We want to thank everyone who attended our webinar “Common Compliance Findings and How to Prevent Them.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides from the webinar.

We look forward to serving all your compliance needs. Feel free to contact us with any requests or questions. Click an icon under “Contact Us” at the top right.

Question 1 – If we purchased a QC manual from MCA, are updates available for new laws?

• Answer - Yes, MCA does offer updates to your Quality Control Plan. You can contact us at your convenience so that we can discuss the specifics of your plan.

Question 2 – Do you have a suggestion on how much time before closing we should pull the FNMA comparison report?

• Answer – If you are referring to the re-pulling of credit to check for undisclosed liabilities, we suggest you pull this as close to closing as possible.

Question 3 – What is an example of proof of receipt?

• Answer – An example of proof of receipt would be a confirmation email, delivery receipt, fax confirmation, etc. (See slide 32)

Question 4 – How do you address a GFE issued as a lender and a subsequent submission as a broker?  One will have YSP and one will not, and investors fees are different.  Can you give guidance on this when we are submitting to 2 different avenues?

• Answer – Once you provide the GFE, you cannot change the amount in block 1. This includes your investor fees. However, when you lock the loan, you will then be required to state the credit (YSP) to the borrower.

Question 5 – If the origination fee on the initial good faith estimate is less than the actual origination charge on the final HUD, is any corrective action required?

• Answer – No corrective action is needed. However, some investors will require your most recently disclosed GFE figures match the final figures on your HUD1.

Question 6 – Are we required to provide evidence that the disclosures were provided to the borrowers within 3 days of the application date and/or the disclosures are required to be signed and dated within 3 days of the application date?

• Answer – Yes, you are required to provide evidence you sent disclosures within three days of application. Borrowers are not required to sign the initial disclosures. However, some states do require their disclosures be signed.

Question 7 – Is redisclosure of TILA required if it increases .125%? We are interpreting if this increases or decreases.

• Answer – TILA does state you need to redisclose if the APR increases or decreases by more than .125%

Question 8 – Do you have a list of what is considered “prepaid finance charge”? I am finding a great disparity of what is considered a PPF.

• Answer – We recommend you visit Doc Magic’s site for their Fees & Charges List Matrix.

Question 9 – When a loan goes from a “float” to a lock and nothing else will change, is the GFE required to be redisclosed?

• Answer – Yes, you will need to redisclose and update the important dates section on the GFE.

Question 10 – What is considered an early default, and if we do not service, how would we know?

• Answer – Early Payment Default (EPD) is defined as 60 days late in the first 6 months by FHA and Fannie Mae defines EPD as 90 days past due in the past 24 months. For FHA, you can get this info in FHA Connection. For Fannie Mae you will need to be the servicer for this info.

Question 11 - How do you determine the application date while auditing to know that the initial disclosures were provided within 3 business days?

• Answer – We generally use the earliest date located on the application. Generally the day the LO signed the application.

Question 12 – Must we issue a new TIL to customer within 3 days of discovering a change of interest rate or is it okay if mailed 6 days before closing?

• Answer – A borrower must receive the new TIL 3 days prior to closing. If you mail the redisclosed TIL, you can close on the 7th day after mailing.

Question 13 – If you are a wholesale lender, does the 7 days start when you get the application or when the broker took the initial application?

• Answer – According to TILA, a broker cannot issue a TIL (unless table funded). The 7 day waiting period does not start until the lender issues the initial TIL.

Question 14 – Does the 10 business days include Saturdays? I’ve heard yes and no.

• Answer – Yes, you can count Saturday as a business day. (See slide 33)

Question 15 – What is a best practice correction, if a GFE does not have the important dates filled in correctly?  Is it okay to send a revised one to the borrower and put a processor cert explaining why in the file?

• Answer – Yes. You are required to redisclose the GFE if there are changes to the important dates. Your Changed Circumstances form should state the reason for the change.

Question 16 – Do we need to include the TIL verbiage on all Truth in Lending disclosures? We have heard it is not required on the final TIL.

• Answer – When reviewing the file for an audit, we follow the instructions per MDIA in that we look to see the verbiage has been included on the initial and any subsequent TIL disclosures, as well as the final TIL. What you are referring to is that some lenders are allowing the omission of the verbiage if the final TIL is within .125% tolerance of initial TIL. If the final is over the .125% tolerance, technically it is a re-disclosure of the TIL and is required to be provided to your borrower within 3 business days of closing. You will then have three disclosures, the first two which will be required to have the verbiage, and the Final, which your lender may not require the verbiage to be printed on.

Question 17 – What can I do to remedy findings in my QC audit report?

Answer – We suggest you review all the findings you receive in your Quality Control report. If you find that the issue was incorrect, copy the documents and attach them to your Quality Control report and make note of the corrections.

With the FTC’s further extension of the Red Flags Rule deadline, Mortgage Compliance Advisors encourages mortgage brokers and lenders not to put off implementing their Red Flag Policy.

May 28, 2010 – This morning, the Federal Trade Commission announced a further extension of the enforcement date for the Red Flags Rule. The previous enforcement deadline, June 1, 2010, has now been extended to December 31, 2010. The FTC states that the reason for the extension is to allow congress time to “consider legislation that would affect the scope of entities covered by the Rule.” However, the FTC goes on to say that the announcement “does not affect other federal agencies’ enforcement of the original November 1, 2008 deadline for institutions subject to their oversight to be in compliance.”*

The FTC’s Red Flags Rule is designed to reduce identity theft by requiring organizations to “implement a written Identity Theft Prevention Program designed to detect the warning signs – or ‘red flags’ – of identity theft in their day-to-day operations, take steps to prevent the crime, and mitigate the damage it inflicts.” Mortgage Compliance Advisors reminds mortgage brokers and lenders that although the enforcement deadline may have moved, it is still a sound business decision to implement a written identity theft prevention program as soon as possible. Most financial institutions are already taking steps to mitigate identity theft, but a written policy is a smart way to help protect customers and the company and to make sure proper procedures are followed.

As a simple solution to help mortgage brokers and lenders comply with the Red Flags Rule, Mortgage Compliance Advisors announced the launch of its succinct, customizable Red Flag Policy. The Policy is tailored specifically to an organization’s size, risks, and complexity.  To create a customized Red Flag Policy, clients may purchase the Do-it-yourself template; or the client may provide MCA with basic information about the organization, and MCA can create a comprehensive, customized Red Flag Policy in just a few hours. These options provide a way for the client can have their policy taken care of well before the deadline.

*(Read the FTC’s announcement at: http://www.ftc.gov/opa/2010/05/redflags.shtm.)

Call 877-226-3217 or visit our website for more information about our Red Flag Policy.

-

We have posted the slides from our May 2010 webinar “Red Flags of Fraud.” If you would like to view or print previous presentations, you can find the slides from all of our past webinars under the News and Resources tab.

As always, we are happy to hear from you and encourage you to submit requests for webinar topics to info@mortgagecomplianceadvisors.com.

• Download the slides for “Red Flags of Fraud”

Check back soon for answers to all the questions asked during the webinar!

We want to thank everyone who attended our webinar “Managing Your Early Payment Default Risk.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides from the webinar.

Question 1 – HUD just eliminated the Correspondent level of FHA approval.  Will only DE’s apply to market watch?

• Answer – The market watch will now (once the regulation takes effect) only apply to the Sponsor (DE) lender. HUD no longer puts out a market watch list; however, they still do keep track of the lenders (sponsors) they have concerns about.

Question 2 – Are there other reports besides the Neighborhood watch, we the lender need to be reviewing?

• Answer – Outside of Neighborhood Watch, we suggest you practice effective communication with your lenders to determine how the loans you originate are performing.

Question 3 – A.) Is Sponsor responsible for tracking and if so How do they find out about EPD’s for 100% review, or  B.) Is the investor responsible for reviewing the loan they purchased?

• Answer – The Sponsor is responsible for finding out about the EPD through Neighborhood Watch HUD  website. The investor is not the one that would be responsible to HUD for the EPD.

Question 4 – When reviewing Neighborhood Watch, how can we determine if a company is on the HUD Watch list vs. being terminated?

• Answer – If the percentage reaches termination threshold, HUD will contact the appropriate parties. Neighborhood Watch will provide lender status as (A) active, (T) terminated or (M) merged.

Question 5 – How would a small sampling of loans affect the ratio, especially in HUD review for termination?

• Answer – When HUD is analyzing the number of default loans compared to the region, or the nation, it does consider the total number of loans that were closed to see how that affects the default ratios. While there is no guarantee that a small number of loans with just a few defaults will make HUD overlook the ratios, it is one aspect of the overall analysis.

Welcome to the MCA Monthly Update. To help you stay compliant and up-to-date, our newsletters contain underwriting tips, processing tips, and compliance updates. We hope that you find the content informative and useful. As always, your feedback is appreciated. Join our free monthly webinar “Managing Your Early Payment Default Risk.” We want to thank those who attended last month’s webinar, especially our panelists. We had great interaction and discussion, and we look forward to the next webinar. . We have posted the slides from March’s webinar on our website. You can find slides from every webinar on our website under the News & Resources tab. . Because we receive many questions about Early Payment Defaults (EPDs), April’s webinar will focus on managing your EPD risk. . Learn what constitutes an EPD, its effects, and how to limit your exposure. . Join our webinar on Thursday, April 22 at 12:00 pm MST. Reserve your webinar seat now at: . https://www1.gotomeeting.com/register/585502440 . Today, mortgage lenders are working to reduce the risk of one of their loans going into early payment default (EPD). Join us for our next free monthly webinar to learn what constitutes an early payment default, how it can affect your business, and steps you can take within your organization to limit your exposure. . We are always happy to hear from you and encourage you to submit your questions to info@mortgagecomplianceadvisors.com. . - – - – - – - – - - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - - . If you have any questions, simply reply to this email or call us at 877-226-3216. . For real time compliance news, you can now follow us on Twitter and Facebook. www.MortgageComplianceAdvisors.com

Feel free to call us with any questions at 877-226-3216.