The OCC, Federal Reserve, CFPB, FDIC, FHFA, and NCUA recently issued notice of a Final Rule establishing new appraisal requirements for “higher-priced mortgage loans” (HPMLs). The Final Rule is being implemented under the Federal Truth in Lending Act and was required under Dodd-Frank. We discussed an earlier proposed version of the rule last November. Whether a consumer mortgage loan is an HPML generally depends on if the interest rate exceeds 1.5% or 2.5% over prime (depending on principal amount) for a first-lien residential mortgage, or 3.5% over prime for a subordinate-lien residential mortgages. There are a number of significant exclusions from requirements under the Final Rule, for example, for property located in “rural counties” and for property acquired from servicemembers.
Entries in Mortgages (5)
The OCC, Federal Reserve, CFPB, FDIC, FHFA, and NCUA recently issued a joint notice of a proposed rule implementing new appraisal requirements for “higher-risk mortgages.” These requirements would apply under the Federal Truth in Lending Act and were imposed by Dodd-Frank. “Higher-risk” mortgages are defined to include first-lien residential mortgages that exceed an interest rate threshold of 1.5% or 2.5% greater than the average prime offer rate for a comparable transaction (depending on principal amount), and subordinate-lien residential mortgages with an interest rate in excess of 3.5% of the average prime offer rate. There are a number of exclusions from the definition of “higher-risk mortgage” in the proposed rule.
On October 24, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, announced changes to the Home Affordable Refinance Program. The program was originally introduced two years ago to help homeowners struggling with their mortgage payments, but the program failed to help as many homeowners as predicted. According to the FHFA announcement, the modified HARP program will include lower fees and closing costs to better enable consumers to refinance their homes. More detailed guidance on the program is expected by November 15, but the FHFA noted that the availability of the program will depend on individual lenders since the program is not mandatory.
On October 18, 2011, the Maine Bureau of Financial Institutions released its quarterly report of mortgage lending in Maine. According to the report, “seriously delinquent” mortgages involving state-chartered institutions were down since June, but foreclosures are going up. There is a silver lining, however. The report also found that, of those loans in foreclosure, more were leaving the process prior to foreclosure than at any point since 2006 when the State began tracking this statistic. Mortgage originations are also up 9% over the prior quarter. This story was also reported in Maine Biz on October 19, 2011.
On September 27, 2011, the Superintendant of the Bureau of Financial Institutions issued notice of two proposed rules in light of the passage of Public Law 2011, Chapter 427, “An Act to Amend the Maine Consumer Credit Code to Conform with Federal Law.”
The first rule would repeal Regulation Z-2, Truth in Lending (Bureau of Financial Institution Regulation 38 and Bureau of Consumer Credit Protection Chapter 240), which dates back to 1981. As a result of Public Law 2011, Chapter 427, which incorporates federal truth-in-lending regulations into Maine law, the Bureau considers Regulation Z-2 out-of-date and duplicative. State-chartered banks and credit unions would look to the Maine Consumer Credit Code for any distinctions from federal truth-in-lending laws.
The second rule would eliminate Bureau of Financial Institutions Chapter 144, which implemented Section 8-506 of the Maine Consumer Credit Code. Section 8-506 imposed restrictions and requirements on certain residential mortgage loan practices, such as determinations of a reasonable, tangible net benefit from a higher-priced mortgage loan and a prohibition on “flipping.” Chapter 144 Public Law 2011, Chapter 427 exempted supervised financial organizations from Section 8-506, rendering Chapter 144 (Bureau of Consumer Credit Protection Chapter 550) inapplicable to state-chartered banks and credit unions.
The deadline for public comment on the new rules is October 31, 2011. A link to the Bureau’s notice may be found here: http://www.maine.gov/pfr/financialinstitutions/notices/Regs38and44proposedrepeals.htm