The American Bankers Association (ABA) recently summarized information about the mortgage reform that is sure to pique the interest of lenders, as the next two months will be critical to lending institutions due to a dozen new pending regulations. Some issues are still open to comments so not everything is set in stone; however, those affected may want to educate themselves further.
A final rule regarding how “high cost mortgages” are defined is slated to be finalized by January 21st. Restrictions on such mortgages is expected.
The ABA is encouraging anyone who will be affected by changes in mortgage and or home financing to stay abreast of new rules and regulations. Many points are still up for discussion, however, the time is quickly expiring.
Here’s a timeline that illustrates the changes that could take place:
10/19/12: Comments on the proposed RESPA and Truth in Lending Act (TILA) rules are due. The proposed rules will require servicers to provide borrowers with periodic statements, rate reset notices and error resolution. Some argue this will put unnecessary burden on servicers, especially small firms, while others feel the changes will be an improvement that’s well worth the extra work.
10/15/12: Comments regarding the Dodd-Frank appraisal reforms which require in-person property visits and new requirements for appraisal independence are due.
Another change up for final review on 10/15 concerns high-risk mortgages. Six federal regulators have suggested that lenders should give prospective borrowers free copies of appraisal reports and other written documentation concerning the value of the property in question.
10/16/12: Comments due on proposed rules regarding loan originator compensation by Consumer Finance Protection Bureau (CFPB).
All rules sets listed above must be finalized on or before January 21, 2013.
11/6/12: Comments regarding proposed merged RESPA and TILA forms.
In addition to summarizing the issues and informing industry members of the comment periods, the ABA also presented summaries of other pending issues that may be of importance to many mortgage industry workers. These include GSE reform, final escrow rule, ability to repay, eminent domain issues and more.
To see an illustrated version of the timeline explained above, visit the following link: http://www.aba.com/press/pages/081012backgroundermortgagereform.aspx
Changes to Fannie and Freddie Too
Anyone expecting to secure financing from either Freddie Mac or Fannie Mae should also be aware that there are pending changes on the table for both of those agencies. However, it is doubtful that anything will go into effect until after the upcoming US Presidential election.
In regard to escrow, there is a rule pending from the Federal Reserve that would amend the Truth in Lending Act by lengthening the time frame for maintaining escrow accounts on mortgages deemed “high-priced”.
Other issues concerning the mortgage process such an assessment of a borrower’s ability to repay, risk retention and the way in which qualified residential mortgages are handled are also under discussion.