Mortgage Compliance Advisors - Your One Stop for Quality Control Services and Resources » red flag rules

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.”

We have posted the slides from last month’s webinar on our website. You can find slides from every webinar on our website under the News & Resources tab.

Review common mortgage fraud issues and the FTC’s Red Flags Rule enforced 12/31/10.

Join our free webinar on Thursday, November 18 at 12:00 p.m. MST.

Reserve your webinar seat now at:

https://www1.gotomeeting.com/register/681262872

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.

This free webinar is open to everyone, and we encourage you to submit your questions during registration or to info@mortgagecomplianceadvisors.com.

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For real time compliance news, you can now follow us on

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www.MortgageComplianceAdvisors.com

Webinar Questions and Answers

Webinar Q&A from “Managing the Year of Change”

We want to thank everyone who attended our webinar: “Managing the Year of Change.” As promised, we have posted the slides and answers to the questions asked.

Download the slides

Download the slides in handout format

We have included the first three questions below. *Please visit our website to read all 7 questions and answers.

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.

…Read the rest of the questions and answers on our website.

HUD/FHA Update

ML 2010-35: Borrower Certification for FHA Refinance of Borrowers in Negative Equity Positions

- Announces that mortgagees must obtain signed certification form from borrower if underwater borrower is refinancing. View the entire letter

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ML 2010-36: Requirements for Combined Loan Amounts

- Eliminates requirements that sum of all liens not exceed geographical max mortgage limit for both purchase and refinance transactions. View the entire letter

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To view all HUD Mortgagee Letters for the year, visit HUD’s website.

Fannie Mae Update

*To view an announcement, visit https://www.efanniemae.com/sf/guides/index.jsp.
Click “2010” on the right, under “Announcements and Lender Letters.” You will then have access to all 2010 announcements.

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SEL-2010-14: Appraiser Independence Requirements

- Announces Appraiser Independence Requirements, which replace HVCC. Effective immediately. Announcement on eFannieMae.com

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SVC-2010-16: Miscellaneous Servicing Policy Changes

- Announces misc. servicing policy changes, including:

Retirement of Payment Reduction Plan

Clarification of mandatory pre-filing mediation policy for mortgage loans in Florida

Waiver of escrow deposit accounts

Flood insurance requirements

Submissions of underwriting and servicing review files

Announcement on eFannieMae.com

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LL-2010-12: Making Home Affordable: Interactions with Hardest-Hit Fund Unemployment and Reinstatement Programs

- Provides guidance to servicers for interactions with Hardest Hit Fund Unemployment and Reinstatement Programs. Announcement on eFannieMae.com

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To view all Fannie Mae Announcements and Letters for the year, visit

Fannie Mae’s website.

Freddie Mac Update

*To view an announcement, visit http://www.freddiemac.com/sell/guide/. The bulletins and industry letters are on the right.

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Bulletin 2010-23: Selling and Servicing

- Announces Appraiser Independence Requirements, which replace HVCC

- Makes changes to requirements regarding:

Property eligibility

Credit

Eligibility requirements for Freddie Mac counterparties

Operational

Mortgage insurance

Bulletin on FreddieMac.com

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Bulletin 2010-24: State Farm Florida Insurance Company

- Announces that Freddie Mac will accept insurance from State Farm Florida Insurance Company… Bulletin on FreddieMac.com

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Bulletin 2010-25: Servicer Requirements for Hardest Hit Fund

- Provides guidance to servicers for interactions with Hardest Hit Fund Unemployment and Reinstatement Programs. Bulletin on FreddieMac.com

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Bulletin 2010-26: Foreclosure and Bankruptcy Referrals in Florida

- Announces that servicers may not refer any new Freddie Mac foreclosure or bankruptcy cases to Law Offices of David J. Stern, P.A. in Florida. Bulletin on FreddieMac.com

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To view Recent Freddie Mac Bulletins/Industry Letters, visit Freddie Mac’s website.

VA Update

Circular 26-10-13: The Veterans Benefits Act of 2010

- Announces enactment of Veterans’ Benefits Act of 2010

Changes to funding fee exemption status

Creation of Specially Adapted Housing (SAH) assistive technology grant program

View the entire circular

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To view VA Circular/News for 2010, visit the VA website.

Feel free to call us with any questions at 877-226-3216 or reply to this email.

Answers to Questions from our Webinar “Red Flags of Fraud.”

admin — Thu, 27 May 2010 17:34:11 +0000

We want to thank everyone who attended our webinar “Red Flags of Fraud.” 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 – What steps would you take if the signatures did not match?

Answer - We first suggest contacting your borrower and discussing the discrepancy with them. If you feel the situation warrants special consideration, such as a deliberate case of misrepresentation, you can contact any of the suggested sites we made available during the presentation (local HUD office, Fannie Mae or the FTC). You should retain in your file the steps you took in detecting and addressing the discrepancy.

Question 2 – Does the geographic concentration change when you look at fraud for profit vs. fraud for housing?

Answer – The geographic concentration can definitely change. We provided the following two sources which demonstrated significant concentrations of fraud in specific geographic location: https://www.efanniemae.com/utility/legal/pdf/fraudstats/fraudupdate0410.pdf and www.fbi.gov/hq/mortgage_fraud.htm. Another excellent source for information on mortgage loan fraud is through the Financial Crimes Enforcement Network, www.fincen.gov.

Question 3 – The IRS allows an ITIN number for the purpose of an individual to file their tax returns, and illegal aliens who do not have a valid Social Security Number can get these IRS issued ITIN numbers. If we discover this, what are we supposed to do?

Answer - If you feel the ITIN number may have been misrepresented to you, you can begin by verifying the information through the IRS as well as following the steps we have suggested in reporting any deliberate acts of misrepresentation. If you are unsure whether an ITIN number itself is a valid form of identification, verify with your lender what they will accept.

Question 4 - What do you “actually” do when you find different addresses on documents?

Answer – We suggest first contacting your borrower and discussing the discrepancy with them. There may be a logical explanation. If you feel the situation warrants special consideration, such as a deliberate case of misrepresentation, you can contact any of the suggested sites we made available during the presentation (local HUD office, Fannie Mae or the FTC). You should retain in your file the steps you took in detecting and addressing the discrepancy.

MCA offers a comprehensive Red Flag policy, and we can provide one for you quickly and easily.

Call 877-250-5243 or click an icon under “Contact Us” for more information or to get started.

(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.)

Slides for May 2010 Webinar: “Red Flags of Fraud”

admin — Fri, 21 May 2010 20:30:43 +0000

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!

MCA Monthly Update – July 2009

admin — Thu, 02 Jul 2009 13:40:00 +0000

Welcome to the MCA Monthly Update. To help you stay compliant and up-to-date, each newsletter we send contains underwriting tips, processing tips, and compliance updates. We hope that you find the content informative and useful.

For next month’s newsletter, we would like to address the biggest issues you are facing in the mortgage industry. Please let us know about any industry issues that you find confusing, or if you just want some more information. We’ll try to answer all your questions in the next newsletter.

REMINDER: APPROACHING DEADLINE OF RED FLAGS RULE

As a reminder, the Federal Trade Commission’s Red Flags Rule will go into effect in less than a month, on August 1. The FTC will require that all financial institutions and creditors, including mortgage brokers and mortgage lenders, have in place a written identity theft prevention program, also known as a Red Flag Policy. (For more information, visit www.FTC.gov or contact us with your questions.)

UNDERWRITING & PROCESSING TIPS

Based on some common findings from quality control audits, we have compiled a list of three tips from the month of June.

1. Make sure that the application and initial disclosures have correct dates. If they are mailed, be sure to date stamp when they were sent in the mail, to stay in compliance with the three day rule.

2. For Prepaid Finance Charges (PFC’s), make sure that they are disclosed accurately on the initial TIL, and clearly marked on the initial Good Faith.

3. Last month we mentioned that everyone should have a closing package from the closing agent for their file. FHA requires lenders to get and maintain copies of at least the HUD-1’s, Note, Deed of Trust, and the final Truth in Lending.

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 three additional letters. Below is a brief summary of all three:

• Energy Efficient Mortgages – Increase in the Dollar Amount of Energy Efficient Improvements: Letter 09-18. “In addition to the base FHA maximum mortgage amount limit, which is calculated on the value of the home, the mortgage loan amount for an Energy Efficient Mortgage (EEM) can be increased by the cost of effective energy improvements…

The maximum amount of the portion of the EEM for energy improvements is the lesser of 5% of:
o the value of the property, or
o 115% of the median area price of a single family dwelling, or
o 150% of the conforming Freddie Mac limit.” (Click here to view the entire letter.)

• Condominium Approval Process – Single Family Housing: Letter 09-19. FHA “is implementing a new approval process for Condominium Projects to insure mortgages on individual units… FHA will now allow lenders to determine project eligibility, review project documentation, and certify to compliance of Section 203(b) of the NHA and 24 CFR 203 of HUD’s regulations.

…[this letter] provide[s] guidelines and instructions on options available to lenders to receive mortgage insurance on condominium units which are located in a project.” (Click here to view the entire letter.)

• Processing Pre-Application Firm Invitation and Firm Commitment Extension Requests: Letter 09-20. This letter discusses FHA’s “policy to grant temporary authority to Multifamily Hub/Program Center Directors to grant one extension, for up to 90-days, of the pre-application firm invitation letter and one 120-day extension of an issued Firm Commitment. The authority granted under this Mortgagee Letter expires December 31, 2009.” (Click here to view the entire letter.)

To view all HUD Mortgagee Letters for the year, click here.

Mortgage Compliance Advisors Announces Launch of Red Flag Template

admin — Thu, 21 May 2009 13:31:00 +0000

With the Federal Trade Commission’s announcement of the Red Flags Rule beginning August 1, 2009, Mortgage Compliance Advisors launches its Red Flag Policy Template for mortgage brokers and lenders.

Salt Lake City, UT – May 21, 2009 – Earlier this month, the Federal Trade Commission announced its extension of the Red Flags Rule from May 1 to August 1, 2009. Beginning August 1, all financial institutions and creditors with covered accounts must comply with the Red Flags Rule. (For more information, visit ftc.gov.) The FTC stated that this 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.” An organization’s Identity Theft Prevention Program, also known as a Red Flag Policy, must be appropriately tailored to its size, risks, and complexity. 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 template.

Mortgage Compliance Advisors (MCA) is partnering with Hudson Cook, LLP, to offer this template, The Mortgage Industry Guide to the Red Flags Rule. The template contains required Red Flag policies and procedures, which include: identifying and detecting red flags, preventing and mitigating identity theft, and periodically updating the program. To create a customized Red Flag Policy, clients may purchase and personally fill out this template; or the client may provide MCA with basic information about the organization, and MCA can fill out the policy template. In order to comply with the Red Flags Rule, organizations must have the policy in place by August 1, 2009.

For more information on the Red Flag Policy Template, visit www.MortgageComplianceAdvisors.com/red_flag_rule.php or call 877-226-3217.