Welcome to the MCA Monthly Compliance Update. To help you stay compliant and up-to-date, our newsletters contain compliance tips and updates. We hope that you find the content informative and useful. As always, your feedback is appreciated.
Join our free monthly webinar “Reviewing Red Flags of Fraud.”
The December 31st enforcement date is fast approaching for the Federal Trade Commission’s Red Flags Rule. Join us for a free webinar on November 18, where we will have a review of common mortgage fraud issues, as well as valuable information and a Q&A session about the FTC’s Red Flags Rule. (It should be noted that the extension of the enforcement deadline to December 31, 2010 does not affect other federal agencies’ enforcement of the original November 1, 2008 deadline.) We hosted a webinar in May about the red flags of fraud, and this month’s webinar will update the information and discuss any new developments.
Question 1 – You have stated that MDIA defines an application the same way as a GFE. So, you are saying that if we do not disclose a GFE because we do not have all of the pieces, then we do not have to issue the TIL either?
Answer – Yes. This is correct. TILA/MDIA shares RESPA’s definition of an application. If you do not have what is defined as an application then you are not required to disclose a TIL statement. This can be found in 12 CFR 226.19 for the Truth in Lending Act.
Question 2 - The Dodd 1 yr GFE and TIL combined implemented from what effective date?
Answer – The effective date is 1 year after transfer. That would be July 22, 2011. However, there is already a working copy going around, and I would expect it to be implemented well before this date.
Question 3 – I had a question related to the LO compensation that we discussed in webinar today. Changing LO compensation is a fairly easy regulation to comply with. It requires a change to the existing mind set, but logistically, it is not difficult. The requirement is to pay the LO based on total volume as a percentage or flat fee per until or some other method that doesn’t result in steering the borrower to an undesirable product.
Ok, so I’m with the regulators so far. Then, here is where I get lost. The regulation also says that companies that broker loans are also subject to the regulations. Ok, so now a brokerage firm or even a lender when acting as a broker also can not be paid differently for different pricing tiers or loan programs? So, effectively investors have to stop by brokerage firms how they are currently paying them. It is not simply paying the loan officer appropriately, but you also have to change the way you pay the firm. The interesting part is that secondary market transactions are exempt, so investors can still pay lenders but not brokers in spread premiums that change with loan program. So, it appears that the regulation much like RESPA is trying to put brokers at a competitive disadvantage. Am I understanding this correctly?
Answer – Yes, according to the rule, an originator is a loan originator and a broker company. Therefore, a broker company cannot be compensated based on the terms of the loan.
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