaster occurs, if we receive an acceptable appraisal on a property in a disaster area, that property becomes eligible for a PIW on a future
transaction. 

Lenders may exercise these future PIW offers in accordance with the requirements of B4-1.4-10, Property Inspection Waivers. For example, lenders may already be receiving PIW offers on properties impacted by Hurricane Sandy, and in the coming months, will receive offers on properties impacted by Hurricanes Harvey and Irma, if an appraisal performed on those properties post-hurricane was submitted to Fannie Mae.

Effective Date
Lenders should feel comfortable exercising these waivers as long as they meet our standard PIW requirements.

Selling Guide Announcement SEL-2018-04, Native American Tribes as Community Seconds Providers

Effective: May 1, 2018
Industry: Mortgage Lending
Source: Fannie Mae   SEL-2018-04 →
Tags: Underwriting, Assets

Generally, Native American tribes are federally recognized as sovereign nations, making them similar to federal, state, or local government. They typically create sovereign instrumentalities to implement their federal and tribal housing programs.

We are updating our Community Seconds mortgage and donation from entities policies to include Native American tribes and their sovereign instrumentalities as eligible providers. This update supports our Duty to Serve efforts for Native American lending.

Effective Date
Lenders may immediately begin using Native American tribes and their sovereign instrumentalities as eligible Community
Second mortgage and donation providers. 

Fannie Mae UCD Collection Solution - New User Interface for Manual Data Entry

Effective: May 25, 2018
Industry: Mortgage Lending, Mortgage Servicing
Source: Fannie Mae   Uniform Closing Dataset (UCD) Release Notes →
Tag: UCD

The UCD collection solution will be updated with a new user interface that will allow data entry of the UCD data from the Borrower Closing Disclosure. Once the data entry is complete, the Closing Disclosure PDF can be uploaded and the UCD file can be submitted. Upon submission, a UCD Findings Report will be generated.

NOTE: Any lender who would like to participate in testing the new data entry user interface prior to May 25, please contact your Fannie Mae representative or the UCD Mailbox. 

NCUA Advertising Rule

Effective: May 25, 2018
Industry: Consumer Lending
Source: Other   NCUA Final Rule →
Tag: Banking

The NCUA Board (Board) is revising provisions of the NCUA’s advertising rule to provide regulatory relief to federally insured credit unions (FICUs). The advertising rule requires FICUs to use the NCUA’s official advertisement statement when advertising, and it currently permits three versions of that statement. 

Under this final rule, the Board is allowing FICUs the option of using a fourth version: “Insured by NCUA.” To provide additional regulatory relief, the Board is: (1) expanding a current exemption from the advertising  statement requirement regarding radio and television advertisements; and (2) eliminating the requirement to include the official advertising statement on statements of condition required to be published by law. 

Reverse Mortgage Loan Servicing Manual Updates

Effective: May 1, 2018
Industry: Mortgage Servicing
Source: Fannie Mae   RVS-2018-01 →
Tag: HECM

Expense Reimbursement Claim Submissions

  • 2-06, Submitting Expense Reimbursement Claims, has been revised to authorize servicers to submit final expense reimbursement claims beyond 60 days after the date Fannie Mae disposes of an acquired property for HECM loans, as long as it is submitted within 30 days of receipt of an initial or supplemental Advice of Payment (AOP) from HUD.

Mortgage Loan Status Codes

  • 6-01-05, Trial Balance Transactions, has been updated to require that servicers perform a monthly reconciliation of mortgage loan status codes and report any discrepancies to Fannie Mae.

Miscellaneous Revisions

A full review of the Reverse Mortgage Loan Servicing Manual was completed to now include clarifications and reminders of existing requirements regarding

  • the assignment of HECM loans to HUD,
  • mortgage insurance claim documentation,
  • special remittances for third-party proceeds, and
  • the definitions for specific mortgage loan status codes.

While many topics were impacted as part of this review, the key topics updated are as follows:

  • 3-04, Payment of Taxes and Insurance
  • 3-10, HECM Loan Specific Requirements for the Assignment of the Mortgage Loan to HUD
  • 4-02, Acceleration of the Debt
  • 4-05, Initiation of Foreclosure Proceedings
  • 5-02, HECM Loan Specific Mortgage Insurance Claim Requirements
  • 5-04, Property Management
  • 5-05, Submitting Special Remittances
  • 6-01-03, General Servicing Transactions
  • 7-03, List of Contacts

Effective Date Servicers are encouraged to implement the above policy changes immediately, but must implement these changes by the May 2018 month-end reporting cycle. 

Additional Resource

The complete Fannie Mae Single-Family Reverse Mortgage Loan Servicing Manual can be accessed here: https://www.fanniemae.com/cont...

West Virginia Safe Mortgage Licensing Act

Effective: May 31, 2018
Industry: Mortgage Lending
Source: West Virginia   West Virginia HB 4285 →
Tags: West Virginia, Licensing
  • Amends licensing requirements of mortgage loan originators; 
  • Increases the number of hours of education required for licensure and to meet continuing education requirements; and 
  • Increases the licensure application fee.

Utah Residential Mortgage Practices and Licensing Act

Effective: May 8, 2018
Industry: Mortgage Lending
Source: Utah   Bankers Advisory Alert →
Tags: Utah, Licensing

The amendment defines “balloon payment” as a required payment in a mortgage transaction that:

  1. results in a greater reduction in the principle of the mortgage than a regular installment payment; and
  2. is made during or at the end of the term of the loan.

The amendment excludes from licensing a nonprofit corporation that:

  1. is exempt from paying federal income taxes;
  2. has as the nonprofit corporation’s primary purpose serving the public by helping low-income individuals and families build, repair, or purchase housing;
  3. does not require, under the terms of a mortgage, a balloon payment;
  4. performs loan originator activities, using only unpaid volunteers or employees whose compensation is not based on the number or size of the mortgage transactions that the employees originate.

Additional Amendments:

  1. Section 2 of the amendment provides that “the division of real estate may not license an entity and a licensed entity may not conduct the business of residential mortgage loans unless the entity conducts the entity’s business of residential mortgage loans from a location within the United States.”
  2. Section 3 provides for record requirements and states that “a licensee, or a person required to be licensed shall maintain the licensee’s or the person’s possession a record required for that licensee by a rule made by the division.”
  3. Section 4 states that “a failure to respond to a request by the division in an investigation within 10 days after the day on which the request is served is considered as separate violation of this chapter.” 
  4. Section 7 amends provisions relating to registration requirements and qualifications under the Appraisal Management Company Registration and Regulation Act. It states that “an appraisal management company is required to register if in a calendar year, the company oversees an appraiser panel of twenty-five or more certified or licensed appraisers including at least one appraiser certified or licensed in the state and at least one appraiser certified or licensed in a state other than Utah, a territory, or the District of Columbia.” 
  5. Section 10 provides for fees charged by the division of real estate for registration and services and states that “the division shall collect the annual registry fee from each appraisal management company and each federally regulated appraisal Management Company, and transfer the fees collected to the Appraisal Subcommittee on a monthly basis.” 
  6. Section 11 provides for the appraisal management company adherence to professional standards and states that the “appraisal management company shall have a system in place to ensure that it only selects for a real estate appraisal activity an appraiser who is independent of the transaction and has the requisite education, expertise, and experience necessary to competently complete the real estate appraisal activity for the particular market and property type.” “The appraisal management company shall also conduct its services in accordance with the requirements of the Truth in Lending Act, 15 U.S.C. Sec. 764 1639e (a)-(i), and the regulations thereunder.” 
  7. Section 12 provides that the “division of real estate authority may examine any book or record of an appraisal management company and require the appraisal management company to submit any report, information, or document to the division.” “Upon the Appraisal Subcommittee’s request, the division shall transmit a report to the Appraisal Subcommittee regarding the division’s supervisory activities involving appraisal management companies or other third-party providers of appraisals and appraisal management services, including any investigation the division initiates or disciplinary action the division takes.” 
  8. Section 13 provides that “a license under this chapter is not required for services rendered by an attorney admitted to practice law in Utah in performing the attorney’s duties as an attorney.” The Real Estate Appraiser and Licensing and Certification Act provisions regarding the duties of the real estate appraiser licensing and certification board and the division of real estate’s denial of licensure, certification, or registration and investigations are also modified.

Requirements for Foreclosure by Advertisement and Period of Limitation on Actions

Effective: May 7, 2018
Industry: Mortgage Servicing
Source: Michigan   House Bill 4470 →
Tags: Foreclosure, Michigan
  • For purposes of this subdivision, an action or proceeding for the appointment of a receiver is not an action or proceeding to recover a debt.
  • The period of limitations on an action charging a surety on a bond of a personal representative or guardian is 4 years after the discharge of the personal representative or guardian.
  • Except as otherwise provided in this section or another statute of this state, the period of limitations is 10 years for an action founded on a bond of a public officer.
  • The period of limitations on an action founded on a bond executed under sections 80 and 81 of 1846 RS 16, MCL 41.80 and 41.81, is 2 years after the expiration of the year for which the constable was elected.
  • The period of limitations is 10 years for an action founded on a covenant in a deed or mortgage of real estate.
  • Except as otherwise provided in another statute of this state, the period of limitations is 2 years for an action charging a surety for costs.
  • The period of limitations is 2 years for an action brought on a bond or recognizance given on appeal from a court in this state.
  • The period of limitations is 10 years for an action on a bond, note, or other like instrument that is the direct or indirect obligation of, or was issued by although not the obligation of, this state or a county, city, village, township, school district, special assessment district, or other public or quasi-public corporation in this state.
  • The period of limitations is 6 years for an action to recover damages or money due for breach of contract that is not described in subsections (2) to (8).

Customer Due Diligence Requirements (Beneficial Owners)

Effective: May 11, 2018
Industry: Consumer Lending
Source: Other   Bank Secrecy Act →
Tag: Banking
  • Includes a new requirement to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions
  • “Covered institutions” are financial institutions subject to Customer Identification (CIP) requirements, including banks, broker-dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities. Many other entities in the financial services industry, while not legally obligated to comply with CIP requirements, are contractually bound to do so by their lenders.  Those entities must learn whether their lenders similarly will require them to comply with the new beneficial ownership requirements.
  • Covered financial institutions will be required to have written procedures to identify and verify beneficial owners of legal entity customers who open new accounts on or after May 11, 2018.
  • Identification can be accomplished by gathering personal identifying information on the form FinCEN included as Appendix A to the Final Rule, found here, or by equivalent means.

Revised Loss Mitigation Policies for Affected Borrowers in Certain Presidentially-Declared Major Disaster Areas

Effective: May 1, 2018
Industry: Mortgage Servicing
Source: FHA   Mortgagee Letter 2018-01 →
Tags: Disaster, Loss Mitigation

Mortgagees must implement the amended policies set forth in this Mortgagee Letter no later than May 1, 2018, but may begin using the new policies immediately. ortgagees may no longer offer the policies in this Mortgagee Letter to borrowers on or after May 1, 2019, which is the Sunset Date for the Mortgagee Letter.

(info) Since the policies in this Mortgagee Letter only apply to certain Presidentially-Declared Major Disaster Areas, the changes are not being incorporated into Handbook 4000.1.

Reduced Income Documentation for Disaster Loan Modifications and Disaster Standalone Partial Claims Only

For the designated PDMDAs, a Verification of Employment (VOE) is not required to confirm a Borrower’s employment status and income is the same as it was prior to the disaster. In lieu of the VOE, Mortgagees may confirm a Borrower’s employment and income using either:

  • The Borrower’s most recent pay stub for Wage Income reflecting year-to-date earnings;
  • The Borrower’s most recent Bank Statement reflecting deposits of income amounts from applicable sources; or
  • Other documentation (e.g., Monthly Statement of Social Security Benefits, Monthly Pension Statement) reflecting the amount of income.

This streamlined verification of income process must not be used to evaluate a Disaster-Affected Borrower for an FHA-HAMP option. The policy impacted is referenced in Handbook 4000.1, III.A.3.c.iv(C)(1)-Eligibility for Loan Modification without a Financial Evaluation.

Elimination of the Trial Payment Plan Requirement for Disaster Loan Modifications and Disaster Standalone Partial Claims Only

For the designated PDMDAs, a Trial Payment Plan (TPP) is not required before completion of a Disaster Rate and Term Loan Modification or a Disaster Standalone Partial Claim for a Borrower who was current or less than 30 days past due as of the date of the applicable Disaster Declaration.

Elimination of the TPP requirement is not applicable for Disaster-Affected Borrowers receiving an FHA-HAMP option. The policy impacted is referenced in Handbook 4000.1, III.A.3.c.iv(C)(2)- Terms of the Loan Modification. (For Loan Modifications without a Financial Evauation)

Application of the One Modification or Partial Claim within 24-month Restriction

For borrowers in the designated PDMDAs, any modification or partial claim received within the prior 24 months as of the date of the applicable disaster declaration will not count for the purposes of applying the “one modification or partial claim within a 24-month period” criterion to potential future loss mitigation assistance.

The policy impacted is referenced in Handbook 4000.1, III.A.2.k.v(C)(2)-Borrower Qualifications. (For Loan Modifications) and 4000.1,III.A.2.k.vi(B)(2) - Borrower Qualifications (For FHA HAMP)

Disaster Standalone Partial Claim (New Loss Mitigation Product)

For the specified PDMDAs, the Mortgagee must evaluate Borrowers for a Disaster Standalone Partial Claim at the end of the Forbearance period if the Borrower does not qualify for a Disaster Rate and Term Loan Modification.

(warning) Please refer to ML 2018-01 for complete requirements. 

Evaluation of Disaster Affected Borrowers for other Loss Mitigation Home Retention Options

Borrowers who do not meet the criteria for a Disaster Loan Modification or a Disaster Standalone Partial Claim following Disaster forbearances or who have a continuous reduction in income or increase in living expenses must be considered for an FHA-HAMP option under the Loss Mitigation Option Priority Waterfall in Section III of the FHA Single Family Housing Policy Handbook 4000.1.