REGULATION Z REVISIONS IN EFFECT JULY 30, 2009

On July 30, the new Regulation Z changes for the Truth in Lending Act (TIL) became effective. As part of Regulation Z, the Mortgage Disclosure Improvement Act (MDIA) revised TIL requirements surrounding early and final disclosures to homebuyers, as well as discussing when fees are allowed to be collected. (Read the Federal Reserve Board’s press release at www.federalreserve.gov/newsevents/press/bcreg/20090508a.htm.)

A Few Highlights:
– Creditors must “give good faith estimates of mortgage loan costs (‘early disclosures’) within three business days after receiving a consumer’s application for a mortgage loan and before any fees are collected from the consumer, other than a reasonable fee for obtaining the consumer’s credit history.
– Creditors [must] wait seven business days after they provide the early disclosures before closing the loan
– Creditors [must] provide new disclosures with a revised annual percentage rate (APR), and wait an additional three business days before closing the loan, if a change occurs that makes the APR in the early disclosures inaccurate beyond a specified tolerance [.125%].”

UPDATE: DEADLINE FOR RED FLAGS RULE EXTENDED TO NOVEMBER 1

Last week the Federal Trade Commission announced a three month extension of the Red Flags Rule deadline. The FTC moved the deadline from August 1 to November 1, to give creditors and financial institutions more time to implement a written Identity Theft Prevention Program, also known as a Red Flag Policy. (For more information on this FTC requirement, see www.ftc.gov/opa/2009/07/redflag.shtm or contact us with questions.)

FHA UPDATE

HUD frequently publishes updates, known as Mortgagee Letters, containing new policies and other information for lenders. Since our last newsletter, HUD has published four additional letters. Below is a brief summary of all four:

• Home Equity Conversion Mortgage Refinancing of Existing Loans: Letter 09-21. This letter discusses a technical correction for the HECM program, and reiterates guidelines for refinancing HECM mortgages.

“FHA will insure all loans that were originated for the purpose of refinancing an assigned loan that is not in a due and payable status for reasons that cannot be corrected, such as death of the last mortgagor or conveyance of title by all mortgagors, but closed on or after October 6, 2008, the date of the Final Rule.” (Click here to view the entire letter.)

• Revised Temporary Authority for Multifamily Hubs to Process Waiver Requests Pertaining to the Three-Year Rule for Section 223(f) Apartments: Letter 09-22. This letter “rescinds and replaces ML 2009-06… [and] sets forth the Department’s revised policy to grant temporary authority to Multifamily Hub Directors to waive the Three-Year Rule for Section 223(f) applications, for the purpose of providing liquidity to recently constructed or substantially rehabilitated, self-sustaining properties that are unable to secure permanent long term financing due to the freeze in the capital markets…” (Click here to view the entire letter.)

• Making Home Affordable Program: FHA’s Home Affordable Modification Loss Mitigation Option: Letter 09-23. This letter “announces a new FHA Loss Mitigation option, the FHA-Home Affordable Modification Program (FHA-HAMP). FHA-HAMP will provide homeowners in default a greater opportunity to reduce their mortgage payments to a sustainable level. This Mortgagee Letter is effective August 15, 2009… FHA-HAMP can be utilized only if the mortgagor(s) does not qualify for current loss mitigation home retention options…”

A Few Highlights/Guidelines:
– Partial claim up to 30 percent of the unpaid principal balance as of the date of default combined with a loan modification
– Mortgagor must successfully complete a three month trial payment plan, making each scheduled payment on time.
– Servicer must obtain an executed Hardship Affidavit (available at https://www.hmpadmin.com/portal/docs/mod_docs/hamphardshipaffidavit.pdf) from every mortgagor and co-mortgagor seeking an FHA-HAMP
– Front end debt to income ratio must be as close as possible, but not less than, 31 percent
– Back end debt to income ratio must not exceed 55 percent
– Mortgagee may receive an incentive fee of up to $1,250 (Click here to view the entire letter.)

• Housing Tax Credit Coordination Act of 2008: Letter 09-24. This letter “describes the additional authority granted under HERA and the Department’s implementation of Sections 2832 and 2834 of the Act.

– Section 2832 of HERA requires the Secretary to implement administrative and procedural changes to expedite the approval of multifamily housing projects utilizing FHA mortgage insurance programs with either Low-Income Housing Tax Credits or tax-exempt housing bonds…
– Section 2834 of HERA provides three substantive changes to the Department’s processing of certain FHA mortgage insurance applications.” (Click here to view the entire letter and the details of all changes.)

To view all HUD Mortgagee Letters for the year, visit the official website www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm.

FANNIE MAE UPDATE (Coming next newsletter)