More Job Security - TIL Proposal now finalized?

Sounds like the TIL proposal has been finalized and being issued next week (see paragraph 3). Should be interesting to see how bad it will end up.

http://www.federalreserve.gov/newsevents/speech/bernanke20080708a.htm

The recent experience, including the broader turmoil we have seen in the financial markets, will have--indeed, is already having--important consequences for U.S. regulatory policy. First, regulators are taking action to strengthen consumer protections. Next week, the Federal Reserve Board will issue new rules on mortgage lending, using its authorities under the Home Ownership and Equity Protection Act. These new rules, which will apply to all lenders and not just banks, will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending. We received many helpful comments on our proposal and we incorporated a number of them into the final rules. In another effort to protect consumers, the Board has also recently issued proposals to substantially improve credit card disclosures and to address a number of unfair or deceptive acts and practices in credit card lending.

Thanks for the heads up David.
I'm keeping my fingers crossed that they did listen to input and the new category of "High Cost" but not "HOEPA High"
didn't make it to the final.

SO - - The final rule is now out. here is draft for the Fed Register
Which Guru will be first to weed through the 419 pages and give us the scoop?

Here is the Press Release:

http://www.federalreserve.gov/newsevents/press/bcreg/20080714a.htm

FRB Press Release RE: TIL Final Rule

FRB Highlights of TIL Final Rule

FRB Staff Memo to Board RE: TIL Final Rule & Reg. C Proposed Rule This is a 65 page document.

ARGHHHHHhhhhhhhhh!!!!!

I've started reading. Did someone once say suicide is painless.....I may need to check into this option. ESCROWS!!!!!

only for high cost rider...just high cost...calm down.

anybody got the quick link to the original proposal (I've got examiners and didn't want to take the time to dig if someone could just magically put it out here...I can't remember what they WERE proposing on YSP's and now I'm curious.

Disclosure, I think - if you've ever read any of the state level high cost laws, it's not dissimilar. It's actually more benevolent than a lot of those.

sorry - double post.

But it will cover MANY conventional loans. The magical issue is the new index the FRB is creating. We don't know what it will be. The proposal indicated to use 3/5% over the H-15 report. Speaking with several clients indicated this would capture up to 80% of their mortgage loan portfolios. Hopefully, the new index will be high as the final rule uses 1.5/3% (off the top of my head). This could be devastating.

That's the key David...somehow I have a feeling our FI will rule in the NO HIGH COSTS LOANS...whatever it takes to do so.

Oh..and never mind about the original proposal...the "short-version" has what I needed in it.

thanks!

Our biggest hurdles will be that if our in-house mortgages get pulled into the "high price" group, we'll have to:

• document the borrower's ability to repay (however THAT'S to be accomplished)
• not consider income that we don't verify
• escrow for taxes and insurance for 1st lien loans (we do not currently escrow for in-house mortgages....we don't have very many of these)

and for all loans secured by the borrower's principal dwelling, we'll have to:

• provide a TIL prelim for loans that heretofore were not included in the requirement

A lot of my banks give early TILs anyway - they find it easier to train the lending staff to just hand those out, regardless of type/purpose for RE loans. So that one I don't see as too much of a problem. The escrows one I think is going to be tricky. I'm waiting to see the index, of course.

sWIGGLES, your documentation to support repayment should just be income verification/job stability to justify appropriate DTI ratios...shouldn't be a big hurdle. Now servicing (escrows) for those who do not currently do so, that could be interesting.

Well you know we'll be covering this at our Oct. loan conference.

http://www.bolconferences.com/lcdc/

That's why I was not calm. Is a year and a half long enough to get escrow set up and get everyone trained?

If you begin now! It's a PITA tho...it's been quite a number of years since I was involved in those day-to-day issues.

Any idea on when this new index will be revealed so we will have a better idea of how bad to panic????????????

From The Fed's Press Release on the new Final Rule for Reg Z - subprime fallout & new category of " Higher Priced " loans

" The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market. To provide an index, the Federal Reserve Board will publish the "average prime offer rate", based on a survey currently published by Freddie Mac. . . . "

:: Raises Hand ::
Excuse me teacher, but didn't they just close the weekend before The Fed put this out on Monday ??!?!?!

I'm feeling so much better about all this.....

The escrow problem will depend on how many loans you have and your systems capabilities. A few wouldn't be hard, but would be a PITA. A lot would be a problem and be a PITA for several people.

Also consider the customer with a lien-free home. They want a HELOC or improvement loan. Nothing big. But if you do it, you'll be first lien. Escrow. Ugg.

But hey, I'm betting as we begin to better understand all of this, we'll realize there are plenty more problems.

Also, I think you have until 04-2010 for escrows. Heck, with all that time you could...

- switch positions
- hope the rules change again
- attend a BOL webinar on the topic and just get it like you've gotten the changes before it to everything else we do.

Andy, You just make it seem all better!!


(thanks for the smile!)

Freddie Mac didn't close.... they just got a vote of confidence from the Fed.

For those of you who are ABA members, they have published a nice nine page summary of the new regulations. It is a good document to use to explain the changes to your CEO or Senior Lender.

Where would you find that on the website? I couldn't locate it.

I couldn't locate it either.

Just submitted my comprehensive summary to the different areas here...it was all of 1.75 pages long. Only time will tell if/how it will affect us...hard to say until the "average offer on prime loan" figures come out. Our biggest hurdle will be the escrow portion, if it does ends up affecting us.

I got to it through a link on ABA Newsbytes on July 15th. This is the link, though I don't know if it will work.

http://www.aba.com/Compliance/mortgage_reform.htm

OOPS - - I am taking a long weekend & I guess my brain had already checked out.
I read this at least 3 times & my brain saw INDY Mac every time
As Rosanna Rosanadanna would say " NEVER MIND "

They don't mention it, but are they going to have thresholds for mobile homes as well? Reg. Z cover them as principle residences, does it not?

Mobilehomes (manufactured housing) have their own category for escrow requirements and a later compliance date.

Thanks, Joker. I forgot....I read it but my brain is mush!

Our CEO has sent me the following questions about the verification of assets and income:

"Do we have to have a written verification in file? Do you have to verify all of the assets of an applicant? For example, if an applicant has $5 million in various security accounts and 20 rental properties, do you have to verify all? Is there a specific form or method for verification under this law?"

And a question about escrow accounts for in-house first mortgages: "What about the short term loans done to facilitate a permanent mortgage closing?"

I'm signing up for the BOL Webinar in August, but meanwhile, does anyone have any thoughts about what the answers might be?

I read that they will be happy if you use FHA's credit analysis....I printed myself out a copy to see if it's different than what we already do.

All it says is verify & document, so I'm sure you could notate the file, etc.... Also, loans not covered: Home equity lines of credit, reverse mortgages, construction-only loans, Bridge loans, "business purpose" loans.. Your example sounds like a Bridge loan to me

Due to quarter end reviews and other projects I have not yet read this thoroughly, but notating something in the file would not, IMO, be sufficient to document that you have verified income, deposits, or whatever without documentation to support that notation.

Heck I could notate in the file I verified Jane's accounts to be $55,000 but without documentation I may have only verified the account to me $55 and my $55,000 notation was either an out right lie to trump up the loan or a legitimate decimal point error.

Does anyone know what the status is on the index the Fed is publishing? I'd like to see where our in-house mortgages are going to fall BEFORE the mandatory compliance date (we charge some pretty high interest rates IMO, so I'm nervous)

I haven't seen anything, but the rates on which they plan to base the index are available here, Freddie Mac
That should give you a precusory idea of where you stand.

I have been looking for the new rule to be published in the Fed. Reg. but haven't seen it yet. Did I overlook it?

If i did this correctly, here is the Final Regulation from the Federal Register.

If not try searching the Federal Register website for:
page 44522 Vol. 73, No. 147

I got an error message on that link. This should get you there.

http://edocket.access.gpo.gov/2008/E8-16500.htm