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Thursday, August 21, 2014

CFPB Bulletin Addresses Mortgage Servicing Transfers

By: ABIA Outside Counsel Chrys D. Lemon, McIntyre & Lemon, PLLC

The CFPB released a bulletin outlining expectations for mortgage servicers on loan transfers.
“[The] bulletin gives examples of some things CFPB examiners will look for when loans are transferred. In particular, CFPB examiners will carefully scrutinize transfers of loans with pending loss mitigation applications or approved trial and permanent modification plans. Examples of good practices by servicers include flagging those loans and taking special care to ensure that all relevant documents are transferred in a timely manner.
“‘At every step of the process to transfer the servicing of mortgage loans, the two companies involved must put in appropriate efforts to ensure no harm to consumers. This means ahead of the transfer, during the transfer, and after the transfer,’ said CFPB Director Richard Cordray. ‘We will not tolerate consumers getting the runaround when mortgage servicers transfer loans.’”
If you would like to learn more about ABIA's work with CFPB to educate them about the bank-insurance industry or join our CFPB Task Force, please contactus and visit our website
 

NAIC Adopts Corporate Governance Disclosure Model Act for Insurers

At its recent meeting, the National Association of Insurance Commissioners (NAIC) adopted new models requiring US insurers to report corporate governance practices to regulators, stating that this will "provide a means for insurance regulators to receive additional information on the corporate governance practices of U.S. insurers on an annual basis."
"Under the requirements of the [NAIC's] Model Act [and Model Regulation], U.S. insurers will be required to provide a detailed narrative describing governance practices to their lead state or domestic regulator by June 1st of each year. The narrative will be protected by strict confidentiality measures, which were included within the models to encourage insurers to be open and transparent in describing their governance practices to regulators. Insurers will be allowed some discretion in determining the level within the organization to report their corporate governance practices. . . . The new disclosure requirements are expected to commence in 2016."
 
Key items required to be described within the corporate governance disclosure include:
  • The insurer’s corporate governance framework and structure including duties and structure of the Board of Directors and its committees;
  • The policies and practices of its Board of Directors and significant committees including appointment practices, the frequency of meetings held and review procedures;
  • The policies and practices directing Senior Management including a description of defined suitability standards, the insurer’s code of conduct and ethics, performance evaluation and compensation practices, and succession planning; and
  • The processes by which the Board of Directors, its committees and senior management ensure an appropriate level of oversight to the critical risk areas impacting the insurer’s business activities including risk management processes, the actuarial function, and investment, reinsurance and business strategy decision-making processes.

Wednesday, August 20, 2014

New Flood Insurance Available Online, Effective October 1, 2014

A new Flood Insurance Manual available effective October 1, 2014 is now available online.

Significant revisions include the following:
  • Updates to the NFIP Bureau and Statistical Agent Regional Offices (REF Section).
  • New policy procedures concerning accepting a signed statement from the insured in lieu of the
    prescribed documentation of primary residence, when such documentation is not available at the time of policy application for newly purchased properties. (GR, APP, and PRP Sections).
  • Guidance on eligibility for a beneficiary of a Trust for primary residence rating (GR Section).
  • Further guidance on named insureds for tenant’s coverage (GR Section).
  • Updated information on the photograph requirement for transfer of elevation-rated business policies (GR Section).
  • Revised rate tables for policies written or renewed on or after October 1, 2014 (RATE, CONDO, and PRP Sections).
  • Updates to the Building Drawing instructions to revise footnotes and rating guidance to comply with HFIAA. Addition of a new Building Drawing for building with a subgrade crawlspace and attached enclosure/garage (LFG Section).
  • Updates to the Coastal Barrier Resources System Communities list (CBRS Section).
  • Updates to the Community Rating System Eligible Communities list (CRS Section).
You can download the manual here.


CFPB Updates Guidance on Mortgage Servicing Transfers

The Consumer Financial Protection Bureau (CFPB) yesterday issued a compliance bulletin to residential mortgage servicers and subservicers regarding potential risks to consumers with transfers of residential mortgage servicing rights. The bulletin warns mortgage companies about legal obligations to protect consumers before, during and after loan transfers between mortgage servicers.
 
This compliance bulletin replaces the CFPB Bulletin 2013-01 (Mortgage Servicing Transfers) that was released in February 2013. The updated bulletin includes adjustments to the ability to repay/QM provisions of the Dodd-Frank Act, and to the dollar amount thresholds in Regulation Z regarding the CARD Act and HOEPA.
 
The CFPB is required to calculate annually the dollar amounts for several provisions in Regulation Z, based on the annual percentage change reflected in the Consumer Price Index.

“[F]or the purpose of a creditor’s determination of a consumer’s ability to repay a transaction secured by a dwelling, a covered transaction is not a qualified mortgage unless the transaction’s total points and fees do not exceed:
  • 3 percent of the total loan amount for a loan greater than or equal to $101,953;
  • $3,059 for a loan amount greater than or equal to $61,172 but less than $101,953;
  • 5 percent of the total loan amount for a loan greater than or equal to $20,391 but less than $61,172;
  • $1,020 for a loan amount greater than or equal to $12,744 but less than $20,391; and
  • 8 percent of the total loan amount for a loan amount less than $12,744.”
For the Card Act, “[t]he minimum interest charge disclosure thresholds will remain unchanged in 2015. The adjusted dollar amount for the penalty fees safe harbor in 2015 is $27 for a first late payment and $38 for each subsequent violation within the following six months.”
 
For HOEPA loans, “the adjusted total loan amount threshold is $20,391, effective January 1, 2015. The adjusted statutory fee trigger for HOPEA loans is $1,020 . . . .”
 
The ABIA has Task Forces of members that work on issues related to Qualified Mortgages and the CFPB's regulation of insurance products. If you are an ABIA member and would like to learn more about our Qualified Mortgage task Force or ABIA's work with CFPB to educate them about the bank-insurance industry or join either Task Force, please contact us and visit our website.

Friday, August 15, 2014

CFPB Takes Actions against Mortgage Originator for UDAAP Violations

This week, the Consumer Financial Protection Bureau (CFPB) took enforcement action and fined a mortgage originator and affiliate for "unfair and deceptive practices" regarding false rate advertisements, up-front fees, affiliate referral arrangements, and inflated prices.
 
According to the CFBP Release, the Bureau "took action against Amerisave Mortgage Corporation, its affiliate, Novo Appraisal Management Company, and the owner of both companies, Patrick Markert, for engaging in a deceptive bait-and-switch mortgage-lending scheme that harmed tens of thousands of consumers. The Bureau found that Amerisave lured consumers by advertising misleading interest rates, locked them in with costly up-front fees, failed to honor its advertised rates, and then illegally overcharged them for affiliated ‘third-party’ services. Amerisave and Novo will provide $14.8 million in refunds to harmed consumers and pay a $4.5 million penalty. Patrick Markert, as an individual, will pay an additional $1.5 million penalty."
 
The CFPB found that Amerisave:
  • Deceptively advertised low interest rates that were not available;
  • Locked consumers in with costly up-front fees;
  • Failed to properly disclose its affiliate relationship; and
  • Charged unfairly inflated prices for services through its affiliate.
The ABIA has a Task Force of members that work on issues related to the CFPB's regulation of insurance products. If you are an ABIA member and would like to learn more about ABIA's work with CFPB to educate them about the bank-insurance industry or join our CFPB Task Force, please contact us and visit our website.