Multiple advertisements in any media, such as Web page advertisements on a Web site corresponding to a newsletter blast or in a catalog, are considered a single advertisement if the following criteria apply:
►A trigger term is used;
►Such term requires a table or schedule in order to provide information regarding a finance charge associated with the trigger term, or any other term is used that appears in the opening disclosures;
►The advertisement clearly and conspicuously sets forth or is required to set forth the foregoing table or schedule; and
►These advertisements are required to refer and/or provide access to such table or schedule.
Put otherwise, single advertisement guidelines apply for any advertisement where a statement of finance charge is required for a trigger term, or disclosure is required in opening disclosures for any other term, where the trigger term or other term appear in a catalog or advertisement, thereby requiring clear and conspicuous reference to the page or location where the mandated table or schedule begins. [12 CFR § 226.16(c)(1), 2010]
This article originally appeared in the January 2017 print edition of National Mortgage Professional Magazine.
Under the Truth in Lending Act and its implementing Regulation Z, the Fair Labor Standards Act and the Interagency Guidance on Incentive Compensation Plans, there are many factors that must be considered in such a review. These regulations, in particular, have all contributed to complicating the employment contract for a mortgage loan officer (MLO). State employment law also applies. In developing compensation plan guidelines for employment agreements, it is helpful to work with a risk management professional.
►If the commission rates paid to MLOs vary, make certain those differences in compensation are not reflected in the rates the borrowers are charged.
►Make sure that each MLO receives at least the minimum wage and that each MLO is paid for overtime appropriately. Require MLOs to submit records for hours worked. Maintain the records.
►Protect the institution’s financial records and intellectual property by incorporating strict confidentiality requirements and non-solicitation provisions into the employment agreement.
►Consider the inclusion of an arbitration clause to settle disputes, and in so doing minimize the potential for class action litigation.
►Incorporate qualitative factors into the employment agreement so that compensation is not tied exclusively to volume. Incentive compensation based exclusively on quantitative factors is subject to regulatory criticism.
If the situation involves an FHA/VA/FHA/Federal Housing Authority loan, Lender A must, at the borrower’s request, transfer the case to the Lender B. Note that FHA does not require that the client name on the appraisal be changed when it is transferred to another lender.
November 2010 (Reposted April 2017 for formatting)
Transfer of the Appraisal
Q37. May an appraisal be transferred to a lender from a correspondent lender and, if so, under what circumstances?
Yes. A lender may accept an appraisal from a correspondent lender that complies with AIR.
Q38. A mortgage broker submits a loan to lender A, which orders an appraisal. The broker later decides to submit the loan to lender B because it is offering better terms, or for another reason. May the appraisal obtained by lender A be used by lender B (assuming the mortgage broker has no control over or involvement in the assignment)?
Yes. A lender may accept an appraisal transfer from a different lender. However, the lender delivering the loan to Fannie Mae makes all representations and warranties that the loan complies with the requirements of the Fannie Mae Selling Guide and related documents. Lender A must be named as client on the appraisal report.
Q39. Lender A (an approved Fannie Mae Seller/Servicer) originates and closes a loan in its name, but sells it to lender B (another Fannie Mae approved Seller/Servicer), which in turn sells that loan to Fannie Mae. Is lender B under any obligation to obtain a new appraisal?
No. Lender B may buy a closed loan from Lender A and sell the loan to Fannie Mae without a new appraisal if Lender B can represent and warrant that any appraisal conducted in connection with the loan conforms to AIR.
Freddie Mac: Appraiser Independence Requirements FAQs
27. Can lenders accept appraisals transferred from another lender?
A lender may accept an appraisal from a different lender if the appraisal is obtained in a manner consistent with AIR, and the lender receiving the transferred appraisal determines that the appraisal conforms to its own requirements and is otherwise acceptable.
28. Can lenders accept an appraisal from an AMC specifically authorized by a different lender to act on its behalf?
Yes. If the lender receiving the transferred appraisal determines the appraisal was obtained in a manner consistent with AIR that the appraisal conforms to the lender's requirements and is otherwise acceptable.
29. May an appraiser update an appraisal for another lender?
Yes. An appraiser is permitted to perform an update of an appraisal for another lender.
30. What documentation is required during an appraisal transfer to demonstrate that the lender transferring the appraisal is complying with AIR?
Each lender must develop its own documentation requirements to ensure compliance with AIR, based on its business model and processes.
31. AIR allows Lender B to originate a loan using an appraisal transferred by Lender A if Lender B determines that the appraisal with written assurances that the appraisal was obtained in a manner consistent with AIR, conforms to Lender B's requirements for appraisals and is otherwise acceptable. Will Freddie Mac hold Lender B liable for remedies if it is discovered after the transfer that Lender A did not obtain the appraisal in a manner consistent with AIR?
Yes. As with all other representation and warranties under the Guide, Freddie Mac will hold Lender B, the lender who sold the loan to Freddie Mac, fully responsible for any violations of AIR and our Guide requirements.
Under FCRA, a “furnisher” of information to credit reporting agencies (1) shall not furnish any information relating to a consumer if the person “knows or has reasonable cause to believe that the information is inaccurate” and (2) has an affirmative duty to “correct” and “update” information it has previously furnished that is “not complete or accurate.” [15 U.S.C. §1681s-2(a)(1) and (2)]
This can create significant challenges for subservicers or companies acquiring mortgage servicing rights (MSRs) from other lenders or servicers because the transfer of detailed borrower account information from one servicer to another typically does not occur instantaneously on the date that the servicing transfer becomes “effective.” Moreover, borrowers’ payments may be in transit during the transfer process or sent to the former servicer because the borrower has simply failed to process the new servicer’s instructions.
Human Resources (“HR”) compliance is a specialization that very few risk management firms offer. Ours does! Unfortunately, the legal community tends to focus on the litigation arising from compliance failures involving human resources, rather than providing reasonably-priced, compliance reviews of the HR function. Our firm actually has a Director of Human Resources Compliance, an expert in the regulatory requirements of human resources. We focus on guidance and reviews that seek to prevent litigation!
Here are just two of the many federal regulations that affect HR compliance. Local and state statutes should also be included in any HR policy statement.
Under Regulation B, the implementing regulation of the Equal Credit Opportunity Act (ECOA), there are specific requirements for providing a copy of an appraisal and other written valuations developed in connection with certain mortgage transactions. [See § 1002.14, Regulation B]
►Require creditors to notify applicants within three business days of receiving an application of their right to receive a copy of appraisals developed.
►Require creditors to provide applicants a copy of each appraisal and other written valuation promptly upon its completion or three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier.
►Permit applicants to waive the timing requirement for providing these copies. However, applicants who waive the timing requirement must be given a copy of all appraisals and other written valuations at or prior to consummation or account opening, or, if the transaction is not consummated or the account is not opened, no later than 30 days after the creditor determines the transaction will not be consummated or the account will not be opened.
►Prohibit creditors from charging for the copy of appraisals and other written valuations, but permit creditors to charge applicants reasonable fees for the cost of the appraisals or other written valuations unless applicable law provides otherwise.
The Board of Directors or Senior Management should delegate the responsibility of monitoring and responding to complaints to a manager. Some companies give this individual the title Complaint Resolution Officer or CRO.
All written complaints initially would be directed to the appropriate department and functional area, or, if there is any uncertainty, instead to the CRO. The appropriate personnel will draft responses to consumers and/or regulators, and cross copy the CRO. If the company is small, the initial complaints would be sent directly to the CRO.
►Summarize the facts in a chronological order;
►Detail the precise claims of the complainant;
►Express the resolution desired by the complainant; and,
►Indicate management’s response to the claims of the complainant.
The report should include the recommended course of action or corrective procedures and comments on whether the complaint represents an isolated case or a pattern or practice that needs to be corrected.
►Complaints should be acknowledged within 15 days after receipt of the correspondence, oral, telephonic, or electronic notification of a complaint;
►Inquiries, comments, or objections should be answered or information provided within 15 business days after receipt;
►Complaints not involving an on-site investigation should be fully processed and responded to within 30 days after receipt; and,
►Complaints involving an on-site investigation should be resolved within 45 days after receipt.
You are correct, that under the TILA-RESPA Integrated Disclosure Rule (TRID), the lender must issue a revised Closing Disclosure (CD) if any of the fees reflected therein become inaccurate at or before consummation and, if such revisions result in an increase in the APR of more than 0.125%, consummation must not take place sooner than three business days following the issuance of the corrected CD. [12 CFR § 1026.19(f)(2)]
2. “Such inaccuracy results in a change to an amount actually paid by the consumer from that amount disclosed under paragraph (f)(1)(i) of this section . . . “ [12 CFR 1026.19(f)(2)(iii)]
At the recent NMLS Annual Conference held in Austin, TX, I attended a break-out session conducted by SRR officials Pete Marks and Rich Madison. Also presenting was Tammy Scruggs, a Director in the Kentucky Division of Financial Institutions and Vice-Chairperson of the Mortgage Testing and Education Board. (MTEB)
Question: We originate loans almost exclusively through E-Sign procedures. Recently, we were cited for not providing proper disclosure to consumers regarding our E-Sign policies. What are the proper disclosures that we must provide consumers in order to ensure compliance with E-Sign?
The Electronic Signatures in Global and National Commerce Act (E-Sign Act) provides a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce. The E-Sign Act allows the use of electronic records to satisfy any statute, regulation, or rule of law requiring that such information be provided in writing, if the consumer has affirmatively consented to such use and has not withdrawn such consent.
Prior Consent is required from the consumers in order to implement the E-Sign Act procedures. Prior to obtaining their consent, financial institutions must provide consumers, a clear and conspicuous statement informing the consumer:
►Of any right or option to have the record provided or made available on paper or in a non-electronic form, and the right to withdraw consent, including any conditions, consequences, and fees in the event of such withdrawal;
►Whether the consent applies only to the particular transaction that triggered the disclosure or to identified categories of records that may be provided during the course of the parties’ relationship;
►That describes the procedures the consumer must use to withdraw consent and to update information needed to contact the consumer electronically; and
►That informs the consumer how the consumer may nonetheless request a paper copy of a record and whether any fee will be charged for that copy.
Jonathan Foxx is managing director of Lenders Compliance Group, the first and only full-service, mortgage risk management firm in the United States, specializing exclusively in outsourced mortgage compliance and offering a suite of services in residential mortgage banking for banks and non-banks. If you would like to contact him, please e-mail Compliance@LendersComplianceGroup.com.