Major Mortgage Issues Still To Be Resolved

August 20, 2013 at 8:06 am Leave a comment

imagesLet’s face it, everyone is in a bad mood the first day back after vacation; the President of the United States is apparently no exception.  He used his first day back on the job after hobnobbing with the beautiful people to gather together the nation’s financial regulators, including NCUA’s own Debbie Matz, Federal Reserve Chairman Ben Benanke, and CFPB’s Richard Cordray, to nudge them to get a move on to finalize regulations implementing the Dodd-Frank Act.

Although the so-called big-ticket items, such as implementing the Voelker Rule, got most of the press attention, there’s plenty of crucial stuff left for the CFPB to finalize before lenders can fully begin to implement a post-Dodd-Frank consumer mortgage rule.  In fact, when it comes to the issues that are going to most directly affect the American consumer on a day-to-day basis, Richard Cordray , and not the President, was the most important guy in the room.

Here are some of the key issues the CFPB still needs to finalize:

  • How are points and fees ultimately going to be defined?  It’s great to say that to make a qualified mortgage, lenders will have to limit points and fees to 3% of the mortgage.  However, there is no final definition yet of what must be included under the 3% cap.
  • Until we know exactly what the finance charge is, we really won’t know what federal disclosures are required.  For example, under the Dodd-Frank Act, a loan is defined as a HOEPA loan if it exceeds certain thresholds.  However, as the Bureau itself has explained in a regulatory preamble, “because new categories of charges would be included in the calculation of points and fees. . .the more inclusive finance charge, which would also include most third-party charges would result in more loans being classified as high-cost loans.”
  • This all must be resolved when the CFPB finalizes its combined TILA/RESPA proposals.  Those could come out anytime between September and January.  But given that timeline, credit unions hopefully won’t have to start providing the combined disclosures until next Spring at the earliest.
  • Finally, one of the dumbest proposals still under consideration is the requirement that settlement disclosures which currently must be provided within 24 hours of closing, must be provided no later than 3 days before closing.  Don’t underestimate just how disastrous this idea is.  Can you imagine explaining to a home buyer who has gone through all the hoops of the home buying process that the closing will have to be further delayed because the federal government mandates that you have at least three days to review the document on a house you have already agreed to purchase.  Given how difficult it is to coordinate closings already, this kind of condescending mandate is going to result in a lot of people yelling at your front line employees, who are doing nothing more than complying with federal law.

Hopefully the CFPB will come to its senses, but the President has a point.  It’s time to wrap things up.

What’s done is done.  Luca Brasi sleeps with the fishes.

Entry filed under: Compliance, Regulatory. Tags: , , , , , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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