As President of CoAMP, I attended the NAMB Legislative Conference in D.C. on 3/10-3/12/13.
Below are key Compliance Tips in case of CFPB audit
Broker Owners:
NMLS Call Reports: Did you know your Tangible Net Worth requirements must be met consistently and not just once a year? NMLS resource center will help clarify requirements: http://mortgage.nationwidelicensingsystem.org/slr/common/fs/Documents/FS%20Table.pdf
This will be looked at closely to ensure timely reposting and accuracy of information.
Policies and Procedures: Have updated and clean manual in your office that is pertinent to your business model. Keep full documentation of training of your LO’s and staff to ensure all are following your Policies and Procedures.
Documentation: in conjunction with your NMLS Call Reports be sure to have a very detailed list of all loan transactions to help identify patterns for possible disparate impact. When in question contact the CFPB for assistance (855) 411-2372 or http://www.consumerfinance.gov/askcfpb/submit-question and document your initiative and their response.
Compensation: if you have different LO Comp % with multiple lenders and/or pay your LO’s different %, be sure to have the reasons documented well as to why you made these decisions.
Following the Rules:
State law trumps Federal law in regard to policies, disclosures, guides. If a lender asks for something which is in conflict with State requirements, contact your state regulator for guidance.
Processors who are ‘in-house’ and not licensed, be very careful they are not “arranging a transaction” with borrowers and not discussing any loan options and/or details of the transaction. This will be looked at carefully to ensure processors are not operating as an Originator is they are not licensed.
Licensing will be audited. If an LO is not licensed in another state and submit an application under the license of another LO who is, this will be discovered very easily and is a hot-spot for CFPB.
Advertising rules for your state will be monitored very closely especially social media, so contact your state regulatory office to ensure you are following protocol. www.colorado.gov (303) 894-2166.
LO Comp Rule effective 1/10/14:
New rule will remove the dual comp issue for borrower-paid transactions and allow broker owners to pay LO’s per transaction and not require the hourly/salary compensation. LO’s will be able to be paid in the same manner as lender-paid compensation
LO’s on a borrower-paid will be allowed to cover unexpected costs for borrowers. These must be UNEXPECTED costs, i.e. originally had a PIW option and now full appraisal is required, so LO may pick up the cost for borrower. be sure these are well documented instances.
Qualified Mortgage/Ability to Repay Rule effective 1/10/14:
Lenders will have ability to choose to provide QM/ATR mortgage or not. If a lender provides a non-QM mortgage, this will allow borrowers who default to have ability to pursue TILA damages against the lender. Currently, QM will tighten DTI limits to 43% back-end ratios (non-government loans) and also cap all fees and point to under 3%. The 3% cap will include lender fees and LO Comp. NAMB’s HR 1077 is currently working to amend the calculation of fees as there are several issues pointed below, which is what I was discussing with our Congressmen in D.C.
•1. On Lender-Paid transactions the LO Comp is being “double-dipped” by counting the company compensation and then the compensation to originator again. NAMB/CoAMP suggest a revision to the Rule to only count the compensation going to the originator.
•2. Lender underwriting fees will be included in the 3% and this may mean that lenders will remove the upfront fee and build it into rate/price, which will result in higher rates for consumers.
•3. Since the 3% is based on the loan amount, this may cause disparate impact issues for lower loan amount borrowers.
•4. This Rule will only affect wholesale brokers and thus will put small business at a competitive disadvantage and reduce consumer lending options
CFPB: Consumer Financial Protection Bureau
They are responsible for enforcement and clarity on Dodd-Frank regulations. www.consumerfinance.gov and welcome comments from industry professionals as well as consumers at https://help.consumerfinance.gov/app/tellyourstory
Adrienne L. Randol, CML
2013 President of CoAMP (Colorado Association of Mortgage Professionals)
303-720-9450 arandol@franklinamerican.com
