We want to thank everyone who attended our webinar “Common Compliance Findings of 2010 & How to Prevent Them.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.
Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email email@example.com.
Have more questions? Submit a question or comment in the comment box at the bottom.
You can also sign up to receive invitations to our webinars and monthly compliance updates.
Question 1 – What kind of documents are reviewed for proof of UW signature?
- Answer – Loan Approval, Transmittal Summary, FHA Transmittal Summary, FHA Conditional Commitment, FHA DE Approval, VA Loan Analysis, etc.
Question 2 – What is the Tabular TIL?
- Answer – TILA, specifically MDIA, states the following: “The September 2010 interim rule requires creditors who extend consumer credit secured by real property or a dwelling to disclose summary information about interest rates and payment changes in a tabular format.” This will be enforced on all applications taken after January 30. For more information, please visit http://www.federalreserve.gov/reportforms/formsreview/RegZ_20100924_ffr.pdf.
Question 3 - What are the penalties or ramifications for not disclosing correctly or timely?
- Answer – The penalty for violating RESPA is up to $10,000 and/or 1 year in prison for each violation. The penalty for violating TILA is $5,000 and/or 1 year in prison for each occurrence. This is in addition to any restitution paid to borrowers.
Question 4 – Can GFE be given to one of two applicants at the time of application and funds collected at that time for appraisal?
- Answer – No, this is would be a violation of RESPA and TILA, as both do not allow for certain fees (including appraisal fees) to be collected at time of application. Also, the GFE may be provided to all borrowers on the application.
Question 5 – When you indicate 7 days from initial TIL to closing, is the day of the TIL day zero, then 7 business days, and then closing can occur after the 7th day?
- Answer – The 7 day waiting period begins the day you send the TIL to the borrower. Closing can occur after the 7th day.
Question 6 – If the borrower dates the disclosures the same day as they were disclosed, would you still need proof of when and how you sent the disclosures?
- Answer – If the application is taken in person and the borrower signs the application and signs/initials the disclosures with a date, this is acceptable evidence of disclosure.
Question 7 - Does the date you pull a credit report count as an item to determine if you’ve taken an application?
- Answer – No. A credit report is not one of the 6 pieces of information that RESPA has defined as an application.
Question 8 - Please provide commentary on important date #2: What is the date for subsequent reissues?
- Answer – You are not required to offer the settlement costs for longer than the original 10 business days.
Question 9 – Can you comment on delivering redisclosures via e-disclosure…do we follow the delivered timeline outline for “mailed” or can we consider received when they receive the e-disclosure?
- Answer – You will need to follow the US mail timeframe unless you have evidence that the borrowers have received the disclosures.
Question 10 - What kind of evidence is acceptable to retain in file that initial disclosures were provided within 3 days?
- Answer – Please refer to page 27 of the presentation. The slides from this webinar can be found at http://www.mortgagecomplianceadvisors.com/wp-content/uploads/2010-Common-Compliance-Findings.pdf.
Question 11 – Is a Decline a changed circumstance?
- Answer - A decline is not a changed circumstance. A decline is an Adverse Action, and a notice must be given to the borrower with reasons for the denial within 30 days of application.
Question 12 – Do any regulators (FDIC, etc.) post common audit findings online?
- Answer – I don’t believe so, but they are government agencies and therefore subject to the Freedom of Information Act.
Question 13 – If a mistake is made on page 1 of the GFE, can or should it be corrected without a changed circumstance, or should you just leave it and risk the violation?
- Answer – It can only be corrected if there is an acceptable changed circumstance. RESPA does not allow for change to be made as a result of a typo or mistake. We highly recommend you review your GFE prior to disclosure.
Question 14 – Should box 1 be the expiration date, or are they asking the date of the GFE?
- Answer – If you are referring to box 1 in the important dates section, this is how long you are going to make the rate offered on the GFE good for. There is no rule as to the time you must give, other than that a date must be given.
Question 15 – Where is the best place to go to get the detailed information on LQI?
- Answer - Please refer to this site https://www.efanniemae.com/sf/lqi/index.jsp.
Question 16 – We need to pull LDP & GSA on FNMA files?
- Answer – Yes. It is now a FNMA regulation that is part of LQI and is required on applications taken after 6-30-10.
Question 17 – We have to re-disclose the TIL if the APR “decreases” by 0.125%?
- Answer – Yes. Here is the excerpt from TILA 226.22:
(2) the annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.
(3) In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than ¼ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.46
Question 18 - Re: the Final GFE matching the Final HUD, how do we “force” Escrow to not change the Final fees after closing?
- Answer – I would recommend reviewing all the HUDs prior to closing and ensure they have been completed correctly.
Question 19 - Where can we get the Special Information Booklet?
- Answer – Special information booklets can be downloaded at http://www.hud.gov/offices/hsg/ramh/res/settlement-cost-booklet03252010.cfm or you can contact HUD to order copies.
Question 20 - Does the letter stating that the disclosures were sent need to be signed by the borrower? Or can we just do a certification?
- Answer – No, the letter does not need to be signed by the borrower. You will just need to retain documentation of when and what documents were sent.
Question 21 – Providing disclosures within 3 days is a hot topic. We have online customers that submit online and “view” the disclosures during this process. Is the submittal printout in the file showing the disclosures viewed, proof that the disclosures were provided?
- Answer – If you can show proof that the borrowers viewed the disclosures and you retain this documentation in your file, it should be acceptable. Please review the e-disclosure rules to assure you are in compliance.
Question 22 – We have a few lenders that will not provide copies of the underwriting package signed by the underwriter. How do we handle this if we cannot get these items from the lender?
- Answer – I would recommend you note in your file that you requested these documents from the lender and your request was denied.
Question 23 – You said RESPA/TILA adopted the 6 pieces of information as a Loan Application. Would that also apply to the ARM Booklet due 3 days after “application”?
- Answer – This is correct. If you take an application for an ARM loan, you will need to provide the CHARM booklet to the borrower within 3 days of receiving all 6 pieces of information.
Question 24 – Are we required to input the SRP that we are receiving for the rate on the GFE, regardless of whether we are bank/broker, correspondent etc….?
- Answer – SRP is not required to be disclosed on the GFE.
Question 25 – Some end investors will not purchase the loans if the disclosures and re-disclosures are incorrect or not provided within the proper timelines. Same with the APR decreasing by more than .125%. Some end investors will not purchase the loans, so I would recommend checking with your intended investor.
- Answer – We always recommend ongoing conversations with your investors as to what their requirements and polices are.
Question 26 – Shouldn’t line 1 of the important dates be the actual lock date if the loan is locked?
- Answer – If your rate is locked, line 1 in the important dates section should be the day the rate lock expires.
Question 27- Is the late fee for VA 5% or 4%?
- Answer – The late fee for a VA loan is 4%.
Question 28 – Refinance loans must be disclosed within 3 days of receiving the 6 pieces of information, correct? You cannot choose not to ask for income or withhold disclosures for the documentation to support what the borrower has stated or provided, correct?
- Answer - I agree on both accounts.
Question 29 – On the GFE, can the credit amount change if you are a broker? One of my lenders told me that could never change. My understanding was it could as long as you were below the original total origination fee.
- Answer – It is our understanding that fees to the borrower can decrease (or credit increases) without penalty.
Question 30 – If you have an interview date on the 1003 of the 3rd, but you don’t have the 6 items to make it an official application but you get a contract on the 10th, can the interview date be the 3rd and all the rest of the RESPAs be dated the 10th?
- Answer – Yes, this is acceptable. However, your application date will be the 10th, as this is when you received all 6 pieces to complete the application.
Question 31 – By date stamp, do you just mean having a date on the cover letter?
- Answer – Yes. Or a date stamp on each disclosure provided to the borrower.
Question 32 – Must an authorization to release information be signed prior to pulling credit, or can it be done later? My understanding was they can give you a verbal authorization.
- Answer – You are allowed to receive verbal authorization to pull credit. However, we recommend you document in your file when the verbal authorization was given. Only having a borrower authorization in the file signed after the credit was pulled is not acceptable.
Question 33 – Are fees/costs included in the Rehab Escrow Account on 203K deals disclosed on the GFE?
- Answer – Yes, these would need to be disclosed on the GFE as they are costs associated with obtaining the loan.
Question 34 – Are they going to put the GFE and TIL on one form or just make it one set of rules/timing?
- Answer – They are going to combine both forms into one single form. There have already been some working drafts of the form released.
Question 35 – How can you prove when you received all 6 items needed for the application?
- Answer –When there is evidence in the file.
Question 36 – Could you explain briefly what a change of circumstance is defined as?
- Answer – The following describes RESPA’s definition: Changed circumstance is now defined in § 3500.2 as: (1) Acts of God, war, disaster, or other emergency; (2) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (4) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.
Question 37 – I know what LDP is, but what is GSA?
- Answer – The GSA is the General Services List, also known as the Excluded Party List.
Question 38 – Earlier in the conference you said there were some exceptions to the 3 day waiting period after a TIL is disclosed. Can you clarify that?
- Answer – TILA does offer an exception to the 3 day waiting period. It states if the borrower has a bona fide personal emergency, they can waive the waiting periods. However, I would not recommend using this exception, and most investors will not allow this either.
Question 39 – The error rates re: final HUD-1 does not match the most recent GFE …Do your findings only include those fee discrepancies that exceed tolerance levels, or are you including all discrepancies in this trending analysis?
- Answer – We would issue findings for both a tolerance violation as well as the final HUD-1 not matching the most recently issued GFE. Both would be included in the trending analysis.
Question 40 – What is the best source for testing—Is it Volume Percentage or Statistical Samples?
- Answer – We recommend using the volume percentage sampling.
Mortgage Compliance Advisors offers a free webinar every month. Visit www.MortgageComplianceAdvisors.com to register for next month’s webinar or to learn more about how MCA can serve all your compliance needs.
(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)