We want to thank everyone who attended our webinar “Compliance Q&A Webinar.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.

• Download the slides

Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com.


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Question 1 – Our in-house officers are paid by salary, our secondary market officers will be paid on a basis point system.  Do we have any worries?

• Answer – Compensation given as salary is acceptable, as well as compensation based on basis points, as long as the basis points are based on loan amount.

Question 2 – If you submit a loan to one investor and they don’t approve it for some reason, and then it gets submitted to a different investor, would that be an allowable CIC if the investor charges are higher than the original investor charges?

• Answer – No, this would not be an acceptable changed circumstance. Please refer to RESPA FAQ:

xv) A mortgage broker issues a GFE based on one lender‘s loan products and origination fees, but places the loan with a different lender.

A: No, this would not constitute a changed circumstance.


Question 3 – Is it correct the TIL does not need to be signed? Do you recommend it be signed?

• Answer – The borrowers are not required to sign the TIL Statement. Yes, we recommend the borrower sign so you will have evidence they received and viewed the TIL Statement.

Question 4 – If a lender accepts a GFE that was issued by a broker, is the lender required to include a GFE in the 3 day disclosure package to the borrower?

• Answer – The lender is not required to issue a GFE when they receive the loan package. However, they are allowed to issue a GFE when they receive the loan package if they wish.

Question 5 – If the seller pays the closing cost, how does this affect the APR?

• Answer – According to RESPA, seller paid costs are still considered borrower paid costs. Therefore, since a borrower paid cost is reflected in the APR, all seller paid costs will affect the APR.

Question 6 – Where does Fannie say we have to pull a new credit report on all loans?

• Answer – If you are referring to the new LQI and Undisclosed Liabilites rule, Fannie Mae does not require you pull a credit report on all loans. If you are referring to audits, in section D1-3-03, Fannie Mae states that on all loans selected for audit “The lender must reverify the borrower’s credit history by obtaining a new in-file credit report for loans underwritten manually and through DU or other automated underwriting systems. The credit report must be from a source other than the original credit reporting agency.”

Question 7 – I am under the impression that since the Origination Fee cannot vary in percent as a function of the loan amount, L.O.’s must pre-determine how many points they will charge every future borrower. So I may decide that everyone gets charged 1.5 points. As a result, If Borrower A asks for a $400,000 loan, I’ll make way more than I would have prior to April 1. And Borrower B, who wants to buy a $60,000 house, with $10,000 down, will be lucky to get a call back. Is this accurate?

• Answer – In my opinion, yes, this would be an accurate statement.

Question 8 – Since the Fed announced in February 2011 that they were declining to finalize the interim rule from September 2010 and the interim rules from August 2009 then is there even a revised TIL requirement?

• Answer – Yes. The revised TIL is still required as this was not part of the rules that were delayed.

Question 9 – Our Bank pays our originators $500.00 for employee loans. Naturally this is different than our normal commission structure. Are we OK with this commission?

• Answer – Yes. A flat fee commission would be acceptable.

Question 10 – Are you saying that a doc prep fee and underwriting fee is now part of the LO compensation?

• Answer – No. Third party fees are still allowed under the new LO comp rule.

Question 11 – What is your advice on this? Our broker has been told he should create an independent DBA and have them invoice separately for processing. If you are a TPO and have an in-house processing department, lenders are recommending we do not include this fee in our base points.

• Answer – It would seem that this would be acceptable. However, remember if you are an affiliate, this would not be acceptable. There has not been clear guidance given regarding this situation.

Question 12 – What if you are a One Man Shop? Do ALL the Rules of the LO Comp apply?

• Answer – Yes, you are still subject to the new LO Comp rule.

Question 13 – In RESPA, when a borrower chooses to remove escrow from the loan application on the day of closing, should the GFE be re-disclosed?

• Answer – We recommend issuing a new GFE when there are any changes to the loan. However, it’s our opinion it would not be necessary to re-issue a GFE in this situation.

Question 14 – If you pull credit but don’t meet all the requirements to be classified as an “application” but the FICO is too low to complete a loan, you still need to send an adverse action notice, correct?

• Answer – Yes. ECOA’s definition of an application is much broader than RESPA’s definition. Because of this, you would need to issue an adverse action notice.

Question 15 – LO Compensation Question #1 (on slides): The answer to this does not seem to match what is indicated in 226.36 D-1-ii. For purposes of this paragraph (d)(1), the amount of credit extended is not deemed to be a transaction term or condition, provided compensation received by or paid to a loan originator, directly or indirectly, is based on a fixed percentage of the amount of credit extended; however, such compensation may be subject to a minimum or maximum dollar amount.

This would seem to indicate the Loan Officer can be paid based on a percentage of the loan amount even when a borrower paid scenario is used.

• Answer – The guidance given in the Federal Reserve’s webinar indicated that if a broker receives compensation directly from the borrower, then employees of the broker may only be paid salary or hourly. I would encourage you to listen to the recorded Federal Reserve webinar for additional guidance on this.

Question 16 – LO compensation question  #2 (on slides): If the borrower is given a credit from the lender for the higher rate, why is the credit not considered the borrower’s funds?  They are “paying” for the credit as part of the high rate. Further, this would keep it under D-1 as consumer paid and work in the consumer’s favor.

• Answer – Lender credits are acceptable as long as they come from the lender and not the broker/LO. If YSP is being paid, all of the YSP must be issued as a credit to the borrower.

Question 17 – LO compensation question  #2: Ok, so if this can’t be used to pay for compensation to the lender/broker, doesn’t this go against RESPA and how the GFE is set up? Since a break down is not required, is all of block one considered compensation to the lender/broker? Block one contains the origination charges and block two (credit) is subtracted to give the borrower an adjust origination charge.  It seems this undermines the intention of RESPA to work in favor of the borrower.

• Answer – Please refer to the RESPA Roundup March 2011 for clarification on how to complete the GFE after the LO Comp rule goes into effect.

Question 18 – Your GFE Cheat Sheet says that the “must go to settlement within __ days” should be NA if a loan is floating.  But, since rate being offered takes into account the anticipated lock period, shouldn’t this field include the anticipated lock period?  Otherwise, if you were pricing a 15 day lock, couldn’t borrower accept the GFE, but say that they want to settle in 60 days?

• Answer – Please refer to the RESPA FAQ page 24 question 11:

Q: The loan originator must state how many calendar days within which the applicant must go to settlement once the interest rate is locked. The number of days cannot be determined until the lock period is determined. May the loan originator enter a range of days for allowable lock periods? Must the loan originator account for the rescission period if the loan is rescindable?

A: No, the loan originator may not enter a range of rate lock options on the GFE. Line 3 requires the disclosure of the number of days in which the borrower must go to settlement. Line 3 in the ―Important dates‖ section on the GFE must be completed with one rate lock period and may need to take into account factors affecting the settlement date.


Question 19 – If your redisclosed GFE has higher fees due to a changed circumstance, don’t you need to allow 10 days on the “Fees Good Through” date?  You said dates don’t need to change, so I just want to clarify.

• Answer – Please refer to REPSA FAQ question #12 under the important dates section:

12) Q: If a revised GFE is provided due to changed circumstances or a borrower requested change, must a loan originator complete Line 2 in the ―Important Dates‖ section on the revised GFE if the shopping period has ended and the borrower has already expressed intent to continue with the application?

A: Yes, the loan originator must complete Line 2 in the ―Important dates‖ section with the same date from the last GFE. The borrower is not required to re-indicate the intent to proceed with the revised GFE because the borrower has previously expressed an intent to move forward with the transaction.


Question 20 – If we are a financial institution that pays only salary and hourly wages to LO’s, is there any reason to have to provide Safe Harbor information?

• Answer – I believe the Safe Harbor is only necessary if you are a broker.  If you are not brokering loans, you would not be subject to the Safe Harbor rule.

Question 21 – What if the lock is being extended? [regarding Important Dates section]

• Answer – We would recommend re-issuing a new GFE with the updated dates in the Important Dates section.

Question 22 – Different investors have different fees which are built into our origination fee. These show on our funding advice.  Will regulators expect to see these reflected differently on the origination charged? ie. RD loan fees are 257.00

• Answer – If audited, they may request these documents. I cannot speak as to what regulators will look for. They always seem to surprise me on what they will look for. I would recommend retaining any information in the file necessary to explain any questions to an auditor.

Question 23 – Flag Star fees are $300- would a regulator expect the origination fee to be $43 higher on the HUD for a Flag Star loan? This question regards what our regulator will want to see.

• Answer – I cannot speak as to what regulators will look for. They always seem to surprise me on what they will look for.  I would recommend retaining any information in the file necessary to explain any questions to an auditor.

Question 24 – Does the lender credit have to be on the GFE?

• Answer – No, a lender can issue a credit at closing and it would not be necessary to re-issue a new GFE, as the costs to the borrower are decreasing.

Question 25 – So how do you clear this issue?  The borrower cannot pay it because this would change fees that should have been disclosed.  The lender won’t eat the fees. So as a lender, do we deny the loan and have the broker start all over?  This is pertaining to fees that a broker forgot to disclose.

• Answer – The lender would need to cover the fees or the borrower would need to pay the difference.

Question 26 – If a customer did not want an escrow account at application and then decides to escrow during the underwriting process or before closing, do we need to re-disclose GFE to include the escrow since it is not one of the changes that effect tolerances?

• Answer – We recommend issuing a new GFE when there are any changes to the loan. Also, if there is any change to the borrower credit (YSP) due to the escrow change, you would need to redisclose.

Question 27 – On a zero cost loan, if you disclose at application on the GFE that you are going to give them a credit of $400 for the appraisal and the appraisal actually comes in at $375, do we still have to credit them the full $400 or can we credit them for the actual cost of the appraisal to the Bank of $375?

• Answer – You are not allowed to decrease the amount of a credit listed on the GFE unless there is an acceptable changed circumstance. A decrease in the borrower credit for the appraisal being less is not an acceptable changed circumstance.

Question 28 – On a zero cost home equity loan, are you required to redisclose because of adding escrow?

• Answer – We recommend issuing a new GFE when there are any changes to the loan.

Question 29 – Is Safe Harbor on all loans or just TPO?

• Answer – It’s our understanding the Safe Harbor is only for TPO loans.

Question 30 – If you put a policy in place requiring an updated credit report be obtained prior to closing for the purpose of QC, do you then have to update the ratios, DU, etc. for underwriting purposes if additional credit has been extended?

• Answer – Possibly. Please refer to Fannie Mae Lender Letter SEL-2010-11. In the letter, it states if you discover additional debts or lower income and DTI to exceed 45% or an increase over 3%.

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.)

Did you know…?

Brokers are not required to issue an initial TIL or initial Servicing Disclosure Statement.

In accordance with RESPA and TILA, we will not issue a finding to brokers if these documents are not in the file. Check out the regulations:

• Servicing Disclosure Statement: Delivery. The lender, table funding mortgage broker, or dealer that anticipates a first lien dealer loan shall deliver the Servicing Disclosure Statement within 3 business days from receipt of the application by hand delivery, by placing it in the mail, or, if the applicant agrees, by fax, e-mail, or other electronic means. In the event the borrower is denied credit within the 3 business-day period, no servicing disclosure statement is required to be delivered. If co-applicants indicate the same address on their application, one copy delivered to that address is sufficient. If different addresses are shown by co-applicants on the application, a copy must be delivered to each of the co-applicants. RESPA §3500.21.c

• TILA Disclosure Requirements. The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). TILA 226.17

How does TILA define who is a Creditor?

A creditor is a person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. TILA 226.2(17)


*Don’t forget to check with your investors and state licensing authority regarding their rules and regulations.

We want to thank everyone who attended our webinar “Managing the Year of Change.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.

• Download the slides
• Download the slides in handout format

Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com.

QC Audits | QC Plans | Training & Consulting | TPO Management | Agency Approval | Red Flag Policies | Tax Transcripts & Social Security Verifications


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.

Question 4 – What is GSA and LDP?

• Answer – GSA and LDP are lists compiled by the government that include individuals and companies that have violated certain rules, laws, or who have defaulted on an obligation. If a borrower or company is on either of these lists, then they would be excluded from receiving a loan in certain circumstances.

Question 5 – For an FHA loan, how do we handle where purchasing spouse is legal US resident with valid SS#, but non purchasing spouse is illegal with only an ITIN?

• Answer – FHA does not allow a borrower with an ITIN. You will need to search out a different solution for this or not use the non-purchasing spouse in the approval.

Question 6 – It appears under the new LO compensation rules that take effect 04.01.2010 apply to mortgage broker companies and retail lender companies when their broker loans and not just to how the LO is paid.  Of course, secondary market exception applies to non-brokered rules but it appears that companies not just LO compensation cannot be paid differently based on the loan program. Therefore, it appears to make YSP or market price now illegal even if the LO is paid consistent with the rule.  So, investors are going to have to change the way they pay the broker companies as well is my understanding.

• 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.

Question 7 – Can you say again where the handouts from the slideshow are on your website?

• Answer – Copies of the slides to all our webinars are located in the News and Resources tab on our website. You can also download the slides directly here.

Have more questions? Submit your question in the comment box below.


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.)

We received the following compliance question and wanted to share the answer with you, along with our advice. We hope you find the information useful, and we welcome your questions and comments. (To leave a comment, scroll to the bottom of the page, type your comment in the box, and click Submit Comment.)

Question: Can Brokers Provide the Initial TIL Statement? Does “Creditor” mean Broker?

Answer: According to Federal Reserve Board staff, the answer is NO except for table-funding.

• “Creditor,” as defined in Regulation Z Section 226.2(17), means the lender whose name appears on the mortgage note and to whom initial loan payments are owed. Therefore, the seven-business day waiting period does not commence until delivery of the Initial Truth In Lending Statement bearing the name of the lender on the note. Early disclosures given in the name of the broker (or a pre-existing creditor who cannot complete the loan transaction) do not satisfy MDIA requirements. Moreover, under new Regulation Z rules, no advance fee may be collected from the consumer other than a credit report fee by either the lender or any third party until after the creditor has delivered the Initial Truth In Lending Statement or three business days after it has been mailed. 12 CFR 226.19(a)(1)(ii).

• Reg Z. TILA 226-17(a)

• Form of disclosures. (1) The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). The disclosures required by §§ 226.17(g), 226.19(b), and 226.24 may be provided to the consumer in electronic form without regard to the consumer consent or other provisions of the E-Sign Act in the circumstances set forth in those sections. The disclosures shall be grouped together, shall be segregated from everything else, and shall not contain any information not directly related³⁷ to the disclosures required under § 226.18 or § 226.47.³⁸ The itemization of the amount financed under § 226.18(c)(1) must be separate from the other disclosures under § 226.18, except for private education loan disclosures made in compliance with § 226.47.

• Reg Z. TILA 226.2 17(i)

• Creditor means: (i) A person (A) who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and (B) to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract.

Our advice: MCA advises all lenders working with broker/TPO partners to issue a TIL when the application is received by the lender. Issue a TIL within 3 days of receiving the application and clearly indicate when and how the TIL was sent to the borrower. MCA also advises lenders to start the 7 day waiting period as required by MDIA the day the lender issues the TIL. Any fees collected by the broker/TPO or lender received prior to the issuance of the TIL by the lender is a violation of TILA.

We welcome your comments below.

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. Since there have been multiple recent regulation changes, this month’s newsletter focuses on compliance updates. Beginning with the next newsletter, in addition to the FHA update, we will be adding update sections for Fannie Mae and Freddie Mac. We hope that you find the content informative and useful. As always, your feedback is appreciated. If you have any questions, simply reply to this email or call us at 877-226-3216.

FREDDIE MAC UPDATE (Coming next newsletter)