Tag Archives: Consumer Financial Protection Bureau

CFPB New Rules

14 Feb


The Consumer Financial Protection Bureau list of new mortgage rules can be read in full at the link above.  Some of these will be implemented by January 2014.

Final rules issued by the CFPB for 2013

January 22 Remittance Rule (Regulation E) Temporary Delay

January 20 Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z)

January 18 Appraisals for Higher-Priced Mortgage Loans (issued jointly with other agencies) Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuations Under the Equal Credit Opportunity Act (Regulation B)

January 17 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules

January 10 Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z) Escrow Requirements under the Truth in Lending Act (Regulation Z) High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act (Regulation Z) and Homeownership Counseling Amendments to the Real Estate Settlement Procedures Act (Regulation X)

CFPB Issues Final LO Compensation Rule

22 Jan

” The final rule implements the Dodd-Frank Act and clarifies the scope of the rule as follows:

• The final rule defines “a term of a transaction” as “any right or obligation of the parties to a credit transaction.” This means, for example, that a mortgage broker employee cannot receive compensation based on the interest rate of a loan or on the fact that the loan officer steered a consumer to purchase required title insurance from an affiliate of the broker, since the consumer is obligated to pay interest and the required title insurance in connection with the loan.

• To prevent evasion, the final rule prohibits compensation based on a “proxy” for a term of a transaction. The rule also further clarifies the definition of a proxy to focus on whether: (1) the factor consistently varies with a transaction term over a significant number of transactions; and (2) the loan originator has the ability, directly or indirectly, to add, drop, or change the factor in originating the transaction.

• To prevent evasion, the final rule generally prohibits loan originator compensation from being reduced to offset the cost of a change in transaction terms (often called a “pricing concession”). However, the final rule allows loan originators to reduce their compensation to defray certain unexpected increases in estimated settlement costs.

• To prevent incentives to “up-charge” consumers on their loans, the final rule generally prohibits loan originator compensation based upon the profitability of a transaction or a pool of transactions. However, the final rule clarifies the application of this prohibition to various kinds of retirement and profit-sharing plans. For example, mortgage-related business profits can be used to make contributions to certain tax-advantaged retirement plans, such as a 401(k) plan, and to make bonuses and contributions to other plans that do not exceed ten percent of the individual loan originator’s total compensation.”


“Regulation Z already provides that where a loan originator receives compensation directly from a consumer in connection with a mortgage loan, no loan originator may receive compensation from another person in connection with the same transaction. The Dodd-Frank Act codifies this prohibition, which was designed to address consumer confusion over mortgage broker loyalties where the brokers were receiving payments both from the consumer and the creditor. The final rule implements this restriction but provides an exception to allow mortgage brokers to pay their employees or contractors commissions, although the commissions cannot be based on the terms of the loans that they originate.”

The rules will take effect in January 2014, except for the prohibition on mandatory arbitration and on the financing of credit insurance which will take effect in June 2013

A summary of the rule can be read here:


Making Comments on CFPB Proposed New Forms

11 Jul

Did you know that you may comment on the new mortgage forms proposed by the CFPB (Consumer Financial Protection Bureau)?

The link below allows you to search for the proposed forms and make a comment on their improvement.  Comments will be accepted through November 6.


Considering that getting a mortgage is probably the biggest financial decision most people will make, the CFPB aims to make disclosure forms more readily understood by the general public.

This means that mortgage professionals will have to learn to use and explain the new forms.  There is sure to be a learning process involved, but the end result will provide greater clarity in the costs and terms of a loan.

CFPB Reports on Reverse Mortgages

29 Jun

As required by the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) has issued its report to Congress on Reverse Mortgages.  It was not far from what industry experts might have expected:  it highlighted the number of defaulted loans, talked about transparency and disclosure, and stressed the vulnerability of seniors as possible victims of scams.

The key findings reported that (1) reverse mortgages may be difficult to understand, (2)borrowers are using reverse mortgage products in different ways than they used to, starting at a younger age, (3) some product features are “risky”, (4) counseling should be improved, and (4) lastly that further regulation may be required as well as continuing supervision and enforcement of current regulation.

There was note of the increased use of reverse mortgages as a means to refinance traditional mortgages:  not surprising in the wake of the bad mortgages issued in the past decade.  Also the fact that a majority of borrowers tend to choose fixed rate products; again, not surprising considering their suspicion regarding variable rate products due to past experience.  The CFPB seems to believe that choosing the fixed rate product makes borrowers more susceptible to scams.

As a result, the CFPB will likely rewrite some important loan disclosure documents to better inform consumers.  They may also impose further regulation where they see necessary.

The report contains detailed information about the HECM product and its development, information about borrowers and their motivations for choosing a reverse mortgage, market and pricing, and current and proposed regulation.  You can see the entire report here:


It is worth taking a look at.

More from National Mortgage News on LO Comp

1 Jun

Will the CFPB Delay the LO Comp Rule Too?

by Paul Muolo MAY 31, 2012 12:01pm in National Mortgage News

The Consumer Financial Protection Bureau this week decided to delay the issuance of a final “qualified mortgage” rule until after the Nov. 6 elections. The scoop was first reported by National Mortgage News on its website Thursday. This new development has prompted many loan officers and nonbank lenders to speculate that maybe (just maybe) the CFPB will delay its compensation proposals until well into next year. Of course, final proposed regulations have not been written yet. And what’s been unveiled to this industry thus far has caused much anger and resentment toward the young agency. There is much confusion over the idea of ‘flat fee’ compensation, but a close reading of the rule suggests that LOs can continue to earn percentage-based commissions depending on how a loan is funded. But there is one piece of good news in the CFPB proposal: it opens the door to allowing mortgage brokers to eat unanticipated increases in third-party costs, passing that savings onto applicants and using it as a competitive advantage against bank LOs. Then again, the CFPB also has concerns about allowing such practices.

Proposed LO Compensation?

31 May

from National Mortgage News MAY 25, 2012 by Paul Muolo

CFPB to Industry: Here’s the Compensation Proposal. Tough Luck

Roughly 18 representatives of the residential lending industry sat around a table this past Wednesday at the Treasury Department in Washington with various members of the Consumer Financial Protection Bureau. According to those in attendance, the messages delivered by the CFPB were loud and clear: (*)Flat fee compensation is a done deal. Deal with it. (*)CFPB wants licensing and regulatory parity for banks and nonbanks alike. (*)If you have payments made to affiliates your life will be more complicated and difficult. (*)The CFPB doesn’t care that its mortgage compensation proposal will destroy the lending industry and hand the business over to the nation’s largest banks…

A few other notes about the meeting: no representatives from trade organizations were allowed to sit at the U-shaped table with the CFPB officials. Trade reps were relegated to the audience. Trade groups, however, were permitted to submit the names of five people who would sit at the table. CFPB chief Richard Cordray was not there in person and instead phoned it in and then departed after five or ten minutes. Another CFPB forum for large banks and wholesalers was being held down in North Carolina, Go figure…

Of course, all the sentiments you read in this blog might be exaggerated. Believe what you want. Talk to people who were there. Next week National Mortgage News will be writing more about the meeting. Maybe it will all turn out rosy in the end…

Have any more insights on the meeting? Drop me a line at: Paul.Muolo@SourceMedia.com

Oh, and one another thing: mortgage bankers are being told to get ready for CFPB examinations of their shops. Here’s the good news: the big banks get audited first for mortgage compliance. Then the agency will get around to everyone else. If your firm is listed on the NMLS you will face an audit at some time in your lifetime. If you have a phone, you have a lawyer…

As for who we can blame for this potential nightmare: the list is long but starts on Wall Street and shoots out to Orange County, Calif., where mortgage geniuses the likes of Roland Arnall and others plied their trade during the go-go years and said President (George W.) Bush forced them to make loans to poor people as part of the ‘Great Ownership Society.’ For the complete list read “Chain of Blame…”

If you want to fight the power (the CFPB/Dodd-Frank) check out this petition: http://www.change.org/petitions/petition-to-amend-the-dodd-frank-act

MORTGAGE DATA STUFF: There are $9.1 trillion of outstanding home mortgages (servicing rights) in the U.S. Don’t believe the other general media. If you need complete channel breakdowns, top wholesalers, correspondent, servicers and much more order the Quarterly Data Report and/or MortgageStats.com. Discounts are available to National Mortgage News advertisers. For more info, email: Deartra.Todd@SourceMedia.com.

MORTGAGE PEOPLE: Ken Ferrari recently left Carrington Mortgage Services where he served as vice president, Eastern division. One source said his job was eliminated as part of a restructuring.

READING MATTER: When will REITs start buying MSRs? See the Monday paper edition of National Mortgage News. Don’t subscribe? Call: (800)221-1809. A paid sub gets you all of our web content totally free…