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• Applies to express trusts, charitable or uncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust
• Does not apply to a business trust, a trust created by a deposit arrangement in a financial institution, or any arrangement under which a person is a nominee or escrowee for another.
• Establishes definitions, knowledge requirements, default and mandatory rules, common law and governing law, etc.

Please read the entire rule for details.

These provisions are effective on January 1, 2019.

Compliance Monitor--Robert Harrison

The Commonwealth of Kentucky amended its provisions relating to contracts; when parties are bound to the interest rate in a contract and the interest rate parties are entitled to receive after default. These provisions are effective on July 12, 2018 (or 90 days following adjournment of the current legislative session).

Any party to a contract governed by Kentucky Revised Statutes 360.010(1) is bound to the interest rate as it is expressed in the agreement (K.R.S. 360.010(2)).  The party entitled to be compensated interest after default at the rate of interest as is expressed in the contract or obligation prior to the default. If the interest rate expressed in the agreement is a variable rate, then the rate from default to judgment is calculated and adjusted according to the terms of the agreement (K.R.S. 360.010(3)).  If the agreement does not contain a rate of interest, then the party entitled to be paid will receive interest, from default to judgment, at the legal rate of interest (K.R.S. 360.010(4)).

A new section of Kentucky Revised Statutes Chapter 371 is created as part of these amendments. This new section states that the obligation of an obligor to pay a debt is not extinguished by any action taken by an obligee; an obligee has the right to maintain its own records and may consider the obligation as not collectible, but this will not remove the obligation from the obligor’s responsibilities (K.R.S. 371(1)). The obligor maintains the right to prove that it has fully or partially paid the obligation in accordance with the terms of the agreement (K.R.S. 371(2)).

The full text of these amendments can be found here: http://www.lrc.ky.gov/recorddocuments/bill/18RS/HB369/orig_bill.pdf

ReverseMortgageDaily--Alex Spanko

Connecticut lawmakers this week advanced a bill that would introduce new requirements for reverse mortgage lenders in the state.

The state senate on Tuesday unanimously passed S.B. 150, which would prevent lenders from accepting applications for Home Equity Conversion Mortgages unless they clearly explained the pre-loan counseling requirements, provided a list of Department of Housing and Urban Development-approved counselors, and received a signed form attesting that the counseling process had been completed.

Lenders would then be required to retain a copy of the letter, signed by both the borrower and the counselor, for the duration of the loan.

The Associated Press first reported on the passage of the bill.

Should lenders run afoul of the law, they would then be in violation of the state’s unfair or deceptive trade practice laws. Under those statutes, Connecticut’s consumer protection commissioner can issue cease and desist orders, seek restitution, and impose penalties of up to $5,000 for “willful violations.”

The bill was introduced by state Sen. Douglas McCrory, a Democrat, and State Sen. Kevin Kelly, a Republican. 

The proposal now goes to the state’s House of Representatives for further approval. 

The Connecticut state senate last year passed a similar bill, which some lawmakers at the time noted was “redundant”; HUD already requires all potential borrowers to undergo counseling as a condition of taking out a HECM.

Martin Looney, president pro tempore of the state senate, told the Associated Press that he’s received multiple reports of “reverse mortgage lenders preying on seniors in Connecticut.”

National Mortgage News--Bonnie Sinnock

Mortgage and title insurance companies licensed in New York need to file disaster response plans this year in line with increased state attention to business continuity planning.

The New York Department of Financial Services previously directed property and casualty companies to fill responses to a pre-disaster data survey by May 19, and most insurers need to respond to related online questionnaires by June 29. But the updated guidance "now also requires mortgage insurers and title insurers to file a disaster response plan and questionnaire" by Sept. 28.

“When disaster strikes, as it did when Hurricanes Maria and Irma devastated Puerto Rico and the Virgin Islands last year, it is important for all insurers to be able to respond quickly and to be able to continue operations to ensure they can serve the increased needs of consumers resulting from the emergency, whether it’s a storm, a data breach or a terrorist attack," said New York Financial Services Superintendent Maria Vullo in a NYDFS press release.

Private mortgage insurers, who primarily provide coverage in the government-sponsored enterprise market that dominates the home lending business, already must address business continuity planning as part of GSE eligibility requirements and are examining whether New York's requirements are appreciably different.

"USMI and our member companies are reviewing New York’s updated disaster response and recovery plan requirements for insurers," USMI President Lindsey Johnson said in a statement emailed to National Mortgage News.

"USMI member companies have robust and comprehensive business continuity and disaster recovery plans in place," she said. "Business continuity planning is required as part of the Private Mortgage Insurer Eligibility Requirements set by the government sponsored enterprises and approved by the Federal Housing Finance Agency and are a topic that are routinely covered during audits with Fannie Mae and Freddie Mac.”

New York's oversight of business continuity planning tends to be more detailed than the federal guidance some other states look to in their licensing requirements.

Some other states are using the Federal Financial Institutions Examination Council's framework for their state licensing review process, and Massachusetts also has "put a lot of focus on having a well-documented business continuity plan," said John-Thomas Gaietto, executive director of technology services at mortgage industry consultancy Richey May.

"We are definitely seeing other states look at this, but definitely not to the degree as New York. The reason being is that New York had some significant financial damages from hurricanes that have come up to the Northeast," said Gaietto. While Irma and Maria did more damage in the Southeast, the Northeast has suffered damage from past storms as well that the recent severe hurricanes in other parts of the country call to mind.

"It's probably a handful [of states doing this] from what we've gotten direct feedback on," he said. "But I think we're going to see that evolve."

Buckley Sandler, LLP--InfoBytes Blog

On April 17, the Wisconsin governor signed AB 822, which eliminates the requirement that financial institutions pay interest on certain residential mortgage loan escrow accounts. Previously, Wisconsin required institutions to pay interest on escrow accounts at a rate of no less than 5.25 percent if the loan was originated between February 1984 and December 1993, or at a variable rate if the loan was originated on or after January 1, 1994. Effective April 17, financial institutions are not required to pay interest on escrow accounts for residential mortgage loans originated on or after the effective date.

MBA Newslink

On Apr. 25, with his signature on HF3158/SF2571, Minnesota Governor Mark Dayton (D) paved the way for the state's adoption of the Nationwide Multistate Licensing System Uniform State Test for state-licensed mortgage loan originators (https://www.revisor.mn.gov/bills/bill.php?b=House&f=HF3158&ssn=0&y=2017).  

The bill, which received the support of the Minnesota Mortgage Association and was unanimously passed by both chambers of the State Legislature, also adds one hour to the state's MLO continuing education requirements that must focus on state laws and regulations. MBA has worked with partner associations across the country to achieve nationwide adoption. Implementation is expected in the state to begin on August 1.  

For questions, please contact William Kooper (202) 557-2737 wkooper@mba.org; or Kobie Pruitt (202) 557-2870 kpruitt@mba.org.  

• Authorizes  a lender to contract for and receive a convenience fee from any borrower making his or her payment by debit card, electronic funds transfer, electronic check or other electronic means
• Convenience fees shall not exceed the actual cost or four percent (4%) of the electronic payment transaction, whichever is less
• Lenders must notify the customer of the amount of the convenience fee prior to completing an electronic payment transaction, and provide an opportunity for the customer to cancel the transaction without incurring a fee
• Lenders shall continue to make  available the option to make payments on
  a loan by check, cash or money order directly to the lender without the imposition of a convenience fee or by various types of electronic payment transactions with any convenience fee fully disclosed either in the loan contract or at the time of the transaction
• Payments of elected convenience fees shall not be refundable

These provisions are effective on November 1, 2018.

A licensee who is authorized to make supervised loans may sell goods at any location where supervised loans are made upon meeting the following conditions:

•  The Administrator of the Department of Consumer Credit shall be notified in writing of the type and nature of goods to be sold at the location of the licensee
• Any sale of goods authorized pursuant to this subsection shall be purchased through a loan with the licensee
• All goods sold by the licensee pursuant to this subsection shall be restricted to purchase loans made only at A-lender rates and terms

These provisions are effective on November 1, 2018.

MBA Insights--John I. Vong, CMB, CMT

John Vong, CMB, CMT, is president and co-founder of ComplianceEase, Burlingame, Calif., and a frequent contributor to MBA Insights. He can be reached at j.vong@complianceease.com.

State regulators, like nature, abhor a vacuum, and with good reason. As the current Administration changes its stance on regulations and enforcement in the areas of environmental protection, climate change, and immigration, we've seen governors, attorneys general and regulators push back against the Administration and, in some cases, step up their enforcement efforts.

The latest example comes in the area of consumer protection. At the end of last month, New Jersey Attorney General Gurbir Grewal and Governor Phil Murphy (D) announced the state would create a "state-level CFPB" to "fill the void left by the Trump Administration's pullback of the Consumer Financial Protection Bureau."

And New Jersey is not alone. Shortly after Office of Management and Budget Director Mick Mulvaney was appointed acting director of the CFPB, AGs from New York, California, Connecticut, the District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Mexico, North Carolina, Oregon, Vermont, Virginia and Washington state banded together to express their concerns about the new direction in leadership and reiterated their statutory authority to enforce federal and state consumer protection laws.

Under Mulvaney, the CFPB's shift from "regulation by enforcement" to "more formal rulemaking on which financial institutions can rely" has resulted in zero enforcement actions against any bank, lender, credit card company or any other entity within its purview (with one major exception: the Bureau on Apr. 20 issued its first fine to Wells Fargo for $1 billion). By comparison, the CFPB under Richard Cordray performed 175 examinations of larger banks and non-banks, resulting in four mortgage-related enforcement actions last year.

State regulators, on the other hand, in coordination with the Multi-State Mortgage Committee, Multi-State MSB Examination Taskforce and the State Coordinating Committee, performed more than 32,000 state-level examinations, resulting in up to 10,000 enforcement actions. In California alone, four of the top 10 non-bank lenders were fined more than $13 million in the past year and a half for violating the state's per diem interest rule.

The reason many states are stepping in and vowing to maintain current regulatory enforcement efforts is that, following the consolidation of consumer protection under the Dodd-Frank Act, no federal agencies other than the CFPB are charged with protecting consumers. The Federal Reserve and the Office of the Comptroller of the Currency, for example, are mostly focused on safety and soundness, and the Federal Deposit Insurance Corp. is focused on loan-level compliance.

There are historical precedents for state activism in the area of mortgage lending. For example, the federal Home Ownership and Equity Protection Act, which addresses high cost lending, came to be as a result of earlier state regulations addressing lending abuse.

At the moment, the CFPB's "less-is-more" approach to regulation isn't creating too much confusion and, at first glance, may even appear to be a boon for lenders. But if it continues, it will raise the question of how will federal mortgage regulations evolve, or devolve, in the next few years? And what changes can we expect when the temporary GSE Qualified Mortgage exemption, also known as the QM Patch, ends in January 2021? (Today, most high-DTI prime lending gets done via "patch.")

In addition, the shift to state-level actions will present new challenges from a compliance perspective, especially for non-bank lenders that must be licensed in all 51 jurisdictions. Lenders will need best-of-breed compliance management systems to stay abreast of these changes and ensure consistent application of the jurisdictional rules and regulations appropriate for each loan.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)

Asurity Technologies--Marsha Williams

The Oregon Department of Consumer and Business Services (“Department”) recently amended its rules related to mortgage lending and mortgage servicing, effective April 17, 2018.

“Contract or agreement for servicing the residential mortgage loan” means an agreement for the ongoing servicing of a loan and does not include one-time transfers of funds such as those associated with the origination or closing of a loan.

“Liquidity” means an unrestricted cash and cash equivalents, investment grade securities that are available for sale or held for trade, and unused/available portion of committed servicing advance lines.

“NMLS Call Report” means a report of condition and loan activity accepted by the Nationwide Multistate Licensing System (“NMLS”) as of January 1, 2016.

“Originates” means providing a service involved in the creation of a residential mortgage loan, including but not limited to the taking of the loan application, loan processing, the underwriting and funding of the loan, and the processing and administrative services required to perform these functions.

“Tangible net worth” means total equity minus receivables due from affiliated entities, minus goodwill and other intangible assets, and minus the carrying value of pledged assets net of the associated liabilities of the pledged assets.

Each person applying for a mortgage servicer license must submit to the Director of the Department of Consumer and Business Services (“Director”) all the following required application materials and information:

• A completed Form MU1 submitted through the NMLS and approved by the Director.
• A completed Form MU2 submitted through the NMLS and approved by the Director for any individual required to submit biographical information.
• Fingerprints and an authorization to conduct a criminal records check and obtain a credit report submitted through the NMLS from any individual that acts as a controller or manager for the mortgage servicer. Fingerprints need not be submitted for registered agents.
• Either:
• A corporate surety bond submitted through the NMLS that meets specified terms calculated using the appropriate loan servicing volume amounts; or
• An irrevocable letter of credit filed with the Director through the NMLS that meets specified terms calculated using the appropriate loan servicing volume amounts.
• Financial statements prepared in accordance with generally accepted accounting principles, including a balance sheet and a statement of income or operations, dated not more than six months prior to submission of the application through the NMLS.  The financial statements may be prepared by the mortgage servicer, except that if the Director finds it in the public interest, the Director may require that a mortgage servicer submit financial statements prepared by an independent accountant. If the financial statements are more than six months old, interim period financial statements prepared by the mortgage servicer for the period ending the last full month prior to the date of application shall also be submitted.
• A statement with a detailed breakdown of the portfolio of mortgage loan servicing rights on a nationwide basis, as well as separately for Oregon. The information should reflect the composition of the portfolio based on mortgage servicing rights owned and aggregate number of loans and unpaid principal balance of all 1-4 family residential mortgage loans segregated by subservicer. The information provided should be as of the most recent quarter and reported in the form of an NMLS Mortgage Call Report.
• The names and contact information of all subcontractors performing servicing activities on behalf of the mortgage servicer.
• Biographical information required to be submitted through the NMLS.
• The information required for each branch office submitted through the NMLS.
• Payment of fees for application or renewal, as applicable paid through the NMLS.

A mortgage servicer license will expire on December 31 of each calendar year. At least 30 days prior to the expiration of a mortgage servicer license, the mortgage servicer must submit a renewal request for the license to the Director through the NMLS and must:

• Complete a renewal request with an attestation that the records are true and accurate; and
• Pay any applicable renewal fees.

A mortgage servicer seeking to renew its license shall each calendar year:

• Submit, or confirm, through the NMLS a corporate surety bond meeting specified terms and calculated using the appropriate loan servicing volume amounts; or
• File or have on file with the Director an irrevocable letter of credit which meets specified terms calculated using the appropriate loan volume amounts.

If a mortgage servicer submits an application for renewal which is incomplete in any respect, the Director will notify the mortgage servicer of the deficiencies on the application. The mortgage servicer will have 30 days from the date of the notice or the end of the renewal period, whichever occurs last, to complete the application for renewal. If the mortgage servicer fails to complete the application for renewal, the license will be terminated on the expiration date by reason of failure to renew.

An applicant or licensee operating as an approved servicer by one or more government sponsored enterprise (“GSE”) must maintain liquidity, operating reserves, and tangible net worth that meet the standards set by the GSE. If approved by more than one GSE, the applicant or licensee must meet the highest standard of the GSEs for which it is approved.

An applicant or licensee with a portfolio of only non-GSE loans must maintain a minimum tangible net worth of $1 million or maintain a $1 million surety bond.  An applicant or licensee with a portfolio of non-GSE loans must maintain liquidity, including operating reserves, of .00035 times the unpaid principal balance of the portfolio.

The Director may waive or adjust one or more of the requirements if it finds that doing so will be in the public interest. The Director will consider the servicer's loan portfolio, operational risks, net worth, operating reserves, and degree of supervision by other regulatory entities.

Examination charges must be paid upon receipt of the invoice of examination fees.  In addition to the initial application and renewal fees, licensees must pay an examination charge in the amount of $75 an hour for each person used in performance of the examination.  If an employee of the Department is required to travel out of state to perform an examination, the rate of charge is $75 per hour plus costs for travel and subsistence for each such person.  If the examination is performed by a consultant hired by contract for the particular work, the charge payable by the licensee is the actual cost to the Director of the contract consultant.

A person need not obtain a mortgage servicer license if the person:

• Is an employee of a licensed mortgage servicer or an exempt entity acting within the scope of the person's employment;
• Owns the rights to service a mortgage loan but does not otherwise service a residential mortgage loan, including having an ongoing contractual obligation to provide financial support to a subservicer;
• Is an escrow agent licensed by the Oregon Real Estate Agency operating a collection escrow but does not otherwise service a residential mortgage loan;
• Is a licensed money transmitter conducting a money transmission at the borrower's request, and does not otherwise service a residential mortgage loan; or
• Is a nonprofit organization that:
• Has been granted a tax-exempt status under section 501(c)(3) of the Internal Revenue Code;
• Promotes affordable housing, affordable housing financing, or other similar services approved by the Director; and
• Has not violated a state or federal law and has not engaged in a course of dealing that is fraudulent, deceptive, or dishonest.

A person qualifies for the exemption for a particular calendar year if it, along with all affiliates in all operations within the United States, serviced fewer than 5,000 residential mortgage loans in the twelve-month period preceding September 30th of the prior year.   If a person exceeds the threshold in the twelve months prior to September 30th of a given year, the person does not qualify for the exemption for the following year and must comply with the licensing requirement beginning on January 1st of the following year.  A person that does not qualify for the exemption for a given year but has serviced fewer than 5,000 loans for six consecutive months may apply to the Director to surrender its license. The Director may approve a licensee to surrender its license after finding that:

• The licensee has an adequate business plan to operate below the 5,000 loan threshold for at least the next twelve months;
• The licensee's business plan adequately protects the interests of borrowers; and
• Surrender of the license is otherwise in the public interest.

Each statement or notice sent to a borrower after January 1, 2019, must include the following text: "Residential mortgage loan servicers are regulated by the Oregon Division of Financial Regulation. To file a complaint, call (866) 814-9710 or visit http://dfr.oregon.gov." 

This bill will allow counties to receive prompt notification about the ownership of foreclosed properties within their jurisdiction. This “push” rather than “pull” system could prove very helpful to county public safety and code enforcement officials to better manage properties in transition.

• Requires DLLR to establish a procedure for foreclosure purchasers to keep the registry information current by providing updated information within 21 days of learning of any changes
• Requires DLLR to promptly send a copy of the initial registration and any sub
• It creates a process for local officials to receive prompt and accurate notifications about foreclosed properties which allows them to take timely action in the interest of their communities.

These provisions are effective on January 1, 2019

• Authorizing a certain lending institution that makes a certain loan secured by a certain first mortgage or first deed of trust to create a certain escrow account solely for the payment of water and sewer facilities assessments on a certain request;
• Providing that certain provisions of law do not apply to the payment of water and sewer facilities assessments under a certain direct reduction method;
• Providing that funds in a certain escrow account for use for certain purposes may not be used in a certain manner; etc.

These provisions are effective on October 1, 2018.