Last week, the CFPB published a second update to its examination procedures to account for the new mortgage regulations going into effect in January 2014. The update includes Interim TILA Examination and Interim RESPA Examination Procedures and covers the CFPB’s mortgage origination rules issued through May 29, 2013, and mortgage servicing rules issued through
July 10, 2013. As we previously reported, the Bureau updated the Interim TILA Examination Procedures and Interim ECOA Examination Procedures this past June.
Although the CFPB’s associated press release trumpets the revised examination procedures as increasing transparency and offering valuable guidance, the new procedures generally restate existing rules with little added value. The revised procedures address a number of requirements, including:
- Requirements that lenders evaluate a borrower’s ability to pay back the loan: The Interim TILA Examination Procedures add a section on the Ability to Repay Rule. The section repeats the Ability to Repay Rule’s requirement for creditors to determine that a consumer has the ability to repay a loan. Using the principal and interest over the long term, creditors need to verify a consumer’s financial information, evaluate that information, and conclude that the borrower can repay the loan.
- Requirements that ban or limit certain points, fees, and features: Within the section relating to the Ability to Repay Rule, the Interim TILA Examination Procedures add sections relating to limitations on points, fees, and loan features for a Qualified Mortgage.
- Requirements that servicers provide monthly statements and disclosures: The Interim TILA Examination Procedures add a section on periodic statements for closed-end mortgages. The new section summarizes and restates requirements regarding periodic statements from the Mortgage Servicing Rules. As described in the procedures, mortgage servicers must provide regular statements which include the amount and due date of the next payment; a breakdown of payments by principal, interest, fees, and escrow; and recent transaction activity. In addition, the procedures restate requirements regarding interest rate adjustment notices for ARMs.
- Requirements that creditors use a licensed or certified appraiser: The Interim TILA Examination Procedures add a section restating the requirement that creditors use a licensed or certified appraiser to prepare a written appraisal report based on a physical inspection of the interior of the property for higher-priced mortgage loans.
- Restrictions on dual tracking: The Interim RESPA Examination Procedures add limited language regarding restrictions on dual-tracking, although the term “dual tracking” is only used once in the examination procedures. The concept of dual tracking is addressed in a section titled “Prohibition on Foreclosure Referral.” The section repeats the standards for when a servicer can make a first foreclosure notice or filing.
- Requirements that servicers establish policies and procedures for access to servicing personnel and a review process: The Interim RESPA Examination Procedures add a section regarding continuity of contact. This section summarizes the relevant provisions from the Mortgage Servicing Rules.