Reg. Z and HPML- Ouch!

The ABA has just released its ABAworks regarding the recent amendments to Reg. Z. The information on the hpml rules is at least disturbing to community banks that now must decide whether to attempt to comply and take on even greater risk of legal action and expenses or to just forego the offering altogether. Are there any others that see the potential for banks leaving the mortgage market due to the hpml rules, especially community banks where a large portion of their portfolio is secured lending? Where would the community bank make up this lost revenue? Credit cards or auto loans? I dare say not.

I was just reading through the ABAWorks that came out recently on the Reg Z changes. It's indicating an effective date of October 2009 BUT and effective date for the Early Disclosure Provisions of July 2009.

I have also read through the Federal Register's Final Rule issued at the end of July last year.

From everything I read in the FR, the effective date for all changes is October 1, 2009 - except the escrow account provisions for higher cost mortgages which is 4/1/2010. I don't see any requirements for a July 2009 start for anything, let alone the early disclosure requirements.

I freaked out when I saw a July 2009 effective date (I've got a compliance exam starting in early May that I've got to get through first).

Can anyone confirm whether or not this ABA Works stuff is an error for the early disclosure piece. I'm just not seeing it in the final rule.

On December 5th, the FRB issued a proposal for changes to Regulation Z (Truth in Lending) that would revise the disclosure requirements for mortgage loans. The revisions would implement the Mortgage Disclosure Improvement Act (MDIA) which was enacted in July 2008 as an amendment to the Truth in Lending Act (TILA). Under the MDIA, the proposed rules would become effective on July 30, 2009. The original due date for comments was January 23, 2009, but the FRB extended it to February 9, 2009.

From the press release:

"The MDIA requires creditors to give good faith estimates of mortgage loan costs ("early disclosures") within three business days after receiving a consumer's application for a mortgage loan and before any fees are collected from the consumer, other than a reasonable fee for obtaining the consumer's credit history. These requirements are consistent with the Board's July 2008 final rule which applied to loans secured by a consumer's principal dwelling. The MDIA broadens this requirement by also requiring early disclosures for loans secured by dwellings other than the consumer’s principal dwelling, such as a second home."

Here's a link to the Federal Reserve press release:

http://www.federalreserve.gov/newsevents/press/bcreg/20081205a.htm

Thanks Gem! Yup, I knew about the MDIA proposal, but didn't connect the two together in by brain. I have some other questions then - but first this is how I now understand this whole mess...someone please correct me if I'm wrong.

Reg Z final changes that were issued 7/30/2008 are effective 10/1/2009 except those outlined under the MDIA proposal. These would be effective 7/30/2009 (assuming the final to MDIA doesn't change the effective date). My take from the MDIA proposal is that all changes outlined in the Reg Z final rule related to the early disclosures (which is the early TIL, right? plus some other restrictions on fee collection) will now be effective 7/30/2009, not 10/1/2009. Plus MDIA expands the type of transactions where these early disclosures are required to include loans secured by a dwelling even if it's not the consumers principal dwelling (i.e. a second home).

When the ABA works says "creditors must give good faith estimates of mortgage costs ("early disclosure") within three business days of receiving a consumer's application" - it's talking about the early TIL, right? The true "Good Faith Estimate" under RESPA is still also required if the transaction meets RESPA rules.

Has anyone heard when the MDIA proposal is to become final? We don't do any "residential mortgage transactions" where an early TIL is required now, but we do originate a lot of Home Equity Term loans so after these become final we will need to provide an early TIL a lot more often. This will be a significant operational change for us so as much lead time as possible would be great.

Wow, compliance is fun!

Per Sandra Braunstein's speech last week, they are looking to have a the final on the MDIA amendments to TILA by "early spring". Whatever that means.