Under the new High Cost mortgage rules, borrowers will be required to complete homeownership counseling before taking out a high-cost mortgage and lenders will be required to provide a list of counseling organizations shortly after application.

Does the requirement to provide a list of counseling organizations within 3 days of application apply only to High Cost mortgage loan applications, or to all RESPA covered transactions?

From what I have read it looks like it is going to be for all mortgages except for reverse mortgages and mortgages secured by a timeshare.

That's correct, Kolt55. Essentially, it will be provided whenever you provide the RESPA booklet.

John, what about refinances?

What if the nearest homeownership counseling service is over an hour away from you?

Time to get certified???

Is there a "rural" exception to this anywhere? I haven't had time to really read this one yet.

My big question on this rule is - will they update the rate tolerances once the APR changes with the integrated disclosures?

The counseling service can't be an affiliate of the lender.

No rural exception. I'm shooting from the hip here, but I bet there will be a bunch of folks trying to get certified to do the counseling via the Internet. That would be a nice niche.

Yes, that is the big question

Thanks for saying that. It helped to clarify it in my mind. I was reading the summary again this weekend, and that's what I thought it said:

The final rule implements two additional Dodd-Frank Act homeownership counseling-related provisions that are not amendments to HOEPA.
• The final rule requires lenders to provide a list of homeownership counseling organizations to consumers within three business days after they apply for a mortgage loan, with the exclusion of reverse mortgages and mortgage loans secured by a timeshare. The final rule requires the lender to obtain the list from either a website that will be developed by the Bureau or data that will made available by the Bureau or the Department of Housing and Urban Development (HUD) for compliance with this requirement.
• The final rule implements a new requirement under TILA that creditors must obtain confirmation that a first-time borrower has received homeownership counseling from a federally certified or approved homeownership counselor or counseling organization before making a loan that provides for or permits negative amortization to the borrower.


http://files.consumerfinance.gov/f/201301_cfpb_high-cost-mortgage-rule_summary.pdf

http://files.consumerfinance.gov/f/20130...r-consumers.pdf

Three separate requirements: Under RESPA Reg X §1024.20, you'll have to provide a list of approved homeowner counseling organizations to all applicants except for reverse mortgages and timeshare loans.

Under Regulation Z §1026.34(a)(5), you won't be able to extend a high-cost mortgage loan to a consumer unless he/she/they produce a certification they have completed homeownership (HO) counseling.

Under Reg Z §1026.36(k), you won't be able to allow a consumer who is a first-time home loan borrower to obtain a loan (other than a reverse mortgage or timeshare loan) the periodic payments of which may result in negative amortization, without certification the consumer has obtained HO counseling.

Isn't the third one listed limited to first time home buyers?

You are correct - only to first time borrowers (who have not previously had closed-end or open-end cr secured by a dwelling)

My bad. Thanks for catching that. I updated my post to make that correction to avoid misinformation.

The final rule requires lenders to provide a list of homeownership counseling organizations to consumers within three business days after they apply for a mortgage loan, with the exclusion of reverse mortgages and mortgage loans secured by a timeshare. The final rule requires the lender to obtain the list from either a website that will be developed by the Bureau or data that will made available by the Bureau or the Department of Housing and Urban Development (HUD) for compliance with this requirement.

I assume then the homeownership counseling notice when they go 45 days past due will be still required even though they recieve a list of names in the beginning??

Its going to take forever to close a loan now. Just sayin!!!!

In the Lending Triage the materials state on page 172 that for a loan to be covered it must be a high cost, secured by principal dwelling AND where negative amortization may occur. This second part virtually eliminates all loans except any ATMs that may be out there.

Anyone have another take on this?

That should have been ARMs instead of ATMs

Go back to page 172. There are two types of loans to which the mandatory homeownership counseling requirement will apply:

1) A high-cost mortgage loan (consumer credit transaction secured by consumer's principal dwelling) either open- or closed-end. [new 1026.34(a)(5)]

2) consumer credit to a first time borrower on a closed-end dwelling-secured transaction other than a time-share or reverse mortgage transaction, that may result in negative amortization. [new 1026.36(k)]

Group 1 includes all HOEPA loans that are subject t0 1026.32; group 2 is much more restrictive, and most banks don't see many of them.

What about a foreign national purchasing a second home. Would they need to get the homeownership counseling. Or it's only for principal dwelling?

Depends on whether or not they are a resident alien. Regulation Z does not apply to NRAs:

Official Interpretations of this section.

1(c) Coverage

1. Foreign applicability. Regulation Z applies to all persons (including branches of foreign banks and sellers located in the United States) that extend consumer credit to residents (including resident aliens) of any state as defined in §1026.2.

If the loan is secured by real estate that is not the homeowner's principal dwelling, it won't be subject to 1026.32; if it's not subject to 1026.32, it won't be subject to 1026.34. If it's not subject to 1026.34, the required homeownership counseling provision won't apply, EXCEPT that it will apply in the case of a first-time borrower if the scheduled periodic payments on the proposed loan could result in negative amortization.

The residency status of the borrower is immaterial.

Randy,

I've never figured out whether that comment 1(c) means that if a person extends consumer credit to residents (including resident aliens) of any state, the person will be subject to the regulation regardless of the residence of a given consumer, or

that the protections of Reg Z are not extended to individuals who are not residents (including resident aliens).

I can tell you that when I was in international private banking, we applied Z to resident aliens and not to those buying homes here who were not resident aliens.

We spent a lot of time on that topic and the bank was very careful to divide those customers up into what area could handle their loans.

In that case, I defer to Mr. Carey and Ms. Blanchard, and retract my analysis above, since the nonresident alien would not be entitled to the protections of TILA and Reg Z.

What about the first group you referrred to in RESPA 1024.20? That would be all mortgage related transactions that you would be required to give the list. Is that correct?