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Linda Knowlton is vice president and manager at Fort Myers, Fla.-based Mortgage Group Services LLC and president of the Southwest Chapter of the Florida Association of Mortgage Professionals (FAMP). She serves as Membership Committee chairperson for FAMP State and as director of the FAMP Foundation Education Board. National Mortgage Professional Magazine recently spoke with her about her work with this chapter.
 
How did you get involved with the Florida Association of Mortgage Professionals Southwest Chapter and what was the path that led you to the leadership role?
I became involved about five to six years ago. I was attending a continuing education course on a local level and the then-current president, Dave Kane, was at the meeting. He indicated the Chapter needed to step up and get more people involved or we would have to close our Southwest Chapter. I wouldn’t say that the chapter was dormant at the time, but it was pretty close. We lost thousands and thousands of brokers across the state and it impacted the Southwest Chapter.
 
So, we got together with three or four others and started work on rebuilding the chapter. We started with less than 40 members when I took office, and now we are almost to 100.
 
Why should a mortgage professional in your market get involved with FAMP’s Southwest Chapter?
You do not need to be active at a state level, but you need to be active locally and know what goes on. We, as licensed originators, must support and police our own industry. Communication is the key to any success individually and professionally, and FAMP is striving constantly to communicate to our members. FAMP provides information that we need to use on a daily basis. For example, we have the Office of Financial Regulation speak to our Chapter and discuss regulations, license requirements and audits. We also have had a local attorney discuss contract issues. Other speakers and topics include, tax analysis hosted by a FAMP-supported PMI company; compliance; licensing and regulation topics. Our local and state legislators have also spoken at many of our meetings. It is essential that we know who are local and state legislators are. When we lobby in Tallahassee and in D.C.; we get to know who the players are and who we need to be in front of and they get to know who we are as well.
Our chapter has 12 meetings a year, which include two luncheons and a social each quarterly. We also hosted our first golf tournament, to benefit a local non-profit.
 
How is your chapter involved in the state and national legislative discussion?
At a state level, each FAMP Chapter goes to Tallahassee—or, as we say, we “Rally in Tally”—each year. At the national level, we encourage members to go to the NAMB Legislative & Regulatory Conference in Washington, D.C. to lobby on Capitol Hill.
 
What do you see as your most significant accomplishment within the Southwest Chapter?
It would definitely be my involvement in rebuilding the Chapter. We took a chapter that was not active for at least three to five years, and have tripled the membership, but more importantly, we are supporting our industry on a local level with our SW Chapter.
 
What is the level of synergy between your chapter and NAMB?
We have a very good relationship with NAMB. NAMB Past President John Councilman lives here—and he is very active in our chapter. It is nice to have him here. We provide communication from NAMB to our members on a weekly basis.
 
In your professional opinion, what can be done to bring more young people into mortgage careers?
We’re trying to obtain new Millennials as members. FAMP’s Chapters are also trying to recruit Millennials from related industries, such as banking and real estate, or right out of college. Do have an answer yet? No. But we are trying to bridge the age gap for the association and the industry.
 
How would you describe your area’s housing market?
It is very active, from a standpoint of sales values. Certain portions in our market are between $175,000-$300,000, and they are pretty active—we are seeing multiple offers. There are also many first-time homebuyers in this market—I am currently working with four of them, which is very encouraging. We also have a lot of seasonal buyers, and that market is pretty strong. There is a challenge with homes in certain price ranges staying on the market longer than they should. Staying connected with the real estate agents and builders help us with our “local” information and we also have them as FAMP members.

Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at PhilH@MortgageNewsNetwork.com.
 
Mark Severance is the branch manager at Regency Mortgage in South Burlington, Vt., and past president of the Vermont Mortgage Bankers Association
Mark Severance is the branch manager at Regency Mortgage in South Burlington, Vt., and past president of the Vermont Mortgage Bankers Association. National Mortgage Professional Magazine recently spoke with him regarding his work with the state’s trade group.
 

How and why did you get involved with the Vermont Mortgage Bankers Association? Can you share the track within your association that led to the leadership role with the association?
I got involved in the VMBA right after it was formed. I always recognized the value in having a trade association to represent the needs of the individual businesses and the group. When the first VMBA president decided to leave the industry part way through his first year, I assumed the presidency to complete his term, and then served a term of my own. I have since done two other terms on the board, and served as president for two years from 2014-2016.
 
Why do you feel members of the mortgage profession in your state join VMBA?
Three reasons: Access to educational opportunities (required for licensing), access to information that affects us all, such as legislative activity, and networking. 
 
What role does VMBA play in the federal and state legislative and regulatory environments? Are there any items on the current agenda you would like to highlight?
We maintain a relationship with a lobbyist in Montpelier to be our “eyes and ears” so that we can be informed on any legislative initiatives that may affect us. We have testified in committee meetings from time to time, and we try to set ourselves up to be resources for our legislators when they need information when considering a bill.
 
Right now, the one thing I can focus on is the State Current Use program. The current laws create a lien on a property when enrolled in Current Use, even when there is no payment or tax triggered. I would like to see that changed so that the lien only comes on to the property when a tax is triggered, which would mirror the policy in other states.
 
What do you see as your most significant accomplishments with VMBA?

Building the association, getting involved with the national Mortgage Bankers Association (MBA) and attending the National Advocacy Conference, providing communication to members about various factors that affect our daily operations, and developing a very positive relationship with our regulators in Montpelier.
 
What is synergy between VMBA and the national MBA and other mortgage/housing trade groups?
VMBA is a member of the national MBA. I sometimes find our influence to be minor, due to being in a state with a small population. I think we can do more in terms of connecting with other trade groups, because there are other groups that have similar interests and focus, such as Realtors, Home Builders and Appraisers.
 
In your opinion, what can be done to bring more young people into mortgage careers?
This is a big issue. Many companies are now starting to address the fact that there are very few young people coming into the business. This is primarily the result of licensing issues, and the time delay between starting work and actually earning commissions. Companies are developing training programs and transitional strategies to get new people from ground zero to the time where they can be productive.
 
How would you define Vermont’s housing market?
Strong. Activity this spring has been robust, and properties are selling quickly, and often with multiple offers.

Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at PhilH@MortgageNewsNetwork.com.
 
Debbie Reinhardt is mortgage planner and central branch manager at American Pacific Mortgage and president of the Greater Sacramento Chapter of the California Association of Mortgage Professionals (CAMP). National Mortgage Professional Magazine recently spoke with her regarding her work with the state’s trade association.
 
How and why did you get involved with the California Association of Mortgage Professionals? Can you share the track within CAMP that led to the leadership role in your chapter?
I served as vice president of the California Association of Residential Lenders (CARL) in San Jose for two terms in the late 1980s, and then relocated to the Sacramento area. We had a very active and vibrant chapter of CARL then, but weren’t very involved in legislative issues … of course, we didn’t have too many legislative issues back then.
 
I decided to become involved in CAMP in 2010 after Dodd-Frank was signed into law by President Obama, because of the unintended consequences on our ability to do business in the best interest of our clients. Unfortunately, when government steps in and tries to “fix” issues, not having a thorough understanding of the lending industry, it can and often does hamper and actually harm a buyer/borrower in a real estate transaction. I estimate that the additional costs incurred by lenders to satisfy the burdensome rules of Dodd-Frank have added an additional 0.50 percent to 0.75 percent to the interest rate for borrowers, while the benefits realized by borrowers are nebulous at best.
 
I joined the board of the Greater Sacramento Chapter of CAMP and served first as secretary, then chair of the Membership and Education Committees. I was asked to stand for president last year and agreed to run for the 2016-2017 year. We received the award for Large Chapter of the Year at the end of 2016.
 
Why do you feel members of the mortgage profession in your state join CAMP?
Some join because they realize that CAMP advocates on their behalf and for their borrowers, at the state level as well as in Washington, D.C., in conjunction with NAMB. We would be able to accomplish more if we had more members. It would give us a larger voice in legislation being drafted and/or considered because there is power in numbers when it comes to politics.
 
When I’ve participated in Legislative Days at the state capitol, one of the first questions I’m usually asked is: “How many members does your association have?” Considering there are several thousand loan officers in California, it is disappointing that CAMP’s membership statewide is only a little over 2,000 members. We plan to increase our membership by 10 percent each year.
 
I think most join to take advantage of the educational and networking events CAMP hosts monthly. I believe that we do a good job of educating our industry about changes that our members need to be aware of. We also have joint networking events with many professional real estate groups, such as the WCR (Women’s Council of Realtors), YPN (Young Professionals Network), NAHREP (National Association of Hispanic Real Estate Professionals), AREAA (Asian Real Estate Association of America), and the local real estate associations.
 
It is our goal to let more loan officers and mortgage brokers know about the additional benefits they can gain from membership, like discounted continuing education; Web site and CRM set up; Market Focus, an automated marketing service; Constant Contact, PRO mortgage origination software; a review management system; and UPS shipping services. Also included with membership is a free half-hour of legal advice every month from Herman Thordsen. A variety of medical and dental plans, plus a vision plan, are available through CAMP.
 
What role does CAMP play in the federal and state legislative and regulatory environments, and are there any items on the current agenda you would like to highlight?
CAMP is dedicated to watching the state laws that affect our industry, in conjunction with any federal laws that affect us. We attend Lobby Day in Washington, D.C. in April, followed by our own State Lobby Day in Sacramento in May. We take these opportunities to talk to legislators, and educate them to think about how their votes affect our industry’s ability to serve their constituents and perhaps how changes to proposed legislation might be beneficial. We advocate or oppose legislation based on how it might ultimately affect a homeowner or borrower. The legislation might deal with property taxes, interest deductibility, disclosure of loan terms such as with PACE or HERO loans, compliance issues, licensing requirements, flood insurance availability and cost, and any other issue that might affect our industry and thereby affect our clients.
We support HR3393—The Mortgage Fairness Act. This bill would make a technical correction to the Dodd-Frank Act, allowing low and moderate income borrowers and homebuyers some flexibility in the loans they choose so that they can have better cash flow at the time of closing.
 
We also support licensing, continuing education and NMLS registration for all originators in order to increase professionalism in our industry. We are advocating support for including veterans as a protected class under ECOA, helping end discrimination against VA loans, and increasing lending limits (eligibility) for VA loans.
 
What do you see as your most significant accomplishments with the association?
We are systematizing the marketing of our educational and networking events to ensure timely and frequent notification of our members and future members to achieve maximum attendance and enlist new members. We are also in the process of revamping our Web site to make it more user-friendly for joining CAMP, registering for an event or learning about all the benefits the association has to offer and how you can become involved.
 
We increased our membership by more than 10 percent last year and intend to equal or surpass that increase this year. The officers and committee chairs being installed in July will have written descriptions of their duties and responsibilities, which will help them more successfully satisfy the requirements of their offices and committees.
 
What is the synergy between CAMP and NAMB?
NAMB is the good “Big Brother,” always watching out for all the states, as their representatives go to The Hill almost every day to advocate for legislation affecting all the states. California, as the most populous state, works hand in hand (conferences, Webinars, outreach programs) with NAMB and other interest groups for the betterment of our profession. Membership in NAMB keeps one abreast of developments on a national level, whereas CAMP focuses on the state level.
 
How would you define your state’s housing market?
I think inventory is a problem in almost all areas of California. Many homes are receiving multiple offers and selling very quickly at or above the listed price because there just aren’t that many homes for sale. Appraisers, having borne the brunt of some of the blame for the housing crisis, are not using time adjustments to increase value, so some appraisals are coming in below the agreed upon selling price. Frequently, this necessitates re-negotiating the sales price at or near the appraised value. This is having some effect on moderating price increases.
 
Even in the new home arena, builders have been somewhat slow to re-engage so we are lagging quite a bit behind in the number of housing units needing to be built to satisfy the new household creation. This trend is continuing to increase prices, although not as rapidly as last year. As interest rates slowly rise, hopefully this will act as an additional damper on price increases or many first-time buyers may find themselves priced out of the market.
 
We still have some areas with some homes that are underwater due to maxing out their equity during the boom times, but in most areas values are back or close to where they were before the meltdown. We are anticipating another good year in the mortgage business, although more from purchase business as refinance volume has dropped significantly due to the slight increase in interest rates.

Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at PhilH@MortgageNewsNetwork.com.

 
Question: We are in the process of reviewing our loan officer compensation plans, which means we are also looking closely at the employment agreements. I realize that the details in this area are very complicated, but would it be possible to offer some basic concepts that should be considered in our review analysis for the employment agreements?
 
Answer
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.
 
Here are some concepts every financial institution should consider when structuring an MLO employment agreement:
 
►Do not impose a monetary penalty on an MLO for failing to follow policy (i.e., collecting all required fees) on a per loan basis. That amounts to varying compensation based upon a term of the transaction. Instead, use a semi-annual review to adjust commission rates positively or negatively.
►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.
 
In the review process, it is critically important not only to consider the applicable federal and state regulations, but also conduct a thorough review of their commentaries and supplementary information.

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.

Frederic P. “Freddie” McDowell is a loan originator at Boca Raton, Fla.-based Choice Mortgage Bank, and president of the Palm Beaches Chapter of the Florida Association of Mortgage Professionals (FAMP). National Mortgage Professional Magazine recently spoke with him regarding his work with this trade association.
 
How and why did you get involved with FAMP? Can you share the track within FAMP that led to the leadership role in your chapter?
I became involved with FAMP to lend support to the only organization that represents mortgage professionals in the state of Florida … brokers and lenders. I became a member in the 1990s, worked on several of the chapter committees; became an instructor for the “FAMP Foundation,” which provided required CE credits to loan originators to renew their license; served on the Palm Beach Chapter Board of Directors; and recently became president of the Palm Beaches Chapter of FAMP.
 
Why do you feel members of the mortgage profession in your state join an association like FAMP?
I believe members join FAMP to receive quality education, keep current on political affairs, and become part of an organization which holds its members to a high standard of ethics to be able to serve the public in a more professional manner.
 
What role does FAMP play in the federal and state legislative and regulatory environments, and are there any items on the current agenda you would like to highlight?

Our organization supports NAMB, which does have more influence on matters of federal legislative and regulatory environments than we do as a state organization. But we as a state organization have managed to communicate with our state legislature and work with the legislators to help provide legislation that not only protects the public, but also creates fair playing fields within our industry.
 
What do you see as your most significant accomplishments with the association?
Hopefully, I have provided the leadership of the Palm Beaches Chapter to work cooperatively with the state level of the organization to achieve its goals with the membership, and have brought forth a supportive effort with our fellow chapters to work with them in achieving their local goals. Through my work with our great board of directors, we have doubled our membership and are in the process of providing increased rapport with our surrounding professional organizations involved with serving the consumer in the purchasing and financing of properties.
 
We are also developing local non-CE programs to provide practical training and education for our membership and related professional organizations involved serving consumers in the purchase and financing of properties.
 
What is the synergy between FAMP and NAMB?
We highly support NAMB through our organization, both through membership and corporation whenever possible. Several of our FAMP state association officers, and past presidents are also officers within NAMB who are working to achieve the goals of both organizations.
 
In your opinion, what can be done to bring more young people into careers in the mortgage profession?
We can provide practical training programs for specific areas of the profession, such as processor, loan originator either sponsored by our organization or made available through the college system, or private schools that are accredited and monitored by the state legislature.
 
How would you define the state of the Florida housing market?
Our state’s housing market is inflating at what I consider an alarming rate, causing a dwindling of affordable homes for middle- and lower-income families. Florida is not, in my opinion an “industry-based state.” Thus, wages do not increase with inflated home costs. Once homes break the affordable threshold for fixed-income individuals, and the two-person middle-class working family’s income, their ability to make mortgage payments are exceeded. It is rapidly getting very hard to find homes for $200,000 to $300,000 in the metropolitan areas—especially in Palm Beach, Broward and Miami-Dade Counties.

Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at PhilH@MortgageNewsNetwork.com.

 
Michael Mulgrew is president of Columbus, Ohio-based Partners United Financial LLC and current statewide president of the Ohio Mortgage Bankers Association (OMBA). National Mortgage Professional Magazine recently spoke with him about his work with his state’s trade organization.
 
How and why did you get involved with the OMBA? Can you share the track within your association that led to the leadership role?
I was invited to join the OMBA board after finishing a seven-year progression through the local MBA board and chairs. I accepted the position because I think that it’s our responsibility to serve our industry and give back to our profession. I started as a board member and was invited to join the executive board as secretary, treasurer, vice president and currently, as president.
 
Why do you feel members of the mortgage profession in your state join OMBA?
I believe our association provides tremendous value to our members in several key areas: Advocacy at the state level, training classes that help build skill inside their organizations and quality sessions at our Annual Convention. We provide benefits to all employees of each of our member companies, and provide a diverse offering of training seminars.
 
What role does your association play in the federal and state legislative and regulatory environments? Are there any items on the current agenda you would like to highlight?
We work hard to provide significant advocacy in our state. We’ve built our Political Action Committee to one of the larger PACs in the country and use that leverage to build relationships with key committee members in the legislative bodies. We’ve hired a professional lobbyist and have worked hard to build relationships with our regulators. Our partnership with the national MBA has given us model legislation to propose, and we were successful in advancing a "Vacant and Abandoned Properties” bill that has been signed into law. It will provide large cities with the opportunity to move properties quicker through the process and get them back into the hands of homeowners instead of being a blight in our cities.
We are currently working on a licensing bill that will simplify and modernize our licensing structure in Ohio to keep up with the changes in the industry. We’ve worked with other stakeholders in the community to advance this legislation and have been strongly supported by the national MBA in our efforts.
 
Annually, we host an “Inform the Capitol” Day, where our members from across the state come to Columbus to be educated on important issues in the morning and then we schedule them to meet with their local representatives in the afternoon. We host a reception to close out the day and enjoy good attendance from many of our legislators.
 
What do you see as your most significant accomplishments with the association?
Our association was in a strong place when I arrived on the board, and I am most proud of the fact that we have kept up the momentum moving forward. The legislation is complicated and time consuming, and we have stayed focused on moving it forward inch-by-inch. Our annual convention attendance continues to grow, and this has drawn additional sponsors and energy to our biggest event of the year. 
 
What is the synergy like between your organization, the national MBA and other mortgage and real estate trade groups?
Our executive director, Marianne Collins has long been active in MBA committees and is very well respected at the national level She has helped us forge a great partnership with the national MBA. She also is married to our local association president, and therefore, attends a number of National Association of Realtors (NAR) functions and speaks on behalf of the mortgage industry on their expert panels. This is a tremendous advantage for our association on many fronts, but especially from a collaboration perspective. 
 
In your opinion, what can be done to bring more young people into mortgage careers?
This is a challenge that we face as an industry and are working on multiple solutions to solve it. This past year, our Education Committee Co-Chairs Teresa Rose and Kim Dybvad have been working with the MBA to introduce an internship program for college students interested in a career in mortgage banking. We’re using the experiences of one of our most active members, Union Home Mortgage, who annually hosts 70-plus interns each summer, to provide a template for other members to use to attract the next generation of mortgage bankers to our industry. Teresa and Kim have explored a number of different options to get to this point, and we are anxious to put this program in motion.
 
How would you define your state's housing market?
Our market is still in recovery. Ohio is a very diverse state with a diverse economy. With a statewide average sales price of $228,000 and growing home sales and prices, it’s still an affordable place to live.
However, the northern part of our state is very dependent on the manufacturing aspect of our economy, especially the automotive industry. The central and southwestern portion of the state are more service-based economies. While prices are creeping up, we haven’t reached pre-recession levels and, as a result, there is a shortage of listings.
 
New construction slowed considerable during the recession, and builders are still catching up to meet the needs of today’s homebuyer. As new inventory is absorbed, our sales will likely continue to grow and the market should continue to grow going forward.

Phil Hall is managing editor of National Mortgage Professional Magazine. He may be reached by e-mail at PhilH@MortgageNewsNetwork.com.

http://lenderscompliancegroup.com/
Question: In a situation where a borrower switched from Lender A to Lender B and an appraisal was previously performed for Lender A, can Lender B accept that appraisal? Is Lender A under any obligation to transfer the appraisal to Lender B?
 
Answer
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.
 
If the situation involves a conventional loan, Lender A would have to release the appraisal (which it is under no obligation to do), and certify compliance with the Appraiser Independence Requirements.  
 
Note that in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), a lender is not permitted to request that the appraiser change the name of the client within the appraisal report unless it is a new appraisal assignment.
 
To effect a client name change, the Lender B and the original appraiser may engage in a new appraisal assignment wherein the scope of work is limited to the client name change. A new client name should include the name of the client (lender). As it is a new assignment, the appraiser is entitled to charge another fee.
 
Below are some FAQs from Fannie and Freddie on the topic.
 
Fannie Mae: Appraiser Independence Requirements Frequently Asked Questions
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
November 2010

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.

Joyce Wilkins Pollison is director of Legal & Regulatory Compliance for Lenders Compliance Group.

Question: As part of our company’s efforts to build up the servicing side of our business, and as a hedge against the loss of income from a drop in refinance originations, we just acquired a servicing portfolio from another lender. I am confused about what our reporting obligations are under the Fair Credit Reporting Act (FCRA) with respect to borrower payments that may (or may not) have been made to the previous servicer during the servicing transfer process.  Can you give us any guidance on this issue?
 
Answer
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.
 
This issue is addressed in Regulation X of RESPA [12 CFR 1024.21(d)(5)] which provides that, during the 60-day period beginning on the effective date of transfer of the servicing of any mortgage servicing loan, if the transferor servicer (rather than the transferee servicer that should properly receive payment on the loan) receives payment on or before the applicable due date (including any grace period allowed under the loan documents), a late fee may not be imposed on the borrower with respect to that payment and the payment may not be treated as late “for any other purposes.” (Emphasis added.)
 
This creates an FCRA reporting issue for the new servicer or subservicer because, during the first 60 days after the servicing transfer becomes effective, the new servicer cannot automatically assume that a loan is delinquent just because the new servicer itself has not received payment. It is not uncommon for servicers to suspend credit reporting during that 60 day period to wait for payments from the former servicer. But what happens after that?
 
The new servicer’s affirmative duty to “correct” and “update” information it has previously furnished that is “not complete or accurate” [supra] now requires that any previous credit reporting be revised and updated to show any payments actually received (or not received) by the previous servicer during the 60 day period. This is not something the servicer can just ignore. If the “furnisher” (servicer) becomes aware that payments were in fact received during that period by the previous servicer, the furnisher now “knows” or “has reason to believe” that information previously reported (i.e., absence of payment history because reporting was suspended during the servicing transfer) is inaccurate or incomplete because it now has evidence in its files that payments were in fact received. That information must be reported.
 
In that regard, even though there is no Federal private right of action for violation of these provisions, there can be civil liability to regulatory enforcement authorities for both willful and negligent non-compliance with these requirements. [See 15 U.S.C. §1681n and o, not to mention possible violation of the “Unfair, Deceptive, Abusive Acts or Practices” (UDAAP) provisions of the Dodd-Frank Act [12 U.S.C. §§ 5481, 5531 & 5536(a)].
 
Moreover, the examination guidelines of the Consumer Financial Protection Bureau (CFPB) now include reviews for compliance with the new Mortgage Servicing Rule (Rule) that went into effect on January 10, 2014 imposing additional obligations on servicers. The provisions of that Rule, and related commentary pertaining to mortgage servicing transfers, can be found at 12 CFR 1024.33, 12 CFR 1024.38, and 12 CFR 1024.41.2 and are summarized in CFPB Compliance Bulletin 2014-01, issued on August 14, 2014 to help servicers with these issues. A copy of this Bulletin and the applicable regulations can be found on the CFPB Web site (ConsumerFinance.gov).
 
Among other things, the Rule requires servicers to maintain policies and procedures that are “reasonably designed” to achieve the objectives of facilitating the transfer of information during mortgage servicing and of properly evaluating loss mitigation applications. [12 CFR 1024.38(a), (b)(4)]
 
As you can see, this is a highly technical area. So do not hesitate to call us or your attorney if you need help.

Michael Pfeifer is director of Legal & Regulatory Compliance for Lenders Compliance Group and Servicers Compliance Group.

 
Question: Our bank is undergoing an internal review of its human resources department. I know you conduct such reviews and would like to know some of the primary regulations involving human resources compliance. There are experts in this kind of compliance; however, they seem to be mostly interested in handling litigation issues, while we are looking for a way to draft policies and procedures. What are some important federal regulations involving human resources? What review issues should we consider in our policy statements?
 
Answer
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!
 
HR is the term that describes individuals who comprise the workforce of an organization. Human resources compliance, or "HR compliance," or sometimes colloquially referred to as "HR," is the term that applies to the department and functions within an organization, the administrative responsibility of which is charged with implementing strategies and policies relating to the management of individuals associated with the organization.
 
In many ways, human resources compliance is a central feature of a financial institution’s overall compliance function. This is intuitively obvious, given that local, state, and federal employment laws all play a role in human resources. Indeed, HR must be familiar with a wide array of different statutory and regulatory authorities to effectively and lawfully deal with company personnel.
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.
 
Fair Labor Standards Act (FLSA): This is a federal statute that applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce (unless the employer can claim an exemption from coverage).
 
National Labor Relations Act (NLRA), sometimes called the Wagner Act, which, as amended, is known as the Labor Management Relations Act (LMRA).
The foregoing regulations are but two of the vast array of regulations, at all levels of government, that involve HR.
 
HR compliance takes into consideration virtually all work functions amongst an institution’s rank and file. For instance, HR’s responsibilities in an institution include overseeing and managing duties related to hiring, firing, employee benefits, wages, paychecks, and overtime. 
 
A compliance review of the HR function should include how its many authorities extend to the oversight of workplace safety, privacy, preventing discrimination, prohibiting harassment, minimizing legal liability in the hiring and firing process, worker complaints, job protection, compensation, benefits, pensions, employee training, and labor relations.
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.

 
 
Question: We are drafting a new policy and procedures for providing a copy of an appraisal to the consumer. Would you please outline the most important requirements that we should include in it?
 
Answer
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]
 
There are four requirements that should be outlined in a policy sections with respect to providing a copy of an appraisal to the consumer.
 
As a creditor, the procedures sections should:
 
►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.

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.